SHENANGO VALLEY Officials consider home-rule charter

Shifting the tax burden to a higher earned-income tax would be a main goal.
By HAROLD GWIN
VINDICATOR SHARON BUREAU
SHARON, Pa. -- Now that the vote to consolidate five Shenango Valley municipalities into a single city has failed, Sharon officials are considering taking a serious look at having the city become a home-rule charter municipality.
Fred Hoffman, city council president, said council was moving in that direction earlier this year before a group of Shenango Valley residents got together and secured enough signatures to get the consolidation question on the Nov. 2 general election ballot.
That prompted council to put home-rule discussions on the back burner until the consolidation issue was decided, Hoffman said.
Both Sharon and Farrell voters approved the consolidation proposal, but voters in Hermitage, Sharpsville and Wheatland rejected it, killing the effort.
Hoffman said the majority of council was supportive of the home-rule charter concept earlier this year, and city officials will start looking at that scenario again, especially as a way to ease the property tax burden on city residents.
Home-rule charter communities are allowed to set their own earned-income tax rates on residents and aren't bound by the current 1-percent limit set by the state.
City operations could improve as well, Hoffman said, noting a charter could create a council-manager form of government to replace the current strong mayor government in Sharon.
Tax base
The main issue, however, is the tax base, he said, suggesting that raising the earned-income tax would be a way to lower real-estate taxes.
Hoffman said he had no idea how high the earned-income tax would have to be raised. That's something that would have to be studied before the charter issue is pursued, he said.
Mayor David O. Ryan said he has no problem with the city considering home rule, noting that he brought that possibility up himself when he was running for the mayor's seat four years ago.
Raising the earned-income tax would be one way to improve city finances by taxing those most able to pay, he said.
That would have to come with a corresponding drop in the property tax rate to benefit those on fixed incomes who own their own homes, he said.
Revenue
Sharon's 2004 budget shows an anticipated $4.5 million in real-estate tax revenue based on a 42.5 millage tax rate, with $4.1 million of that coming from current tax payments and about $400,000 from back years' taxes.
A home assessed at $100,000 has an annual tax bill of $4,250, but city Finance Director Michael Gasparich said there aren't many homes in Sharon assessed at that rate. Mercer County still uses 1970 assessment figures in determining property values.
The average residential taxpayer in the city pays about $13 a year for each mill.
Sharon levies a 1-percent earned-income tax now but half of that goes to the Sharon City School District.
The city anticipated raising $750,000 from its 0.5-percent share of the tax this year and will get to keep about $370,000 more in earned-income taxes collected from people who live in Ohio but work in Sharon.
The money is deducted from their paychecks here and they get credit for the payment in their home community, but there is no reciprocal agreement between Ohio and Pennsylvania to allow an Ohio municipality to claim that money from Sharon, Gasparich said.
Likewise, Sharon can't claim any money from an Ohio municipality where a Sharon resident works, he said.
Residents only
Home rule allows a municipality to raise the earned-income tax on its residents, but not on nonresidents, said Atty. Thomas Kuster, solicitor for Hermitage, which has been a home-rule community since the 1970s.
That means if Sharon adopted home rule and raised its earned-income tax from 1 percent to 2 percent, with 0.5 percent still going to the school district, the anticipated revenue would rise to about $2.6 million, including the $370,000 generated by the 1-percent tax on nonresidents working here.
Presumably, that would be enough to cut real-estate taxes by about 15 mills, or just over one-third of the property tax load.
The tax rate could be set higher. There's no maximum set in the law, Kuster said.
Converting to a home-rule charter municipality isn't a simple process, said Atty. William Madden, Sharon city solicitor.
Council would have to pass an ordinance directing the Mercer County Board of Elections to put a referendum on the election ballot asking voters if a government study commission of seven, nine or 11 members should be elected to study the government and determine if a home-rule charter is advisable.
If voters approve that question, people then have to seek election to the government study commission in the next election, Madden said.
What's next
The commission will then have nine months to complete its studies and submit its findings to the public, except, if it is proposing a home-rule charter, it gets an extra nine months to complete that process, he said.
If the commission determines that electing city council members by wards is the best way to go, it gets another two months to work out that process, he said.
If a charter plan is proposed, the commission must present its plan to the community, and the issue goes back on the ballot as a second referendum asking if the charter should be adopted, Madden said.
If it passes, council would have to appoint a transition team to write a new administrative code to govern the basic day-to-day city operations.
The entire process could easily take more than two years to complete, Madden said.