Posted: 9:58 pm EST November 23, 2010Updated: 11:05 pm EST November 23, 2010
ALLENTOWN, Pa. -- WEB EXCLUSIVE -- After a lengthy discussion last week, Allentown city officials debated the proposed 2011 budget one last time Wednesday night. The city is staring down the possibility of a four-tenths of 1 percent increase in the earned income tax (EIT) to cover the gap in next year's budget. The EIT is levied on salaries, wages, commissions and other compensation paid to employees in the city. For an employee making $50,000 per year, that would cost an additional $200 in taxes. The new EIT rate would be 1.4 percent. City Council members questioned City Finance Director Garret Strathearn about the decrease in available money in both the city's risk management and cash reserve funds and whether or not that would affect the city's bond rating. The available money for risk management in 2011 is $491,000. In 2007, the city had more than $6.7 million in the same fund. "We're trying to get to the bottom of this," said Council President Michael D'Amore. "Things that we as a council have been told over the years haven't always been right and now we're seeing even less money in these funds." According to D'Amore, the city borrowed $10 million in 2006 to help its bond rating and have money to use on capital projects. Strathearn said that despite the difficult economic times, the city is still doing well in the eyes of lenders. "We're in decent shape," said Strathearn. "Lenders look at whether or not you can pay your bills. And with a lot of these capital projects there aren't a whole lot of other alternatives than what we have here." Council members were more worried about the negative trend they're seeing in several funds. "When you look at most of these funds, the numbers continue to go down," said Councilman Mike Schlossberg. "While there are some that are going up, the majority are declining and we've lost nearly $7 million in the risk management fund. Not only does that hurt the fund, but wouldn't that hurt our rating as well?" Councilman Julio Guridy said the city currently has a bond rating of BBB+. "This is a fragile situation especially in light of the tough economic times," said Strathearn. "Based on other cities like Allentown, I'd have to say we're holding our own." Strathearn said that the city's outlook as reported by financial firms is currently neutral, down from a previous positive rating. He reiterated several times, however, that the city's rating did not go down. Allentown City Council has set the vote on its 2011 proposed and amended budget for Wednesday December 1 at 7:30 p.m. in City Hall. Copyright 2010 WFMZ. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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