Lansdale’s First Draft of 2024 Budget Balanced, But with No Road Projects

Dan Sokil | The Reporter•

The next two months will bring some big decisions for Lansdale’s borough council.

Council heard a preview of the town’s 2024 budget — and any tax and/or rate increases needed to balance it — on Wednesday night, Oct. 18.

"We need council to review the current draft, that’s in front of you, in as much detail as you can. Borough management needs direction on how to fund necessary projects,” said Finance Director Glenn Dickerson.

"The proposed 2024 budget that is in front of you, is balanced — but it is not financially sustainable beyond 2024,” he said.

Last December, borough council approved a 2023 budget with revenues and expenses of roughly $63 million, and a one-mill tax increase to 7.25 mills, a hike of 16 percent or roughly $120 for the average homeowner over the prior year. At that time, staff and council members said that increase was needed to cover several new employee hires, including four new police officers, two new public works employees to tackle infrastructure projects, and one new employee each in the town’s finance and parks and recreation departments.

In the months since, as those employees have been brought on board, each department has given monthly updates on their ongoing projects and expenses, and in June council voted to approve a sewer rate increase effective Sept. 1, the town’s first since 2015, which plant staff said would go toward replacement of pumps, pipes, and other infrastructure that in some areas is approaching 50 years old.

Public works staff have also given updates about potholes and road repair projects throughout the borough, and staff said in early July they were considering the possibility of a bond borrowing in late 2023 or 2024 to fund long-term infrastructure work.

On Oct. 18, Dickerson unveiled a first draft of a 2024 budget, with revenues and expenses even at just over $59.1 million, but one large difference from the year before.

"The difference is, we basically don’t have any road projects budgeted, in this budget. That is the major difference,” he said.

While most of the budget’s component funds are largely level from 2023’s amounts, the proposed capital budget for 2024 drew lengthy discussion from council, as to whether the town should set aside funds for infrastructure in future years, and/or offset that spending in 2024 via a bond borrowing.

"You should be reserving annual amounts every year, that account for all your future asset replacement needs,” such as roads, vehicles, or other large equipment such as electric transformers, Dickerson told council.

"The borough budget should be putting aside approximately $3.2 million to $3.5 million annually. That’s the depreciation of the current assets we have on our books. So if we’re not putting that aside every year, we’re losing that value,” he said.

One way to continue including road projects in the 2024 budget would be a bond borrowing, and a $10 million bond would require roughly $200,000 to $250,000 in new revenue in 2024 and 2025 in order to offset the up-front costs of the bond, the finance director said.

One way to make up that revenue would be another tax increase, which would be the town’s third straight year with a tax increase, and fourth in five years: Dickerson told council that a 0.25-mill increase would cost the average resident $30 per year or $2.50 per month, based on an average assessed value of $120,000, and generate roughly $203,000 in new revenue.

Staff and council’s electric committee have also begun the process of conducting a new electric rate study in early 2024, and Dickerson said that study could spell out rate increases needed for future years once the 2024 budget is finalized.

"We want to meet our revenue needs, but we also don’t want to burden the residents too much with what we’re charging them. The borough is a not-for-profit organization. We have to recover the cost of doing business, and maintain sufficient resources to continue to invest in the electric distribution system,” he said.

Projects currently planned for 2024 include replacement of relays at an electric department substation, road microsurfacing, streambank restoration near the town’s wastewater treatment plant, and several parks projects, including new signage, trail repairs and maintenance, and fixes to playground equipment. Borough Manager John Ernst added that staff have already begun talks on another way to make up at least part of the roughly $200,000 needed for the bond borrowing: using some of the town’s remaining federal COVID stimulus relief funds.

"We have approximately $300,000 left of our ARPA funding. If we were to split that in half, and assign $150,000 per year, for 2024 and 2025, coming up with an additional $50,000 to $80,000 for that debt service each year, is a lot easier to come up with,” he said.

Council President Denton Burnell asked if that funding had already been designated for any specific use, and Ernst said talks had been held on applying those funds to a restroom project at Whites Road Park, but the town could also seek outside grant funding to offset costs for that or other projects. Councilman BJ Breish asked if the annual budget included any funding for capital projects that could be covered by the bond, and Dickerson said it did, but uses for those funds are already spoken for.

"In the next three years or so, the amount that we currently budget in capital (expenses) is around $3 million, $3.5 million a year. We leave that in the budget, and that becomes our reserve: we use that ($3 million) to build that reserve for three years,” Dickerson said.

Breish asked if that amount set aside for a future capital reserves could be reduced closer to $2.8 million, and part of that amount used to offset the added interest costs, and Dickerson said "that’s a potential option” to consider in further budget talks. Councilwoman Carrie Hawkins Charlton asked if that $3 million would need to be added back into future budgets after the bond proceeds were exhausted, and "a huge impact, after year three.” Dickerson said it’s too soon to tell: "We’re not exactly there yet. It remains to be seen.”

Hawkins Charlton then asked if staff were looking into other ways to fund road projects, and Ernst said staff and the town’s engineering consultant have already begun preparing plans for future road projects, "so that they are engineered and ready to go” if grants or other funds because available. The councilwoman then asked if staff knew the amount that should be set aside every year for future roadwork, and said "to me, that’s not a balanced budget if we’re not including road projects in our budget.”

Ernst and Public Works Director Chris Kunkel said finding that number "has grown very complicated,” in Kunkel’s words, due to inflation, difficulty finding bidders on relatively small projects, and other factors. A paving project for Greenwood Road is currently being engineered, Kunkel told council, and could be done in 2024 if funded, but the cost would be roughly 30 percent higher doing that road solo than if done in combination with other work.

"One of the challenges is that we are such a small municipality, that when you do one road at a time, you don’t get a lot of attractive bidders, because that’s an expensive way to do it,” Ernst said. In recent years staff have tackled as many repaving and resurfacing projects as possible, which have shown results, but have also left more expensive projects that also require underground utility line repairs, which the manager compared to open-heart surgery.

"The roads that we tend to have left are all ‘open-heart surgery,’ and they become very expensive projects, per block, per mile,” he said. "We don’t just have $1 million to use towards Greenwood, when we have four or five other projects that are equally challenged.”

Mayor Garry Herbert said he saw no way to cut services further, particularly with road projects already pulled out of the budget pending the bond borrowing.

"I don’t see how this budget even made it to this floor, because it is not even remotely close to what this community needs,” he said.

Council President Denton Burnell replied that he and the administration and finance committee were open to any and all feedback and suggestions during talks that will continue at committee meetings in November.

"It’s certainly a frustrating position to be in, where we are right now, and I don’t know that I have a good answer. I don’t like the idea of a tax increase this year, frankly, given what we did last year. That’s my five cents,” he said.

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

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