Lehigh Valley

$1 increase proposed in Bethlehem amusement tax

BETHLEHEM, Pa. - A proposed $1-per-ticket increase in Bethlehem's amusement tax generated controversy on City Council Tuesday – not because of the amount, but because members of council were being asked to act on it too quickly.

The city's administration backed away from expecting council to take an initial "first reading" vote on the proposed increase at Tuesday night's meeting, something members of council said they didn't learn they were being asked to do until late Friday afternoon.

Mayor Robert Donchez repeatedly accepted responsibility for what he called a miscommunication. At one point, he referred to it as a breakdown in communication within his administration.

Members of City Council have received "some outrage and bad feedback" to that proposed increase, said council member Michael Recchiuti.

The city imposed a $1.50-per-ticket amusement tax early last year. Now the administration wants to raise that to a maximum of $2.50 on admission tickets that exceed $50, said the mayor.

The $1 increase would generate an additional $200,000 a year for the city, said Donchez.

The sooner that increase would be approved, the sooner the city could start collecting more money.

Donchez initially wanted council to approve it by Oct. 1.

While that's not happening, he still hopes it will be passed soon so the city can start collecting the increased tax in the final months of this year.

"There was urgency in this particular instance because of the timing involved," said David Brong, the city's business administrator.

The proposed tax increase is just one of about a dozen options Bethlehem is considering to eliminate what Brong called an "epic" $5.9-million deficit in the 2015 city budget.

City officials warned wiping out that deficit is going to involve other painful decisions.

"We're required by law to have a balanced budget," said the mayor.

Donchez told council that $5.9-million gap is not anyone's fault. "It's the increase in medical and pension."

Council members complained that they didn't find out until late Friday afternoon that the administration expected them to take a first-reading vote on the amusement tax increase at Tuesday's meeting.

Some felt that did not give them enough time to study the issue.

Council president J. William Reynolds said on Friday, council received an email from Mark Sivak, the city's budget and finance director, asking it to do a first reading vote on the proposal at Tuesday night's meeting.

But on Tuesday, said Reynolds, council received a request from Donchez to delay that first reading vote until its Sept. 16 meeting, with a final vote at its Oct. 7 meeting.

Atty. Jack Spirk, council's solicitor, said if council approves the increase, the mayor then has 10 days to sign the ordinance, adding: "He could sign it the same day."

Spirk said an ordinance becomes law 20 days after it is signed, unless council declares an emergency by resolution and has it immediately become law.

Reynolds said even if council had given the proposal first reading approval Tuesday night and final approval on Sept. 16, the increase could not have taken effect by Oct. 1.

Council member Bryan Callahan suggested that, in the future, the mayor advise members of council about an issue on the same day that he informs "stakeholders."

"I don't want to get phone calls and questions from a stakeholder who is going to be drastically affected by a tax increase, and have to answer questions on a subject I didn't even know about," said Callahan.

"I really did not know anything about this until about 4 o'clock on Friday, on a holiday weekend. It didn't smell right."

"I'll take the responsibility for the miscommunication on this issue," said Donchez.

Donchez told Callahan he thought his memorandum about the proposed increase went to everybody, council members and stakeholders. "That's part of the mistake."

"The intent was to send a letter out to the stakeholders and to meet with them before I presented this to City Council. I made an error on the dates. I apologize for that.

"I respect the process very much," said the mayor, a former member of City Council. "I was part of the process for 18 years. It was my oversight. I take responsibility for it."

Five-year plan

Donchez plans to hold a news conference late next week to explain a five-year financial plan for the city.

He said the administration has been looking at "a menu of 10-12 options," including raising the amusement tax by $1 and that all members of City Council already have been briefed on that plan.

Callahan said increasing the amusement tax briefly was brought up when that five-year plan was presented to council a couple of months ago, but it was not clear that the mayor was in full support of everything in that plan.

Donchez said the 10 or 12 items that were presented to council are options being evaluated by the administration.

"I'm not in favor of everything there," said the mayor. He noted he wanted City Council to weigh in on the ideas being considered.

Brong said each of the 12 options in the city's five-year plan "is going to have its own fan club. There is going to be a sub-class of city stakeholders that's going to have strong opinions about each.

"So we need to be prepared, remembering that our goal is to get after the structural imbalance in the general funds," said Brong. "Not sell more assets, not nibble around the edges, {but} to go after it the way it needs to be gone after."

"We will put forth the items in that five-year-plan that I think are the most logical and the ones that will get passed by City Council," explained Donchez.

"We put some painful ones in there. There has to be shared pain; there's no question about it. We have not made decisions on the menu of options until we have a press conference next week on that."

There often is pain, said Reynolds, but he suggested it can be reduced by making sure everybody knows what's going on.

Short notice

Reynolds said council wasn't notified until 4:45 p.m. Friday -- "after the close of business, with a three-day weekend" -- that the administration expected an initial vote on the amusement tax increase at Tuesday night's council meeting.

