Revenues are flat and expenses will continue to rise if a course correction is not implemented in Williamsport over the next five years.
That was one of many assessments of the city’s financial picture delivered to the City Council Thursday in a study by EConsult Solutions Inc., a Philadelphia-based firm contracted by the city through a contract signed a year ago.
The contract was for $64,625, but the cost to the city was $19,387 due to a Strategic Financial Management Planning Program Grant from the Pennsylvania Department of Community and Economic Development (DCED).
This program provides matching grant funds to help municipalities develop comprehensive, multi-year financial plans and set short- and long-term financial goals.
Mayor Derek Slaughter said some of the study’s concepts have been started and others may be proposed immediately.
The assistance available is unlimited and the state bears 70% of the cost of any project, while the city is responsible for 30%, he said.
Opportunities and challenges
“It is encouraging the way they are working together” as Council and administration, said Steven Wray, senior vice president and director of the firm, who served as policy director for Lieutenant Governor and Acting Governor Mark Singel from 1992 to 1995, praised the city for using its creativity and analyzing and prioritizing projects.
The study, he said, is interesting because it comes at a time when city officials are contemplating how best to spend $25.4 million of the US Rescue Plan money on various projects, he said.
Wray pointed out the value of investing ARPA in the land bank, parks, the flood levee and recreation. He said “These are long-term strategies.”
He warned city leaders and the community not to rely on those ARPA dollars to figuratively “just patch the holes” but continue to make investments, find a cost-saving economic development, and use these funds to promote and expand with investments in the future.
EConsult Solutions Melissa Wright, associate director of the firm, presented the main part of the study. In highlights, she noted that the city has been able to maintain fiscal stability through a combination of increasing its tax rate and cost containment strategies.
The combination has been able to maintain a relatively healthy financial position.
“It is not an absolutely dire situation and there is no need for an urgent financial plan as part of the DCED standards, however there are challenges ahead.” she said.
In recent years, the city’s deficit has required transfers and the real estate tax has been used as a tool to “compensate for the stagnation that is occurring.”
One of the biggest cost drivers continues to be pensions that put pressure on the operating budget and increase at a faster rate than income.
The annual budget deficit and deterioration of the fund balance will continue unless new sources of income are identified, as expenses increase and income does not decrease but remains relatively stable.
Without intervention there will be a “growing structural deficit”, she said.
A conservative goal
The firm recommends that the city maintain a fund balance greater than or equal to zero.
Initial interventions such as large-scale plans such as regionalization or the opportunity to share costs or negotiate contracts are not recommended.
They are not represented in the analysis, Wright explained.
Instead, the key findings have pinpointed ways to jump-start projects to combat the city’s declining population and deteriorating housing stock, which are two major factors slowing revenue growth.
Additional pressures related to revenue growth include staffing shortages and suggestions were made to address the areas of community and economic development, finance, and recreation.
“That would create an opportunity to generate revenue,” Wright said.
the covid factor
The virus remains in several variant forms. The city must be flexible, adaptable, and have the ability to imagine what could happen next and envision the future before it happens in terms of the impact of COVID-19.
The city is very well positioned from a geographical perspective for economic improvement. You should look to reduce labor costs, though that’s never easy and it doesn’t happen overnight.
The audit shows that a significant portion of the general fund budget is affected by the cost of labor. The city has knowledgeable employees and it is important to retain that experience and realize that sometimes these employees may just be an employee working in a specific department.
Consequently, the city must be prepared and have plans in place to replace departing employees and those retiring or near retirement.
The firm praised the city’s plan to invest a portion of federal COVID relief in efforts that can pay dividends, such as the land bank to address blighted residential, commercial and industrial properties and place them on tax rolls. However, the city needs to advocate for itself and push Lycoming County for a reassessment to fully capture the property’s investment value and convert them to taxable parcels because without a county tax reassessment “you are not capturing the value,” according to the study.
Green spaces and parks and more businesses
Studies used by EConsult Solutions show that residences that are located near a green space or park have a property value premium of 7-9%. “These properties are worth more”, Wright said.
The company wants the city to make its government operations more business-friendly by modernizing and investing in software and systems that allow transactions and business to take place without people physically going to an office.
City Officials Responses
during finance committee and board meeting
Slaughter said that the city administration, with the Council’s review, has started a series of these proposals that are in the study. Among them is a plan to add computer software to provide ‘real-time’ data on the city’s finances and for use in the human resources office.
Board Chairman Adam Yoder asked company representatives what the proposed schedule would be and how it would be combined into a package.
It can start once the Council outlines some priority projects. Yoder noted his appreciation for the study and mentioned some of these concerns about revenue growth several months into the pandemic.
To that end, Councilwoman Liz Miele, chair of the finance committee, said she would hope the administration would not allow some earlier plans that did not come to fruition for one reason or another, that were proposed months and years ago that would fit nicely into the strategy that advances, to languish and gather dust.
The issues and community surveys conducted to create a parks master plan could be reviewed and used in a variety of ways that would make sense today and be incorporated into economic development strategy in the future.
Yoder echoed his suggestion. The city should be preparing an economic development strategy and listing measurable items and projects that it can prioritize now and not later, Miele said.
Such a strategy will help the city try to take advantage of this opportunity.
General, “We have been on the right path”, Honey said.