The Tribune Democrat, Johnstown, PA

Local News

January 22, 2014

Franklin seeks commuter tax hike

EBENSBURG — Franklin Borough, which has been recognized as a distressed municipality since 1988, submitted its annual court appeal to raise the “commuter tax” by 0.4 percent for borough residents and 0.3 percent for nonresidents who work in the borough.

The borough’s base income tax rate is 1 percent. With the increase, 1.4 percent of resident income and 0.3 percent of commuter income will go toward the borough.

Borough Solicitor Nicholas Banda interviewed the state’s Department of Community and Economic Development local government services agent, Michael Foreman, Tuesday at the Cambria County Courthouse in Ebensburg. Hearing the borough’s petition were Cambria County Judges Patrick Kiniry, Timothy Creany and Linda Fleming.

Although Foreman told the court that Franklin was doing all in its power to hold the line on spending and adhere to its Municipal Financial Recovery Act  plan – which is designed to get municipalities out of the Act 47 “distressed status” hole – he referred to the borough as an “extraordinary” example of tax base deflation, depopulation and disinvestment within the past three decades. He added that the level of services the borough is able to provide is “skeletal.”

“They’re struggling just to survive and hold on to what they have, in terms of the resources and tax base, taxpayers,” he told The Tribune-Democrat following the hearing.

According to Foreman, who said he has been overseeing the borough’s finances and recovery plan since 2001, there are 21 total Act 47 municipalities in the state, including Franklin Borough and the cities of Johnstown and Altoona.

Through the state DCED, he said, six municipalities have successfully exited the Act 47 program, including Shenandoah in Schuykill County, Ambridge in Beaver County and Homestead, East Pittsburgh, North Braddock and Wilkinsburg in Allegheny County.

When Franklin Borough filed for distressed status, it was to stanch the bleeding not only from a $175,000 embezzlement committed by former Secretary-Treasurer Nancy J. Miller, but also from industries that flew from the borough, including Bethlehem Steel, which caused a 37 percent drop in real estate tax revenues when it folded, and FreightCar America Inc., which reverted to its parent company’s headquarters just when officials thought the borough was about to bounce back, Banda said.

“Every time we get back on our feet, something happens that sets us back,” he said after the hearing.

“We take one step forward and two steps backward.

“(Raising the commuter tax is) an opportunity for boroughs or municipalities like Franklin to get some additional income other than real estate taxes or a traditional earned income tax,” he said. “It helps, but it doesn’t get them out of the woods.”

Fleming, when interviewing Foreman during the court proceedings, said she asks the same question every year: Why would the state pay a consultant to come to the borough each year, rather than send the money directly to the borough?

She offered the metaphor of “giving Franklin a fish, instead of teaching them how to fish.”

Foreman said it would require a change in the existing state legislation regarding distressed municipalities. He added that while state programs like emergency loans for operating expenses and grants are available, the grants, specifically, come with eligibility criteria like purposeful investment that will increase the tax base. At the local levels, he said, Franklin can take advantage of the state’s Keystone Opportunity Zone and other tax abatement programs to entice new industry.

“It’s all about creating jobs and sustainable investment so that the business will be there for years to come,” he told Fleming.

Although Banda said the three-judge panel usually submits its written opinion on the borough’s tax increase eligibility within a week to 10 days, he said he feels confident it will be granted, as it has every year since it was first petitioned in 1997.

“I think the court will approve it,” he said. “I don’t want to second-guess them, but the court understands the criteria that we have to show and I believe we’ve shown it.”

As Kiniry passed Banda on his way out of the courtroom, he waved and jokingly remarked, “See you next year.”

Justin Dennis is a multimedia reporter for The Tribune-Democrat. Follow him on Twitter at Twitter.com/JustinDennis.

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