Lansdale’s Second Draft of 2024 Budget Carries No Tax Increase

Dan Sokil | The Reporter•

The second draft of Lansdale’s 2024 budget has good news for taxpayers, but more work to do before it’s official.

Council heard an update on the town’s draft budget, and the proposed spending cuts and new revenues that could mean no tax increase is needed for 2024.

"We initially said it would potentially require a one-quarter-mill tax increase,” said Finance Director Glenn Dickerson.

"Subsequent to that meeting, we were challenged with going through the budget, and finding a way to fund that without a tax increase. So as of today, this is where we’re at,” he said.

In October Dickerson presented a first draft of a 2024 budget with revenues and expenses balanced at just over $59.1 million, down from the roughly $63 million budget in 2023 due to the removal of road repair and repaving projects, and with taxes held at 7.25 mills, the level set after a one-mill increase in 2022 for ’23. Council had approved a sewer rate increase effective Sept. 1 that is meant to be the first in a series of increases over the next several years, and an electric rate study is currently underway that could spell out future rate hikes needed after 2024.

In October, council also heard details about a potential $10 million bond borrowing the town could take out to pay for capital projects like road repairs, sewer infrastructure, and other needed long-term expenses, and how that borrowing would require $200,000 to $250,000 in new revenue in the first two years to offset capitalized borrowing costs. During the administration and finance committee meeting on Nov. 1, Dickerson showed that group a series of line item spending cuts and revenue increases that could help the town meet that added cost without raising taxes.

"We have identified $192,000. We are working diligently to find the other $57,500. We know that we can find it. There are some other opportunities we just need to quantify,” he said.

"We are diligently looking at this, and committed that we present a budget to you in two weeks, that meets the objective of not raising taxes,” Dickerson said.

Cuts proposed from the first draft include $30,000 out of the town’s façade grant improvement program, which provides a match to local business owners who make upgrades to their business exteriors; another $25,000 in a line item listed as "borough partner contribution,” and $20,000 in cuts from "event elimination” and from the borough police department’s capital budget. New projected revenues include $50,000 from a proposed road degradation ordinance, meant to help recover costs of wear and tear on the town’s roadways; an additional $30,000 in code permit fees; and another $17,500 in "Final bill fees,” and Dickerson gave details on each.

In response to questions from residents and council, Dickerson said the "final bill fee” line item comes from fees charged to title companies when properties in the borough go to a settlement: "It’s all of the work my (finance department) staff does to create a final bill, when a property goes from person A to person B.” The line item for code permit fees comes from a council approval earlier this year that adds single-family units to the town’s rental ordinance, and will add about 500 properties into the town code department’s inspection and licensing program.

The $20,000 listed as "Event elimination” comes from police and public works costs to staff events in town: "There’s a potential that an event, that happens in the borough on an annual basis, may not happen next year and after that. That’s a reduction in expenses,” Dickerson said, without naming the event specifically. The $25,000 cut in "Borough partner contribution” was "Some money going to one of our partners, that was budgeted at a certain amount. We’re reducing that by $25,000,” Dickerson said, and the group’s identity was spoiled by council President Denton Burnell: "VMSC — nobody wants to raise taxes, but that money has to come from somewhere.”

Anther new revenue source the town could consider in future years could include a stormwater management fee, to charge those who do new projects for the impact of adding impervious ground coverage in the town, Dickerson said. The $10 million bond borrowing will likely total roughly $9.5 million once fees and processing costs are included, and that money would not all be spent at once, so the town could also see some new revenue in 2024 from interest earnings on the bond proceeds before they’re allocated to the capital projects.

"If we’re borrowing at four percent, while that money sits in the bank until we pay for projects, we can earn five percent. So we’re actually earning a little more in interest, that we’re accruing while it sits in the bank,” Dickerson said.

Staff have not yet calculated those possible earnings, and the bond borrowing will likely not happen until early 2024 and have no impact on the 2023 budget before the current year closes, he said. Of the capital projects that the borrowing could fund, staff have tentatively identified roughly $1 million in police equipment that could be funded, including new security cameras, dashboard cameras for police vehicles, and upgrades for the department’s main dispatch desk that dates back to the building’s opening in 2015, according to borough Manager John Ernst.

"The technology is always changing over ten years. The security cameras, addition of a couple of additional security cameras in places we’ve located, and we are replacing all of the stuff that’s met its useful life,” he said.

Electric superintendent Andy Krauss said his department began replacing transformers in the borough roughly ten years ago, and each costs roughly $1 million to do, with costs only increasing due to recent supply chain disruptions and inflation. Part of the borough’s electric revenues are typically transferred to the general fund and other funds to cover other expenses, Krauss said, and that trend continues in 2024: "It funds your loss leaders — your police department, your parks, your public works,” that don’t generate their own revenue.

"Right now, you cannot keep taking $7 million or $8 million a year, right off the top of the electric revenue, and keep that sustainable. That’s why we’re falling behind,” Krauss said. "I’m buying reconditioned transformers at $5,000 a unit. When I first started doing this ten years ago, they were under $1,000 a unit. The new units, that $5,000 unit is $11,000 new. I need three of them, to make a power bank. That’s the inflation.”

If council approves the $10 million bond borrowing, Dickerson added, the roughly $3 million allocated for capital projects in the annual budget could instead be used to build a capital reserve, meant to keep up with depreciation costs so large equipment purchases or projects are paid for by saving over time.

"What we’ve never been able to do is take extra money, and put it aside, so that we have that $1 million when Andy’s transformer needs to be replaced,” Dickerson said.

Of the roughly $59 million budget, the electric department’s operating expenditures are roughly $15 million per year, including the wholesale purchase of electricity that is then resold to residents, and police department expenses including officer salaries total about another $10 million.

"We have 105 to 110 full-time employees that are here, so you’re talking salaries and benefits for 110 full time employees. We have another 75 to 100-plus part-time employees that work at our pools. So you’re talking a lot of salaries and benefits that are part of that $60 million,” Dickerson said.

"Somewhere between 50 and 60 percent of our total budget” go to salaries and benefits, he added, which Ernst said is "by far the largest” expense category in the budget, and Krauss added a warning: "And I’m having a hard time finding skilled staff.”

In October staff had said council could also choose to use part of the roughly $300,000 left in federal COVID relief stimulus funding to help balance the budget, and Dickerson said the latest draft does not require tapping any of those funds to balance the budget. Current plans call for that funding to go toward a permanent restroom at Whites Road Park, Ernst said, and staff are currently looking to find grants that could reduce that cost if matched by the borough funds.

"We have to commit to spending all of the (stimulus) funds we received by December of 2024, and spend it by December of 2026. So we have some time,” Dickerson said.

Lansdale’s borough council next meets at 7 p.m. on Nov. 15 and the administration and finance committee next meets at 6:30 p.m. on Dec. 6, both at the borough municipal building, 1 Vine Street. For more information visit www.Lansdale.org.

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