Chambersburg gets nod for earned income tax collection

On a 16-7 vote, members of the Franklin County Tax Collection Committee (TCC) chose Chambersburg Area Wage Tax Office (CAWTO) to collect earned income taxes, beginning in 2011, a year before required. At the Aug. 26 meeting of representatives from each taxing body in the county, the weighted vote gave CAWTO 73.1 percent, and the other finalist, Capital Tax Collection Bureau (Cap Tax), Harrisburg, 26.1 percent. The committee met at the county administration annex in Chambersburg. TCC chairman Dave Jamison, also on the board of directors for CAWTO, presided over the meeting.
Most of the 'no' votes came from the southeastern end of Franklin County. Local officials against hiring CAWTO were Bill Needy for Antrim Township, Arnie Jansen for the Greencastle-Antrim School District, Lloyd Hamberger for Waynesboro borough, Mike Christopher for Washington Township, and Eric Holtzman for Tuscarora School District. The other no votes came from Fannett-Metal School District and Mont Alto borough. James Farley for Greencastle borough, Caroline Dean for Waynesboro-Area School District and Jason Cohen for Mercersburg borough voted yes.
The other affirmative votes came from Chambersburg; the townships of Fannett, Greene, Guilford, Hamilton, Letterkenny, Lurgan, Metal, Montgomery, Peters, Quincy, St.Thomas; and Chambersburg Area School District.
A collection agency had to be chosen by Sept. 15, according to the schedule accompanying Act 32 of 2008, consolidating the number of EIT collection agencies in the state.
G-ASD on May 6, Antrim Township on July 13 and the Borough of Greencastle on Aug. 2 passed resolutions hiring CAWTO on a temporary basis to collect EIT, due to the retirement of the local tax officer. The negotiated rate was three percent, though the agency charged its other customers five percent.

Discussion

The final motion, after several revisions to clarify issues, required CAWTO to collect the $35 million in taxes at a fee of 2.2 percent the first year, 2.0 percent in 2012, and 1.89 percent in 2013.
Companies responding to a request for proposal received a template to plug in their numbers. Cap Tax offered a contract charging an estimated $530,000 for operating expenses, and would keep interest, fees and penalties. Cohen converted CAWTO's numbers so that the committee could compare "apples to apples." Chambersburg's fees were $717,000 if penalties and interest were returned to individual municipalities, and $618,000 if that money went into a pool for distribution.
Cohen believed the difference in collection expenses would be $76,000 per year, with CAWTO higher. Hamberger thought it would be $270,000 over three years, the equivalent of three or four police officers or a fire truck.
Needy was critical of CAWTO's technology, and its intent to add $130,000 to its personnel budget to cover Greencastle and Waynesboro tax work. Holtzman stated CAWTO's offer was only a proposal, and the rate could go up significantly. Dean was open to Chambersburg if it would reduce staff benefits and make some concessions. She did not like the idea of a "blank check" being allowed. Jansen thought the management was top heavy.
Supporters of the Chambersburg agency liked the local control, and if Cap Tax didn't work out, there would no longer be a local bureau to submit a bid.
Though Cap Tax was an independent organization, CAWTO was not, and Cohen agreed its bylaws would have to be rewritten. A new board would need to be appointed, with representatives from the group in the room.  
Some members were uncomfortable with the notion that the TCC would have to micromanage the agency.
"We are it," said Hamberger. "This is a contract with ourselves."

Reaction

Jansen was hopeful the rate assigned to CAWTO was achievable and would result in lower fees for taxpayers. "It was three percent and now it's two percent. That's good."
He was not anxious for the oversight the tax committee would have to exercise on the agency. "I would have preferred a bureau, not something we have to manage."
Needy wanted CAWTO to put forth an effort. "Taxes collected are the key factor," he said. "The rate will adjust itself. They must be more aggressive to get the money in."

CAWTO

The Chambersburg Area Wage Tax Office formed in 1975 to collect local earned income and local services taxes. It originally served one school district and four municipalities and of late handled taxes for three school districts and 16 municipalities. It was ruled by a 19-member board of directors. Office space at 443 Stanley Ave. is rented from the Chambersburg Area School District.
Jim Clapper, 58, director since 1981, was pleased his agency was chosen for Franklin County.
"It's been a big struggle," he acknowledged of the contentious discussions over the past year. "We have a lot of work to do to convince those who opposed us. I think we'll be able to do that."
The office has eight other fulltime employees. Clapper proposed additional staff for when Greencastle and Waynesboro come on board. He expected the workload to increase by up to 50 percent. He already had made adjustments to serve the three Greencastle entities through the end of the year, and if Waynesboro also hired CAWTO for 2011, rather than the mandated start date of 2012, he said he would be ready but "it's going to be tough."
The office allows taxpayers to pay online through its website, but they cannot yet file taxes that way. They must mail in returns. He said the new board, comprised of 25 members representing 25 jurisdictions, would have to decide what computer technology it wanted. As in the TCC, the votes will be weighted based on population.