Proposed 2017 Budget. General Fund Stormwater Management Fund Sewer Fund Water Fund Solid Waste & Recycling Fund

Transcription

1 Proposed 2017 Budget General Fund Stormwater Management Fund Sewer Fund Water Fund Solid Waste & Recycling Fund

2 2017 BUDGET ADDRESS J. Richard Gray, Mayor November 22, 2016 Members of City Council, Residents, and Guests: Thank you for the opportunity to present our proposal for the City of Lancaster s 2017 Annual Budget. As with previous budgets, this proposal represents a responsible attempt to balance the interests and concerns of taxpayers with the ever increasing costs associated with providing essential services. Since taking office in 2006, restoring the City s fiscal stability and credibility has been my top priority. Tough choices and prudent planning over the past decade have allowed us to achieve that stability and to establish credibility with bond rating agencies. Last month, Moody s Investor Services reaffirmed the City s financial health by assigning the City with an A1 bond rating and removing a negative outlook that was noted on their prior report. Moody s Services found that The City s tax base has shown signs of stabilizing as ongoing redevelopment and population growth offset a weak socioeconomic base. Moody s went on to say that Lancaster has a history of careful management. Over the years, the City has made a concerted effort to foster economic development while maintaining a healthy reserve position. The revitalization, investment, and growth that Lancaster City has enjoyed over the past decade is starting to pay off in other ways. With respect to Earned Income Tax, Lancaster City revenues are rising at a faster rate than the rest of the County. This indicates that total wages earned by City residents are on the rise. In 2017, we expect Earned Income Taxes to account for an estimated 11 percent of General Fund revenues. We re also starting to see a positive growth trend in Real Estate Transfer Tax revenues. We anticipate that by the end of this year, Real Estate Transfer Tax revenues will recover to pre recession levels. This positive growth indicates that the City s real estate market continues to be strong and growing. Still, in Pennsylvania local governments are forced to rely on property taxes as the primary source of revenue. The City does not have the power to create new revenue sources or to impose different taxes as a way to reduce the burden of property taxes. We get no share of state income taxes; no business taxes; and no funds from the County to support City operations or services. Indeed, just over half (51%) of all General Fund revenues come from real estate taxes. Because of this, municipalities with a large percentage of properties that are tax exempt face special challenges. An estimated one third of City properties are not taxed, and County owned property alone represents roughly $1.2 million in lost revenue to the City. Many tax exempt property owners make voluntary contributions to the City in lieu of taxes. These contributions account for roughly 4 percent of General Fund revenues, or $2 million. Lancaster General Health contributes $1.5 million dollars each year, accounting for 80 percent of all payments made in lieu of taxes. On the expense side, we ve managed to hold the line in our proposed 2017 General Fund Budget, to an increase of only 1.1 percent over this year s amended Budget. This is below the average 2.1 percent annual budget growth that we ve been able to maintain over the past decade. Much of this increase in expenses can be attributed to the cost of state mandated defined pension benefits for Police and Fire and contractual salary obligations. In 2017, pension costs will increase by $620,000. 1

3 Any budget reflects both the priorities of the organization and a balance between competing interests. This 2017 Budget represents a balance of cautious optimism about the City s fiscal future with a realistic assessment of factors that will impact City finances in the years to come. Last year, we were able to avoid a tax increase because of one time savings from bond re financing. This 2017 Budget proposes a 3 percent tax increase for 2017 that will generate approximately $780,000 in additional revenue. For the average residential property assessed at $75,000, this amounts to a tax increase of about $32.00 a year. Rising pension costs are a driving force behind the tax increase I am proposing. I am confident that current staffing levels of 145 Police and 74 Firefighters adequately meet our public safety needs. With two thirds of the proposed budget being spent on public safety, our priority must be to maintain those staffing levels. Over the next five years, 20 percent of our Police Officers and nearly 40 percent of our Firefighters will have served the City for 25 or more years and be eligible for full retirement. This presents both an opportunity and a challenge. As more experienced Officers and Firefighters retire, they will be replaced by new employees starting at entry level salaries. This will place additional demands on public safety officers as new recruits join their ranks. At the same time, recent Police and Fire labor contracts call for changes in pension and post retirement medical benefits for new hires that will reduce retiree benefit costs over the long term. This budget proposal also includes a sewer rate increase for our inside City customers that would result in a quarterly increase of approximately $6.60 for the average residential customer. This rate increase is necessary to keep pace with the increased investments we continue to make in the sewer infrastructure, making up for decades of deferred maintenance and repairs. The fact that Lancaster is currently fiscally sound is no accident. The City s fiscal condition today is the result of our decision nearly a decade ago to be honest with taxpayers and to increase taxes incrementally as needed. Our Bond Rating is strong, our reserves are stable, and our fiscal house is in order. Most importantly, we have preserved vital services for our residents, businesses and visitors. In the coming weeks I look forward to discussions with City Council and the public about our proposed budget and ways that we can continue to provide the highest level of service to our customers at a reasonable cost. ### 2

4 2017 Budget Highlights General Fund Real Estate Tax increase proposed $32 for average residential property Expenses increase only 1.1% vs Amended Earned Income & Real Estate Transfer revenues increasing LOOP added to EDNR Parking enforcement moved to Lancaster Parking Authority Stormwater Management No fee increase EPA mandates unknown Sewer Fund Inside City Rate Increase: $6.61/quarter for average residential customer Water Bond refinancing savings continue PUC rate case for Outside City customers in 2017 Solid Waste and Recycling No rate increase 2017 is the 11 th year of single hauler program 3

