Lansdale votes ahead tax increase for 2025 budget

It’s not final yet, but a hefty tax increase could be coming to Lansdale’s residents in 2025.

Council voted unanimously to prepare and advertise an 8.25 mill tax rate for the upcoming year, a possible increase of $130 per year that council members say may come down before a final vote.

“Certainly we haven’t decided that’s what we want to do, but we have to prepare and advertise. So that would be the ceiling, but we’re not approving that as the millage rate,” said Council President Mary Fuller.

Last December, council approved 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. That group had previously approved a sewer rate increase that September, said an electric rate study was underway to look at whether rate increase could be needed after ’24, and had discussed a bond borrowing for capital projects like road repairs, sewer infrastructure, and other needed long-term expenses.

Over the subsequent year, council has heard presentations about more possible major expenses, including repairs and renovations to the town’s two pools, increased costs for transmission of electricity the town resells to residents, and traffic safety upgrades that could address speeding and safety concerns in several neighborhoods — all while integrating a new finance director after a departure this summer. In early November council’s committees held preliminary talks on the 2025 budget, and said full scenarios would be presented in detail on Nov. 20; on the latter night, staff filled in the details.

"What you are seeing here is a working document. There will be continual conversations, as we move through what some of these numbers are, what some of the initiatives are, and what some of the strategies are for moving toward a balanced budget," said borough Manager John Ernst.

"The number you will hear tonight is a ceiling. That's a 'not to exceed' number. We won't go higher than that, but we're not saying we are going to that number," Fuller said.

Money 'spoken for'

Ernst then outlined how the borough has seen four new department heads arrive in 2024, to lead the finance, public works, library and human resource departments, before summarizing the financial picture as it stands in 2024. The current tax rate of 7.25 mills is allocated to yield 3.62 mills or $2.95 million to the general fund; 2.66 mills or $2.1 million to debt service, 0.66 mills or $543,000 to library services and 0.31 mills or $257,000 to fire services.

Roughly 77 percent of annual expenditures "are spoken for before we sit down to talk about what we are going to do," Ernst said, including required wages, salaries and benefits, healthcare costs, debt service payments, pensions, and the library costs. The remaining 23 percent of expenditures are allocated into contracted services, operational supplies, capital projects, the town parking authority's costs, and other smaller allocations, he said. 2024 accomplishments include an electric department substation replacement, public works inlet repairs, vehicle purchases, the study of the town's two pools, library equipment replacements, the long-discussed East Main Streetscape project, pump station upgrades at the town's wastewater plant, and the borough police department's renewal of their accreditation status.

Planned projects for 2025 include continued electric and wastewater infrastructure projects, major renovations to the Whites Road Pool complex, and a new restroom at that same park, the manager said. Grant funded projects included in the draft budget include $2 million in aeration system upgrades at the wastewater plant, a revamp of the Fifth Street playground and park using a combined $784,000 from two grants, $390,000 for a new restroom at Whites Road, and $200,000 for new vehicle purchases, the manager said.

"What you'll see in this 2025 budget is an investment in at least these three areas," he said.

    Lansdale borough Manager John Ernst shows how the town's 2024 tax millage is split between several categories, during the Nov. 20 council meeting. (Screenshot of meeting video)
  

Library boost

The draft 2025 budget calls for an increase of $100,000 in funding allocated to the Lansdale Public Library, a five percent rate increase for electric fees to take effect in April, "the first rate increase in about 10 years," and a long-discussed bond borrowing meant to fund capital projects.

"This year, we need to pull the trigger on a bond borrowing, about $12 million," Ernst said.

For the library, the current allocation of roughly $540,000 would increase by just over $97,000, with those funds going toward expenses recommended by that library's new board of directors. Part of that allocation would increase the hourly compensation for library staff from just under $12 per hour to $15 per hour, savings could be found via shared services including IT and building maintenance, and membership in the state's library system could bring roughly $60,000 in new revenue while increasing the library's readership base.

"People who are in Hatfield, people who are in Towamencin, are now able to come to our library for free. Also, with state services, we are learning there are many fees the library pays now, that come as a membership as a state library — there's a redundancy in services that can be reduced," Ernst said.

Electric costs up

On the electric charge, staff have warned of pending increases in the town's capacity and transmission fees likely to hit the region in 2025, for all suppliers including those outside the borough.

"This is for every electric customer in the middle Atlantic states, as far west to Chicago: every single electric customer, whether you are PECO, PPL, Con Edison, or Lansdale Electric, your rates are going up because of this," Ernst said.

The five percent increase effective in April would follow rate increases that PECO and PPL have already begun to implement starting in January, the manager told council. Based on the average customer's bill in September 2024, that customer would pay $178 per month to the borough, compared to $183 to PPL and $203 to PECO, and that five percent rate hike would increase that bill to $187 per month when it takes effect, the manager said.

Costly capital needs

Finance director Jim Lathrop broke down "quite a few capital projects" the borough plans to address, and why staff recommend they be paid for via 15- or 20-year bonds, to spread those costs over the estimated lifespan of those projects. $10.6 million of the bond borrowing would go toward general fund projects, including $3.5 million for the Whites Road pool repairs and renovations, and the rest to road repairs and upgrades on Edgemont Avenue, North Cannon Avenue, Poplar Street and West Third Street, Lathrop told council.

"The pool will be paid over 15 years, while the roads will be paid over 20 years," he said.

