Taxpayers will shoulder the burden of Mayor Gabriel J. Campana's $21.1 million proposed city budget for 2013, and he and other city leaders say the city faces an unsustainable formula to keep funding rising pension and health care costs for unionized employees.
Campana's proposed budget calls for a real estate tax increase of 0.85-mills, or $85 more per household assessed at $100,000. The proposed spending plan also reduces the city workforce by five employees, eliminating three officers on the police force and two Streets and Parks employees.
"I had to take certain measures to ensure that local taxpayers can continue to afford a high level of city services without experiencing a sizable tax increase," Campana said.
In a meeting with the Sun-Gazette, Council President Bill Hall and Councilman Jonathan Williamson hinted that the mayor's proposed tax hike may not be enough.
"It's not whether there will be a tax increase," said Hall.
The city should have been considering incremental tax increases as well as trimming expenses in prior years when the city held a tighter rein on taxes, he said. He also noted the impact of a big tax hike now on taxpayers who face school district taxes and other expenses.
"We can't control the costs of such things as electricity, energy, tires, gasoline and fuel," Hall said. "You either plan for it, or if you have wishful thinking and you get slammed."
Council will review Campana's budget proposal during two budget work sessions this week.
Those sessions are at 7 p.m. Monday and 7 p.m. Wednesday.
"Pension costs in all departments have doubled or more than doubled," said Joseph Pawlak, city fiscal and budget officer. The cost for average police officer and firefighter pensions went up by $11,000, while other employees' pension costs rose by $5,000 per employee, he said.
"Our $2.1 million obligation to fund pensions goes up to $3.8 million," he said of next year's figures.
"The pensions are increasing expenses by about $1.7 million, and are one of the biggest challenges in the budget," said William E. Nichols Jr., director of finance, who also warned about the danger of using the city surplus to fund deficits.
"We always try to start a budget conservatively and hope to find ways to save or increase revenues through the year," Nichols said. "We saved more money than expected this year and received more revenue, but the danger of using a carry-over surplus is, it is a one-time solution to a never-ending budget situation. It makes future budgets more difficult to balance."
Hall also warned about the dangers of using the city fund reserve to try to balance the budget.
Next year's city revenue is estimated at $21.2 million and expenses are estimated to be $21.1 million, with a fund balance of $2.2 million.
"That's money in reserve or savings," Hall said. The city is funding a $2 million deficit from its savings, or cash reserve, Hall said.
Beyond next year, the city must either raise revenue, spend less or borrow because it can't continue to draw down its reserve, said Williamson, chair of the city finance committee.
Meanwhile, this year's estimated expenses were $19.3 million, and the city took in $20.5 million in revenues.
"That's probably due to increased economic activity from Marcellus Shale," Williamson said.
More people are working, Williamson said, pointing to the earned income tax.
The earned income was budgeted at $1.85 million this year, but the actual revenue produced was $1.94 million, an increase of $90,000.
Meanwhile, mercantile tax, which is collected from businesses, also increased by $60,000. Revenues from the local services tax, mechanical devices tax and business privilege tax also increased.
"It's obvious in the city there's more economic activity," said Treasurer Thomas P. O'Connor, who wasn't sure if the boom was Marcellus Shale-related. "Certainly, some of it may be related to that. If more people are eating in restaurants and buying goods and services, that's a good thing."
Building permits are anticipated to yield $500,000 next year with construction of the YMCA on Park Avenue, a new medical center on the Susquehanna Health campus and renovations to the Williamsport Area School District.
However, council tends to review the city's comparative equity statement, which shows a five-year average for building permits. The five-year average is a more conservative assumption of $410,000, Hall noted.
"We look at all revenue estimates in a conservative manner," he said. "We look at the averages in the past, not necessarily what is projected - because it can change."
The city is expected to get another $550,000 from the gas drilling impact fee. The first impact fee check is expected to arrive in days, with another, of an unknown amount, expected in July. The impact fee money is put into capital projects and not used for operating expenses. Still, the administration placed $300,000 of impact fee money in the general fund.
"We may ask where it will be spent," Williamson said.
By far, the most expensive departments are the police and fire. The proposed police department budget is $7.7 million and the proposed fire budget is $6.2 million.
The proposed police budget indicates an increase of about $580,000 and the fire department, an increase of $700,000, according to Pawlak. "It's due to pensions and health care," he said.
Campana has asked to reduce the police department complement to 49 officers. The department also wants council to approve the purchase of four police cars and a $360,000 records-management system.
"That system is in the capital budget, not the police department budget," Pawlak said.
Streets and Parks is budgeted at $2,083,864 and includes eliminating two positions. The proposed budget for flood control is $615,035 and includes $330,000 for a flood levee certification.
Codes enforcement has a proposed budget of $637,687, which is up from $572,000.
Campana's office budget is proposed at $355,585. Pensions for the mayor's office are $23,600, which rose from $10,100 this year. Additionally, the office has budgeted $110,000 for litigation, more than double what it was this year. "That's a contingency fund for our expected arbitration with unions," Campana said.
City Council's proposed budget of $363,000 is an increase over this year's budget of about $238,000. Pensions jumped from $35,000 to about $83,000.
Council's legislative contingency fund went from $40,000 to about $120,000. That also is budgeted for arbitration and discussions with collective bargaining units negotiating contracts, Pawlak said.
The city clerk's proposed budget is $75,147, up from $67,000, an increase due to a rise in pension that went from $5,000 to $11,800.
The recreation department budget is estimated at $166,804. The city closed Brandon Park Pool and Memorial Pool and will keep retain East End Pool if it obtains funding for maintenance.
The office of finance and budget director budget goes from $527,516 to $575,123. The office budget is high because it retains the city insurance policies, Pawlak said.
Human resources budget is $80,363 an increase from $69,670. The pension went from $5,000 to $11,800. Advertising costs also were projected to increased by $3,000.
The controller's office budget is $124,297, which includes personnel and office expenses. The treasurer's office proposed budget is $174,803. The budget rose by $16,000.
"We budgeted for unknown insurance costs to replace a retiring employee in the treasurer's office," Pawlak said.