Lansdale Votes Ahead Budget While Debating Tax Increase

Dan Sokil | The Reporter•

Budget season looks likely to continue into December, and Lansdale’s borough council still has one big decision to make.

Council members heard an update on that 2024 budget on Nov. 15, with a new request from staff to approve a tax increase, and several council members saying they’d oppose doing so.

"While the budget up for review is balanced, I am recommending borough council enact a one-eighth-of-a-mill tax increase,” said borough Manager John Ernst.

"As inflation and supply issues continue to impact the budget in unpredictable manners, the proposed funding increase will allow the borough to be proactive in responding to inflationary pressures on future budgets,” 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 2023 budget 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. Council also heard in October about a potential $10 million bond borrowing that could 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, and in early November staff presented a series of line item cuts that could help narrow the deficit.

On Nov. 15, Ernst and Finance Director Glenn Dickerson presented the latest draft, with a request that council consider approving the tax increase for 2024. In the latest draft, Dickerson told council, the town’s revenues and expenses are both balanced at roughly $59 million, with reductions from the year before due to onetime cost savings identified in order to cover expenses related to the proposed $10 million bond borrowing.

A one-year reduction in electricity transmission costs is also included in the draft, Dickerson said, but that expense will likely revert to prior levels for 2025 and beyond.

"The combination of the cost savings opportunities, and that savings in electricity costs, are really the reason that our expenses are down year-over-year,” he said.

Revenues also dropped slightly due to a reduction in onetime revenues related to Merck sending extra sewer flow to the town’s wastewater plant, but the drop in revenues was offset by a sewer rate increase approved over the summer that took effect in September, he said.

The town’s current tax millage level of 7.25 mills is currently distributed as 4.22 mills or roughly $3.4 million to the town’s general fund, 1.85 mills or $1.5 million to debt service, 0.73 mills or $581,000 to library services and 0.45 mills or $356,000 to fire services, before any increase for 2024. Based on an average assessed property value of $120,000, that millage currently yields a $780 annual tax bill to that resident, with a similar value yielding a tax bill of roughly $3,556 from the North Penn School District and $468 to Montgomery County at current millage levels.

"From the borough, you get police, fire services, Public Works, the library, administration, code enforcement, finance, park and rec, and then your IT and GIS services,” he said.

The finance director then outlined a series of infrastructure projects accomplished in 2023, and similar projects slated for 2024 that include a new electric unit substation replacement, ongoing road and sinkhole repairs, a new restroom at Whites Road Park, upgrades to the HVAC system at the library, and streambank restoration and equipment upgrades at the wastewater plant.

"There’s a lot of work that still needs to be done, so our 2024 budget is really designed to replenish our funds, so that we can continue to invest in Lansdale,” he said.

Increasing the town’s real estate tax millage from 7.25 to 7.375 mils would generate roughly $101,000 in new annual revenue, the finance director said, and would bring that average resident’s tax bill from $780 per year to $795, or from $60 per month to $66.25 per month.

"This potential funding increase will allow us to be proactive in responding to those inflationary pressures on future budgets,” he said.

Councilman Rich DiGregorio asked how long the one-eighth-mill tax increase had been discussed, and Ernst said it was raised "within the past couple of weeks,” as staff and council debated whether to approve smaller tax increases more often, or larger increases after keeping taxes level.

"Do we want to do a larger tax increase every three years? Or do we want to look at providing smaller, stepped increases on a regular basis, get to a point where we can then take a break and evaluate where we are, and decide whether we need to do it the following year?” Ernst said.

"Right now, this one-eighth of a mill is just under two percent of the total budget. And if you look at inflationary rates throughout the country, they’re just around two or three percent. With this proposal, we are looking to keep up with the costs of services and products that we buy,” he said.

DiGregorio answered that he’d rather hold off: "The last three years, we raised taxes, and last year was a big one. Now, we’re hitting the taxpayers again, for a fourth year,” he said.

Councilman BJ Breish agreed, saying he would rather give residents a year without an increase, and time to plan for the next one.

"If we can give households a year heads-up, that we may have to be looking at this in the future, that seems to be the more appropriate thing to do, because at least folks can brace for a potential increase,” he said.

In earlier draft budgets in October, staff had said the town would need to cover roughly $250,000 in new costs related to borrowing and interest expenses for the $10 million bond, and Breish asked if and where any cuts to earlier drafts had been found. Dickerson said changes since the earlier drafts had been highlighted in the latest version posted for public review, with some discrepancies from 2023 to 2024 caused by new financial software that caused new classifications for some items.

"That entire document will be available for public review for 10 days, so we will make sure it’s a little more descriptive, so people don’t have to say ‘Hey, what does this mean?'” Dickerson said.

Council VP Mary Fuller asked if the draft included full funding for the long-discussed East Main Street streetscape project, and Ernst said that project is largely grant-funded, with final plan approvals expected from PennDOT by the end of 2023, and updated cost figures won’t be available until bids are received early in 2024.

"That bid process will start to help us understand exactly how much the current project will cost,” Ernst said.

Mayor Garry Herbert added thanks to staff for what he called "budget-trimming meetings” that refined the latest draft: "I think it was extremely valuable for us to do that, and I can’t thank you enough for taking the two days, three days that we spent, plus hours on emails and phone calls. I think this represents the tightest budget that we could have, at this time.”

Council President Denton Burnell said he realized "the ask around taxes is frustrating,” but recalled earlier borough budgets prior to his arrival on council in the early 2010s, "when this body would typically borrow from its reserves, and balance the budget, and not necessarily do the responsible thing.”

"We don’t want to raise taxes. It’s our pocketbooks. Nobody wants to do that. But it’s John and his staff’s responsibility to say ‘Hey, yeah we balanced the budget, but if we don’t raise taxes, in a year I’m going to come and ask you for twice as much,'” Burnell said.

"When you’re in this building next year, talking about 2025, you probably won’t be talking about one-eighth. It’ll be more than that. So it’s fine to prepare people for the eighth, but it’s probably more,” he said.

Fuller said she’d like to hear more public feedback, and agreed: "We should do little asks more often, than one big ask. But I have to say I am leaning toward preparing people this year for that to happen in subsequent years.” Councilwoman Meg Currie Teoh agreed: "This is the year where we take the break. Last year was big, we just raised sewer rates, things are tough for a lot of folks. And I think laying that groundwork, saying ‘Next year this is going to happen, prepare yourselves for this, we can’t not do it,’ but I think this is the year we don’t do it.”

After the discussion, councilwoman Carrie Hawkins made a motion to advertise the 2024 budget for public advertisement, and Breish asked if that budget would include the recommended tax increase.

"The draft of the budget does not. The tax increase would be enacted separately, as an ordinance. So no — this is simply the budget at this point,” Burnell said.

Council then voted unanimously to advertise it.

Lansdale’s borough council next meets at 8:30 p.m. on Dec. 6 with the administration and finance committee at 6:30 p.m. that night, both at the borough municipal building, 1 Vine Street. For more information visit www.Lansdale.org.

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