Easton could expand its earned income tax (EIT) to include those who work but do not live in the city.
Mayor Sal Panto said Tuesday evening the city is considering the new tax on commuters to deal with financial challenges over the next two years, which include $27 million in payments on lawsuits and a drastic increase in pension plans.
"I call it kicking the can down the road, or placing current debt on future generations," Panto said.
The new tax -- a suggested 1.75 percent -- would also include city government employees who don't live within Easton. City residents already pay the same rate.
Speaking to the Easton Area School Board Tuesday night, Panto said Easton's pension obligations have jumped from $600,000 a year in 2008 to $1.5 million this year. Next year, it will be close to $4 million.
"It's a substantial increase on a budget of $30 million," he said.
The city's "moderately distressed" status as defined by the state means property taxes are unlikely to fill the gap.
The city is unlikely to see the full amount of increased revenue from the EIT, though, because taxpayers dollars are shared with the municipalities where they reside.
This means the EIT increase won't cover Easton's shortfall, said Panto. Whatever costs aren't covered by expanding the EIT base and rate will come from the city's general fund.
He said the city has pursued a realistic financial investment plan to increase revenue from investments that fund the city's pension plans, a move he credited with preventing the situation from being worse.
"Our conservative approach has been one that has worked well," City Finance Director Chris Hegele said. "We're trying to learn from our mistakes of 2008 and 2009."
To that effect, the city is estimating a 6 percent return on its pension investments, down from 8 percent two years ago.
The city's "distressed" status will allow for the additional tax increase over the state's usual limit, he said.
And, with so many other communities in a similar predicament, it's important the city increase its revenue through the EIT sooner rather than later, when Easton will likely have to share the money with more communities that are also likely to add or increase their EITs, he added.
"In my mind, that means it's more urgent to do it now," Hegele said. "We'd have the money in the bank."
City Councilwoman El Warner worried that it would not be enough.
"Those who work for the city would pay the same rate as those who live and work in the city," Warner said. "But what happens if (commuters) live in another distressed city?...This can help for now, but we can't think of this as a fix."
"It's not a permanent fix or a permanent tax," Hegele replied. "It's to get us out of distress."
Council will discuss proposed EIT changes at a future meeting, likely in two weeks. Council members noted they expect the public will want to weigh in.