Luzerne County Council vice chairman John Lombardo acknowledges there are pros and cons and wants to review a cash advance for tax arrears.
The move, known as “monetization,” could generate millions of dollars in cash upfront to avoid a county property tax hike in 2023, Lombardo said Monday.
“I think it’s a creative way to close the budget gap this year. I don’t want to raise taxes, and I’m certainly not in favor of the 6.75% tax increase that County Manager Randy Robertson has proposed,” Lombardo said.
The council would need to identify approximately $7.1 million in cuts or new revenue to avoid the 6.75% increase, which translates to $55 more per year for the average property, which is valued at $132,776.
With monetization, the county would receive the instant money through a loan, which would then be repaid with tax receipts when property owners pay arrears taxes or bidders buy properties in tax sales.
After accounting for fees and costs, the lump sum payment could be about 95% of the outstanding tax liens, Lombardo said.
Analysis would be needed to determine whether county revenue would decline in coming years if revenue were pledged on the monetization loan, the administration said.
The county’s proposed 2023 budget already anticipates $8.975 million in arrears tax revenue.
Lombardo said he has been researching the concept for several weeks and said the monetization is currently being used successfully in several school districts in the area and has been used by the county in the past. Wilkes-Barre has been monetizing its tax delinquency for more than a decade.
On the plus side, Lombardo said there will be an immediate cash injection to “close the budget gap”.
His main concern is dependence on a one-time source of income. County officials have been working to implement recurring revenue budgets for years, he said.
“I think if there’s a single year a one-time correction is appropriate, this could be it,” Lombardo said, citing rising energy costs and other inflation.
The monetization could also give the council some breathing space to work with the administration to address “structural issues” in the county government that require further scrutiny, Lombardo said.
Some departments appear to be “severely underfunded and understaffed,” while other areas may have the potential for streamlining, he said.
Until the council and administration find a way to correct imbalances, the county is in for a “perfect storm,” affecting the quality of some services and creating a situation where officials “go from crisis to crisis,” he said.
Even as monetization progresses, Lombardo said he will work with his colleagues to find budget cuts and expects departments to “justify every single dollar.”
He plans to address the possibility of monetization during Tuesday’s working session and schedule a more in-depth discussion and presentation at a later session if others are interested.
“I really hope that turns out to be positive. If the council doesn’t like this idea or thinks it’s a wise move, it’s up to all of us to find a solution,” Lombardo said.
Robertson said he understands there are positives and negatives to monetization and has asked the county’s budget/finance department chief, Brian Swetz, to further explore the option and report back to the council.
The district’s last approved monetization would have been in 2013, but then-district manager Robert Lawton chose not to proceed with the budgeted cash advance on back taxes. Although his decision resulted in a $4.3 million shortfall that year, Lawton had said he didn’t want to use the one-time correction because it came with fees and would reduce the amount of money the county spent in subsequent years collect back taxes.
Prior to the introduction of Home Rule in 2012, former county commissioners had been making regular money since 2008.
Reach out to Jennifer Learn-Andes at 570-991-6388 or on Twitter @TLJenLearnAndes.