City Council has already heard a lot about the 2025 budget, but on Tuesday, council and the city administration made it official, introducing the appropriations bill and two tax rate bills that council members will vote on next month.
Reflecting the adoption of home rule, which city voters approved in a referendum earlier this month, the budget package calls for raising the earned income tax rate by 0.5 point, from 0.6% to 1.1%. The property tax rate would remain unchanged at 12.64 mills. (One mill equals $1 per $1,000 of assessed property value.)
For more information
Lancaster’s draft 2025 budget and related presentations are available on the Budget & Budget Documents page of the city’s website.
Home rule is what allows the city to raise the EIT. Without that change, the city had anticipated needing to raise property taxes by 1 mill, and continuing to raise them roughly every other year to cover its structural deficit. From 2002 through 2023, the city raised property taxes 11 times.
The hope is that EIT tax hike can be a one-time adjustment. Projections indicate that at 1.1%, EIT revenues should grow enough from year to year to avoid the need for any tax increase, EIT or real estate. The expectation is that the city could hold the line “for the foreseeable future,” Mayor Danene Sorace said.
The School District of Lancaster collects an EIT of 0.5%. City taxpayers thus pay a total rate of 1.1%, which would rise to 1.6% with the proposed increase in the city’s rate.
The administration had been evaluating a smaller potential EIT hike of 0.3 points, but that would not be enough to preclude further tax hikes, city Director of Administrative Services Tina Campbell said earlier this month: Indeed, the city would be seeing deficits again after just a couple of years.
- Previous coverage: 0.3 or 0.5? City Council hears budget, income tax scenarios
Council President Amanda Bakay said she believes the 0.5-point hike “is the right one … We have to make this decision and get it right the first time.”
As she noted, other home rule municipalities have been able to avoid further tax hikes following a right-sized initial EIT hike.
With a 1.1% EIT, residents earning $60,000, roughly the city median, will pay $660, an increase of $300 from 2024.
About the budget
Lancaster’s budget has five components. The largest, the general fund, totals $76.8 million, up 5.5% from the 2024 budget as passed.
Lancaster has four “enterprise funds”: Water, sewer, stormwater, and solid waste & recycling. Real estate and EIT taxes go into the general fund; each enterprise fund is supported by a corresponding fee paid by customers or property owners.
For 2025, the administration is proposing a 10% increase in trash fees and a 12% increase in sewer fees. For most households, those would amount to an additional $8 per quarter for trash and $5.25 a month for sewer.
There are no increases are proposed for water or stormwater. However, the city is planning to apply to the Public Utility Commission in early 2025 for a rate increase on its suburban customers.
The enterprise funds total $80.6 million, for a total 2025 combined operating budget of $157.4 million.
On the expenditure side, the budget provides for some one-time legal fees the city expects to incur in the course of shifting to home rule and drafting a new administrative code and ethics code. It maintains grants at existing levels for two nonprofits to which the city contributes: Lancaster EMS ($150,000) and the Lancaster Public Library ($110,000).
Lastly, it uses just $2.4 million of the city’s remaining American Rescue Plan Act funds, reserving the other $1 million so it can go toward renovations planned at several parks on the city’s south side. City Council must allocate all ARPA funds by the end of this year.
City resident Suzy Gomez accused council and the administration of raising taxes on struggling city residents to benefit themselves. Sorace responded that City Council salaries are unchanged in the budget, and that under home rule council members will be ineligible for health insurance or pension benefits after Jan. 1.
Previously, in making the case for home rule, the mayor has higher revenues are needed to preserve core services that residents depend on — police and fire protection, the maintenance of streets and parks and so on — and that shifting more of the tax burden to the EIT is better for lower-income and fixed-income residents.
City Council is scheduled to vote on the 2025 budget on Tuesday, Dec. 17.
