City Budget Highlights

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2 City Budget Highlights 2

3 2019 Budget Highlights General Fund Real Estate Tax increase Millage rate increases from 10.7 to 11.7 mills Assessment appeals $13.4 million reduction in assessed value Earned Income & Real Estate Transfer revenues still strong Increased benefit expenses account for 40% of total expense increases Mayor s Office of Neighborhood Engagement Stormwater Management Fund SWM Fee rate increase 80% of customers to see fee increase of $3.50 to $10.50/year in 2019 (depending on size of property) First full year of debt service impact for capital projects Mandated projects continuing as result of EPA consent decree Sewer Fund No rate increase 2019 study for PUC rate filing Resolution of long term bulk sewer billing dispute Mandated projects continuing as result of EPA consent decree Water Fund Bond refinancing savings continue $1.5 million 2019 Distribution System Improvement Charge filing in early study for PUC rate filing Solid Waste and Recycling Fund Rate increase of $10/year for all customers first increase since 2010 Recycling rule changes uncertainty in market driving higher expenses 3

4 City of Lancaster Combined Operating Budgets: $114,353,581 Stormwater Management Fund $4,119,660 4% Sewer Fund $17,545,469 15% General Fund $60,346,080 53% Water Fund $27,807,186 24% Solid Waste & Recycling Fund $4,535,186 4% 4

5 2019 General Fund Revenues By Revenue Category Real Estate Taxes $30,155,800 50% PILOTs $2,160,000 4% Earned Income Taxes $6,375,000 10% Grant Revenues $4,253,192 7% Other Taxes $2,869,500 5% Public Works Revenues $6,421,472 11% Regulatory License Fees $635,000 1% Public Safety Revenues $2,935,500 5% EDNR Revenues $1,395,000 2% Use of Reserves $2,449,616 4% Other Revenues $696,000 1% 5

6 Economic Development 2018 Reassessment Budget Impact City Taxes Tax Reform? 6

7 New Projects New revenues over time but not yet. No property tax revenues are used to support economic development in the City. Tobacco Road 101NQ LERTA is a tax abatement program available to nearly all City property owners that allows a phase in of taxes on improved property over a period of years. Conestoga Plaza Holiday Inn & Lancaster Square Fulton Bank Economic development projects throughout the city create jobs and make Lancaster City a more vibrant place to live. However, other than real estate taxes that will eventually be paid on new projects, most projects produce little or no additional revenues to the 7City.

8 8 $1,925,412,200 $1,939,205,900 $1,908,726,600 $1,905,874,900 $1,909,944,000 $1,919,114,100 $1,926,006,600 $1,936,793,400 $1,942,317,800 $1,947,414,400 $1,947,948,800 $1,953,855,300 $2,500,000,000 $2,000,000,000 $1,500,000,000 $1,000,000,000 $500,000,000 $0 Before Reassessment Total Taxable Assessed Value Even after significant economic development over the last decade, total taxable assessed values in the City grew by only 1.35% Total Taxable Assessed Value

9 2018 Reassessment The 2018 Countywide Reassessment resulted in a 36% increase in the value of all taxable property in the City. To adjust for the increase in TOTAL assessed value, the City s tax rate was reduced from mills in 2017 to 10.7 mills in $3,000,000,000 Total Assessed Value $2,657,331,700 $30,000,000 Real Estate Tax Revenues $26,596,260 $26,720,000 $2,500,000,000 $25,000,000 $2,000,000,000 $1,953,855,300 $20,000,000 $1,500,000,000 $15,000,000 $1,000,000,000 $10,000,000 $500,000,000 $5,000,000 $ $ Actual 2018 Projected 9

10 What s happened since reassessment? 2018 Property Assessment Appeal Actions Decrease % Increase 3 2% No Change 39 23% 170 Property Tax Assessment appeals resulted in a net reduction in total assessed value of $13,440,000 for At the proposed 2019 tax rate of 11.7 mills, this reduction in assessed value will reduce City revenues by $157,000. The contracted wage increase of 3% for City firefighters in 2019 costs $158,

11 Real Estate Tax is the only source of City revenue controlled at the local level. City Tax Revenues Four City taxes produce 66% of General Fund revenues Real Estate Tax 2018: $26,720,000 49% of total revenues Earned Income Tax 2018: $6,400,000 12% of total revenues Local Services Tax 2018: $1,685,000 3% of total revenues Real Estate Transfer Tax 2018: $1,030,000 2% of total revenues Rate Set by Mayor/Council Proposed rate: 11.7 mills Rate set by State Law.6% for City residents only Commuters pay EIT to their home municipality Rate set by State Law $47/year for those who work in the City Rate set by State Law.5% of sale price 11

12 NOT City Tax Revenues City Business Tax Personal Income Tax Sales Tax Beer/Wine/Liquor Tax Prohibited by State Law 100% State Revenue 100% State Revenue 100% State Revenue The good news: In 2018, $6.2 million in PA corporate taxes, personal income taxes, sales taxes, and PA beer/wine/liquor taxes paid by businesses in the CRIZ stay in Lancaster City to support economic development projects 12

