A proposed 2 percent Luzerne County tax hike should be off the table for 2018 because the county’s debt repayments will decrease $5.3 million next year thanks to recent refinancing, county Council Chairwoman Linda McClosky Houck reiterated this week.
McClosky Houck said there may be confusion about the tax-avoidance option because the $5.3 million is separate from an $11.6 million windfall for 2017. Council may use the $11.6 million to get caught up on employee pension subsidies and whittle down a deficit on the county’s books.
“There should not need to be a tax increase next year,” said McClosky Houck, who made a similar argument days before she was re-elected Nov. 7.
The administration’s proposed 2018 budget factored in $26.1 million for debt repayments next year, but the county now owes $20.76 million due to the refinancing.
McClosky Houck said she plans to propose a budget amendment reducing the debt expenditure by $5.3 million.
If it passes, $5.3 million less in revenue will be needed, ending justification for a tax hike to generate an additional $2.1 million, she said.
Even if no further spending cuts are made, the county would be left with $3.2 million extra that could be placed in reserve and used to further reduce the deficit if the money is not spent by year’s end, she said.
She also expects a majority of council will agree on some additional spending cuts in the proposed budget, which would further increase this surplus.
Councilman Vice Chairman Tim McGinley said he does not want a tax increase and is prepared to support some cuts, such as rejecting at least some of the 16 new positions requested by the administration for 2018.
However, McGinley warned council members must keep an eye on the big picture and carefully weigh how they handle next year’s debt service reduction because it is a special, temporary reprieve. Under the new refinancing schedule, debt repayments will increase from $20.76 million to $24.9 million in 2019 and back up to $26.1 million in 2020, remaining around that amount through 2028.
Meanwhile, the county capital fund, which was primarily comprised of past-borrowed money, is essentially “wiped out” by pending projects, McGinley said.
Around the corner is an estimated $20 million unbudgeted expense to overhaul the emergency 911 radio communications system so emergency responders can continue exchanging messages after their existing transmitters and receivers become obsolete in 2020, he said. The administration has said no additional state funding is expected for that project.
McClosky Houck said debt repayments will still be $1.2 million lower than expected in 2019. Savings from an upcoming energy efficiency project also may cushion the blow.
“In 2020, the debt payments will go back up, and we will have to tackle that when we get there,” she said.
This year’s $11.6 million windfall came from refinancing debt payments, a baseball franchise litigation settlement and other sources. Both the administration and the county’s financial adviser — Harrisburg-based Public Financial Management (PFM) — have advised using $8.6 million to get caught up on pension subsidies that have been a year behind for years. They suggest applying the remaining $3 million to the deficit.
The county’s deficit was pegged at $7.98 million at the end of 2016.
PFM and the administration also urged council to avoid applying one-time savings and revenue to recurring operating expenses.
Council is scheduled to adopt a 2018 budget on Dec. 12, and council members continue to review budget proposals and possible amendments reducing expenses.
As of Friday evening, two council members — Harry Haas and Kathy Dobash — had proposed budget amendments.
A 2 percent real estate tax hike would increase the county tax bill on a $100,000 property about $12, from a total of $597 to $609.
Reach Jennifer Learn-Andes at 570-991-6388 or on Twitter @TLJenLearnAndes.