In the October 21 article “Protests, pandemic tested Sorace in his first term”, LNP | LancasterOnline reported that Lancaster City Mayor Danene Sorace believes the city’s finances remain volatile.
“A growing imbalance between the amount of money the city raises and its overall spending, combined with a dwindling cash reserve, threatens to send the city into municipal bankruptcy in the coming years if not resolved.” », Says the article.
The solution, Sorace said, lies in reforming property taxes and providing cities with another way to raise funds.
While I am a proponent of property tax reform, let me try to explain why I am troubled by the mayor’s argument.
As of January 1, 2015, the Town of Lancaster General Fund had a balance of approximately $ 10 million; these are the resources the city has to make up for any deficit that year.
For 2015 and the next five years, the city projected deficits totaling nearly $ 12 million, or about $ 2 million each year.
If those $ 12 million losses had occurred, the city would have wiped out its $ 10 million fund balance and ended up with $ 2 million in the hole by the end of 2020.
But these predicted deficits were incorrect. Instead of a loss of $ 12 million, there was an overall increase of $ 5 million over those years. So, as of January 1, 2021, the city fund balance was $ 15 million – the initial $ 10 million plus the additional $ 5 million.
Simply put, it is misleading to claim that there is a structural deficit or that fund balances are declining.
The city administration, headed by the mayor, with input from all city departments, assembled these budgets and submitted them to Lancaster City Council for approval. Each year the costs include 100% for all staff positions in the budget, although not all positions will be filled for the entire year.
By presenting the 2021 budget to city council, the city administration planned to underutilize the 2020 salary level by $ 2 million. Likewise, substantial savings can be expected in the years to come.
This overbudgeting of wage spending is one of the main reasons why projected deficits do not occur. The city knows this, and therefore its use of the term “structural deficit” is misleading.
There is a good case for property tax reform in Pennsylvania. But it’s not that.
I wish the city, LNP | LancasterOnline and the Hourglass Foundation, when arguing for tax reform in Pennsylvania, would be more specific in how they describe the current financial situation of the town of Lancaster. The people of the city deserve to know the true financial situation.
As stated earlier, I certainly understand the need for some form of state tax reform that would allow the city to increase its tax revenues and reduce its dependence on property taxes. Most of the townspeople, including me, would be delighted with this.
However, the rationale should not be based on overestimated dire economic circumstances facing the city, but rather on the desire to reduce the property tax burden on city properties.
Arthur Morris was Mayor of the Town of Lancaster from 1980 to 1990.