Borough taxes down, but manager concerned

May 28, 2006

By DARRELL L. BREESE

Frontiersman

PALMER - Saving tax payers money today could be a bad thing for the future, according to Mat-Su Borough Manager John Duffy.

Mayor Tim Anderson had one goal he wished to accomplish when he first was elected to office in 2000, now in his final year in office, he has achieved that goal.

&#8220I've always wanted property-tax payers to pay less in taxes than they did the year before,” Anderson said. &#8220It looks like that might be about the same as last year, or even a little higher with the adoption of the current budget.”

A $5.7 million energy relief revenue sharing contribution from the state made a property tax reduction a reality. By adding the money to the general fund, the mil rate dipped well below the 10.235 tax cap established by the assembly in August 2005. The final fiscal year 2007 budget set the mil rate at 9.658.

&#8220While lowering the tax cap is a good thing this year, it has long-term ramifications,” Duffy explained.

&#8220By using all the funds from the state this year to provide tax relief, the result will be an estimated $2.7 million deficit in next year's budget, and a $1 million deficit the following year.”

According to borough finance director Tammy Clayton, the projected shortfalls in future budgets are based on those budgets remaining the same as the one adopted Thursday.

&#8220What the assembly did by creating a budget under the tax cap, it reduced all future tax caps,” Duffy said. &#8220That means the next several years will be faced with a shortfall.”

Under the tax cap, borough revenue increases cannot exceed what was collected last year, with adjustments made based on the federal consumer price index and the percent of change in the population over five years. The limitation is placed on property tax, cigarette tax, vehicle tax and other revenues.

&#8220We're in a high-growth phase currently in the borough,” Duffy said. &#8220We're facing the addition of a two new elementary schools that voters just approved, and the construction of a career center, meaning the school district will be needing more money next year. It will be difficult to find the funding necessary.”

Assembly member Betty Vehrs looks at the effects of the current budget for future budgets.

&#8220The point of the tax cap is to continue work toward lowering borough spending each year,” Vehrs said. &#8220We're only facing a deficit next year if we have another high budget full of pork and extra spending. If cuts are made, then there is not going to be a deficit.”

Tammy Clayton, borough finance director, predicts that the average homeowner will see a reduction in the tax bill of about $250. But Anderson questioned the numbers.

&#8220The equation can't determine what the increase in assessment will be,” Anderson said. &#8220This year, the average increase in assessments was 12 percent, but some people saw larger increases. The borough can adjust the mill rate, but we have no control over what the market does to assessments.”

Duffy said that the tax cap will be set at 10.2 mills next year, and would not give room for the simple addition of inflation into this year's budget.

&#8220We'll most likely have to put less toward the matching funds used for federal grants,” Duffy said. &#8220That means less money for roads and other major infrastructure projects. It might take longer to get the needed roads built in the Valley because of that.”

During a Tuesday budget hearing, the assembly voted to increase the borough's school contribution by $1.5 million.

While the amendment passed in a split vote with Vehrs and assembly member Jim Colver voting against it, the motion to increase funds later passed unanimously, Colver clarified on Friday.

Contact Darrell L. Breese at

352-2267 or at darrell.breese@

frontiersman.com.