Borough Council’s review of the proposed 2015 budget kicked off Monday with some concerns over rising taxes and lower ratings.
The review marked the first of several days of discussions, starting with financial trends, debt management, capital improvement and detail on receipts.
“Some people say that a government should be run like a business,” Councilman Evan Myers said. “Certainly there are similarities between business and government ... but government is not a business. We’re here to serve our citizens and not make a profit.”
Myers said he was a bit concerned that the proposed budget raises taxes on property, and makes it even harder to afford to live in State College. The need to provide citizens with great services and the need to protect the affordability of the borough for the citizens sometimes conflicts, so it’s important to scrutinize the expenditures and understand why there may be changes from 2014 and 2015 and if the money needs to be spent.
“We need to be careful that we don’t price State College into becoming a different kind of community (than) it is now,” he said.
The budget is proposing a 3.36 mill real estate tax increase that would yield about $1.5 million for the borough.
In conjunction with the borrowing done earlier this year, Assistant Borough Manager Roger Dunlap said, the borough’s general obligation debt rating has been lowered one notch from “AA” to “AA-” by Standard and Poor’s. A weak borough economy with a low per capita income was cited as the reason.
Myers asked if the lowering would have any impact the borough has to pay. Borough Manager Tom Fountaine said it could in future borrowing, but not on any current borrowing.
“The ratings standards have changed,” Dunlap said. “In the past where there could be recognition for unique local circumstances, i.e., people showing a relatively low per capita income have disposable income actually to spend, the rating agencies actually don’t have the ability to do that anymore.”
The low per capita income will continue to be an issue in this community forever, he said. It would have happened eventually, he said, because the ratings agencies are routinely re-evaluating all of their ratings across the board.
“If the borough goes back into the financial market in the future,” he said, “we would ask to be re-reviewed and would consider other rating agencies to consult with at that time.”
Approved projects in the capital improvement plan require $2.2 million from the general fund in 2015, according to the budget. Twenty-one projects have been funded for a total of about $5.5 million. Capital fund projects include street reconstruction for $675,000, street and alley resurfacing for $453,000 and downtown infrastructure improvements for $350,000.
According to the receipts, there is a 13.7 percent increase in the proposed budget.
Taxes increase by 15.8 percent, primarily as a result of the proposed 3.36 mill increase and a 0.25 percent realty transfer tax increase for the redevelopment authority.
Fines and costs will decrease by 5.2 percent dues to reductions in fines and ordinance violations, Dunlap said.
Grants will also decrease 34.1 percent due to reductions in federal grants for public safety programs.