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Allentown mayor presents no-tax-increase budget to City Council

By Randy Kraft, WFMZ.com Reporter, RKraft@wfmz.com
Published On: Nov 07 2012 11:23:09 PM CST
Updated On: Nov 08 2012 04:44:23 AM CST

Allentown's Mayor explains budget

ALLENTOWN, PA. -

Portraying Allentown as a city whose residents cannot afford a tax increase, Mayor Ed Pawlowski presented an overview of the proposed 2013 general fund budget to City Council Wednesday evening.

His proposed $87.8 million budget will require no increases in real estate taxes, fees or charges in 2013. He said it will be the ninth consecutive year without a tax increase in the city.

“The financial circumstances of many of our residents make it impossible to increase property taxes,” explained the mayor.

Twenty-four percent of the city’s residents live at or below the poverty level, according to Pawlowski, and 20 percent are senior citizens on fixed incomes.

In addition to limited incomes of many residents, he explained another reason for not raising taxes: Allentown already has the highest municipal millage rate in Lehigh County -- not including school taxes.

“Even though we’ve kept taxes flat for nine years we are still at a massive competitive disadvantage to our surrounding municipalities,” Pawlowski told City Council. “Further reliance on property tax may cause an even greater shift of residents to the suburbs.”

He said the city wants to keep that tax rate unchanged both to ease the tax burden on residents and to give Allentown a greater advantage “in attracting middle-class homeowners and businesses back to the city.”

Allentown’s population is just over 119,000 residents, according to the U.S. Census Bureau. Pawlowski said the city’s population increased by nearly 11 percent -- 11,400 people – between 2000 and 2010.

Despite a larger population and reduced resources, he said the city’s shrinking workforce provides residents with “consistent quality services.”  He added the city’s employees are working harder and “doing a lot more with a lot less” and by being more innovative.

The mayor said in 2013 the city’s staff will total 903 employees, the lowest in almost 33 years. “There were over 1,000 a few years back.”

He said the city sometimes is criticized for not cutting management positions, “but that’s not true. In 2005, we had 132 management positions in the budget. This year we have 98. That’s a reduction of 34 management staff over the course of the last seven years.”

Only one City Council member had a question for the mayor when he concluded his 25-minute overview presentation.

In the regular City Council meeting that followed the presentation, resident Glenn Hunsicker questioned how Allentown can keep balancing the budget with no tax increases.  He said a tax increase has to come sooner or later. Eventually, said Hunsicker, the city can’t say “the community cannot afford a tax increase, because that’s the only place you’re going to get the money.”

While the mayor was not present to respond to Hunsicker’s remark, earlier he told council that projected expenses in the 2013 budget will decrease by more than $1 million. He also said his administration will work with council in 2013 to evaluate each department “and look for ways to improve service and reduce costs.”

But he also warned council “there’s no way” the city can avoid increases in taxes and fees in future budgets if it doesn’t quickly address its coming pension crisis.

Council intends to adopt the 2013 budget at 7:30 p.m. Dec. 5. A budget amendment meeting is scheduled for 7 p.m. Dec. 4. Budget meetings with various city departments are scheduled to begin at 6 p.m. Nov. 13, 15, 20, 27 and 29 and Dec. 4.

The proposed budget projects revenues of $87,978,105 and expenses of $87,849,234.

Because the economy continues to recover very slowly, the mayor told council: “We have projected flat growth in almost every line item on the revenue side.”

He said 18 new positions in the police department will be filled in 2013, but paid by new federal grants.  He also said the city will begin construction of the East Side fire station.

By department, said Pawlowski, just over 60 percent of the general fund budget is for police and fire fighting. By category, 77 percent of the budget is for personnel and benefits.

The mayor said Allentown is facing the most serious financial challenge in its 250-year history: “Our massive unfunded pension liability.” That liability totals more than $200 million. The city will be required to pay nearly $18 million toward that debt in 2013. It was required to pay $15 million this year.  He said that represents more than 20 percent of the general fund budget and added that will grow close to 30 percent of the entire budget “in just a few short years.” He warned that is “absolutely unsustainable” for Allentown.

He reminded council his recommended solution is to lease the city’s water and sewer operations “in exchange for a significantly large upfront payment, the proceeds of which will go toward reducing the unfunded pension liability to a manageable level.” If that lease deal is successful, he said, next year the city will be required to pay $3.5 million rather than $18 million and will stabilize those debt payments for the next 20 to 30 years.

The city is seeking requests for proposals from seven water companies interested in leasing the water and sewer systems. The mayor hopes to have those proposals before the end of this year. He also hopes the proposed 50-year lease will bring Allentown $200 million or more to end its pension fund crisis.

Pawlowski explained if the water/sewer systems are leased early next year, the 2013 budget will be reopened and amended by City Council to reflect that additional revenue coming to the city. “Many budgetary line items will be impacted,” predicted council member Jeanette Eichenwald.

Alluding to his controversial lease plan, the mayor said in 2013, Allentown “will take major steps forward on its journey to become an even greater city where people desire to live, work, play and invest.”