Lancaster’s government is on track to finish 2024 without needing to tap its cash reserves to balance its budget, City Councilman Jaime Arroyo said this week.
Arroyo, who serves as City Council’s finance chair, reviewed a midyear budget report with his fellow council members at Monday’s committee meeting. (To see the full 30-page report, click here (PDF).)
Through the first half of the year, the city has paid out $29.2 million. That works out to 39.8% of projected full-year expenditures,
That figure, however, doesn’t account for debt service, which is mostly paid in the fall. Factoring that in and pro-rating it puts the city at 47% of its full-year spending as of the halfway mark, Arroyo said.
On the revenue side, the city has brought in 57% of its expected revenue, so far. That’s about normal, Arroyo said. On real estate tax collections, the city is at 94% — all on-time payments have been received, while late payments will continue to come in and be booked.
As for earned income taxes, most companies process them quarterly, so there’s a lag; accordingly, the city has received just 30% of expected EIT revenues, as most second-quarter payments are still pending.
In summary, the city currently is a bit ahead of its revenue projections and under budget on expenses, “which is good to see,” Arroyo said.
Asked by council President Amanda Bakay how spending is being kept down, Director of Administrative Services Tina Campbell said the savings mostly come from vacancies — either not filling them, or delaying new hires. Other savings have come from restructuring fleet leases and finding efficiencies in the city’s IT systems, she said.
City Councilwoman Janet Diaz, who is considering a run for mayor next year, asked several questions about third-party legal services and other professional consulting contracts. The city has dozens of consulting agreements, many with multiple fee rates depending on the level of service required for a given task, Mayor Danene Sorace said. Arroyo noted City Council approved the line items covering those expenditures when it passed the 2024 budget in December.
Diaz said she she’s fielding questions from constituents about why the city is “going under,” and wants to be able to answer them. The term “going under” exaggerates the city’s predicament, Sorace said: The city is facing a structural deficit in 2025, which department leaders are working to eliminate through a mix of expense reductions and revenue increases.
The latter could include an earned income tax increase if home rule passes in November. In a statement on social media, Diaz blamed Lancaster’s financial difficulties on “the mismanagement of previous administrations” and said she is wary of any solution that would increase the burden on lower-income residents and those on fixed incomes.
Sorace and the Pennsylvania Economy League say the struggles of Lancaster and other cities stem from Pennsylvania’s outdated municipal finance laws, which lead to chronic structural deficits even when jurisdictions operate efficiently. Sorace has said an increased EIT would be more equitable than additional property increases, and would allow natural revenue growth without rate hikes due to the increase in taxpayers’ incomes over time.
City Council will have discussions like Monday’s on a regular basis if Lancaster shifts to home rule. The proposed charter would oblige City Council to hold quarterly budget updates and the administration to submit monthly budget reports, which would be publicly posted.
For next year, 2025, Campbell and the rest of the city’s senior leadership are currently preparing two budgets: One if home rule passes, one if it doesn’t. Sorace said last month that both budgets will be introduced Oct. 1 and discussed in depth at an information session on Saturday, Oct. 12.
