Controversial Tax Increase in Middletown Approved

One after one residents spoke against the 1 percent Earned Income Tax (EIT) the Middletown Board of Supervisors pushed through Monday night.

During a packed meeting filled with some heated moments, supervisors Pat Mallon, George Leonhauser and Drew Kreiling voted yes; Supervisors Robert McMonagle and Tom Gallagher, who had been outspoken against the tax, voted no.

The 2014 budget also comes with a 2 mill decrease in property taxes. The decrease is expected to save the average township homeowner $58.

Many residents made it known they rather see their property taxes go up this year in order to avoid the EIT, which has been called the “largest tax increase in Middletown history.”

Gallagher suggested the township reverse the 2 mill property tax cut, add 2 more mills onto that and tap the $40 million investment fund to cover the gap in the 2014 budget. McMonagle suggested the township cut all departments by 4 percent in an effort to fill the gap without implementing an EIT or touching the investment fund. 

Just after the budget vote came through the meeting was called to recess by Mallon due to angry shouts that came from the audience. Many said they would remember who voted for the tax increase when the next election cycle came around.

“It wasn’t an easy decision and I don’t expect everybody to like it,” Mallon said after the meeting. He added the EIT will help stabilize the fiances of Middletown without cuts to service.

Mallon repeated last night what he told LevittownNow.com last week: the EIT could be lowered in future years if the township’s financial situation improved.

“It’s not fair. It taxes progress. It taxes hard-working individuals,” resident Alex Doman said.

A couple who moved to the community in the past three months said they picked Middletown because it did not have an EIT other towns did.

Mallon told residents he spoke with a real estate industry expert who told him there was no data to show an EIT impacted house values or people’s choice to move to a community. He did say that a high property tax rate did.

Many of those who spoke during the more than an hour long public comment session said they felt mislead during the last election when Republican candidates William Oettinger and incumbent Leonhauser campaigned on seven years of no tax increases.

Some residents also spoke against the board and said they should have been more transparent about the tax.

“You gave the impression everything was fine,” resident Ritchie Webb said, adding that “people felt mislead.”

Officials said they held two public budget sessions in fall and no residents showed up.

A structural imbalance in the General Fund since 2006 has caused problems for the township’s financial health. Reasons for the loss of funds in 2013 include an increase in police pension, healthcare costs and loss of the anticipated $1,300,000 budgeted transfer from the Investment Fund to the General Fund due to poor performance of the Investment Fund, officials have said. Mallon said the township previously made money off the investment fund and was able to cover shortfalls, but this year was different.

Township Manager Stephanie Teoli-Kuhls said the board asked her to draft the 2014 without substantial cuts to services. Mallon said the township has and will continue to cut costs where possible.

Officials did note the new budget could be reopened anytime before the township financial year starts in March.

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