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Proposed city budget includes first tax hike in 4 years, plus utility rate increases

Mayor Danene Sorace, right, delivers her budget address to City Council on Tuesday, Nov. 22, 2022. (Photo: Tim Stuhldreher)

Mayor Danene Sorace presented a draft budget for 2023 to City Council Tuesday evening that includes an 8% property tax hike, increases in the city’s utility and trash rates and a hike in its stormwater fee.

All told, the increases would raise expenses for the median city homeowner by $84 per quarter or $336 per year.

The city last increased property taxes four years ago, enacting a 1 mill hike for 2019. The 11.7-mill rate has remained in effect since then, the longest stretch without an increase since at least 2006.

In her budget address, the mayor said the budget reflects a reality that preceded her tenure and hasn’t changed. Lancaster, like its peer cities across the commonwealth, is obliged to cover ever-increasing expenses, but its property tax base is barely growing, and outdated state law severely limits its other revenue-generating options.

“It is as if I am performing the same song on the fourth Tuesday of November that I performed for the last five years,” the mayor said.

“Why is the song the same? Because we only have one tune to play, and that is raising property taxes. All the other methods of taxation are frozen in time, and we are powerless to implement any new taxes.”

(Source: City of Lancaster)

Tuesday’s budget address starts the clock on the city’s annual budget process. City Council will discuss the spending plan at its committee meeting on Monday, Dec. 5, and at a budget hearing beginning at 10 a.m. Saturday, Dec. 10.

Council is scheduled to vote on the budget at its meeting Tuesday, Dec. 20. The meetings and hearing take place at City Hall and are open to the public.

The draft budget calls for $71.87 million in general fund spending, up 7% from 2021. Adding in the water, sewer, trash and stormwater funds brings the total to $141.1 million, up 7.5%.

The proposed property tax, utility rate and fee hikes are as follows:

  • Property taxes: Millage would increase from 11.7 mills to 12.64 mills, a hike of 0.94 mill or 8%. The median city owner-occupied house is worth $127,500; its taxes would rise by $119.85, a hair under $30 per quarter. (1 mill equals $1 per $1,000 of property value.)
  • Water rates: For the median customer, rates will increase $20 per quarter to $121.68 (up 19.7%)
  • Sewer rates: For the median customer, rates will increase $24 per quarter, to $142.90 (up 20.2%)
  • Trash rates: For residential customers, rates will increase $5 per quarter, to $78 (up 8.3%)
  • Stormwater fees: Rates will rise 21%. This fee has four tiers, based on the amount of impervious area a property has; 78% of city properties are in the two middle tiers. They will pay either $9.38 per quarter (for 1,001 to 2,000 square feet), up by $1.63; or $28.13 per quarter (for 2,001 to 3,000 square feet), up by $4.88.

The proposed water and sewer rates apply only to customers within city limits; rates for suburban customers are set through a filing process with the state Public Utility Commission.

Sorace acknowledged that the rate increases would be hard on households on fixed incomes. But they’re necessary, she said.

They ensure the ongoing provision of clean water, trash disposal and so on, she said.

Moreover, “these investments also mean that we are avoiding fines and even more expensive repairs in the future,” she said. “In short, we need to make smart investments now to avoid placing a larger burden on taxpayers in years to come.”

Raising the city water and sewer rates is done through an ordinance; raising the stormwater fee and the trash fee is done by resolution. All four pieces of legislation will be brought before City Council on Dec. 5, Director of Administrative Services Patrick Hopkins said.

The sewer and general-fund budgets are being impacted by the expiration of savings from past bond refinancing, leading to increases of $1.5 million and $2 million, respectively, in debt service starting next year.

Click to enlarge. (Source: City of Lancaster)

The mayor noted that property taxes don’t even cover police and fire services, the city’s largest single expense. The city is projecting a 5% increase in earned income tax collections, but at $8.4 million, they only account for 12% of general fund revenues.

The city’s budget this year used $4.5 million from its American Rescue Plan Act allocation for “revenue replacement,” providing dollars that would otherwise have to come from taxes. For 2023, the proposed sum is $6 million. After 2024, ARPA will no longer be available; Hopkins noted last year that the city will need a strategy to deal with that.

The city’s success in securing grants is a bright spot, Sorace said: It has secured more than $49 million in federal, state and foundation awards, not counting American Rescue Plan Act funds.

She also noted the recent revision of the city’s fees for services such as plan reviews, building permits and so on. The revisions were intended to accurately reflect the costs incurred by the city, and the fees are expected to generate an additional $750,000 next year, the mayor said.