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Amusement tax may ease deficit in Jim Thorpe

  • CHRIS ADDY/SPECIAL TO THE TIMES NEWS John McGuire, borough council president, right; and Jim Thorpe Chamber of Commerce members, left, listen to Wes Johnson, borough manager, second from right, tell them to which types of businesses the proposed…
    CHRIS ADDY/SPECIAL TO THE TIMES NEWS John McGuire, borough council president, right; and Jim Thorpe Chamber of Commerce members, left, listen to Wes Johnson, borough manager, second from right, tell them to which types of businesses the proposed amusement tax would apply.
Published November 17. 2010 05:00PM

Tuesday night, a conversation began between the Jim Thorpe Borough Planning Commission and local businesses that could prove a critical first step in solving the borough's $150,000 to $175,000 budget shortfall next year.

"Tax revenue doesn't start coming in until April or May," borough manager Wes Johnson told the committee and Chamber of Commerce members present. "Historically, municipalities have had to get a tax anticipation loan. We've been fortunate enough to avoid that, but it's never a good practice to spend more money than you're taking in."

With the goal of easing the expected deficit, the planning commission is looking into the fiscal benefits of an amusement tax, an ordinance aimed at shifting some of the tax burden from borough residents to tourists.

Defined by the Local Tax Enabling Act of 1965, which gives municipalities this authority, an amusement tax is applied to the admission prices of places of amusement, entertainment and recreation.

The courts have upheld that this is a tax on the "privilege of engaging in an amusement levied on the patron, as opposed to a tax on the operator of an amusement facility."

It's because of this that the planning commission expects the 5 percent tax to be passed on from the tourist-heavy businesses it will likely effect to the visitors of Jim Thorpe, a source of revenue that has until now been untapped and could go a long way to chipping away at the budget shortfall.

The amusement tax is narrowly defined by the state and could be further narrowed by the borough council. It was made repeatedly clear that the commission was in the very beginning stages of calculating the revenue additions and scope of the potential ordinance and they will surely be tailoring the tax so as not to be punitive to businesses, and to fit Jim Thorpe's unique fiscal outlook.

Originally capped at 10 percent, any municipality first levying an amusement tax after Dec. 31, 1997 is limited by a 5 percent ceiling, the rate the commission expects to apply to the borough.

What is initially unclear is how the Jim Thorpe Area School District's prevailing amusement tax rate of 2.5 percent would fit into the new structure.

Johnson's interpretation is that half of the school district's 2.5 percent rate, or 1.25 percent, will be combined with a 3.75 percent ordinance rate to amount to a net 5 percent borough rate.

Johnson calculated overall amusement tax revenues of $15,000 by using the current admission prices of the Mauch Chunk Opera House and scenic railway tours.

Bike rentals, carriage rides and Segway tours would likely be considered part of the tax base as well.

The Local Tax Enabling Act establishes a tax base of 40 percent for lift tickets at ski facilities, greens fees at golf courses and admission to bowling alleys, giving these businesses an effective cap at 2 percent.

Some Jim Thorpe attractions, most notably the Old Jail Museum and the Asa Packer Mansion, would be exempt from the tax because of their 501(c)3 nonprofit status.

Members of the chamber of commerce want the commission to define the ordinance so that it creates a minimum threshold under which an organization could not be taxed.

Their concern is that the ordinance, if not narrowly defined, could prove overly restrictive and cause smaller organizations to be taxed for minimal, infrequent income sources. One suggestion was a $5,000 floor.

The commission assured business owners that no one would be "taxing lemonade stands." Those concerns have been raised before and the Commonwealth Court has upheld that the municipality is to define an amusement in the ordinance, but not to such a degree as to render that definition meaningless.

More will be done in coming months to further the dialogue between the municipality and local businesses while custom-fitting an ordinance appropriate to the borough of Jim Thorpe, and both sides are encouraged by the level of cooperation and transparency.

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