If any of you who attended the Annual Chautauqua meeting this year still have some questions about the recently confirmed Earned Income Tax misallocation issue, I did a little research and have more details for us. I requested from the EIT Bureau Board, and promptly received, a rather detailed presentation of the issue, including its history and a breakdown of the "financials" from 2004 to 2006 and by municipalities involved. This included numbers for Mt. Gretna Borough, which, by the way only has 207 registered voters.
The short story on how this came to light is that certain recipients of Lebanon County's EIT revenues were receiving what they thought to be significantly smaller amounts of monies than they knew they were owed, so they started making complaints, which led to an investigation/audit.
According to the attendees at last night's EIT Board meeting, the formula for determing what amount of the total EIT Revenue that a municipality is allocated in a given year is directly proportional to its contribution to that pot. Here is an example: Say the total EIT revenue for the year 2020 was $100 and Mt. Gretna Borough residents contributed $10 to that total. So, the result of the formula applied here is that half of Mt. Gretna's residents' contributions are given to the school district, and half of that contribution is given to Mt. Gretna Borough. So, in my example, for the year 2020, Mt. Gretna Borough would receive $5 from the EIT revenue (give or take a little for nominal fees/adjustments charged to the $5).
Sticking to only the numbers as they pertain the Mount Gretna Borough, it was found that, for the years 2004 through 2007:
Total Earned Income reported to the Dept. of Revenue $ 6,349,685,057
Total Mt. Gretna Borough residents' earned income $ 18,005,380
Total EI Tax reported to the DOR $ 97,673,527
Total Mt. Gretna Borough residents' EI Tax contribution $ 123,370
Applying the formula for distribution of that revenue, for the years 2004 through 2006, Mt. Gretna Borough should have received about half of its EIT contribution, so about
$ 61,000
Instead, Mt. Gretna actually received $ 256,642
This is an overpayment of $ 195,642
Now, the auditing firm's research included more years than I have included here, which is why we are told that the amount we were overpaid was really around $244,000.
The EIT Bureau Board seems to be on the right track in pursuing a fair resolution to this problem. It has moved forward from Day 1 adhering to the principals of transparency and collaboration, rather than with paternalism and heavy-handedness. The Board seems to consider communicating with the taxpaying public as an essential that is preferred over just relying on city solicitors' participation negotiating municipal agreements for "re-direction" of overpayments, and encourages us to attend their monthly meetings, held every third Wednesday, at 6:30pm at the Lebanon School District Office (just go in the door and turn to the left).
However, the next two meetings will be held at the Municipal Building's auditorium, as we have some very important voting to participate in in Sept. and Oct. They will also be publishing a new website and designating a Right-to-Know officer soon. I will keep you posted on those accomplishments as they happen.
Before I hit the publish button on this post, I want to bring up two points for thought that this tax stuff generates.
First, via a phone conversation with our Borough Office, I learned this morning that Mt. Gretna Borough does not have an "official Municipal Representative" to the tax board. While we may "manage to get someone, including our solicitor (Kilgore) to attend the important stuff", we need to have an official municipal representative. Why? Well, because this is how a taxing body establishes its constitutionality for taxing us--remember that whole "taxation without representation" thing?
And, don't we, as Borough residents, get the opportunity to vote on the issue of the Borough aqcuiring long-term debt obligations? Again, the process pursued here is not settlement negotiations in some legal action--it is the development of a contractual financial obligation, the assumption of a debt obligation. So, why aren't we being informed and brought in on this whole process? Look, I have faith that my neighbors will do the right thing when presented with factual information, so I honestly don't think that returning overpayments is something that we would avoid.
However, the scenario presented to us at the annual meeting suggests that our solicitor is making all the decisions and entering the Borough into these long-term commitments. This situation is confirmed by the Board's statements last night that they do not know who our official Municipal Representative is, but that they pass on all such communications to Bill [Care] and by the Borough administration denying that we even have an "official Municipal representative."
So, who is committing the Borough taxpayers to this debt obligation? Because this isn't a legal action, Kilgore's real role here is to profer to his or her client a legal review of an agreement's terms--it is not to act as executive officer for a municipality.
While our Borough administrators may defer to him and think that Kilgore "is really one of us", he REALLY is not, and I would not, by a long shot, be the only Mt. Gretna resident to make that assertion. And, if the response to that fact is that he "has been here long enough" or longer than I have, so that justifies placing a restriction or qualification on my requests for proper representation, or for enforcement of Borough Ordinances or state laws, then I respectfully request a pro-rated reduction on my tax burdens and Chautauqua fees. The reality is that each of us is a full-fledged resident, with attendant rights and obligations. Period. Any other heirarchy or "classification" of residents is parternalistic, and unethical.
The second point of concern is that there doesn't seem to be a "zealous representation" by our solicitor of our interests in the resolution of this Over-Under EIT issue. Kilgore himself said at the annual meeting that he was negotiating a longer payment term for us, but he made no reference to or informed us as to our alternative of challenging the total amount, especially in terms of using new residents' tax payments to pay for another person's criminal misconduct, or of using any resident's Borough contributions to pay for another person's criminal misconduct.
