According to articles in LNP, Lancaster city and the School District of Lancaster have negotiated a 99-year easement for less than one acre of land. Under the lease, the city gets to use the land for 99 years with the proviso, among other things, that it pays the district $100,000 per year during each of the first 20 years of the lease. In order to make these payments each year, the city will need about $1.42 million in today’s dollars and earn 3.5 percent on it. So, for this discussion, let’s say the current cost to the city of the lease is $1.42 million.
The city has received two appraisals on the property. One for $200,000 and the other for $490,000, with the average of $345,000 — say $350,000.
So, if the land is valued at $350,000, why is the city paying $1.42 million, a premium of $1.07 million? I understand that it has been a contentious negotiation. The city wishes to place a water tank on the land, and the district does not want the tank there. However, such a premium appears excessive and, for the reason explained in the next paragraph, will most likely result in city residents paying this $1.07 million premium in future water bills.
Because the project involves a water tank, the cost will be paid by water users. How the cost is built into the bill is by the city proportioning each project expense to “inside city water users” and “outside city water users” and making sure the water rates achieve the revenue to pay the expense. Water rates are different for inside city versus outside city users. The inside city rates are set by City Council; the outside city rates must be approved by the Pennsylvania Public Utility Commission.
Here lies the problem. The PUC will only approve the land easement for what it considers the fair market value. In the case at hand, it appears that the city is paying a $1.07 million premium that the PUC will not allow. Consequently, instead of sharing the entire land cost with outside city users, city residents will likely pay the entire $1.07 million premium in their water bills plus their share of the remaining $350,000 — not a good deal for city residents, particularly those struggling to pay their water bills every three months. I encourage the city and the district to revisit the terms of this agreement that unwittingly (hopefully not knowingly) places an unjust burden on city residents.
It is not a good time to be adding an unjustified financial burden on city residents, homeowners or tenants. Residents of Lancaster city, particularly those of low to moderate or fixed incomes, are facing increased financial stress related to real estate taxes, water rates, sewer rates and stormwater rates. Over the last 10 years, the collective cost of these four categories has gone up 96 percent for the average city resident. This increase has occurred in spite of a low Consumer Price Index increase of approximately 20% over this same 10 years.
It will not get any better in the city. To its credit, the city administration, at budget time, provided detailed projections of the challenges ahead. Using the city’s own income and expense projections for 2019 through 2023, it appears the city will need to increase real estate taxes 1 mill in each of 2020, 2022 and 2023 in order to have a year-end balance in 2023 of about $6 million, compared with $11.6 million at the end of 2018. With big water, sewer and stormwater projects ahead, the time has come for the city to tighten its belt and not assume greater burdens such as contemplated by the land payment for the new water tank.
Lancaster resident Arthur Morris was the City of Lancaster’s mayor from 1980 to 1990.