Consolidation advocates plan tax cuts

A key point of the plan's tax savings could face a legal challenge.
By HAROLD GWIN
VINDICATOR SHARON BUREAU
SHARON, Pa. -- A citizens group advocating consolidation of five Shenango Valley municipalities has come up with a plan it says will significantly cut real estate taxes for many taxpayers.
However, if a voter referendum on the issue passes Nov. 2, the people in charge of organizing the new government won't be bound by that plan.
They'll be bound only by the specific terms of the referendum question, which stipulates that the new city, to be called Shenango Valley, will be governed using the existing Hermitage Home Rule Charter and run by a nine-member legislative body, said Fred Reddig, deputy director of the Pennsylvania Governor's Center for Local Government Services.
The referendum question doesn't go any further and everything else, including the tax structure suggested by Citizens For the Valley, is up in the air. That may or may not be what the new city ends up with, Reddig said.
Will have deadline
If a majority of voters in each of the municipalities of Sharon, Farrell, Hermitage, Sharpsville and Wheatland vote "yes" on the consolidation question, the current governing bodies of those communities will have 60 days, under state law, to start the process of forming a new, single government.
They can do it themselves or appoint a transition committee to draft the rules for how the new government will operate, Reddig said.
Although the law has a specific time period for starting the process, it doesn't have one for coming up with the final version, he said, noting the law stipulates only that it be done in a "reasonable time."
The plan being advocated by Citizens For the Valley was drafted by James DeCapua, executive director of the Mercer County Regional Council of Governments and a subcommittee chairman for the intergovernmental study committee that tried for four years to come up with a consolidation plan for the five municipalities.
That committee ended its efforts nearly one year ago without making any recommendations for any type of joint municipality.
Gregg Buchanan of Hermitage, the driving force behind Citizens For the Valley, decided not to let the issue die there and organized a petition-signing drive in each of the five municipalities to get the consolidation referendum on the ballot.
He said much of the plan prepared by DeCapua is based on what came out of the intergovernmental study committee's work.
Tax structure
The plan not only calls for following the Hermitage Home Rule Charter as the form of government, it also advocates following the Hermitage tax structure to fund the new government.
That structure relies on a higher earned income tax and a lower property tax than is levied in any of the other four municipalities.
Hermitage residents pay a 2.25 percent earned income tax, with 0.5 percent going to the Hermitage School District and the city keeping 1.75 percent.
The city of Hermitage also levies a 5-mill real estate tax.
Sharon, Sharpsville and Wheatland residents all pay a 1 percent earned income tax with 0.5 percent going to their respective school districts. Sharon's real estate taxes stand at 42.5 mills, while Sharpsville is at 20.7 mills and Wheatland at 15 mills.
Farrell has a 1.8 percent resident earned income tax with 0.5 percent going to its school district and real estate taxes set at 22.67 mills.
4-mill property tax
The Citizens for the Valley plan proposes a 2.25 percent earned income tax (with 0.5 percent still going to the school districts) and only a 4-mill property tax for everyone, resulting in much lower property tax bills for all but Hermitage residents, whose taxes would drop just 1 mill.
To do that, the plan requires shifting the $1.8 million the five municipalities now pay annually for fire protection services from the general fund to a special fire service fee.
However, the legality of that change is the subject of some debate.
Because each of the municipalities has a different fire protection system in place, the plan calls for the creation of five fire service districts, each corresponding to current municipal boundaries.
Each district would have its own fire service fee corresponding to the cost of its fire service.
For example, Sharon, the only municipality with a full-time paid fire department and no volunteers, would have a higher cost than any of the others, all of which have volunteer or a combination of paid/volunteer departments.
The plan proposes assessing a higher percentage of the fire service fee against commercial and industrial companies because they will be getting a big tax break but not paying any earned income taxes.
Residents, including all homeowners and renters, would be assessed an undetermined, but more nominal, fire service fee.
Therein lies problem
That disparity in fees could be a problem.
Stipulating that he wasn't offering a legal opinion, Reddig said his agency believes that fees can be levied and vary from district to district but must be uniform within each district.
Some members of the intergovernmental study committee, some of whom oppose consolidation, said the districts and fees would be illegal.
Tom Lally, who chaired the fire service subcommittee for that group, cited the opinion given by the subcommittee's legal counsel, Atty. Thomas G. Wagner, which says that, though fire districts can be created, the tax rate levied to support those differing level of services must be the same throughout the new municipality.
DeCapua said because the assessments would be labeled as fees under a home rule government rather than as taxes, the legal question wouldn't apply. Wagner also addressed that issue.
"It may be argued that the cost of providing paid fire protection services in specific districts could be treated as a service fee, rather than a tax. However, at least one Pennsylvania court has already decided that the levy of a service fee for police and fire services is really a tax," he wrote, referring to a 1995 Washington, Pa., court case.
Adverse effect
If it is finally determined that the fire service fee idea isn't legal, the size of real estate tax breaks in the plan would be adversely affected.
The plan projects a $2.9 million overall general fund reduction in government operating costs for the city.
In addition to the $1.8 million in shifted fire costs, the plan predicts that general government costs would be cut by $675,000 by eliminating much duplication of services and facilities and reducing the number of elected as well as appointed administrators and mid-level managers.
The plan also shows a projected $437,000 reduction in police costs by reducing the number of full-time police officers from the current 85 to 69 but adding 16 part-time officers to help cover shifts.
Buchanan said the plan is a suggestion as to how a new government might work. The fire district issue isn't insurmountable, he said.
Instead, the new city might have a volunteer fire department supplemented with paid firefighters who would man stations to move equipment in the event of a fire call, he suggested.