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The budget dilemma: Here's what we'd do

Middletown Borough officials have made borough government smaller. 

 

They’ve cut staff, eliminated the town’s emergency dispatch center and virtually eliminated the annual contribution to the Middletown Public Library. Yet our town's taxpayers face the possibility of a property tax and electric rate increase for 2015.

 

Why? Health insurance costs will increase by 24 percent next year, according to borough officials. Try as you might, it seems impossible to control the cost of health care – small businesses, including our business, can attest to that. Though health care administrators would deny it, annual premiums seem to be based on the number and age of employees, their use of health insurance and the toss of a dart at a board full of figures.

 

Perhaps the truth is that municipal finances are much more complex than the finances that govern your household. Maybe that’s why financial consultants like Susquehanna Group Advisors, the state-approved consultant that advises Middletown as part of the state’s Act 47 Early Intervention Program, exist.

 

Susquehanna Group’s Mark Morgan has provided three options to Middletown Borough Council for plugging an anticipated gap in the 2015 budget. We’re certain none will inspire residents to dance joyously on the square, but at least the borough is in the unique position of having options that other municipalities do not possess.

 

Option one: Raise property taxes by .5 mills and electric rates by 1 cent.

 

Option two: Drop the tax increase but raise electric rates by a penny and cut two more borough employees.

 

Option three: Don’t raise a thing, but transfer a hefty amount from the borough’s electric trust fund, a fund born from a previous court settlement between the borough and Met Ed over a contested rate agreement that had allowed Middletown to purchase electricity for resale at a very, very low price.

 

At least one councilor, Benjamin Kapenstein, favors freezing taxes and electric rates and using money made from a potential leasing of the borough’s water and sewer systems to United Water. Council voted in September to negotiate a 50-year lease with United Water that would require United to pay $43 million to the borough, money that would pay off Middletown's long-term debt and finance the much-needed installation of new water and sewer lines along Main Street. If enough is left to plug the budget gap in 2015, that would be the best solution.

 

There appears to be no consensus yet among councilors as to what to do. Indeed, it’s not an easy decision. We believe a property tax increase should be avoided, though, and that an electric rate increase alone should be the only increase considered.

 

Raising electric rates spreads the financial burden to a greater number of people than a property tax increase, we believe. Council cut electric rates, in part, to make Middletown a more attractive place for business and real-estate developers – we don’t see a property tax increase, even a half-mill hike, as being a more attractive option.

 

And council has more flexibility in regulating electric rates throughout the year – in the past, it has reviewed rates as frequently as every three or so months. A property tax increase will stand for all of 2015. And we are hard-pressed to come up with any instance of a municipality lowering its property taxes, so we suspect that half-mill hike will continue in perpetuity.

 

If the borough can get enough money out of United to cover next year’s budget gap as well as pay off debt and improve infrastructure, that would be great – and the best option. If that won’t resolve  the borough's predicament, an electric rate increase seems to be the best choice.

 

Last Updated on Tuesday, 09 December 2014 22:02

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