13 PA Tax Reform When? 13

14 2018 Reassessment Property Owner Impact 14

15 Property Tax Rates 2019 School District of Lancaster mills 59% City 11.7 mills 33% County mills 8% Note: SDoL millage rate is for the fiscal year of July 1, 2018 June 30,

16 $200,000 $180,000 $160,000 $151,042 All Residential Properties Average Assessed Values 2017 vs Reassessment $184, Average Assessed Value 2018 Average Assessed Value $140,000 $134,494 $120,000 $111,534 $104,170 $100,000 $80,000 $93,698 $77,654 $66,534 $79,716 $59,070 $76,203 $75,482 $60,000 $40,000 $20, % +44% +20% +29% +37% +38% $0 Northwest Northeast Southwest Southeast Annex Total Note: These are from the preliminary reassessment figures. Final reassessment figures were slightly lower across the city.

17 2018 Property Reassessment Citywide Impact ALL Properties 8,774 Properties 6,935 Properties Tax Burden Shift 3% or more tax reduction 3% tax reduction to 3% tax increase 2,041 Properties 3% or more tax increase 17

18 2018 Property Reassessment Citywide Impact ALL Properties Of these properties, 71% saw at least a 10% reduction. Level 2,041 12% Of these properties, 73% saw at least a 10% increase. Reduction 8,774 49% Increase 6,935 39% Of these properties, 23% saw at least a 25% reduction. Of these properties, 36% saw at least a 25% increase. 18

19 2018 Property Reassessment Citywide Impact by Quadrant Northwest 18% 7% 75% Northeast 45% 40% 15% Annex 39% 29% In general, the County s 2018 reassessment resulted in a shift of the City property tax burden from properties in the Southwest and Southeast to the north, and more so to the Northwest. Southwest Southeast 32% 3%+ Reduction 11% 17% 72% 30% 9% 61% Level 3%+ Increase 19

20 3% or more tax reduction 8,774 Properties Where are they? Of the properties that saw a 3% or more tax cut in 2018, 77% will have a lower tax bill in 2019 than they did in This means that 38% of ALL properties in the City will have a lower tax bill in 2019 than they did in Southwest 49% Southeast 21% Northeast 20% Northwest 8% Annex 2% 20

21 3% tax reduction to 3% tax increase 2,041 Properties Where are they? Southwest 32% Southeast 13% Annex 9% Northeast 32% Northwest 14% 21

22 3% or more tax increase 6,935 Properties Where are they? Northwest 40% Northeast 29% Southwest 15% Southeast 13% Annex 3% 22

23 General Fund Budget Revenue & Expense Trends 23

24 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $4,070,333 $4,200,828 $4,064,525 Earned Income Tax Revenues $6,400,000 $6,375,000 $6,080,711 Earned Income $5,799,890 $5,545,625 Tax revenues are $4,811,055 $4,985,491 $5,239,415 based on earnings of City residents. Increased EIT revenues are a reflection of the total earnings of all City residents. Increasing revenues does NOT mean that all City residents are earning more. $ Projected* * 2018 Projection includes $105,000 additional distribution from LCTCB 2019 Budget 24

25 $1,200,000 $1,000,000 $968,248 Real Estate Transfer Tax Revenues $989,415 $1,197,274 $1,050,000 $1,030,000 $848,826 $800,000 $726,696 $600,000 $591,545 $551,102 $531,810 $539,545 $496,620 $469,748 $400,000 $200,000 $ Projected 2019 Budget 25

26 General Fund Full time Employee Count Even with new positions in Mayor s Office of Neighborhood Engagement, Human Resources, Code Compliance and the Police Bureau, the total General Fund full time employee count is 9% lower in 2019 than it was in

27 General Fund Budget Stability Police $19,470,446 45% Admin Services $8,419,288 19% 2007 Fire $8,910,428 20% Public Works $4,873,727 11% Leg/Financial $124,143 0% Financial stability has meant that the various department shares of the City General Fund Budget have been maintained year after year. EDNR $1,615,765 4% Executive $489,915 1% The Police and Fire Bureau budgets combined are more than 60% of the General Fund budget more than total Real Estate Tax revenues. Police $25,871,755 43% Admin Services $11,079,775 18% 2019 Fire $11,717,798 19% Public Works $6,661,280 11% EDNR $3,971,329 7% Executive $874,525 2% Leg/Financial $169,618 0% Note: EDNR increase includes adding CDBG funds to EDNR after

28 Budget Stability another view Salaries $21,795,816 50% Debt Service $2,947,973 7% Benefits $12,698,923 29% Operating $5,814,673 14% Salaries $28,006,674 47% Debt Service $4,965,713 8% Benefits $18,259,134 30% Operating $9,114,559 15% 2007 The relative size of the 2019 four main budget categories have remained nearly the same over a 13 year period. 28

