This struggling Pa. community could raise more revenue with a new form of government. But the process is complex.

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MOUNT PENN BOROUGH — A financially strapped Berks County municipality should ask its residents to adopt a form of government that would allow local officials to raise taxes beyond state limits, an expert has recommended.

A home rule charter would let Mount Penn borough raise desperately needed revenue and avoid additional property tax hikes. But, as the expert explained, such a path is “complex,” “expensive,” and takes just under two years. It requires the creation of a commission, a study, and a referendum that, in the end, local voters may reject.

The Pennsylvania Economy League made the recommendation as part of a larger report on Mount Penn’s finances. The nonpartisan good-government group has been reviewing the borough’s books and operations as it considers merging with neighboring Lower Alsace Township. The report was mostly funded through a government grant from the state Department of Community & Economic Development.

The Economy League says adopting a home rule charter would give Mount Penn “increased revenue flexibility.” Pennsylvania municipalities without home rule charters cannot increase various taxes beyond limits set by state law from the 1960s, including the earned income tax and a per capita tax on residents.

Without that versatility, municipalities rely heavily on property taxes to fund government operations and services.

Home rule “would allow the borough to raise other taxes, like earned income, that tend to grow more naturally year-over-year and do not impact seniors on retirement income or businesses,” the report states.

The borough council, which received a presentation on the report on Nov. 19, had mixed reactions to the recommendation. Some members were open to the flexibility a home rule charter could bring, while others were concerned it would allow for unchecked tax hikes.

Council President Troy Goodman said the more he learns about home rule, the more he sees it as a viable option for Mount Penn.

“It gives us sustainability. It would enable us to survive, even if the merger didn’t go through, and it wouldn’t be such a tax burden as far as the property taxes, and the elderly wouldn’t be affected,” he said. “I’d like to pursue it.”

While the city of Reading is the only municipality in Berks County currently under a home rule charter, other Pennsylvania communities have opted to adopt it for greater taxing power in recent years. Many of these communities then increase the earned income tax rate to generate additional revenue.

In 2022, Beaver Falls City in Beaver County approved a home rule charter. Towamencin Township in Montgomery County followed in 2023, and during this election cycle, Lancaster residents also approved a home rule charter. Lancaster officials will use this new structure to increase its earned income tax.

Limited ways to raise revenue

Mount Penn is challenged geographically.

The borough’s taxing area is less than one-half of a square mile and is mostly residential, leaving little room for growth in its tax base.

While the Pennsylvania Economy League report found Mount Penn’s real estate tax revenue grew by 44.1% since 2019, it wasn’t organic. That growth was fueled by tax hikes, which borough council members noted at the November meeting are driving some families out of the community. The borough raised property tax rates annually for three of the last four years.

All other borough taxes are at the maximum rate allowed by state law, with earned income taxes accounting for 25% or more of Mount Penn’s total taxes, the Economy League found. If the borough formed a home rule charter, it could bump up the earned income tax rate, tapping into more revenue.

Home rule means shifting “responsibility for local government from the state legislature to the local community,” the Economy League explains. A home rule charter is still subject to federal and state constitutions and laws applicable to those municipalities.

However, opponents of home rule charters argue that it gives local elected officials too much taxing power.

Council Member Yrisol Garcia said increasing other taxes outside the borough’s property tax rates simply shifts the taxing burden when everyone is struggling. Whether senior citizens or young families, Garcia said residents are leaving because they “cannot afford taxation.”

“We need to figure out ways to reduce costs. It’s just how it has to be,” she said. “We need to rescope where we are spending our money. I’m advocating for my community members [who] are figuring out how to survive right now.”

A decade ago, concerns around taxes and services under home rule were among the reasons Mount Penn residents rejected the 2014 merger with Lower Alsace. During those discussions, a home rule charter form of government was proposed.

Goodman said the merger didn’t fail because of a home rule charter but because opponents implied the municipal water authority would be sold.

Lower Alsace Township Supervisor John Theodossiou, who is familiar with the 2014 merger attempt, said the earlier proposal wouldn’t need to be changed much to make it “more palatable” to voters.

Implementing recommendations

The Economy League made 51 recommendations to improve Mount Penn’s outlook, including developing a new comprehensive plan “to broadly address future growth and development including housing.” Brough Manager Hunter Ahrens said they’ll tackle that first.

The borough has already incorporated other recommendations, like crafting policies for its fund balance, capital funds, and solid waste funds, Ahrens said.

The Economy League made other recommendations to improve the borough’s fiscal health, recognizing it would need to raise property taxes to offset deficits because there is “little room to cut.” Those include:

• Improving department and service delivery efficiencies
• Negotiating more affordable contracts for health insurance and other contracted services
• Maintaining and improving its shared service agreements
• Developing comprehensive plans and best practices to ensure smart, cost-effective growth and government operations.

Council members also expressed interest in reviewing the joint agreement with the Central Berks Regional Police Department, which accounts for 58% of Mount Penn’s total annual expenses at about $1.2 million. The agreement was not part of the Pennsylvania Economy League’s review.

Council Member Roger Stief said he’s been pushing to review the department for over two years because of cost concerns, and wanting to ensure Mount Penn is getting a fair deal.

“We need to have a hard discussion about the police department,” he said. “Council really needs to look into the recommendations.”

The borough accepted the Pennsylvania Economy League’s report on Nov. 26. Ahrens said the community aims to incorporate at least some of the report’s recommendations in the coming year. The borough council will decide how to prioritize the ones they adopt.

“All of those goals would inform how we’re spending resources,” he said. “It really comes down to the prudence of the elected officials to say one way or the other, ‘Is this the right place to spend our time? Does it align with our goals?’”

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