As I was preparing this budget address, I took a moment to read back through previous budget addresses. My own, as well as that of Mayor Gray’s, and then I took an even deeper dive into the LNP archives back to the 1990s. There is nothing particularly new about this budget, and from my current vantage point, there will be nothing new about future budgets. It is as if I am performing the same song on the 4th Tuesday of November that I performed for the last five years, and that Mayor Gray performed before me, and so on. The beat goes on and it sounds like this:
There is no proposed tax increase because X happened – we increased fees, improved efficiencies, refinanced debt, increased employee contributions to medical expenses, left positions vacant, drawn on reserves. Or my favorite – when there is an unexpected one-time distribution that results in a windfall. It is like Community Chest in Monopoly – sometimes you get lucky.
Or the song is…
There IS a proposed tax increase because all the X’s still don’t make up for the year-over-year increase in costs because of increased medical expenses, expired debt service savings, increased pension cost, and inflation, which we have all felt acutely this past year.
Unfortunately, this is a year with a proposed tax increase. After four years of not raising taxes, the longest duration with no tax increase since at least 2006, I am bringing a budget with a proposed tax increase of 8 percent.
Why is the song the same? Because we only have one tune to play: raise property taxes. All the other methods of taxation are frozen in time, and we are powerless to implement any new taxes. These realities remain unless and until the General Assembly sees fit to modernize a system established in 19651.
I am weary of having this song on repeat.
Over the last four years, property taxes have generated about $30M. There has been a slight uptick – 1.1 percent – as a result of increases in assessed value which amounts to a $332,000 increase since the property tax rate was last increased in 2019. Obviously, assessed value does not keep pace with even modest budget growth. This is the structural deficit I have been talking about ad nauseum.
Property taxes remain the city’s largest revenue source.
On the expense side of the ledger, public safety continues to be our largest expense. Police and fire comprise approximately 60 percent of the city’s budget, a sum $10 million GREATER than the amount of property taxes collected each year.
Let me say that again: Our largest revenue source, property taxes, does not cover the costs of public safety, a core municipal service that residents and visitors alike depend on every day, 24 hours a day. This is not a new phenomenon. Public safety expenses have outstripped property tax revenues since the 1990’s.
And yet, somehow, some way, we continue to manage. We have continued to avoid the fate of so many other cities. We have not declared bankruptcy through Act 47. We have not “kicked the can down the road” as it relates to investing in our infrastructure. We have not sold off our public assets such as the water utility, which Mayor Gray described in his 2013 budget address as “selling our house to buy a meal, after which we would be both hungry and homeless.” We have not hollowed out our workforce. In fact, we continue to attract extraordinary talent – talent that keeps our community safe, clean, and continually reaching to serve its residents.
So, while I am indeed weary of this song, we continue to do the work. This year, as it relates to the general fund, there are three bright spots:
The Earned Income Tax, which is the only tax that substantively increased year over year, is projected to increase another 5 percent in 2023. Underlying this increase is the fact that residents in the City of Lancaster are making more money. And because this is a progressive tax, if you live on a fixed income, you do not pay more.
Fees. Routinely the city sets about to make sure that the fees that we are charging residents are fair and reflect the actual costs of providing services. After conducting a top to bottom fee review, Council approved a new fee schedule in September, which goes into effect on January 1, 2023. We anticipate that this will generate an additional $750,000 in 2023. You may not immediately think of this as a bright spot, but it means that people who are using services in the city that you are not are equitably paying for those services.
Grants. A phenomenal bright spot. Last year, we doubled the capacity of our grants team – it is now staffed by two people, and that investment is already paying dividends. We have over $49M of federal, state, and local funds under management and another $42M in requests. This does NOT include American Rescue Plan Act funding. Grant funding supports 28 positions within the general fund, not including VISTAS, and helps to offset or leverage general fund expenditures. It also provides us opportunities to do things we could not otherwise do, for example, complete the city’s first comprehensive plan since 1993. Hire a health and housing social services case manager. Create a comprehensive parks master plan, which will launch early next year. Provide Love Your Block grants to fuel neighborhood engagement. Invest in making over 700 homes lead safe in the south of the city. Provide electric bikes for our police officers. Support bicycle infrastructure on Walnut, and next year on Lemon. The list goes on!
Additionally, we’ve had American Rescue Plan funding. For the last two years, we have utilized ARPA funds for revenue replacement, which has helped us to avoid a tax increase. This year, however, ARPA was not enough. This year, we are proposing to allocate $6,000,000 of ARPA for revenue replacement. The ARPA funds are a singular opportunity. One that is buffering even larger tax increases and while also making historic investments in areas like affordable housing.
Turning to our enterprise funds of water, wastewater, stormwater, and solid waste & recycling. This year, there will be increases in each.
Water rates will increase by $20/quarter, sewer by $24/quarter, stormwater by $5/quarter, and solid waste and recycling by $6/quarter.
I am not naïve to the fact that cumulatively, these increases will be difficult for those on a fixed income. And yet, without these investments, we would not be able to continue to provide the clean drinking water we depend on, effectively manage our wastewater, meet EPA requirements for stormwater or keep the trash trucks hauling. These investments also mean that we are avoiding fines and even more expensive repairs in the future. In short, we need to make smart investments now to avoid placing a larger burden on taxpayers in years to come.
Water and wastewater in particular are hugely capital intensive. I am also pleased to report that for the first time in the city’s history, we have a comprehensive capital plan that outlines investments in each of our enterprise funds over the next 25-50 years. We were able to successfully bring a rate case to the PUC this past year, the first in five years, which means that we are finally keeping pace with the investments we need to be making. There is much more good news here, which Mr. Campbell will brief you on during our budget hearings.
And while I may be singing a familiar song tonight, we know Lancaster is no ordinary city. Despite operating under the confines of an outdated tax system, the City of Lancaster continues to figure it out. The music will play on, and we will continue to do our level best to provide the highest level of service to our residents and customers at a reasonable cost. We will also continue to leave no stone unturned as it relates to improving efficiencies, stewarding our public assets, and advocating on behalf of this beautiful city and its people.
City Council Budget Hearings will take place on Saturday, December 10 at 10 am in City Council Chambers, City Hall, 120 N. Duke Street, Lancaster, PA. They will also be livestreamed on Youtube.
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