Fair Taxing: How Lock Haven Could Reclaim $20K in Tax Dollars With New Tax Collection Subcontractor

By Emily Wright

LOCK HAVEN— At the Lock Haven City Council meeting on Monday night, City Manager Greg Wilson shared the latest developments regarding the Clinton Tax Collection Committee’s (TCC) subcontractor for collecting Earned Income Taxes.

In an effort to cut costs and retain more tax dollars for public services, the TCC is exploring alternatives to its current tax collection subcontractor, the Keystone Central Tax Office. Since 2010, this office has collected Earned Income Taxes (EIT), Local Services Tax (LST), and Business Privilege Tax (BPT) for 28 municipalities in Clinton County, including the City of Lock Haven and the Keystone Central School District. However, questions about the cost and fairness of the arrangements have prompted the TCC to look at other options.

Currently, the school district’s tax office charges a 5% fee to each municipality for tax collection while charging itself only 2.5%. This arrangement earns Keystone Central School District approximately $550,000 in commission fees.

The TCC investigated alternative subcontractors to compare against what the school district charges. In Pennsylvania, 73% of all TCCs use either Keystone Collections Group or Berkheimer as their subcontractor, and Keystone Collections Group offers the lowest rate of 1.95% for each municipality. The switch to Keystone Collections Group could save each municipality over 3% in fees, including reductions in LST (1.75% instead of 5%) and BPT charges (3% instead of 5%). The City would then be able to retain more tax dollars for its General Fund use instead of losing those funds to collection charges.

For the City of Lock Haven alone, switching to a different EIT subcontractor would result in approximately $20,000 more in the City’s coffers for public services. For all Clinton TCC municipalities, a total savings of approximately $115,798 would be realized.

Members of the school board have recently expressed opposition to moving business away from the district’s tax office and have made their opposition known at the most recent TCC meetings. This has led to a conflict of interest that resulted in the TCC’s attorney resigning to represent the school district solely.

The Clinton TCC has reached out to attorneys who serve TCCs in nearby counties, seeking proposals. They plan to reconvene at the end of October to review these proposals and, ideally, appoint a new attorney. Once that is completed, the TCC will explore an alternative to the current distribution of the weighted vote system with the goal of creating a more balanced voting structure that better reflects the municipalities’ interests.

In most organizations, each delegate would have a single vote. However, TCC voting is guided by weighted votes. The City of Lock Haven’s vote value is nine, Woodward Township’s vote equals 2.9, and Castanea has 1.39 votes. Meanwhile, Keystone Central holds the majority, with 58.44 out of 100 total votes, giving them significant influence over decisions.

“It is the hope of at least the City, Woodward, and Castanea that a system be implemented that will provide the municipalities with more the majority of votes rather than the minority,” City Manager Greg Wilson said in an update issued to members of the City Council. “This would also protect the district from being put in a position where its actions on the TCC could be perceived as self-serving or a conflict of interest if the district’s tax office were retained as the TCC’s contractor.”

To conclude the discussion, the City Council Members expressed interest in encouraging the TCC to make changes that would benefit each municipality financially and also ensure fair representation and decision-making for all involved communities.