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Readers Views: We are not "distressed"

Posted 9/4/12

Editor,Over the past few weeks, I have heard from many Middletown residents who are concerned about the borough’s financial situation.Many of their concerns are based upon rumors and misinformation. I’d like to clear things up.Yes, it is true, …

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Readers Views: We are not "distressed"


Over the past few weeks, I have heard from many Middletown residents who are concerned about the borough’s financial situation.

Many of their concerns are based upon rumors and misinformation. I’d like to clear things up.

Yes, it is true, Middletown has a challenging financial situation to deal with. The borough’s financial experts have advised us we have what they call a “structural deficit’’ in the general fund budget.

The state agrees with that analysis.

Municipalities typically fund general government operations – police, codes enforcement, the finance department, highway and property department and borough administration – with money that comes from taxes and fees.

In Middletown, those taxes and fees bring in much less than it costs to run the general government operations.

For many years, the borough has transferred money from the Electric Department to help pay the general fund’s departmental expenses. Rather than depend on high electric rates, or raising taxes, Borough
Council has decided to seek the state’s help in finding alternatives.

Many residents misunderstand the type of help the borough has asked the state to provide. Here is a simple statement that will probably clear things up for many: Middletown is not a distressed city like Harrisburg. The borough is not facing bankruptcy.

The program the borough has entered with the state is very different from what the state is doing in Harrisburg.

Middletown is in the state’s Early Intervention Program. That is a program, under the Governor’s Center for Local Government Services, that provides municipalities with a grant to help pay for financial advice.

The idea is to give communities the kind of expert help they need to address financial challenges before they reach a crisis stage like they have in Harrisburg. The state has agreed to pay 75 percent of the cost for the borough to hire an advisor who can help it figure out solutions to the financial challenges we face.

People keep asking me how this might impact them, their pocketbooks and their property values. Many have expressed thoughts of moving out of town. This is not necessary.

It would be easy to raise taxes, or raise electric rates, to generate the additional money the borough needs. But that would not be good for residents’ pocketbooks and certainly would not make property values go up.

So instead of taking those easy, but not necessarily beneficial, routes, the borough, with the state’s help, is going to hire an expert to help it find alternatives that won’t involve massive tax or electric rate hikes.

The advisor the borough chooses will come from a state-approved list of folks with expertise and experience in municipal government finance. The advisor will work with the borough to explore alternatives and find solutions.

Again, Middletown is not distressed. It is not bankrupt.

And Middletown is not alone. Over 60 other municipalities have applied for Early Intervention Program assistance from the state.

Entering the Early Intervention Program should not lower borough residents’ property values, or cause residents economic hardship in any way.

It fact, it is a program that will help do the opposite by showing the borough is  committed to finding solutions itself, rather than having a state-appointed receiver impose solutions on the borough. It reassures the borough’s creditors that Middletown is not looking to default upon its obligations. It shows
Middletown is serious about getting its financial house in order.

More important, as it applies to home values, it shows potential buyers that the borough is committed to finding ways to keep electric rates and property taxes in check. Potential home buyers will have assurance that Middletown is taking the steps needed to be fiscally responsible to its rate and tax payers. Keeping taxes and electric rates low will encourage economic development.

There will no doubt be serious debate over what recommendations the borough should implement once the financial experts lay out the options. Not everybody will agree with every idea.

Middletown faces significant financial challenges that must be addressed if we are to rebuild and revitalize the town.

                                        Robert G. Reid
                                        Borough of Middletown