After holding the line on property taxes for the past nine years, Hanover Borough is poised to raise real estate taxes by 38 percent in 2013.
The borough council Wednesday night unanimously approved advertising an ordinance that would increase the tax rate by 1.51 mills, setting the rate for next year at 5.50 mills.
The increase would mean an additional $250.51 yearly in taxes for the owners of a $165,900 house, which is the average household value of a home in the borough. Taxes for that house would increase from $661.94 per year to $912.45.
The increase would generate $1.3 million more in general funds for Hanover, Manager Barbara Krebs said.
Driving the need for the increase is a $547,500 rise in health insurance costs, wages and pensions for the borough next year, Krebs said. The borough faces a 20-percent increase in insurance premiums. Employee contracts call for a 3½-percent wage increase for public works, fire fighters and office personnel, a 3-percent raise for uniformed police officers and a 2½-percent raise for water department workers.
"My expenses are up half-a-million dollars," said Krebs, noting that police, fire and public service were priorities for the council. "Those are the big issues that went up. That's what is causing the need for (tax) increases."
The borough is also looking at issuing $10 million in bonds next year for water, sewer, and public works projects, most of which are state mandated, Krebs said.
"The money keeps going down and the expenses keep going up," she said.
Councilman Sonny Eline said it a testament to borough staff that Hanover has gone so long without a tax increase.
"It's kind of miraculous we've been able to go nine years without an increase. It's unfortunate to have to do one now," he said. "Our bubble has popped."
"Sooner or later, it catches up to you," Council President John Gerken said.
Even with the tax increase, the borough faces a $871,000 shortfall in revenues compared to expenditures next year, Krebs said. The borough will dip into its carryover funds to meet those expenses, Krebs said. The borough used roughly half of its $2.6 million in carryover funds this year to balance the 2012 budget.
"The mill and a half is doable to keep us up and operating," Krebs said.
"We've been able (in the past) to manage balanced budgets. We're to the point now we're going to look at a deficit," she said.
The council will vote on the proposed increase at its regular Nov. 28 meeting. The borough is required to approve any tax increases by Nov. 30 and submit them to the state for advertising.
Meanwhile, council is finalizing the borough's 2013 budget and will take up the issue again at its finance committee meeting next week.
"They're looking at it now to see if there is anywhere we can cut, but they've been looking at it for two months," Krebs said. "They've been looking at it and know they have to go for a tax increase this year."
During budget meetings last year, Krebs warned council members that an increase was likely needed for 2013.
"We've been fortunate to not raise taxes over the toughest part of the economy, the past few years," she said. "It's time (for the tax increase)."
Although the borough hasn't raised property taxes since 2004, borough residents have seen other charges go up, including sewer, water, and garbage rates this year. The borough also increased its local services tax, from $26 to the maximum $52 per year, on those that work within the borough.
Next year, Krebs said, the borough expects another increase of $48 per year for the average water customer within the borough.