Progressive Budget Decision re Earned Income Tax

At times misunderstood when campaigning, I often suggested that the township needed to explore Earned Income Tax (EIT) as a possible revenue source.  There was (and continues to be) a lot of inaccurate information circulating about Earned Income Tax.  An example of misinformation occurred at the last Board of Supervisor Meeting, when Supervisor Chair Warren Kampf indicated that those individuals who lost their jobs would pay Earned Income Tax (if Tredyffrin were to have an EIT).  I hope that Mr. Kampf did not intentionally try to confuse the public with his words;  the fact is that individuals receiving unemployment benefits would not pay Earned Income Tax; unemployment benefits are not subject to EIT.

I thought it might be useful to list examples of income which are not subject to Earned Income Tax:

• Retirement Pensions
• Disability Payments
• Active Military Pay
• Unemployment Compensation
• Insurance Proceeds (non-business)
• Workmen’s Compensation  
• Bequests
• Stock Dividends (non-business)
• Gifts/Lottery Winnings
• Social Security
• Interest (non-business)
• Military Bonuses

Earned Income Tax is based on gross wages, salaries, commissions and other earned compensation. As stated numerous times, approximately $3 million is being paid to other municipalities by Tredyffrin residents.  If an EIT were in place, this revenue would return to the township.  Dave Brill, Township Finance Director, has offered that the potential township revenue could be as high as $8 million (should Earned Income Tax be instituted). 

Assuming that we get through the township budget discussion on December 21 with the proposed draft budget more or less intact, I still contend that the 2010 budget is nothing more than a Band-Aid solution to a far greater financial problem.  I believe that the township will limp along through 2010 with the budget in place.  However, without financial foresight, this time next year the township will be faced with a far greater problem than the reinstatement of $20K to the Fire Department.  The 3 new supervisors all campaigned (and were elected) on the ‘no new taxes’ mantra and they will probably take office on January 4 with that promise intact.  However,  it doesn’t take my London School of Economics education to believe that their promise will be short-lived.  Financially the township is in a very precarious financial situation and we are going to witness firsthand the result of shortsighted financial planning.

I know that this posting of Earned Income Tax discussion will bring opposing comments, and I actually encourage the dialogue.  Tredyffrin’s 2006 Tax Study Commission and voter referendum overwhelmingly were against imposing an EIT.  Warding off that particular argument, clearly 2010 can not possibly be compared economically to 2006; it is a vastly different financial climate facing this township.  I may have been one of the voters in 2006 who opposed an EIT; believing that the township at that point did not have severe financial needs to warrant that taxation approach.  However, if in 2009 this township’s annual budget of $37 million can not fund $20K to our firefighters, something is dramatically different in this current picture.  Each and every taxpayer needs to take a careful look at the proposed 2010 township budget — I believe the future is going to require more than simply tightening our belts as has been suggested by some of our township leaders, as a response to our economic problems!

I came across an interesting article from December 11 concerning the borough of Yeadon, Delaware County — a community located close to the Philadelphia Airport.  I pulled up the demographics to compare Yeadon with Tredyffrin; as you can see they are vastly different.  The median income of Yeadon is approximately one-half the level of Tredyffrin, with 3 times the number of people living under the poverty level.  The point of the comparison is that Yeadon is making a progressive budget decision for 2010 and instituting an Earned Income Tax!  The borough manager believes the move will diversify the tax base and help the seniors stay in their home (the EIT will reduce their property taxes).  I have no idea what the average education level is in Yeadon, but I’m going to make a broad guess and bet that it is far lower than the average Tredyffrin resident.  Why do you suppose than that Yeadon’s leadership was able to conclude that the severity of the economic situation required an Earned Income Tax?  I am  guessing that paying an additional 1% tax to residents of Yeadon is going to be a lot more difficult than a similar tax would be to Tredyffrin residents.  It’s probably a safe assumption that our average Tredyffrin taxpayer is in a far better financial situation than a Yeadon resident. I salute Yeadon Borough for analyzing their economic climate and making this progressive budget decision.

