Towanda Borough Council not using gas lease money to avoid cuts in services

Asked to respond to some local residents who want Towanda Borough to use the $154,000 gas lease payment it has received to avoid a cut in services this year, Towanda Borough Manager Tom Fairchild Jr. said that borough is eyeing other uses for that money.

"We are proposing to use the interest on the $154,000 in the 2010 borough budget to help offset our expenses," Fairchild said. "But the borough council doesn't want to use the principal (of the gas lease payment) for the borough's operating expenses."

Instead of relying heavily on the gas lease payment this year, the borough council is planning to make a series of cuts in borough services, which will help avoid a tax increase.

At a budget workshop on Thursday, the consensus of the council was to keep the borough tax rates unchanged in 2010.

At its budget workshop on Thursday, the council members said they planned to eliminate curbside pickup of residents' leaves, eliminate the pickup of Christmas trees at curbside, and reduce the borough's spring cleanup program to one day per year.

Fairchild is also proposing to reduce the hours the borough's street sweeper is deployed. Another possible cut that has been discussed by the council is to eliminate the Towanda Police Department's K-9 unit.

In 2008, the borough received the $154,000 gas lease payment from Chesapeake Appalachia, which allows the company to drill gas wells on 84 acres of borough land, subject to certain restrictions. The borough will receive more than $50,000 in additional gas lease money if it can show through an ongoing quiet title action that it is the sole owner of the mineral rights at the borough's 33.9-acre former landfill site on Bridge Street Hill.

A number of local residents had posted comments on The Daily Review's readers' blog, stating that the gas lease money should be used to avoid a tax increase this year or prevent services from being cut.

The council might use some of the gas lease payment to make to help pay for upgrades to make the borough's buildings more energy efficient, Fairchild said.

"We're looking at possibly using some of the money as a local match to secure a (federal or state) energy-efficiency grant to make energy-efficiency improvements" in buildings owned by the borough, he said on Wednesday.

As a condition for receiving a federal or state grant, local governments are often required to make a monetary contribution or "match" toward the cost of the project.

Another use for the gas lease money that is being considered is to use it as a reserve fund for the borough for emergency situations or for large, necessary purchases, he said.

In recent years, the borough's reserve funds "have been mostly depleted to purchase and replace equipment such as trucks, police vehicles and fire apparatus," Fairchild said. "Therefore, most of the borough council members and myself are interested in using the approximately $154,000 gas lease payment as a kind of reserve fund/rainy day fund in addition to using it as our local match" for a grant to make borough's buildings more energy efficient, Fairchild said.

Fairchild noted that the Towanda Municipal Authority recently used revenue it received from selling water to gas drilling companies as a local match for the $413,740 state grant it was awarded last month, which will be used to make the Wysox and Towanda municipal authorities' sewer system more energy efficient.

"So the borough is looking at its gas lease money in the same way," Fairchild said.

If the borough were to use its gas lease payment for its ongoing operating costs, "it would help for a few years, but at the end we would have spent all our found money, and we would have to increase taxes even more to make up the difference," he said.

For example, if the borough were to spend the gas lease payment on its operating expenses in allotments of approximately $50,000 over each of the next three years, the borough would be facing a tax increase of 1.5 mils to fill the $50,000 budget hole at the end of the third year, as well as an additional tax increase at that time to meet rising costs, he said.

Not only is the borough facing rising costs, but the borough has to deal with the ongoing problem of having an "exorbitant" amount of tax-exempt property in the borough, he said.

"Twenty-eight percent of the property value in the borough is tax-exempt," Fairchild said. "That is an extremely high rate."

What's more, the borough is facing the added challenge of decreased revenue at this time from a number of sources, he said.

For example, the high unemployment rate is expected to decrease the borough's earned income tax revenue, and the borough is also experiencing a decrease in revenue from the real estate transfer tax, he said. "Properties don't seem to be selling in the borough," he said.

"We're trying to be cautious and conservative with our projected revenues, which is causing us to look at every nickel and dime (we spend)," Fairchild said.

"It's a very tight budget" this year, he said. "We're looking at (eliminating) fall leaf pickup, (and scaling back) the spring clean-up, sort of non-essential kinds of things," he said.

"The K-9 unit is a very valuable service, but how essential is it?" Fairchild asked rhetorically.

While a number of residents have asked why the borough can't use the revenue from selling water to drilling companies to help pay borough expenses, Fairchild said: "The water sales money is not the borough's money. It is the Towanda Municipal Authority's money."

James Loewenstein can be reached at (570) 265-1633; or e-mail: jloewenstein@thedailyreview.com.