5 City of Lancaster Combined Operating Budgets: $103,413,774 Stormwater Management Fund $2,619,736 3% Sewer Fund $16,018,400 16% Total 2017 Operating Budgets are down $800,000 vs Amended Budgets General Fund $54,267,418 52% Water Fund $26,348,159 25% Solid Waste & Recycling Fund $4,160,062 4% 4

6 Sewer Rate Survey Comparative Sewer Rates from November 2015 Rates must increase to continue investment in long term improvements to the City s aging Sewer system. Even with the proposed rate increases, City of Lancaster sewer rates continue to be lower than those charged by many Lancaster County utilities. Lancaster County Sewer Rate Survey Usage = 12,000 Gallons New Holland Borough $42.00 Lancaster City Current Outside $52.25 Lancaster City Current Inside $66.09 Lancaster City Proposed Inside $72.70 Lititz Borough $75.71 Warwick Township* $77.00 Elizabethtown Borough* $87.60 Lancaster Area Sewer Authority* (1/1/16) $89.40 East Lampeter Sewer Authority* $90.00 Mount Joy Borough $90.72 Millersville Borough Residential* $ Suburban Lancaster Sewer Authority* $ Leola Sewer Authority* $ Denver Borough* $ Manheim Area Water & Sewer Authority $ *Flat rate charge not based on consumption 5

7 Bond Refinancing Savings $9,500,000 $8,500,000 $7,500,000 $10,789,989 Water Fund $7,589,213 $6,500,000 $5,500,000 $4,500,000 $3,500,000 $2,500,000 $1,500,000 $500,000 General Fund $2,749,167 Sewer Fund $451,609 $(500,000) 1 6

8 The more things change Police $19,470,446 45% Admin Services $8,419,288 19% Fire $8,910,428 20% Public Works $4,873,727 11% EDNR $1,615,765 4% Executive $489,915 1% The more they stay the same 2007 From 2007 to 2017, the General Fund Budget has increased by an average of only 2.1% per year. Leg/Financial $124,143 0% Police $23,882,262 44% Admin Services $8,904,393 17% 2017 Fire $11,501,463 21% Public Works $5,992,687 11% EDNR $3,225,171 6% Executive $605,609 1% Leg/Financial $157,497 0% 7

9 Where the real change is happening $30,000,000 $26,341,270 $25,000,000 $20,000,000 $15,000,000 $11,248,934 $16,013,328 $13,914,569 $10,000,000 $5,000,000 $2,654,457 $4,193,492 $2,873,661 $0 $0 Stormwater Fund Sewer Fund Water Fund Solid Waste & Recycling Fund

10 2017 General Fund Revenues By Revenue Category Real Estate Taxes $27,830,000 51% PILOTs $2,000,000 4% Earned Income Taxes $5,800,000 11% Public Works Revenues $5,183,000 10% Grant Revenues $4,075,000 7% Other Taxes $2,463,000 4% Regulatory License Fees $645,000 1% Public Safety Revenues $2,640,000 5% EDNR Revenues $1,208,000 2% Use of Reserves $1,996,143 4% Other Revenues $427,275 1% 9

11 Earned Income Tax Revenues $6,000,000 $5,000,000 $4,000,000 $4,200,828 $3,946,676 $3,939,944 $4,070,333 $4,064,525 $5,239,415 $4,811,055 $4,985,491 $5,545,625 $5,713,177 $3,000,000 $2,000,000 $1,000,000 $ Projected 10

12 $1,000,000 Real Estate Transfer Tax Revenues $968,248 $974,261 $900,000 $848,826 $800,000 $700,000 $726,696 $600,000 $500,000 $591,545 $551,102 $496,620 $469,748 $531,810 $539,545 $400,000 $300,000 $200,000 $100,000 $ Projected 11

13 Self Insurance Update General Fund Stormwater Management Fund Sewer Fund Water Fund Solid Waste and Recycling Fund Payment of Health Care Claims Since 2012, the City s claims trends have been good. Several large individual claims have caused an increase in the stop loss insurance premium. Internal Service Fund $$$$$ 12

14 Medical Self Insurance savings by design Internal Service Fund Savings estimated at year end 2016 General Fund $3,110,687 Enterprise Funds ($871,792) Total Savings $2,238,896 The estimated Internal Service Fund balance at year end 2016 is equal to nearly 20% of the City s annual medical insurance expenses. 13

15 General Fund Medical Insurance Spending $9,300,000 Self Insurance began in 2012 $8,800,000 $8,626,402 $8,524,176 $8,300,000 $8,103,000 $8,244,185 $8,245,882 $8,130,044 $8,119,921 $7,973,947 $7,800,000 $7,775,000 $7,803,526 $7,300,000 Insurance Premiums Paid Claims/Admin Paid $6,800, Projected 14

16 2016 Projected Revenue $52,934,837 EIT increase $375,000 RET increase.. $320,000 Property sale. $460, Projected Expenses $52,200,403 Salary savings $665,081 Benefits. $169,761 Operating. $489,451 Debt Service... $297,799 15

17 2018 Budget challenges Labor negotiations Fire contract expires 12/31/17 General Fund refinancing savings expire Debt service increases by $1,000,000 Property Reassessment Countywide property reassessment effective 1/1/18 EPA Mandates Unknown costs for Sewer and Stormwater improvements 16