July 14, 2021
Almost two years ago to the day, Senators Martin, Aument, Argall, and Phillips-Hill sat at this dais along with mayors from three cities, the Lancaster Chamber, the EDC, and PA Municipal League to discuss the fiscal sustainability of cities like Lancaster.
In the ensuing years, we have been hard at work to develop a commonsense plan that would merit the support of the legislature to address Lancaster’s fiscal sustainability. The plan, dubbed STMP+, would allow cities who responsibly managed their finances (no more than 4% average growth in expenses over five years) access to revenue generating tools afforded to cities in municipal bankruptcy. It would, in effect, prevent cities from entering Act 47.
Unfortunately, these efforts failed.
Without STMP+, there are three hard truths that have been further validated by PFM’s review of the City’s finances in 2020 and last week’s report by The Pew Charitable Trusts:
- The limits imposed by PA state law allow the City of Lancaster only one option to increase revenues: Property taxes.
- We cannot cut our way out of our structural deficit. The City’s debt and pension obligations – representing 8% and 12% of the general fund budget respectively – are not affected by headcount reductions. What IS affected by headcount reduction is public safety. Public safety is 62% of our general fund budget.
- We cannot economically-develop our way out of our structural deficit. Most definitely, the City benefits from continued public and private investment in our community. However, that does not translate into seismic shifts to the assessed value of properties cumulatively.
What can we do?
Raise property taxes: If you read the front page of the LNP yesterday, you’ll see that all but three school districts in the County are raising property taxes despite additional federal and state increases in funding. Similarly, the City has received a once-in-a-lifetime injection of federal support through the American Rescue Plan. This has staved off catastrophe for the City, buying us some time. However, a property tax increase is inevitable, and we will begin forecasting when and how much in the coming months.
Cut costs: The City has continued to cut costs through new procurement processes, self-performing work rather than subcontracting, refinancing existing debt, and fund raising to offset costs and/or support special initiatives.
Continue to Advocate & Invite Solutions: While our efforts in the state legislature have been unsuccessful thus far, we are not giving up. The stakes are too high – for the city, the county, and the region. We will begin reaching out anew in the fall as we prepare our 2022 budget and the next iteration of our five-year financial forecast.
In the meantime, all eyes will be on the trial set to begin September 9th which addresses the challenges of Pennsylvania’s education funding system when it comes low-income communities like ours. Depending on how the Supreme Court rules, their decision could provide needed relief to taxpayers, especially in Lancaster City.