The City of Williamsport has enough cash on hand but its personnel face hard choices with a projected budget deficit in 2026 of at least $3 million.

The financial analysis, to date, was provided to the City Council recently by Public Financial Management Co., Philadelphia, a company working with the city on its strategic management plan.

The work by the firm costs $124,000 but is covered with 90% from the state Department of Community and Economic Development and the city funding the rest of the cost.

“You have some resources to work with here,” said Gordon Mann, the firm’s managing director, imploring the council and administration to “not freak out.”

For example, if the city has $7.4 million in cash and uses $2 million this year, the city might need another $1 million next year, he said.

“We don’t want to drop below that danger point,” he said. “We don’t want to get to the point where you are worried about making payroll.”

Nevertheless, the budget, as presented on paper, shows one that is “badly out of balance.”

Mann and Lieke Janssen, a senior analyst at the firm, offered the sobering report, assumptions based on maintaining the current tax rate and employee levels.

Without making any hard choices the general fund deficits are projected to increase from as much as $4.6 million to $6.4 million in 2030, the report stated.

Factors considered

During the height of the COVID-19 pandemic, between 2020 and 2022, revenue exceeded expenses, but in 2023 that changed. What spared the city was being able to use $25.4 million of American Rescue Plan funds on many projects that otherwise could not be paid for using the limited general fund.

This year, there is no more ARPA and the city is operating on a budget of 10 months of revenue for 12 months of expenditures.

“Not too many of us would say, ‘Hey, I think I will work 12 months and take 10 months of paychecks this year,'” Mann said.

The factors assumed $1.4 million taken from emergency reserves for the repayment to the Federal Transit Administration (FTA), which was not a fault by this administration but misdeeds by a former city administrator and former general manager of River Valley Transit, before it became a separate authority.

While this year’s budget shows it is balanced on paper, that is because state governments may consider reserves as revenue, he said.

Spoiler alert

“When we come to the end of this process we are going to have to talk about service cuts . . . we are not going to solve a $3 million deficit by hoping revenues increase,” Mann said.

“This deficit is large enough where we have to put everything on the table to talk about it,” he said. “That’s too large of a deficit to solve by turning the lights off when you leave a building or carpooling to the next conference or cutting the paper clip budget – it’s going to be harder than that.”

“I just want to prepare you for that,” he said. “We’re going to have to come back with some big ideas,” he said.

“Yes, we are going to come back and say this is what this type of tax increase would do,” he said. “I’m not saying we’re going to do it. It’s going to be on the list.”

Also on the list of possible recommendations will be the city taking steps to see if it wants to have a home rule charter, a longer step that is being explored by the council.

Home rule chartered communities such as Lancaster and Altoona offer officials with more flexibility and options for generating revenue rather than relying on the bulk of revenue from real estate tax.

After a discussion with the department heads on the services these departments provide, PFM will look at short-term fixes, those are not great, but will be necessary to get the city to the out-years.