Clearfield Borough Hears First Part of Financial Study

CLEARFIELD – Clearfield Borough has seen its share of woes in recent decades from a declining and aging population to loss of jobs, but according to Michael Weir of Michael Weir LLC of Pittsburgh, those same problems are being seen in cities and boroughs across Pennsylvania.

Weir was brought to the borough thanks to a grant from the Department of Conservation and Economic Development to look at trends with the borough’s finances and look at solutions to possible problems. The study was requested by the borough and was done as a proactive measure to prevent financial problems.

The first three pieces of his six-step early intervention program were discussed with council Tuesday night. Fourth Ward Councilman Barry Reddinger was absent.

One item Weir did note was that the borough is not facing poorly funded pensions as some other cities, and the borough’s debt load is low.

Looking back, Weir said the borough’s revenue from all sources has been increasing at a rate of about 5 percent per year, and ongoing expenses have been increasing at the same rate. The borough’s property tax base is not increasing very much, and other taxes such as the Emergency Municipal Services Tax and the amusement tax have been added.

A good note, Weir said, is that the borough has not used one-time revenues to meet ongoing expenses as he has seen in other municipalities.

“You’ve been good in effect by not sticking your hand in the cookie jar,” he said, noting that one community sold off their fire trucks and then leased them back to the municipality for use. The money from the sale went toward balancing the budget, Weir said.

The biggest expense increases for the borough have come from salary and benefit increases, which have been at about 4 and 5 percent, respectively. Weir noted that in his opinion, these numbers are good because other municipalities have seen increases of 10 to 15 percent.

Weir said that without the reassessment of properties, there will be little growth for real estate tax in the borough. Weir said that in his professional opinion, the county should reassess.

Weir said the county has not reassessed property values in about 20 years, and he said, “As I understand it, probably not for another 20 years.”

Without reassessment, Weir said the borough is left to increase real estate tax to earn more money in that budget column. He said that in five to 10 years, the borough will likely hit the millage cap of 30 (The borough is currently at 25 mills.).

When that happens, the borough can levy special taxes for the fire company, debt service, shade trees and certain other things, or it can go to court to request an increase in the millage.

“In most instances, judges say, ‘Yes,'” Weir said.

This is compounded by the fact that the borough’s collections from Earned Income Tax has only increased by 0.3 percent per year since 2000, a trend Weir said is due to a declining population and the population that remains getting older and retiring.

If the borough continues on the path it is on now, Weir said it is likely to be looking at a structural deficit of more than $500,000 by 2012.

Weir said tax revenues are unlikely to increase without rate increases, and other revenues are unlikely to increase in the next five years. At the same time, he expects expenses to go up at a rate of 3 percent per year with the biggest shares going to health care insurance and energy costs.

Weir said that in the short-term, he recommends that the borough evaluate the need for any vacant position, monitor the use of overtime and sick leave, monitor the use of energy, limit discretionary spending and be aggressive with revenue collections.

He also recommended that rental units be inspected and tenants register their address. When rental units are inspected, Weir said everyone receives adequate housing, noting that other areas such as Beaver Falls and Sharon recently completed similar programs.

In Sharon, 5 percent of rental units left the market, but Weir said these were units that he believed would have been condemned within five years.

“So maybe you’re not taking out the wrong ones in the process.”

When the tenants register also, Weir said a database can be created to ensure renters pay their income tax, and fire companies can use the information to know who is inside. Police departments and landlords also like the database, each for their own reasons.

Weir also suggested business and property registration to ensure that taxes are paid and the right person is billed for taxes. Another recommendation was to selectively audit local employers to be sure that all are collecting money due to the borough.

Another recommendation was to perform an energy audit.

Weir said the borough should also look at its fee schedules.

“Your fees should cover the cost of the activity related to the fee,” he said.

Weir also said the borough should continue to pursue intergovernmental cooperation initiatives such as consolidating police and fire departments.

“It could make sense in the future to consolidate police or fire or with (Lawrence) Township,” he said.

Weir said he will return in about one month to present the other half of the early intervention plan.

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