DuBOIS — The Pennsylvania Economy League (PEL) returned to the area on Tuesday at the DuBois Country Club to review their consolidation study for DuBois and Sandy Township, just as residents get ready to vote on the ballot referendum in the Nov. 2 general election.
The question to be printed on the official ballots for the township and city is as follows:
“Shall the Township of Sandy and the City of DuBois consolidate to form a new Third Class City to be called the City of DuBois and governed by the Council-Manager form of government as provided in the Home Rule Charter and Optional Plans Law and including a seven-member Council, elected at large (one of whom shall be Mayor), an elected Treasurer, an elected Controller, and an appointed Manager?”
PEL Chief Executive Officer LeeAnne Clayberger noted that the ballot question specifies the form of government as a third class city.
“That’s different than what we talked about six months or so ago when we were here in March,” said Clayberger, noting that Tuesday’s presentation was going to talk a little bit about some of those differences.
A large portion of the presentation centered around the financial implications of a consolidation, which is what Communications Director Lynne Shedlock said she believes is one of the most important concerns on the minds of residents — particularly property tax millage.
“We are estimating, based on the updated (ballot) question, a 17.1 millage rate for the new municipality,” said Shedlock. “That rate is lower than the rates currently in Sandy and DuBois. When we had originally done the tax rates, we had ... a range for the service provider. We had special purpose districts for hydrants and for street lights. Under the current question, where the new municipality would be a third class city, it wouldn’t be a home rural community. You can’t have special purpose districts. And therefore we put everything into the general purpose millage, but even putting everything into the general purpose millage, our millage still comes up lower than the current rates. And this assumes the elimination of over $500,000 annually by eliminating duplicate positions through attrition and buyouts, that sort of baseline savings. There could potentially be more savings.”
The current rate is 23.5 mills in DuBois and 18.25 mills in Sandy Township, the study notes.
Shedlock said the study also projects lower combined municipal water and sewer utility rates for most township residents in addition to lower taxes.
“All of the Sandy Township residents that receive sewer and water through the township and are paying the township’s rates would pay the city’s lower rates because it would be all one service district,” said Shedlock. “Township residents that are now billed directly by DuBois already have lower rates. So they would basically stay the same. Treasure Lake residents receive their water and sewer for private utility so their rates would not change, but they would get the property tax savings. So we’re estimating that some Sandy Township residents could potentially see savings of up to approximately $400 (annually) based on the median assessed value of a home and taking into account some property and utility savings.”
While talking specifically about Treasure Lake residents and others without public water and sewer, Shedlock said Treasure Lake residents who get their water from Aqua America are not going to see an impact on their utility rates; the rates will continue to be set by the Public Utility Commission.
Residents with well water and/or on-lot septic systems will have a property tax reduction as a result of consolidation, Shedlock said.
“Treasure Lake would continue to operate, or could continue to operate as it does now as a gated community, there’s no need to change any of that, with the same sort of municipal service level, none of that has to change, and the private assessments that are currently being paid to Treasure Lake, also would not change,” Shedlock said.
Senior Research Fellow Gerry Cross reviewed the financial analysis and historical trends, noting that both municipalities experienced deficits in three out of five years from 2015 to 2019.
“That deficit figure has to be discussed in that, the two different municipalities have different accounting methods,” said Cross. “So we had to make those things comparable. To do that, we removed from the DuBois General Fund the expense for water and sewer operations.”
By removing those two operations, Cross said the study revealed a more comparable situation between the two municipalities. However, he said, they also kept in one-time events, such as capital expenditures and grant monies.
“You can see that most plainly under the City of DuBois General Fund adjustment table, where in 2016, there was a significant surplus of $1.9 million,” said Cross. “That was largely from receiving grant monies in that year. The following year, those grant monies were extended to capital projects, which cost a deficit of $1.6 billion. But in reality, over the last two of those fiscal years, it was balanced with the use of grant money and the timing of the expenses. So when you’re trying to compare that to a municipality, it’s very important to understand that you focus on your overall trends, not on those specific years, because we are comparing two different systems. It is important, though, to learn that the municipal finance picture shows that the municipalities are very similar. There’s not a poor municipality being bailed out by a rich municipality. These municipalities have two solid fiscal structures, in our opinion.”
A financial analysis of DuBois’ projections from 2022 through 2025, based on the 2020 budget, the city is looking at a surplus of revenues over expenditures through 2024, said Cross.
“That’s largely because their situation for debt payments are being significantly reduced after 2020, for the city,” he said. “There’s also a reduction in cost of capital projects that the city is undertaking. However, this situation, as with all municipalities, is one of less growing revenues than the growth of expenditures. And that will have a budget deficit for the City of DuBois in our projections for 2025 (-$96,621). When we make these projections, we use a baseline idea that if nothing changes this is what would happen, which gives leaders the ability to make changes in a significant time to avoid a deficit.”
A financial analysis of Sandy Township’s projections, also from 2022-2025 and based on the 2020 budget, shows that the township deficits are projected to happen sooner than the city’s. The township will have a budget deficit of -$67,998 in 2023, -$155,806 in 2024 and -$236,829 in 2025, according to the study.
“That was based on the historical growth of the assessed valuations, the tax base of the township, and the historical expenditure patterns for the township,” said Cross. “We don’t expect large revenue growth in either Sandy or DuBois from real estate tax base, the assessed valuations, that’s a county function. And you will have expected increases in contractual wages that have already been assigned. And as we all know, the cost of healthcare and other employee benefits increase.
“For example, when you’re looking at the two municipalities, the collective bargaining raises that are already in place, they’re very similar for both towns,” said Cross. “We had a 2.75 percent contractual increase in police salaries in DuBois. And for the police in Sandy, we have between 2.75 percent and 3 percent increases factored in for the projection. So you can see the municipalities have similar expenditure patterns, also. Those trends are considered, while the unit projections are on both.”
The study details the differences between the city, which is a third class city covered by the third class city code, and the second class tax code for Sandy Township, said Cross.
“The biggest significance, in our mind, was the limitation on millage rates for real estate taxes for Sandy. Second class townships in Pennsylvania are limited by the amount of millage they can levy,” said Cross. “Similarly, cities and first class townships are also limited in millage ceilings. But there’s a difference of almost two to one. Cities and boroughs can go to a 30 mill on their tax base. Second class townships are limited to 14 mills.”
The township currently has a 13-mill general fund levy, said Cross, noting that it has another mill in the general fund levy to raise taxes, to go to 14 mills.
“That would bring in approximately another $110,000 dollars to the township,” he said. “In order to be able to fund various expenses, the township uses what are called special purpose millage rates. They don’t count toward that 14 mill cap, but by the same token, they can only be used for what’s specified. When you want to go over the 14 mill cap, it is possible. The township would have to go to court and ask court approval on manual cases to exceed the millage limits. Again, it’s important to understand that special purpose millages are only for the use designed by in the legislation.”
The study notes that general fund expenditures generally cannot be funded by special purposes taxes like police. Police are one of the largest cost centers for the township and projected to rise the most.