Pottstown held back by high taxes

Pottstown offers an appealing alternative to sprawling development -- and the "drive-everywhere-for-everything" lifestyle it requires. Pottstown boasts historic architecture, inexpensive housing, and "walkability" -- interconnected streets that place homes, stores, offices and parks within easy walking distance.

But Pottstown has a major impediment to its appeal: high taxation. Combined, Pottstown Borough and the Pottstown School District levy among the highest taxes in Pennsylvania.

Assessments. Pottstown has about 8,700 parcels, of which 326 are tax exempt. These tax exempt parcels account for about 20 percent of the total value of Pottstown's properties. And total assessments have been falling for 20 years. The total assessed value -- about $763 million -- is actually lower than 1998, the last time Montgomery County reassessed its property. For a complete list of properties as of June 2018, including their tax status, click here.

Pottstown Council has increased real estate taxes nearly 45 percent since 2007. That does not include a $52 annual emergency and municipal services tax first imposed in 2006.

For the third year in a row, the Pottstown School Board voted in June to retain the existing tax rate for the 2017-2018 school year. That is unprecedented in modern times. In total, the school district has raised taxes about 27 percent since 2007. This was even though a change in the state funding formula has substantially increased state subsidies to the district. In the ten years from 2005-2006 to 2015-2016, state subsidies to the school district have increased 60 percent, from $12.4 million to $17.9 million (even with Gov. Corbett's 2013-2014 austerity budget).

So why all the tax increases?  Partially, it’s because revenues are declining.  But mostly, it’s because spending has skyrocketed.

The Pottstown Borough general fund budget has increased 30 percent from 2007 to 2016, from $10.7 million to $14 million.  Pottstown School District spending has increased 28 percent since 2007, well above the rate of inflation. 

Each year, the Pennsylvania Department of Education compares what it calls “local tax effort” among the 500 school districts in the Commonwealth, based on the taxes levied and the community’s ability to pay (as measured by residents’ income and real estate values).  On this basis, the Pottstown School District has the seventh highest taxes in Pennsylvania.  In other words, Pottstown School District taxes are higher than 99 percent of the school districts in the Commonwealth.

There is no such measurement available for local municipalities.  However, the Pennsylvania Center for Local Government Services does compare the total municipal tax revenues per capita among the state’s boroughs, townships, and cities.  The most recent data shows Pottstown placed 223 out of 2,500 municipalities ranked, which means that Pottstown Borough taxes, per capita, were higher than 91 percent of the municipalities in the state. 

But this statistic doesn’t account for the wealth of a community.  Many municipalities joining Pottstown in the top 9 percent of taxes per capita are quite wealthy, like Abington, Cheltenham, Upper and Lower Merion, and Radnor.  They can afford the spending.  Can we?

High taxes not only burden Pottstown residents, they discourage new residents and businesses from moving to the borough.  As a recent Philadelphia Tax Reform Commission report noted, “There is a general agreement among economists that local taxes have an important impact on economic growth … where businesses locate and invest.”

Both Pottstown Borough and Pottstown School District obtain most of their local revenues by splitting a 1 percent earned income tax and by levying a tax on all real estate in the borough.  The earned income tax is capped by law at 1 percent, so the only way to increase local revenues is by increasing the real estate tax.

Unfortunately, the assessed value of all real estate in Pottstown has actually dropped in recent years.  The tax base briefly increased when the former non-profit Pottstown Memorial Medical Center was sold to a for-profit corporation in 2003, adding about $22 million to the real estate tax rolls.  Since then, the tax base has steadily decreased.

Moreover, it takes a substantial boost in the tax base just to provide a modest increase in tax revenues.  There is only one sure-fire way to keep taxes under control: Keep spending under control.  But that’s virtually impossible unless citizens and elected officials know how tax dollars are being spent in the first place. 

The school district and the borough should publish on their Web sites a detailed budget which includes a written description of each service provided and goals for the future.

The first step to control spending is full disclosure.