Financial

Financial outlook reveals challenges and opportunities ahead

Revenue is 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 the many assessments of the city’s financial picture given to City Council Thursday in a study by EConsult Solutions Inc., a Philadelphia-based firm hired by the city through a contract signed a year ago.

The contract was for $64,625, but the city cost of it was $19,387 due to a Financial Strategic Management Planning Program Grant from the Pennsylvania Department of Community and Economic Development (DCED).

This program provides matching grant funds to assist municipalities to develop comprehensive multi-year financial plans, and establish short- and long-term financial objectives.

Mayor Derek Slaughter said some of the concepts of the study have been initiated and others can be proposed right away.

There is no cap or end to the assistance available and the state picks up 70% of any project cost while the city is responsible for 30%, he said.

Opportunities and challenges

“It’s encouraging the way you’re working together” as a Council and administration, said Steven Wray, senior vice president & principal of the firm, who served as policy director for Lt. Governor and Acting Governor Mark Singel from 1992-1995 he lauded the city 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 the $25.4 million in American Rescue Plan money on various projects, he said.

Wray pointed toward the value of investing ARPA in the land bank, parks, the flood levee and recreation. He said “these are long-term strategies.”

He cautioned city leaders and the community to not rely on those ARPA dollars to figuratively “just patch holes,” but continue to make investments, find cost saving economic development and use these funds to promote and branch out with investments into the future.

Treading water

EConsult Solutions Melissa Wright, associate director of the firm, presented the main portion of the study. In highlights she noted the city has been able to maintain fiscal stability using a combination of increasing its tax millage rate and cost-containment strategies.

The combination has been able to maintain a relatively healthy financial position.

“It’s not an utterly dire situation and there’s no need for an urgent financial plan as part of DCED standards, however, there are challenges ahead,” she said.

Over the last few years the city deficit has required transfers and the real estate tax millage has been used as a tool to “offset stagnation that’s happening.”

One of the larger cost drivers remains pensions that are putting pressure on the operating budget and increasing at a rate faster than revenue comes in.

An annual budget deficit and deterioration of the fund balance will continue unless new revenue sources are identified, as expenses are going up and revenues are not going down but staying relatively flat.

Without intervention there will be a “growing structural deficit,” she said.

A conservative aim

The firm recommends that the city maintains a fund balance greater than or equal to zero.

The initial interventions are not recommended as the large-scale plans such as regionalization or opportunity to share costs or contract negotiations.

They are not represented in the analysis, Wright explained.

Instead, the key findings have determined ways to get projects immediately in place to combat the city’s population decline and its blighted housing stock — that are two main factors slowing revenue growth.

Additional pressures relative to revenue growth include staffing shortages and suggestions were made to address those among areas of community and economic development, finance and recreation.

“That would create an opportunity to bring in revenue,” Wright said.

The COVID factor

The virus remains in various variant forms. The city needs to be flexible, adaptable and have the ability to imagine what might happen next and envision the future before it might happen in terms of COVID-19 impact.

The city is positioned nicely from a geographic perspective for economic improvement. It must look at cutting labor costs, although that is never easy and does not happen overnight.

The audit shows a significant portion of the general fund budget is impacted by labor cost. The city has knowledgeable employees and it’s important to retain that expertise and realize that sometimes these employees may be only one employee working in a specific department.

Consequently, the city must be prepared and have plans in place to replace outgoing employees and those at or near retirement.

The firm lauded the city plan to invest a portion of federal COVID relief on endeavors that can return dividends such as land bank to tackle blighted residential, commercial and industrial properties and get them on tax rolls. However, the city needs to advocate for itself and lobby Lycoming County for a reassessment to fully capture the value of the investment in properties and turn them into taxable parcels because without a county tax reassessment “you’re not capturing the value,” according to the study.

Green space and parks and more business-friendly

solutions

Studies used by EConsult Solutions show that residences that are located near green space or a park have a 7 to 9% property value premium. “These properties are worth more,” Wright said.

The firm wants to see the city make its government operations more business-friendly by modernizing and investing in software and systems that allow transactions and businesses to occur without individuals physically going to an office.

City officials responses

during finance committee and in council session

Slaughter said the city administration, with review of Council, has begun a number of these proposals found in the study. Among them is a plan to add computer software to provide ‘real time’ data on city finances and for use in the human resources office.

Council President Adam Yoder asked the firm’s representatives what the proposed timeline would be and how it would go together in a package.

It can begin once the Council outlines some priority projects. Yoder noted his appreciation for the study and that he brought up some of these concerns on revenue growth several months into the pandemic.

To that end, Councilwoman Liz Miele, chair of the finance committee, said she would hope that the administration does not allow some prior plans that did not fully come to fruition for one reason or another, that were proposed months and years ago that would fit nicely into the strategy moving ahead, to languish and collect dust.

Aspects and community surveys done to create a parks master plan might be reviewed and used in various forms that would make sense today and be incorporated into the economic development strategy moving forward.

Yoder echoed her suggestion. The city should be preparing an economic development strategy and listing quantifiable items and projects it can put on a priority list now rather than later, Miele said.

Such a strategy will help the city attempt to take advantage of this opportunity.

Overall, “We have been on the right track,” Miele said.

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This program provides matching grant funds to assist municipalities to develop comprehensive multi-year financial plans, and establish short- and long-term financial objectives.

Source: https://www.sungazette.com/news/top-news/2022/04/financial-outlook-reveals-challenges-and-opportunities-ahead/

Donovan Larsen

Donovan is a columnist and associate editor at the Dark News. He has written on everything from the politics to diversity issues in the workplace.

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