29 Medical Self Insurance General Fund $ Stormwater Management Fund $ Sewer Fund $ Water Fund $ Solid Waste & Recycling Fund $ The City s claims trends have been good since Recent large claims have resulted in the need to increase the City s stop loss deductible from $150,000 per claim to $175,000 per claim. Internal Service Fund $$$$$ Payment of Health Care Claims & Expenses 29

30 Medical Self Insurance Annual Internal Service Fund Year end Balance The estimated Internal Service Fund balance at year end 2018 will be under 5% of the City s annual medical insurance expenses. $2,500,000 $2,144,977 $2,000,000 $1,788,079 $1,500,000 $1,565,323 $1,485,076 $1,289,854 Internal Service Fund Savings estimated at year end 2018 General Fund $707,054 Enterprise Funds ($319,750) Total Savings $387,304 $1,000,000 $500,000 $0 $761,067 $387, Projected 30

31 Self Insured Medical Expenses $14,000,000 $12,000,000 $12,329,699 $11,754,727 $11,521,447 $10,753,269 $10,959,745 $11,072,147 $12,979,717 $12,879,895 From 2012 to 2018, City medical expenses have increased by an average of only 3.5% per year. $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $ Projected * 2019 Estimated does not match 2019 Budget due to expenses being partially offset by employee and retiree contributions Estimated* 31

32 $1,000,000 $800,000 $600,000 $400,000 $200,000 $761,067 $804,256 Net Annual Internal Service Fund Savings/(Deficits) $579, Internal Service Fund balance at 12/31/17 $1.3 million Projected In 2018, high medical claims result in ISF spending of $1 million more than budgeted. $ $(200,000) $(400,000) $(600,000) Internal Service Fund balance at 12/31/14 $2.1 million 2014 $(356,898) $(303,003) $(195,222) 2019 Medical Insurance budgets increase by $755,000. $(800,000) $(1,000,000) $(902,550) 32

33 Medical Expense Cost Control # of City Employees Wellness Participation City employee participation in wellness programs encourages better health and preventative medical care for a healthier workforce and reduction of medical claims. # of City Employees High Deductible Health Plan Opt ins 36% 59% 25% 14% NB Fire Police AFSCME 2018 Total HDHP: Total HDHP: 149 HDHP Opt ins: 26% of FT Employees 33

34 Net pension obligations in 2019 are $330,000 higher than they were in $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $3,260,712 $2,435, General Fund Pension Obligations: $7,397,223 $3,054,241 $2,329,860 $3,544,938 $2,661,318 $3,700,363 $2,753,802 $4,271,599 $2,422,922 State Pension Aid funds only 40% of the City s pension obligations. $2,000,000 $1,500,000 $1,000,000 $500,000 $ Police $526,126 $541,253 $587,551 $615,210 Fire NU Police Fire NU Police Fire NU Police Fire NU Police Fire $702,702 NU 34

35 Stormwater & Solid Waste and Recycling Fees 35

36 Stormwater Management The Stormwater Management Fee was established in The proposed rate increase for 2019 will pay for increased debt service on funds borrowed for capital projects for stormwater runoff and waterway pollution reduction efforts to comply with the EPA Consent Decree. Rodney Park Park Improvements & Stormwater Management Rate Impact for Each Rate Tier SWMF Fee Tier Annual Increase Tier 0 $ Tier 1 $ 3.50 Tier 2 $ Tier 3 $ Tier 4 Varies depending on actual impervious area 36

37 Stormwater Management Fees Rate Tiers and Impervious Area City Properties by SWMF Rate Tier Nearly 80% of City property owners pay the SWM Fee at Tier 1 or Tier 2 rates. These rates will increase only $3.50 (Tier 1) or $10.50 (Tier 2) per year. Tier 2 6,845 37% Tier 1 7,730 41% Tier 3 1,478 8% Tier 4 2,042 11% Tier % Total Impervious Area by SWMF Rate Tier The 11% of properties in Tier 4 represent more than 75% of the impervious area in the City. Tier 4 59,859,810 76% Tier 0 24,582 0% Tier 1 5,631,128 7% Tier 2 9,369,335 12% Tier 3 3,534,997 5% 37

38 Single Hauler Trash & Recycling 2019 Recycling Market Uncertainty How will recycling market upheaval affect improvements in recycling and reductions in trash collected? Even with $10/unit increase in 2019, Solid Waste & Recycling rates have increased less than 1% per year since single hauler began in Pounds per Household per Month 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, Total Single Hauler Customers 18,138 14, * Yard Waste Collected * * Through Oct 2017 Pounds per Household per Month Pounds per Household per Month Recycling Collected * Trash Collected * 38

39 General Fund Five Year Budget Forecast 39

40 General Fund Five Year Projections This forecast assumes no change in Real Estate Tax rate after Taxes paid on avg. residential 40