The Herald, Sharon, Pa.

Local News

November 5, 2009

City will tap reserve fund to cover deficit, Lucas says

By Courtney L. Anderson

SHARON — The city of Sharon will likely be in the red at the end of 2009, Mayor Bob Lucas said.

“We’re going to be in a deficit this year,” Lucas said. “I’m predicting $300,000.”

The shortfall will be made up by tapping in to the city’s fund balance, which was $541,000 at the end of 2008, Lucas said. He noted that when he took office in 2005 the city actually had a negative fund balance.

It appears the income from a higher wage tax, permitted under the home rule charter, will come in about 25 percent below what city officials projected at the beginning of the year.

Lucas’s figures show 2009 wage tax revenues down by about $800,000.

The mayor said he thinks the problem is due more to timing — some businesses did not start collecting the higher rate until the spring — than to unemployment in the area. Sharon’s unemployment 13.5 percent rate is the second highest in the state.

He noted that Hermitage’s wage taxes were down about 7 percent. If 3,000 people in Sharon did not have the new rate immediately withdrawn from their paychecks, that could equal $450,000 due to the city.

Lucas said city officials knew there would be a cash flow problem because the taxes for the last quarter won’t come in until the first quarter of the next year.

A 2.25 percent earned income tax for Sharon residents went into effect Jan. 5. The hike was permissible with a 33 percent decrease in real estate taxes.

The city saved almost $20,000 because they did not have to pay as much as projected to Central Tax Bureau, the company that handles wage tax revenue for the city, because that income was down.

Lucas said being able to make up revenue only through property tax increases is why he suggested the drastic shift for 2009.

He stands by the decision as a good one for property tax payers in Sharon.

Lucas said he would like to see state legislators pass a law that would allow counties to enact a county-wide sales tax. Depending on how the formula shakes out, Lucas said it could benefit city coffers and lower school property taxes.

The 2009 budget has seen changes since it was adopted at the beginning of the year.

Litigation costs are up about $10,000 due to grievances filed by the Fraternal Order of Police, Lucas said.

Overtime in the police and fire departments was also over budget because of staffing shortages in the first half of the year, he said. The city spent $50,000 more than the $77,000 budgeted for overtime in both departments.

With more personnel, Lucas said he hopes that line item will be lower next year.

City council’s travel budget comes in at $10,000 — $9,000 more than budgeted — because they paid to bring in several city manager candidates for interviews, Lucas said.

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