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Borough residents could be facing property tax hike

October 15, 2003|by DON AINES

chambersburg@herald-mail.com

CHAMBERSBURG, Pa. - Property owners in Chambersburg have not seen a real estate tax increase in the past 14 years, a streak that is likely to come to an end in 2004.

Tuesday night, Borough Manager Eric Oyer recommended raising the tax rate 4.8 mills next year to 17 mills. The tax increase, if approved, would raise approximately $720,000 in new revenues, Oyer said.

For the owner of a house with a market value of $100,000, about the average in the borough, the increase would mean an additional $82 each year in real estate property taxes, Oyer said.

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"There are three major problems that have gotten us to the point where we are," Councilman Allen Frantz said. He said those were "minuscule returns on investments," rising health-care costs and shrinking cash reserves.

General fund revenues, including transfers from other borough funds, have grown 11.3 percent over the past four years, while expenditures have risen 36.7 percent, according to the budget document.

In recent years, the borough has relied on cash reserves to balance the budget. In the current year's budget, Oyer said there was a $950,000 budgeted deficit.

In 2004, the proposed budget estimates total revenues at more than $6.9 million without the tax increase. Projected expenditures, however, are $8.2 million, which would create a shortfall of $1.25 million.

Projected cash reserves for the end of 2003 are about $960,000, according to budget figures. With the tax increase, the borough still would need to take about $430,000 from cash reserves to close the gap between revenues and expenditures in the general fund.

In addition to raising real estate taxes, Oyer recommended the council also change its long-standing policy of maintaining cash reserves of 10 percent to 15 percent of general fund appropriations. He suggested lowering the fund balance to 5 percent of appropriations.

Council President William F. McLaughlin said municipal governments are saddled with "an antiquated tax system that does not recognize the realities of the world we live in."

Earlier in the day, McLaughlin said nonprofit groups can have themselves taken off the real estate tax roles and businesses can depreciate their properties, which has retarded the growth of real estate tax revenues despite a building boom in the borough. Oyer said 111 new housing permits have been issued so far this year, more than twice the number issued in the past two years.

Despite that, real estate revenues have remained fairly static throughout the past decade, according to budget figures.

Health-care costs will increase a higher-than-expected 20 percent next year, largely due to a 72 percent increase in the prescription drug plan, Oyer said. The result is that the borough will pay nearly $1.5 million in health insurance costs for the borough's 185 employees and their families.

Oyer said any cuts in expenditures probably would involve cutting both personnel and services to the community.

The largest expenditures in the general fund are for police at $2.9 million; fire, ambulance and code enforcement at $2.1 million; and the highway, traffic and street lighting departments at $1.2 million, according to the budget.

Sewer customers will see rates increase 15 percent next year, while rate adjustments also are likely for borough electric customers.

Preliminary adoption of the budget is scheduled for Oct. 28, with final adoption expected by Dec. 9.

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