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2022 Budget Delivered to City Council

10/18/2021
2022 Budget Delivered to City Council

Allentown Mayor Ray O’Connell delivered his proposed 2022 city budget to City Council this afternoon. The $124.8 million spending plan holds the property tax rate stable at 7.31 mills.

According to O’Connell, no revenue increases are needed to fund the plan which includes several new positions. “My 2022 budget includes two additional firefighters and two additional EMS professionals, as well as manpower assets in CED, Stormwater, Public Works, and Parks, to name a few. We are employing three new vegetation technicians to maintain roadside mowing, street trees, retention basins, and rain gardens.”

O’Connell said the proposed 2022 budget is balanced without having to tap into the city’s cash reserves. “Because of the financial measures explained in my previous budget address, the city started 2021 with a General Fund cash balance of $17 million. The same fund balance is expected to be preserved going into 2022.”

The Risk Fund, capitalized by the same revenue sources as the General Fund, is at an extremely healthy level as of the time of this address. Several hundred thousand dollars will be transferred into the General Fund. Ultimately, the reserve in the Risk Fund will be preserved at a level sufficient to cover any settlements, judgments, or other catastrophic events not covered by the budgeted expenditures in the Risk Fund, and/or the city’s insurance coverage.

In 2022, the city assumes a sizeable new responsibility in its minimum municipal obligation (MMO) for three of its four pension plans. In 2021, the aggregate pension board voted to both change its assumptions in police retirement and to reduce the discount rate (the assumed rate of annual return on investments) by 10 basis points. The cumulative effect increased the MMO by about $1.4 million each year beginning in 2022, the majority of which will impact the MMO going towards the police pension plan. The pension board was advised that an additional reduction of 40 basis points is recommended in the coming years.

The city did not incur any additional indebtedness in 2021, nor does it anticipate the need for borrowing in 2022.

Despite some positive financial outcomes over the last year, the city’s tax base has experienced headwinds over the last year or two. The total valuation of all city property expected to be taxed in 2022 has increased only 0.5% since the start of 2020. Largely due to the COVID-19 pandemic’s squeeze on cyclical sales and wage growth, business receipts decreased about 2.5% in 2020 from 2019, which resulted in less Business Privilege Tax being paid in 2021. Furthermore, the pandemic may have slowed down what was trending towards booming wage growth in the city. Wages reported in Earned Income Tax filings were either flat or slightly down over the last year.

O’Connell said, “Each department of city government is functionally and safely staffed, to ensure that public safety, health, and infrastructure services are promptly and effectively available to every citizen, and to guarantee that each city employee experiences a pay raise in 2022 in consideration of the rising costs of goods, commodities, and services across most sectors of the U.S. economy.”

The Business Privilege Tax remains stable, as does the $52 Local Services Tax. The Refuse Collection and Stormwater Management fees remain flat.

O’Connell will formally present the budget to City Council on Wednesday, October 20 at 5:30 p.m.

Council will conduct a series of budget hearings beginning on Wednesday, October 27. Final adoption must take place by the end of the year.

The budget will be available soon on the city’s website www.allentownpa.gov.

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