An infusion of federal stimulus funds and savings from a bond refinancing are helping to prevent a real estate tax increase for city residents in 2022.
The tax rate would remain at 11.7 mills under the proposed $67 million general fund budget presented to city council on Tuesday evening. That equates to a tax bill of $1,170 on a property assessed at $100,000.
In comments before the meeting, Mayor Danene Sorace said the bond savings and the use of $4.5 million in American Rescue Plan Act funds were crucial to balancing the city’s budget without a tax increase.
“Bond refinancing plus ARPA effectively eliminated our $4.9 million deficit that we were projecting in 2021,” Sorace said. ... “Without ARPA, we would be in a wholly different place and having a very different conversation.”
The city is projecting to use $4 million in ARPA funds in 2023 and again in 2024, but will be preparing intensely, she said, for when that support comes to an end.
“The challenge that we have looking forward is how not to fall off the cliff. And that is the budget planning that we need to really engage in 2022,” Sorace said.
While it does not include a real estate tax increase, the budget proposal does include an increase of $4 per quarter in the solid waste and recycling fee for all residential customers.
In addition, the proposal projects a $2.4 million (8%) increase in water fund revenues based on a requested rate hike for the city water system’s suburban customers. The state’s Public Utility Commission has yet to rule on the request for a 20.8% increase.
The city’s budget includes the general fund and four specialized funds. Total spending planned in 2022 is as follows:
General fund: $67.1 million (up nearly 4% from 2021)
Water fund: $34.8 million (up 2.6% from 2021)
Sewer fund: $18.75 million (down 5.8% from 2021)
Solid waste & recycling fund: $5.75 million (up 4.7% from 2021)
Stormwater management fund: $4.8 million (up 1.78% from 2021)
TOTAL: $131.2 million (up 1.96% from 2021)
Without the American Rescue Plan Act—the COVID-19 stimulus package President Biden signed in March—the city would have had to raise property taxes in 2022, Sorace said.
But once the ARPA funds run out, the city is projected to run out of reserve funds to make up the budget gap by 2025. It will have to raise property taxes or find other sources of revenue to make up the difference.
“For 2022, we're going to be doing a pretty intensive financial planning exercise…. Barring any changes in terms of how we can raise revenues, what that looks like is when are we raising property taxes and by how much,” Sorace said. She stressed the need for the state Legislature to allow the city more options for raising revenue.
The budget is viewable as of Wednesday, Nov. 24, on the city’s website, cityoflancasterpa.com. An overview presentation of the budget will take place at city council’s finance committee meeting at 6 p.m. on Monday, Dec. 6. Then an all-day meeting with budget presentations from each department will take place on Saturday, Dec. 11, starting at 10 a.m.
Council is expected to adopt the final budget at its 6:30 p.m. meeting on Tuesday, Dec. 21.
Sorace said members of the public can call the mayor’s office with any questions or comments, as well as providing comment at the council meetings.