Below is a demographic comparison of Yeadon vs. Tredyffrin with the article concerning Yeadon’s progressive 2010 budget decision. 

Demographics of Yeadon, Delaware County:  As of the census of 2000, there were 11,762 people, 4,696 households, and 2,967 families residing in the borough. The median income for a household in the borough was $45,550, and the median income for a family was $55,169. The per capita income for the borough was $22,546. About 14.6% of the population were below the poverty line.

Demographics of Tredyffrin Township, Chester County: As of the census of 2000, there were 29,062 people, 12,223 households, and 7,834 families residing in the township. The median income for a household in the township was $90,915 and the median income for a family was $121,809. The per capita income of the township was $47,584.  About 3.7% of the population was below the poverty line.

Yeadon Adopts EIT, Decreases Property Taxes

Published: Friday, December 11, 2009

YEADON — Officials will end the year with two bold financial moves.

Council voted 4-0 Monday to impose a 1 percent earned income tax, expected to channel about $900,000 into borough coffers annually.

While municipalities often adopt EITs to close looming budget shortfalls, Interim Borough Manager Paul Janssen said he recommended it as a means of diversifying the tax base.

“Seniors have to pay property taxes like crazy to be able to stay in their house. If council can shift this to an EIT and add a property tax cut it has huge benefit to seniors.” And “They get a tax source that grows.”

Officials plan to use the new tax to decrease property taxes by 1 mill, lowering the rate from 9.89 to 8.89 mills, about 10 percent. The reduced rate had been advertised and is scheduled for adoption Dec. 17. The EIT will also eliminate need to dip into the borough’s fund balance. Janssen said Yeadon had a balanced budget, but it included $197,000 from reserves.

Said Vice President Jack Byrne, “The EIT will generate more revenue for the borough and we’re going to reduce taxes. We have a lot of seniors here and it’s going to be helpful for them.”

Byrne noted that many residents who work outside the borough already pay the EIT, but to the municipality where they work. Adopting an EIT will allow Yeadon to capture those monies.

As I See It . . . Commentary on Board of Supervisors Meeting & Call to Reinstate the Fire Company Budget Cut from Another Township Resident

Over the last few days there has been much discussion about Supervisor Bob Lamina’s  As I See It: Supervisor’s take on Tredyffrin budget: Fair and balanced recent article in the Main Line Suburban.  There was another equally as powerful article in the paper, written by Malvern resident Kathleen Keohane which offers her opinion on the last Board of Supervisor Meeting and includes support to the fire company’s reinstatement of their budget cut.  For the sake of fairness, I want Ms. Keohane’s As I See It: Not much good, but plenty of bad and ugly at Tredyffrin meeting article to receive the same degree of attention.  As taxpayers and residents of Tredyffrin Township, I think we all need to reflect on our expectations from our local government, our leaders and where this township is heading in 2010.  Post your comments here, on the Main Line Suburban’s website or directly to the township supervisors at bos@tredyfrin.org . 

As I See It: Not much good, but plenty of bad and ugly at Tredyffrin meeting

In all the years I’ve lived in Tredyffrin, I have never seen such theater as I witnessed during Monday night’s supervisors’ meeting!

First, a long-serving supervisor decided to leave office with her integrity intact by clearing the air on an issue the board had tried to sweep under the rug – the source of $50,000 in potential revenue recommended by the Business Advisory Working Group (BAWG) in their report. A concerned citizen had stood up at the last BOS meeting to ask how such a recommendation could have made it into the report to the township. Chairman Kampf refused to answer. The topic on the agenda was the budget, he said, and since the $50,000 did not appear in next year’s budget, he would not address it.

