The State College Borough Council heard good news and bad news while diving into the proposed 2015 budget during a work session Monday morning.
The good news: State College still has one of the lowest tax rates in the Centre region.
State College Borough Manager Tom Fountaine told council that even with the proposed tax increase of about $191 per year for a home with an assessed value of $200,000, State College still has the third-lowest tax rate of all surrounding municipalities.
The bad news: pension costs for borough employees have skyrocketed, increasing costs across the board in all borough departments. Fountaine said that pension costs have gone up by 151 percent – an increase of more than $62,000.
Representatives from across borough departments echoed this sentiment, consistently informing council that one of the biggest cost increases in their departments was the cost of employee benefits and pensions.
“The increase in pension costs have been driven by losses in the marketplace in recent years,” Fountaine told StateCollege.com. “The market is actually doing much better today, but those gains won’t be reflected for a couple years.”
The borough completes a document known as an actuarial report every few years, which compiles market trends and calculates pension costs. The next report will be completed in January 2015, and take effect in a January 2016. Fountaine says pension costs may change at that point, but it’s “a very complicated process” that’s difficult to predict.
Fountaine told council that the cost of employee benefits and wages have increased by over four percent. This has led to “a moderate increase” in State College’s overall administrative budget, which includes the office of the borough manger, the mayor, borough council and several other departments.
The borough’s total budgeted administrative cost for 2015 is just under $3,800,000 – an increase of about $244,000 over 2014. This continues a trend of gradual growth since 2011, when administrative costs hovered around $2,900,000.
Part of the increase to administrative costs comes from two one-time transfers out of the administrative fund to help fund two projects of importance to the borough: over $83,000 for the Bellaire Court project, and over $38,000 to help fund the construction of the new Centre Area Transit Authority bus terminal.
Linda Welker of the Centre Tax Agency told council the tax collection organization has been operating efficiently, finding no major issues in a recent audit and collecting over $58,000,000 in 2013. She projects the agency will collect over $60,000,000 in 2014 as more entities take advantage of electronic filing options.
Welker said Penn State will soon switch over to paying its taxes to the Centre Tax Agency once every three months, instead of every month. Though she said this isn’t expected to impact the agency’s total revenue, she’s unsure how the new payment schedule will impact cash flow for State College and other municipalities.
“We are still analyzing this information, but it’s not expected to have a dramatic impact,” Fountaine said. “…This may be detrimental for local municipalities, but it could just as easily not impact us.”
Representatives from the Financial Services and Information Technology departments both told council they had deferred hiring new staff to mitigate increasing personnel costs. The IT department has also been forced to delay funding for a number of capital improvement projects and parking meter upgrades.
The borough will also continue to help fund the Downtown Improvement District, State Theatre and the Campus and Community Partnership Against Dangerous Drinking, with a total cost of $90,000. The borough’s support of Fourth Fest and First Night will also cost the borough $22,500 in 2015.
The State College Borough Council will continue to discuss the budget at a public work session at 11:30 a.m. on Tuesday. The budget is tentatively scheduled for adoption on December 15.
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