Lancaster City Council members struck a supportive but sober response Monday night to the Gray administration's proposed 2009 budget.
Council met with Mayor Rick Gray and Patrick Hopkins, the city's chief financial officer, inside Southern Market Center to review for the first time in detail the proposed $46.1 million spending plan, which includes a 5 percent hike in property taxes.
"Raising taxes is probably the last option, but it's what we're going to have to do" to maintain the current level of police, fire and public works services, said Louise Williams, City Council president.
Particularly troublesome for city officials is the inability to increase revenue other than by hiking the property tax. Meanwhile, the sluggish national economy is eroding the city's other income streams.
Hopkins said Monday the national economy has:
• Prompted people to avoid making home improvements, leading to a projected $300,000 decrease in building-permit fees coming into the city's coffers in 2009 compared to 2008.
• Caused interest rates to drop, which means the city is expected to reap $450,000 less from its investments than it did in the previous year.
• Led to a projected 10 percent fall in the amount of revenue from the tax charged whenever someone buys a property in the city, because people are buying fewer homes.
"We are definitely seeing an impact from the national economy on our revenues," Hopkins said.
That impact led city officials to propose raising real estate taxes by an average of $39 per $75,000 in property value and injecting $3.6 million from its reserve account into the general budget.
Complicating matters are state laws forbidding the city to create new taxes or to raise earned income tax levels above the current 0.6 percent. The only tax city officials can raise to balance its budget, which it is mandated to do, is the property tax.
"We have many red lights in this budget that escape our ability to solve, and it certainly says we need to talk to the guys in Harrisburg" to allow cities other means to raise money, Councilman Jose Urdaneta said.
The Gray administration has pointed out that spending growth would be only 1.8 percent in 2009 versus 2008, much less than in the previous seven years. There are no new spending programs proposed for next year, and the number of full-time employees has dropped by 22, mostly through attrition.
Even so, the cost of providing the same level of service has gone up while revenue has gone down.
"They're trying their best not to raise (property taxes), but I don't know what else he could do," City Councilwoman Pat Coller said. "Can't cut services."
The next hearing on the budget is scheduled for noon to 5 p.m. Saturday, when each department makes a presentation before council. The final vote is expected Dec. 16.
E-mail: dpidgeon@lnpnews.com