In refusing to answer Ms. Benson’s straightforward questions, Mr. Kampf looked like a foolish prevaricator. Ms. Benson remained standing and asked again. Then it became theater of the absurd as every township official and BAWG member sat mute. Apparently no one knew anything about this money. Not even members of the BAWG, who ironically had just received plaques for their hard work on behalf of the community.

The stonewalling raised more questions, but as of last week’s board of supervisors’ meeting, it seemed there would be no answers – until supervisor DiFilippo matter-of-factly reported at Monday’s meeting that the $50,000 offer had come from supervisor Paul Olson last year but had never been put in writing. It was a rare moment of truth.

The origin of an offer by St. Davids Golf Club to pay the township $50,000 was made to get out of a contractual agreement signed back in 2004. The offer became public at a special meeting last month when BAWG chair Tom Colman made a presentation of recommended budget cuts and additional revenue sources. When the offer was made, St. Davids was already in breach of its agreement to construct a sidewalk along the north side of its property on Upper Gulph Road. In addition it turns out that supervisor John Shimrak is a board member of St. Davids and BAWG member Rob Betts is also a member of the golf club.

Ms. DiFilippo stated her opinion that 1) if the township were ever to consider the offer, St. Davids should have to pay the equivalent of the actual construction costs, 2) the funds should be held in a separate Sidewalk Fund, and 3) only the planning commission could approve such a decision, having imposed the sidewalk requirement in the first place as part of a building permit. Not surprisingly the Planning Commission had already denied St. Davids’ waiver request in 2008, at which point it was in breach.

While the facts behind this backroom deal settled over the room, recently retired supervisor Bill DeHaven stepped to the microphone to express some strong opinions. He called the entire sidewalk controversy a red herring. And then he proceeded to criticize his former colleagues’ 2010 budget as one of misplaced priorities, with no evidence of planning – a “get-by budget,” he called it.

DeHaven, a retired police officer, made an emotional plea to restore the fire companies’ funding for 2010. “I love this township. I want it to stay as great as it is and move forward. And I’m willing to pay for it.” He urged the imposition of a dedicated fire tax so that residents would know exactly how much they contributed for fire and emergency medical services.

Supervisors Kampf, Lamina and Olson defended the fire cuts as necessary. At that point supervisor John DiBuonaventuro responded that he was truly offended that $21,000 for fireworks remained in the budget while funding for the fire companies had been reduced by an equivalent amount. And that ironically firefighters would be expected to work for free on the Fourth of July. He reminded the board that its first responsibility was to protect the township’s residents.

If all of this wasn’t dramatic enough, a township clerical worker bravely stood up and spoke bluntly to her bosses. She said that she was one of 24 office workers who had formed a union several years ago because they felt it was the only way they would be able to make a decent living. The elimination of their longevity pay in next year’s budget meant 6-14-percent cuts in their salaries. And since seven clerical workers had been laid off in October, those remaining were expected to take up all the slack. Their average salary: $40,000. The woman expressed her feeling that the supervisors’ decision to make steep cuts instead of raising taxes to pay for necessary services was a mistake. You get the level of service you pay for, she said. She urged everyone to study the budget cuts carefully.

As the emotional pleas from board members, former board members and residents wore on, supervisor Bob Lamina announced that he had decided that he could not support fireworks over fire companies. John DiBuonaventuro immediately asked that the fire companies’ funding be reinstated. Anti-climactically, BOS chair Mr. Kampf refused to consider it. And then he launched into an emotional defense of all the budget cuts as necessary given the current economic climate. “We have a choice,” he said, “to go to the taxpayers or look to ourselves. So we decided to tighten our belts.”

The entire meeting lasted about 75 minutes but it seemed an eternity. In the process, a backroom deal revealed. Emotional pleas for and against budget cuts. All peppered with insulting remarks made by supervisors and citizens alike. You must watch a rebroadcast of this meeting. And then weigh in as a citizen. You can contact your supervisors at bos@tredyffrin.org.