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Working tax may get boost in Chambersburg

November 23, 2004|by DON AINES

chambersburg@herald-mail.com

CHAMBERSBURG, Pa. - Beginning next year, the cost of working in the Borough of Chambersburg could be up to $1 a week, depending on how much the council decides to raise what has been known as the occupational privilege tax.

The council authorized the advertisement of an ordinance to raise the tax from its current $10 up to $52 a year. A vote on the proposal is expected at the council's Dec. 13 meeting.

"This is the first good news municipalities have had from a revenue standpoint from the Legislature in a generation," said Council President William McLaughlin, a proponent of the change in the Local Tax Enabling Act of 1965. He said the legislature passed the amendment "in the wee hours of Sunday morning."

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Since 1965, municipalities and school districts have been allowed to split a $10 occupational privilege tax. Borough Manager Eric Oyer said Chambersburg's half will amount to about $110,000 this year.

The Legislature, however, amended the act, changing the occupational privilege tax to an emergency and municipal services tax. The legislation, which still has to be signed by Gov. Ed Rendell, would allow municipalities to raise their share of the tax to $47 while school districts would still get $5.

There are about 22,000 people who work each day in Chambersburg and about 80 percent of them live outside the borough, Oyer said. If the tax were raised to the full amount, it would bring in about $900,000 in additional revenue, he said.

"For the first time we have the ability to recoup some of our expenses from the people who come into the borough to work each day," McLaughlin said. Five previous attempts to amend the law have failed, he said.

The legislation restricts use of the revenues to police, fire and ambulance services; road construction and maintenance; or the reduction of property taxes, borough attorney Thomas Finucane said.

Although the borough is proposing a 2 mill increase in property taxes for 2005, Councilman John Redding recommended no changes in the budget, suggesting that money from the emergency and municipal services tax could be used as a hedge against future tax increases. One mill generates about $150,000 in revenues, Oyer said.

The proposal unanimously endorsed by the council Monday would raise the tax to $52, with an exemption for those making less than $5,200 a year. Employers would deduct the money from payrolls over one to four pay periods.

Redding suggested the council might not decide to raise the tax to the full $52 all at once, but phase it in over a period of years. The amount of the tax will be decided at the Dec. 13 meeting.

While the borough could realize substantial new revenues from the tax, McLaughlin said the benefits could be fleeting. The cost of health insurance for the borough is expected to increase by $240,000 next year and there could be similar increases over the next few years, he said.

In addition to a property tax increase, Oyer said the borough is using about $500,000 in cash reserves and $250,000 from its self-insurance fund to balance the 2005 budget.

"The borough has a structural deficit of about $750,000" in the budget, he said.

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