Mayor Sorace originally presented the below address at City Council on 11/23, you can watch it here.
Tonight, I present for your review and consideration, the proposed budget for 2022.
Here is the short version: there will be no property tax increases this year, thanks to President Biden’s American Rescue Plan Act (ARPA).
The longer version: due to the revenue replacement provision within ARPA to assist state and local governments with economic recovery from the Covid-19 Pandemic, we are eligible for $3.2M of ARPA Revenue Replacement funds in 2021. This, along with a one-time savings of $1.7M from the bond refinancing completed in September means that we have eliminated the $4.9M use of reserves projected in the 2021 budget.
Instead, we project that we will end 2021 with a surplus of $1.7M realized by approximately $315,000 in benefits-related savings, $770,000 in operational savings, and some better than projected revenues. This will take the General Fund Reserve balance from $15 million to $16.7 million, representing 3 months of operating reserve.
This is good news.
Turning to the 2022 proposed budget, which includes the General Fund and all four enterprise funds – water, wastewater, stormwater, solid waste, and recycling – there is a proposed increase of 2% over 2021 adopted budgets.
There are no proposed changes to water, wastewater, or stormwater at this time. We are estimating increases in the water fund revenues from outside city customers pending Pennsylvania Utility Commission approval and from inside city customers when the PUC rate case has been finalized in order to equalize rates. Subsequently, we anticipate bringing an inside city customer water rate increase later in 2022. Solid Waste & Recycling fees will increase by $4 per quarter, which are directly related to increased hauling, tipping, and processing fees.
Specific to the General Fund, there is a 4% increase in expenditures proposed, or $2.5M. This increase is primarily related to increases in health care costs, pension obligations, operating cost increases, and new budgeted positions, especially as it relates to IT.
There is an anticipated 2% increase in tax revenues.
But for ARPA, we’d be coming to you tonight with a proposal to increase property taxes to fill that gap. Instead, we are proposing a budget that utilizes $4.5 M of ARPA in 2022 and $2.2M in general fund reserves.
This gap year-to-year between revenues and expenses — a 2% increase in revenues and a 4% increase in expenditures — is the structural deficit that I’ve been talking about for years. Why is it structural?
For the past decade or more, the city has relied on the use of reserves to pass a balanced budget. Most years, through some combination of careful spending, one-time wins – e.g., real estate tax sale windfalls, bond refinancing savings, and grants — along with tax increases, we have managed to maintain the level of services that our residents rely on every day.
So while ARPA is buying us time, we must look ahead and plan for the day we won’t have ARPA to backfill our budget. A quick look at our five-year projections shows that we are heading toward deficit spending in three years, erasing our entire general fund reserve.
City residents should note that this is the longest reprieve in raising taxes since at least 2008 – taxes have on average increased every other year during the decade of 2008-2018. I’m grateful that ARPA is allowing our community to collectively get back up on its feet; and yet, I also know that we need real, permanent solutions to ensure the long-term success of the city. Those permanent solutions will only come when elected officials in Harrisburg decide it is time to take up this issue in earnest.
See the proposed 2022 budget here.
City Council Budget Hearings will take place on Saturday, December 11 at 10 am in City Council Chambers, City Hall, 120 N. Duke Street, Lancaster, PA.