The City of Williamsport’s recurring revenues are not growing enough to cover the increase in the city’s recurring costs, resulting in a structural deficit, according to consultants.

That was among the assessments by Public Financial Management (PFM) of Philadelphia to City Council recently.

PFM has been engaged in a five-year strategic management planning process for the city with the state Department of Community and Economic Development (DCED).

Real estate tax revenues account for more than half of the city’s annual general fund budget. The issue for the city is real estate taxes generally do not grow without tax increases. The city’s 2026 budget included a half-mill property tax hike and use of reserves in order to keep it relatively manageable.

Simultaneous to this, the employee compensation costs (including fringe benefits) that make up 75% of the budget are expected to increase 2.1% annually over 2025 levels, said Gordon Mann, PFM’s managing director.

Because of this, the city needs more “robust” revenue growth, he said. Options for achieving that are:

• Diversifying types of taxes that the city uses, within the limits set by Pennsylvania law

• Increasing tax rates or fee rates

• Improving collection of existing revenue sources

• Growing the tax base

This plan presented to the city has several initiatives in each area, and the most crucial initiative in the near term is going through the Home Rule process to gain more local control over the resident earned income tax (EIT) rate, Mann said.

EIT is levied on wages, salaries, commissions, net profits, and other forms of cash compensation. It is limited to no more than 0.5 % by state law and the city can’t increase it unless it goes through the Home Rule process and adopts a charter by referendum, Mann said.

Without that flexibility, the city’s only option for significantly increasing the recurring revenue is repeatedly increasing real estate tax, he said.

The fundamental mismatch between rising expenditures and flat rate real estate tax revenues will put Williamsport’s residents and property owners in a cycle of real estate tax increases, each of which will only be sufficient to temporarily address the structural imbalance, he said.

In contrast, if and when the EIT rate is set at a higher rate, those revenues will grow without future tax increases, matching a revenue source that grows with the trend of expected expenditures, he said.