Luzerne County Councilman proposes back-tax cash advance to help close 2023 budget gap

Acknowledging there are pros and cons, Luzerne County Council Vice Chairman John Lombardo wants to explore a cash advance on delinquent tax receipts.

Known as “monetization,” the move could generate millions of dollars in up-front cash to avoid a county real estate tax increase in 2023, Lombardo said Monday.

“I think it’s a creative way to bridge the budget gap this year. I don’t want to raise taxes, and I am certainly not for the 6.75% tax increase county Manager Randy Robertson has proposed,” Lombardo said.

Council would have to identify approximately $7.1 million in cuts or new revenue to avoid the 6.75% increase, which equates to $55 more annually for the average property assessed at $132,776.

With monetization, the county would receive the instant cash through a loan that is then paid off using tax-claim receipts as property owners pay delinquent taxes or bidders purchase properties in tax sales.

Factoring in fees and costs, the lump payment could be around 95% of the outstanding tax liens, Lombardo said.

Analysis would be required to determine if county revenue would decrease in future years if receipts are pledged toward the monetization loan, the administration said.

The county’s proposed 2023 budget already counts on $8.975 million in receipts from delinquent taxes.

Lombardo said he has been researching the concept for several weeks, saying monetization is currently successfully used in several area school districts and had been deployed by the county in the past. Wilkes-Barre has been monetizing its delinquent tax claims for more than a decade.

On the plus side, Lombardo said there would be an immediate cash infusion to “bridge the budget gap.”

His primary concern is reliance on a one-time revenue stream. County officials have been working for years to implement budgets with recurring revenue, he said.

“I think if there is any singular year a one-time fix is appropriate, this might be it,” Lombardo said, citing rising energy costs and other inflation.

Monetization also could create some breathing room for council to work with the administration on addressing “structural issues” in county government that will require extended consideration, Lombardo said.

Some departments appear to be “severely underfunded and understaffed,” while other areas may have the potential for streamlining, he said.

Until council and the administration figure out a way to correct imbalances, the county has a “perfect storm” impacting the quality of some services and creating a situation where officials “keep going from crisis to crisis,” he said.

Even if monetization proceeds, Lombardo said he will work with his colleagues to find budget cuts and expects departments to “justify every single dollar.”

He plans to bring up the possibility of monetization during Tuesday’s work session and schedule a more in-depth discussion and presentation at a subsequent session if others are interested.

“I really hope this turns out to be a positive thing. If council doesn’t like this idea or think it’s a wise move, it’s up to all of us to come with a solution,” Lombardo said.

Robertson said he understands there are positive and negative aspects of monetization and has asked county Budget/Finance Division Head Brian Swetz to further examine the option and report to council.

The county’s last authorized monetization would have been in 2013, but then-county manager Robert Lawton chose not to proceed with the budgeted cash advance on back taxes. Although his decision created a $4.3 million shortfall that year, Lawton had said he did not want to use the one-time fix because it came with fees and would reduce the amount of money the county collected from back taxes in subsequent years.

Before the 2012 implementation of home rule, prior county commissioners had regularly monetized since 2008.