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Coatesville Council denies tax hike, will use reserves

Legal fees are straining the city, which will face a $1.4M shortfall.

Battling costly lawsuits, cash-strapped Coatesville confronts a $1.4 million shortfall in 2013, but the City Council has decided against raising taxes that already are among the highest in the region.

The council last week voted to forego the finance director's advice to increase taxes for a second consecutive year and opted to draw $1.4 million from a trust fund.

Council President David Collins said raising the levy would have been unfair to residents, whose taxes increased by 5.6 percent last year.

He said lawsuits have burdened the city with high legal fees.

The city's police department is involved in several suits, including ones alleging sexual and racial discrimination. Collins said he hoped that the recent hiring of a new police chief would "bring some semblance of logic to the department."

Finance Director John Marcarelli said the city has worked to keep down expenses, limiting increases to 1.8 percent, but said revenue shortfalls are "killing us."

He said the practice of dipping into Coatesville's $9 million reserve fund - created after the city sold its water authority and which once stood around $40 million - cannot continue.

"That should be there for emergencies, not for regular operating expenses," he said, adding, "$1.4 million is a lot to take out in one year."

But closing the budget shortfall through tax increases would have resulted in "ridiculously high" taxes, Marcarelli said. The annual bill on an average-price home is about $570, he said - that's in addition to school and county taxes. The average value of a home in 2012 was $60,467.

Collins said the council's decision was related to declining home values, which dropped 31 percent from 2010 to 2011 according to The Inquirer's most recent price survey.

"We need to really start getting the property values to turn around," he said. "In other areas, property values have stabilized or are starting to increase."

Drawing funds from a reserve to keep taxes down is not unusual, said Rick Schuettler, deputy executive director of the Pennsylvania Municipal League.

"It's a governing body and if they feel like they don't want to burden their taxpayers, I generally don't think there's anything wrong with that," he said.

Marcarelli said he hoped the city could increase revenue by seeking grants and encouraging economic development.

Collins said the city is also looking at potential cuts to some programs, which could be decided as early as Monday, when the council meets to vote on a final budget.