"As you know, Mr. Donchez, from being on City Council for 18 years, we also have homework to do. We also know a lot of the people that are affected in these organizations.

"I'm not sure how we were going to be able to make an informed decision about this, when we didn't have time to reach out to stakeholders as well."

Reynolds said council did not learn until Tuesday that the administration no longer expected a first reading vote Tuesday night.

"We're not even discussing whether or not the tax is an important thing for us to do," said Reynolds. "If people hadn't started making phone calls, was it still the plan to have council vote on this today?"

"The answer is no," replied Donchez. "There was a breakdown in communications. I'll take the responsibility for it. It will not happen again."

"It was squeezed, we agree," said Brong. "We are going to try our best not to let that happen going forward."

$1.50 tax didn't generate enough revenue

The $1.50-per-ticket amusement tax was initiated in February 2013.

Reynolds read an Aug. 26 memo from the mayor that stated when the tax was first implemented, the goal was for the city to generate about $600,000.

"This has not been the case," stated the memo. "That is why we are looking to increase the maximum tax."

Said Reynolds: "We only ended up taking in between $200,000 and $300,000 in 2013."

He said the city will get about $375,000 in 2014, the amount it projected to receive this year.

‘Stakeholders' impacted by increase

Reynolds said only a short list of organizations would be impacted by an amusement tax increase, including Sands Event Center, ArtsQuest, Lehigh University, Chamber Music Society of Bethlehem and Moravian College.

Sands Event Center pays the most amusement taxes to the city, said Donchez after the council meeting.

Reynolds indicated city officials have met with at least some of those entities on other issues over the last several months. He grilled the mayor about why those "community partners" were not included in conversations with the administration about the proposed amusement tax increase.

Noting the mayor repeatedly called what happened a miscommunication, Reynolds told Donchez: "I know you refer to this as a single mistake, but I don't see it as such."

"This isn't the way a city should be operating," said the council president, adding those stakeholders have invested a lot of money in the city.

Event Center owners oppose increase

The tax increase would be a real burden, City Council was told by Sands Event Center co-owner Jeff Trainer of Salisbury Township, Lehigh County.

"In most cases, we eat up a lot of that tax, because we can't pass it on to the customers." Trainer told council, adding those who attend concerts already pay "huge fees" imposed by Ticketmaster.

Later Trainer said Ticketmaster's fees are about $15 per ticket. "If you start adding more money on it, sooner or later people say: ‘I'm not buying any more tickets'."

"I'm asking you to defer consideration of the proposal," Trainer told council. "We're kind of nervous that this all happened so quickly."

Trainer told council he found out on Aug. 26 that council would be voting on an increase to the amusement tax during Tuesday night's meeting and that the increase would begin Oct. 1. He said he learned all that from a reporter.

"The proposal has taken us by surprise, that it's happening so quickly," said Trainer. "We felt we didn't have time to lay out our own case about what we do to benefit the city of Bethlehem."

"We run amazing shows and a lot of them," said Trainer, adding the events center does about 120 shows a year. "Hundreds of thousands of people come to this facility in the course of a year." He said it may be among the top five venues its size in the United States.

"I'm really concerned about the process," said Sands Event Center co-owner Tom Schantz of Milford Township, Bucks County.

When they first learned about the proposed increase from a reporter on Friday night, "it really stunned us," he said.

"The first time the amusement tax was levied on us, we also found out from a reporter," Schantz told council. "It would be a courtesy to have a heads-up on some of these things."

"We invested a lot of dollars into this city, all privately, never public assistance of anything." Schantz added the events center has generated revenue for the city and interest in the city.

After the meeting, Trainer and Schantz said Sands Event Center has paid $336,000 to the city since the $1.50 amusement tax was implemented.

They said they already "barely break even" on some bands that perform at the center, but hotels, shops and restaurants in Bethlehem all benefit from the people who come to town for those shows. They said they could do fewer and more profitable events, but do more because "we're a community asset."

The event center, said Trainer, has nothing to do with the Sands casino.

A memorandum from the mayor to City Council states "key stakeholders"
have been advised of the proposed increase. It states their feedback is being sought by the administration and that meetings are being scheduled to discuss the issue.

Donchez told council he already talked on the phone with Trainer over the weekend and met with Schantz for more than an hour Tuesday afternoon, along with ArtsQuest president Jeff Parks and ArtsQuest senior vice president Kassie Hilgert, who will become president in January.

He said they were told there would be no vote on the proposed increase at Tuesday's council meeting.

2015 budget

The 2015 city budget must be approved by Dec. 31.

Donchez said Bethlehem's mayors traditionally presented the proposed budget to City Council on the first Friday after the November elections. He hopes to present it to council before the end of October.

He said all department heads had to have their budgets turned in by last Friday.

"Now we're going to start meeting with the department heads and reviewing their budget requests," said Donchez. He said a couple months ago he asked all department heads to reduce their spending by
10 percent.

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