Arguments like that are legitimate to make on behalf of your client, and do not need to be made or pursued in a way that is adversarial or that erodes your respect for the real issue at hand: that some municipalities or school districts were underpaid and need the money. At the end of the day, we all go home to each other as neighbors, so we all have a vested interest in the health and success of our neighboring municipalities and school districts. But just as the underpaid entities seek fairness in the resolution of this issue, the overpaid entities have a right to fairness as well, and to "zealous representation" by whatever legal representative they hire. And, for us, Kilgore has assumed that job.
One thing that I learned from growing up in a rural community is that these little nuanced failings, like the ones that I have described in these last few paragraphs, will be remembered--they get talked about over card tables, over tailgates, and on porches for years, if not generations, and they contribute to aging your legacy into either wine, or into vinegar.
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9 comments:
By law, if the Borough plans on borrowing to repay this "debt," it must seek approval from the Local Government Unit Debt office.
And, if the Borough plans on making an agreement that is essentially it making a "temporary loan" in anticiipation of its tax revenues, it must do so by resolution and it must repay the loan from the first moneys available from taxes in anticipation of which the same were made. See 53 P.S. § 46005 of the Borough Code, outlining powers of the council.
Where did all that extra money go?
Why didn't our beancounter know something was wrong?
10 years or twenty years, if the Borough budget doesn't have the money for itself, how are we going to make a payment to someone else? How can the borough enter into a repayment agreement knowing it won't be able to make the payments?
The need for the municipal representative is because of a new EIT law--Act 32. That new law requires the borough to select a delegate and one or more alternates and for the delegate to attend tax committee meetings, like the mandatory ones that are being held the third wednesdays in Sept and in Nov., also at the municipal building auditorium. There is paperwork that has to be submitted by the delegates and alternates, so someone at the borough office should know who ours are!
Thanks for a very interesting discussion!
Is there an estimate, circulating, of how much each Mt. Gretna Borough resident would owe to cover this $244K overpayment?
As far as determining how much each one of us would owe, I think we would first have to decide whether we want to use all Mt. Gretna residents, or just those contributing to the EIT.
Since we really can't predict how many Mt. Gretnans will file EIT here next year, or the year after...I think we can get to a rough guess by starting with the number of registered voters: 206 and round down from there, since I have been told that some people actually don't winter here that are registered to vote here. We can also knock off some numbers by recognizing many of our residents are retired. So, dividing 100 into 244,000, that gives us about $2440 per estimated earned income tax filer in Mt. Gretna.
A quick check on that formula I think can be done by dividing the total earned in one year by the 100 figure: 5,000,000/100.
That gives us a rough estimate of the average earned income per resident for that year: $50,000. Now, I think that is right on mark with the census figures I came across a few years ago, and it sounds reasonable.
So, I think we can estimate the burden at $2440 for each Mt.Gretna resident filing EIT papers.
I also think that we have another question to bandy about and that is "don't our officers have to be bonded--so why aren't we pursuing a remedy through some sort of insurance like this?"
On the other end of this debaucle, I was told, the gentleman who may have been responsible for sending us too much money was bonded and that his bond was tapped to try to fix this problem overall. However, it apparently wasn't nearly enough to cover the amounts mishandled and missing.
So, my thoughts ask, since it seems like the first gentleman was not prosecuted or found guilty of anything before his bond was tapped, and we know for certain that we received an obviously inappropriate amount AND we can't be sure exactly to whom or where the missing monies went, "are the people who handled those funds for us also bonded and why aren't we tapping into their "insurance"?"
This would seem an especially relevant question if that person should have known reasonably how much we were entitled to or how much we reasonably should have been getting, and accepted 100 to 200 percent more than we were entitled to for year after year without bringing the error to anyone's attention.
To: Mount Gretna Blog
Re: "$2440 for each Mt. Gretna resident filing EIT papers."
Thanks for quantifying this, however, as all households that pay property tax within Mount Gretna Borough are "beneficiaries" of this EIT overpayment, would the $244K figure be divided by a larger no.? In other words, I own property, but am not a resident, nor registered voter, nor EIT filer, but pay property tax to Leb. Co. Should we be tallying property-tax-paying households, rather than EIT filers?
Well, I think that that is the question: "what is the proper, or most fair distribution of responsibility for correcting this overpayment?"
But we do have to acknowledge that we are having this conversation under the assumption that the Mt. Gretna infrastructure was the benficiary of the overpaid monies. So, that would suggest that property owners are the proper source for the repayment.
However, I have not heard that that is how the repayment is going to happen, though--that the annual repayment amount would come from our property tax revenue. I haven't really gotten much by the way of confirmed information about the actual terms and plan for repayment, except that the EITB and Kilgore are negotiating a longer interest-free repayment term for us. That's why I stuck with the EIT numbers.
This is not just an income issue. How has the Boro been setting its expenses over the years based upon inflated income. It would be appropriate to examine every expense, including salaries, to reset them according to actual future income. If the Boro has been living large based upon excessive tax payments to it, a reset may be appropriate. What are the expenses of the Boro, including salaries. This should be public information on their website. More openness and sunshine are in order when we are now faced with a large debt and increased taxes to pay it and operating expenses.
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