Tempers flare as Catasauqua struggles to stay financially afloat

CATASAUQUA, Pa. — After narrowly avoiding financial collapse this winter, Catasauqua is due for rocky times ahead as residents erupt over property tax bills that are more than double last year's amount.

In order to avoid declaring bankruptcy or requesting state intervention, borough council approved a 103% property tax hike last December to keep government operations afloat. Years of deficit spending had emptied the borough's reserves, and it was facing mounting debts, said Glenn Eckhart, who was hired as borough manager in September.

"In my 22 years as an elected official, I've never seen such a poorly run government," said Eckhart, who previously served stints as Salisbury Township commissioner, Salisbury School Board director, Lehigh County commissioner and Lehigh County controller.

• Years of deficit spending forced Catasauqua officials to raise property taxes 103% in 2023
• The borough went from having a $2.1 million surplus in 2018 to needing to borrow $2 million to pay its bills this winter
• Catasauqua's new manager and treasurer hope to reduce property taxes in 2025

He and Treasurer Catherine VanDyne, who was hired in September, hope the tax hike will get Catasauqua onto more solid footing this year. But that money only recently started reaching borough coffers.

To make ends meet through the first few months of 2023, council borrowed $2 million for essentials such as heating borough hall and making payroll. With the blessing of elected officials, borough administrators left multiple positions vacant, switched solicitors, reduced police overtime and delayed public works projects.

"Even when we got that money, I didn't think we were going to get to April," VanDyne said Tuesday.

Thanks in part to a mild winter and early trash bill payments, local officials believe the borough will survive financially. But that won't help the outrage of people in the working-class community.

Since the tax bills went out Saturday, borough hall has been inundated with angry phone calls, Eckhart said, and frustrations have spilled out onto social media. One man posted a photo of his $2,265 bill with the sarcastic caption, "This is what holding the line on taxes looks like."

"I'm so ready to move out of this crap town," one woman commented.

Merrie Smith, who has lived in the borough for decades, said she knew residents were in for a sharp tax hike, but she wasn't prepared for her bill to double. How are elderly residents on fixed incomes supposed to pay for this when energy costs are already rising and food prices have surged, she asked. Local residents, she said, don't feel like they're being heard, and it's concerning that the borough was even put in this situation.

"I don't have a problem contributing and trying to get the borough out of the red, but I don't think we ought to do this all at once," Smith said. "How do I know they're going to be responsible?"

Spending down reserves

It's not unusual for local government to take on debt for capital projects. Just as families borrow to purchase a home or car, governments take out loans for major projects such as buying a new fire truck or repairing a bridge.

But Catasauqua has struggled to pay for the basic functions of government the past few years. Eckhart said that when he and VanDyne started, the borough was months behind on paying essential bills. Missing those deadlines led to steeper debts.

Along with more standard late fees, a $1.2 million payment will be due in February 2024 because the borough missed years of payments on a state grant that remediated the 10-acre Iron Works property on Front Street.

Audit reports show Catasauqua opened 2018 with $2.1 million in reserve, which is above average for a borough of its size. Borough council adopted budgets in 2018, 2019 and 2020 that should have reduced that total to about $500,000, about $1 million less than what financial experts typically recommend.

But the borough failed to keep its expenses under control, burning through an additional $622,759. Even with an 8.2% tax increase, the borough ended 2020 more than $172,000 in the red.

The trend worsened in 2021. While council adopted a budget with more projected revenue than expenses, it didn't stick to its spending plan. Even with a shot of COVID relief funding from the federal government, Catasauqua finished the year with a deficit of more than $580,000, according to its recently released 2021 audit.

To make matters worse, the borough was about a year behind releasing its 2021 audit report, further tanking the borough's credit rating, Eckhart said.

The 2022 audit is not yet due, but according to a 2023 budget estimate, the borough finished last year about $1.6 million in debt.

Catasauqua's financial situation is bleak enough to qualify for Act 47, a state program only available to financially distressed communities, said Ryan Hottenstein, senior vice president of FSL Public Finance and the borough's new financial consultant.

Act 47 municipalities are assigned a state coordinator, who can slash spending and reduce services in an effort to improve government finances. In return, Act 47 municipalities are allowed to raise their earned income tax rates beyond usual levels and receive greater consideration for state grants.

Eckhart and Councilman Howard Cunningham, who is in his second year in office, said borough officials wanted to avoid that. Under the plan constructed by those officials, Catasauqua's tax hike will raise enough money to make the $1.2 million payment to the state for the late grant payments early next year. With that out of the way, the borough will work on building its general fund to about $1.5 million. If all goes according to plan, that should allow council to consider a tax cut in 2025, Cunningham said.

Cunningham said that as a resident he had been suspicious of the budgets for years, saying they looked like fluff. Once the depth of the problem became clear months into his first term, he said borough officials had few responsible options.

"I wanted to do the right thing, and that meant raising taxes," Cunningham said.