City Council moves toward eliminating distressed pension tax
In another move geared toward providing relief to the city’s pension burden, Washington City Council voted unanimously Thursday to advertise for the elimination of the Act 205 distressed pension tax.
“Believe it or not, if we kept it in place, it would have added $300,000 to our contribution this year, because of the state aid we receive,” said Councilman Ken Westcott, who chairs the city’s finance department. “We decided that we would eliminate the tax and keep the cost down. It will be a cost savings to the taxpayers of the city of Washington, and it’s going to save the pension fund about $300,000 this year in payments.”
Act 205, the Distressed Municipal Pension Recovery Tax Act, was signed into law in 1984 and allows municipalities to increase their earned income tax rates to fund their municipal pension liabilities. Faced with an underfunded pension fund, the city initiated the tax in 2009 at a 0.63% contribution of a city employee’s salary.
In both 2018 and 2019, council voted to reduce the tax, with it eventually being decreased to 0.2%
“It’s just time now to get rid of it altogether,” Westcott said.
In another move related to the pension fund, an ordinance was approved in July to refinance the pension bond debt. That move spread the debt over three years, providing debt service relief and freeing up about an additional $425,000 a year over the next two years. At that time, Westcott said the city’s pension bond debt stood at about $1.7 million.
“The money is in place now, and we’re looking at how we’re going to invest it,” Westcott said.
Also on Thursday, council awarded the contract for the 2024 road paving program to El Grande Industries of Donora for $245,639.60.
Roads scheduled for paving are East Chestnut Street from Main Street to College Street; McCarrell Avenue from Chestnut to Addison Street; Allison Avenue from Henderson Avenue to Maple Avenue, and Grove Avenue from Broad Street to Ewing Street.
El Grande was the lowest bidder among the eight bids received for the project.
Council also awarded a contract of $76,482 to El Grande for work at Seventh Ward Park.
City Administrator Donn Henderson said the work will include paving the basketball courts and walking trail.