An additional $1.5 million would go to wastewater treatment plant projects, including a pump station on Franklin Street, chemical feed upgrades at Whites Road, and various pump station and hydraulic upgrade projects, he said.

"That debt will be paid strictly out of the wastewater fund, they will not be general fund obligations, and they will not be paid for by the taxpayers. They will be paid for by the users of the system itself," he said.

"We have quite a few needs, we have to address them, and we do not have the funds to do it, and bond borrowing is one of the best ways to do it," Lathrop said.

Ernst told council that the total projected expenses requested by staff in the 2025 budget total $21.83 million, with total projected revenues at $21.48 million, resulting in a deficit of just over $344,000.

"That $344,000 is already taking into account a half-mill tax increase built into this budget proposal. The proposal for your consideration is that we will be raising taxes by a half mill — with a half-mill tax increase, we still have a shortfall of $344,000," he said.

Cuts considered?

Council could direct staff to remove or defer capital projects, borrow from the town's reserve fund balance — "just transferring money from one account, to pay into the deficit," Ernst said, or raise tax rates to make up the difference. If capital projects are removed, maintenance costs could go up, services could be reduced, infrastructure could deteriorate like sinkholes seen in roads around town, and emergency failures could require costly fixes, with some potential for environmental consequences depending on the infrastructure. Transferring from the fund balance could limit funding for future projects, and in the long run "is not sustainable: when you do it one year, you are faced with the same problem the following year," Ernst said.

The town's general fund balance currently totals just over $18 million, Lathrop said, with the unassigned amount comprising $9.9 million of that number: "it's your rainy day fund, in simpler terms," Lathrop said, with numbers based on the 2022 audit since the 2023 audit is not yet complete. For the wastewater and electric funds, the corresponding figures are $13.6 million in fund balance with $7 million unassigned, and wastewater at $11.6 million total fund balance but only $3.1 million unassigned, the finance director said.

"That's available to use in case of an emergency, or other needs as the council will direct," he said.

The tax scenarios: under the current 7.25 mill tax rate, and with an increase in the town's average assessed property value from $120,000 to $130,000, the average resident's tax bill currently totals $943 per year or just under $78 per month, according to the manager.

"The proposal on the table is increasing to 7.75 mills, which is a 0.5 mill increase from where we are now. That yearly tax bill jumps to just over $1,000 or $85 a month, and it's about $5.50 different than what we're currently paying now" on that resident's monthly bill, he said.

That proposed 0.5 mill increase would generate roughly $383,000 in new revenue, and cost the average taxpayer $65 more per year, the manager said, before outlining more options: raising the millage to 8.0 mills, or 0.75 mils above the current level, that resident's tax bill would increase to $1,040 per year or about $87 per month, roughly $8 per month over the current bill, and would add about $590,000 in total new revenue. An even larger increase, by one mill to 8.25 mills, would bring that resident's tax bill to $1,073 per year or about $90 per month, an increase of about $130 annually or $10.40 over their current monthly bill, with a yield of roughly $790,000 in new revenue from taxpayers.

Staff's recommendation: a combination of all of the above. The first combination would include the 0.5 mill increase, zero transfer from the fund balance, some expense costs, and deferring some projects over two years instead of one.

"We believe we can do that, and not have to transfer any money from the reserve fund, and end up with a balanced budget for 2025," Ernst said.

A second option could keep the 0.5 mill tax increase, transfer $345,000 from the general fund, "and we don't defer any projects, we just keep moving forward, full steam ahead" with all budgeted projects. A third option: increase the millage by 0.75 mills to 8.0 mills, yielding $587,000 in new revenue, then cut projects or defer to make up the remaining $141,000, while a fourth option with a one-mill increase would require no deferrals or reserve transfers.

"We do recommend option one, which is the half a mill increase, combined with strategic reductions and deferrals of expenditures, to present a balanced 2025 budget, while we continue to provide the exceptional services to our residents," Ernst said.

Plenty of questions

After the presentation, came the questions: councilwoman Rachael Bollens asked for clarification on the general fund reserve balance compared to the town's operating expenses, a ratio that prompted several founds of discussion over the summer. The generally accepted practice is to carry 35 to 45 percent in that balance, Lathrop said, and his recommendation is to carry "around that 45 percent level," with the current reserves at about 50 percent.

Councilman Andrew Carroll asked if the recommendations for the electric and sewer fund balances were similar, and Lathrop said those were slightly higher because when equipment fails, repairs or replacement can be costly: "when they have a problem, it's a really big problem — you may want to be a little more conservative" in those reserves, he said.

Carroll then asked if the budget projections included cost increases for union employees and professional contracts, and Ernst said they were incorporated, and largely fall under the portion of the budget for personnel costs. The town's current contract with the borough police union will be up for negotiation at the end of 2025, and the nonuniform union employees will be up for negotiation at the end of '26, according to the manager.

Councilman BJ Breish, who typically goes line-by-line through the draft budget to look for possible cuts, said he was "kind of frustrated" with the late timeline, and said he found roughly $700,000 in possible cuts that could be removed from the expenses, such as contributions to outside agencies and nonprofits and contracted services.

Council voted unanimously to advertise the 2025 budget and to prepare and advertise the tax millage ordinance with a rate of 8.25 mills, and said talks would continue at the December council committee meetings ahead of a final vote to adopt.

Lansdale's borough council next meets at 8:30 p.m. on Wednesday with the various council committees meeting starting at 6:30 p.m. that night, all at the borough municipal building, 1 Vine Street. For more information visit www.Lansdale.org.

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