York County municipalities look at freezing spending, raising taxes as revenues plunge
At least one York County municipality is considering raising taxes and cutting spending, while others are taking a wait-and-see approach as the coronavirus pandemic takes a bite out of their revenue.
Since Gov. Tom Wolf's stay-at-home order shuttered nonessential businesses in March, local municipalities have taken a hit due to a lack of business privilege and mercantile taxes, a vital part of a municipality's economy, officials said.
The financial stability of local governments and the strength of the local economy are "inextricably linked," as local officials depend upon the success of businesses, which pay taxes and also employ residents, who also contribute taxes, said Kevin Schreiber, president and CEO of the York County Economic Alliance.
"As layoffs occur or business production slows, it does have a ripple effect that trails a bit but does catch up to local governments in their revenue collections," Schreiber said.
While some officials are considering options to recover lost revenue, such as freezing nonessential spending and furloughing employees, other municipalities are already recognizing the possibility of a tax hike.
Springettsbury Township's Board of Supervisors had announced May 29 that due to a "lack of clarity" from the state in regard to moving from the yellow phase to green phrase, a potential 2021 tax increase would be evaluated in October.
The township's announcement came after the Board of Supervisors passed a unanimous resolution May 28 supporting an immediate move to the green phase for both the township and York County under Wolf’s three-phase reopening plan for Pennsylvania. York County just moved into the green phase Friday.
Anticipating the impending effects of COVID-19 on the Manchester Township budget, officials there have already taken preventative measures and halted all capital expenditures that have not already been committed for the remainder of the year, said township manager Timothy James.
While business privilege and mercantile taxes contribute 16% of the township's revenue, township officials are most concerned about earned income taxes and local services tax revenues having a negative effect on the 2020 budget, James said.
And though Manchester Township has already taken some action to prevent township services from being affected negatively, James said it's still too early to see the true revenue impact on the township’s budget.
"Time will tell the true impact," James said. "We continue to monitor both revenues and expenses and will take action where necessary to react to the fiscal environment."
York Township Manager Gary Millbrand shared a similar sentiment and said he and the supervisors are unsure of the full effects the pandemic will have on the township until more estimates regarding revenue losses are announced later in the year.
"We're watching this to see how this progresses," Millbrand said.
In 2020, business taxes accounted for $1,643,130, or 6.5%, of York Township's budget, according to its website.
Millbrand said the township has not furloughed or laid off employees because of the COVID-19 pandemic.
In West Manchester Township, officials have not yet considered raising taxes, though there are growing concerns for making up lost revenue, said Kelly Kelch, the township manager.
"With the majority of the stores being closed for at least three or four months ... it’s really going to affect our revenue stream," Kelch said via email. "We would expect this decrease to continue well into the future as people become accustomed to the world of Internet shopping and avoiding restaurants as they adjust to the 'new normal.'"
In West Manchester, 50% of the township's budget comes from taxes, which includes business privilege/mercantile taxes, real estate, local services taxes, earned income taxes and real estate transfer, Kelch said.
He added that with the cancellations of several events in the township's recreation department and volunteer fire departments, many of the revenue streams that provided additional funds are gone for this year.
While overcoming these challenges, Kelch said officials have felt a lack of support because the township is not eligible for grant or loan programs under the CARES Act, which provides economic assistance for workers, families and small businesses, according to the Department of Treasury website.
"The funds collected by local municipalities are funds which can be easily seen and have an immediate impact on residents," Kelch said. "With a sharp decrease in revenues expected and the loss of income experienced by many of our residents, it becomes a delicate balance of funding versus services."
In May, West Manchester supervisors passed a resolution to support and advocate for the reopening of all businesses in a safe and effective manner.
Additionally, the township anticipated the effect of COVID-19 on funding and immediately placed a freeze on nonessential spending, with all purchases being "individually and carefully scrutinized," Kelch said.
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