Middletown Borough Council Minutes

September 17, 2013

September 17, 2013 Middletown, PA 17057 The September 17, 2013 meeting of the Middletown Borough Council was called to order at 7 p.m. by Council President Christopher R. McNamara. Following the Pledge of Allegiance, the following Council members answered roll call: Barbara Arnold, Donald Brooks, John Brubaker, Robert Louer, and Christopher R. McNamara. Councilors Judy Putric, David Rhen, Scott Sites and Sue Sullivan were absent. Also present were Mayor Robert G. Reid, Borough Manager Tim Konek, Police Chief Steven R. Wheeler, and Borough Secretary Chris Courogen. Councilor Brooks made a motion to amend the agenda by moving the public comment to after the scheduled presentation by David Unkovic. The motion was seconded by Councilor Louer and approved by a unanimous 5-0 vote. Mayor Reid and Chief Wheeler presented Officer Pete Fure with a commendation and a citation for valor honoring Officer Fure for his heroic actions under fire as a member of the Dauphin County Crisis Response Team during a December 2012 incident in Harrisburg. Mayor Reid and Chief Wheeler also presented Officer Gary Rux with a certificate honoring Officer Rux for his efforts in organizing Middletowns Night Out event. Council President McNamara then introduced David Unkovic, the former receiver for the City of Harrisburg, who presented a second opinion review of the Boroughs proposed Early Intervention Plan. Unkovic explained Middletown is not the only municipality in the state with financial challenges and presented an overview of municipal finances. After confirming the Boroughs General Fund has a structural deficit, Unkovic said the Boroughs options for addressing the situation were to cut expenses, raise taxes, or to take money from other funds to plug the hole. Taking money from other funds is what was common for many years in Harrisburg and contributed to the City becoming financially distressed. Unkovic also gave an overview of Act 47 before moving on to his comments specific to Middletowns EIP, of which he said Overall, it is a good plan. Unkovic attributed the Boroughs situation to a failure to adjust its ways of doing business in the wake of the Met-Ed settlement, which ended the Boroughs ability to purchase wholesale electric for $0.01 per kilowatt hour. When the Borough had to pay market rates, and then raised retail electric prices significantly, it caused businesses and residents to look to move elsewhere or to find alternative sources of power and it discouraged new businesses from locating in Middletown.

Middletown Borough Council Minutes

September 17, 2013

The Borough also faces other revenue issues due to the loss of homes from the HIA noise abatement buyout and the FEMA HMGP flood buyouts, as well as the influx of students who pay less in earned income taxes. Unkovic cautioned the Borough currently has $8.9 million in unfunded liabilities for postretirement benefits. Unkovic recommended Council accept the report, saying it was wise of Council to go through the EIP process. You have very real financial problems. It is good you got outside perspective, Unkovic said. (The report) has made a lot of good recommendations. Additionally, Unkovic suggested the Borough should consider selling the water-sewer system and/or the electric system, consider moderate real estate tax increases over a period of time, and look to bring police department expenses under control. Following his presentation, Unkovic took questions from current Council members and candidates running for Council seats. In response to a question from Councilor Sites, Unkovic said a law has already been put into effect stopping the practice of transferring water-sewer fund monies for uses not related to water and sewer. Although there is no current law banning the transfer of electric funds, such legislation is under consideration and the Borough ought make contingency plans for the eventuality of that possibly happening. Candidate for Council Tom Handley asked of the EIP plan recommends seeking Act 47 distressed municipality status (Answer: No.) and expressed a view that he opposes the idea of selling Borough assets and would prefer the Borough find a way to use revenue generated by the watersewer and electric systems to reduce the Boroughs unfunded post-retirement benefit liabilities over time. Council President McNamara reiterated what Unkovic had said, reminding that a state law already prohibits such use of water-sewer revenue and that Council cannot justify returning to charging residents 17-18 cents per kilowatt hour for electric. Handley argued more than 80 municipalities in Ohio have their own electric systems and that there is a benefit to owning your own utility systems, even if they do not generate revenue. Council candidate Benjamin Kapenstein asked Unkovic if leasing assets might be worth considering instead of selling them. Unkovic said it depends on the assets whether they can be leased or not, but that ultimately a financial advisor could help analyze the numbers to determine whether leasing or selling would generate a better return. John Patten, chair of the Boroughs Sewer and Water Authority, asked if the Department of Community and Economic Development is still encouraging shared services and regionalization. Unkovic said as a general policy DCED does encourage cooperation and that the state legislature is increasing funding for the local government side of DCED. Unkovic also said there has been a trend toward Public-Private partnerships.

Middletown Borough Council Minutes

September 17, 2013

PUBLIC COMMENT Sandy Robbins asked if Council would take public input prior to making any future decisions about selling assets. Council President McNamara assured her that would be the case, but also made it clear Council is not considering the sale of any assets at this time. Such a step is not part of the Early Intervention Plan Council is looking to adopt. Tom Handley commented on past failures of efforts towards regionalized police services. Unkovic said the environment is different now, with many local governments seeking solutions. That might help break down old resistance to the idea. Rachelle Reid asked where people can get a copy of the EIP. Council President McNamara said it becomes a public document once it is adopted, and will be posted on the Boroughs Web site. The ordinance to adopt it is available to review at Borough Hall. McNamara reiterated there is nothing in the plan recommending sale of assets. Rachelle Reid asked if there was something in the EIP which would allow such a sale. Council President McNamara reiterated the sale of assets is not in the EIP. Dawn Knull thanks Councilor Sites for sitting in the dunk tank during Middletowns Night Out event. Diana McGlone thanked Unkovic for his presentation but said she did not hear anything in his report about how the growth of Penn State and the new train station will affect the Boroughs finances. She also asked what incentives would be offered to attract new businesses and commented that raising taxes would cause businesses to go to other localities. Unkovic said the EIP would boost business confidence and that knowing the Borough has a plan to get its financial house in order projects and image that it is headed to a better place, which would attract new businesses. McGlone asked if Council eventually adopted Act 47 distressed status, would it affect property values in town. Unkovic said he could not say definitively without having some analysis done, but cautions Act 47 is not like bankruptcy and many cities have gone Act 47 and prospered, citing Pittsburgh as an example. Seeing no further comments or questions, Council President McNamara thanked Unkovic for his time. Councilor Brooks made a motion to adjourn. It was seconded by Councilor Sites and approved by unanimous consent. At 8:35 p.m., the meeting was adjourned.

Borough Secretary