COST OF GOVERNMENT

Pottstown’s taxes among highest in PA

Pottstown government is living beyond its means.

Pottstown Council has voted to increase real estate taxes 9.58 percent in 2010.   The Borough increased taxes 10 percent in 2009. It increased taxes 9 percent in 2008 and 26 percent the year before that, on top of a new $52 annual emergency and municipal services tax imposed in 2006.

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

The Pottstown Borough budget has increased 50 percent from 2004 to 2010, from $24 million to $35 million.  Meanwhile, Pottstown School District spending has increased by 35 percent since 2004, more than twice the rate of inflation. Last June, the school district increased taxes 5.7 percent for the 2009-2010 school year.

Yet very little public information is made available to explain how this enormous amount of money is spent.  Even Council and School Board members don’t receive all the information they need to make intelligent decisions. 

Each year, the Pennsylvania Department of Education compares what it calls “local tax effort” among the 501 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 eleventh highest taxes in Pennsylvania.  In other words, Pottstown School District taxes are higher than 97 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 is for 2005, two years before Pottstown Borough raised real estate taxes 26 percent.) In 2005, 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 barely increased in the last decade.  This was despite employing an economic development director for eight years.  The major reason the tax base increased at all since the 1990s was because of an unusual event:  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. 

Now the tax base is actually declining. A recent study for Pottstown Borough by a consultant, Management Partners, predicts Pottstown's tax base will continue to decline for at least the next five years.

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.