2012 Budget

2012 Proposed Budget [PDF]

Business Leaders Breakfast Presentation

2012 Proposed Budget Address

November 11, 2011

Today I am proud to present a no tax increase budget for 2012--a budget that is balanced, fiscally responsible, and meets both the short- and long-term goals for the City. The 2012 Budget is a product of sound fiscal management by every department in the City, and is the result of sensible management practices, cost cutting, and growth of the City’s tax base. Not only does the 2012 Budget not include a tax increase, it provides the resources necessary to meet the goals of this administration—delivering excellent city services in the most cost effective way, and providing the needed investments in our community to continue to revitalize our neighborhoods and grow our tax base. We should all be proud to live in “one of the most livable cities in America” and it is rewarding to be part of this city’s renaissance. The City continues to turn the corner with a $10 million increase in the tax base from last year and a total of $173 million increase since I took office.

Balancing this budget was a difficult task. The 2012 budget represents a 0.1% increase over 2011, a 2011 budget that included a reduction of 54 part-time and full-time positions, representing 7.2% of the city’s total workforce and took us from 670 full-time positions to 629. The 2012 budget includes an overall reduction of an additional 10 positions, resulting in an $870,000 annual savings, bringing the total workforce to
619—easily the smallest workforce in our city’s history. 80% of the city’s budget is made up of wages and benefits and at some point, if you are going to find meaningful cuts you have to look at your workforce. Bethlehem, like so many other cities, can no longer afford the government it had, particularly during these tough economic times, and in the face of rising pension and medical costs we need to right size our government and bring it in line with our ability to pay for it. Ultimately, it meant some very tough choices and separating the nice to have from the need to have, and understanding the difference between a want and a need.

The 2012 budget, while representing just a 0.1% increase, also includes a $1.5 million increase in debt service, which if you backed out of the budget, represents a $1.45 million decrease in total operating costs compared to 2011.

I have often said, property tax increases should always be looked at as a last resort, after all other options are exhausted and every other cut has been made. Certainly, with the current state of the nation’s economy--steady unemployment with anemic growth—it is not the time to burden taxpayers with higher taxes. All of us—whether operating a household, a business, or a government—need to recognize the current economic climate and adjust accordingly. We have done just that. We have held the line on spending and produced a budget that that continues to meet the needs of the residents of Bethlehem and also a budget that meets the ability of the residents to pay for it. We have also cut fat and waste from the system and will continue to do so through the implementation of Continuous Improvement, or “CI in the City,” a program that has already produced millions of dollars of savings to the taxpayers.

I want to thank and recognize my Business Administrator, Dennis Reichard, and Director of Budget and Finance, Mark Sivak, who have spent countless hours pouring over reports and projections to pull this budget together. I would also like to thank each of my department heads, who painstakingly tackled the difficult process of prioritizing their needs for the upcoming year. I also want to make it clear that we will not stop there. Throughout 2012 we expect to continue to maximize efficiencies, and operate government like a business where possible. We will utilize continuous improvement—with its functional peer review of our daily activities—to maximize each dollar spent in City government.

We recognize that this remains a period of unprecedented economic expansion, with $1.4 billion dollars of economic development ongoing in the City. We have worked hard to put our resources on the front lines where they will impact the residents the most. In fact, this administration can honestly say the taxpayers and water and sewer customers of Bethlehem receive more and better services than at any other time in our City’s history.

I also want to highlight a few of the larger investments in this year’s budget:

As a part of the 2012 budget the City is proposing to enter in to a guaranteed energy savings agreement with CTL Efficient Technologies Group, a company within the Constellation Energy family. Having completed an investment grade audit of 20 City buildings, CTL energy engineers evaluated our energy consuming equipment and proposed $2.5 million in conservation measures that have a payback of more than $200,000 per year.

CTL guarantees the energy savings, which annually will pay the debit service of the building upgrades in 13 years or less.

Energy conservation upgrade measures include:

• Comprehensive lighting upgrades with occupy sensors in specific areas
• Replacement of the existing 176 fan coil units in the Center City Complex with individual office controls
• Installation of a state-of-the-art digital HVAC building control system
• Improvements to the roof top air handling units to include variable frequency drive controls
• Replacement of one of the 125 hp. boilers to a high efficiency condensing boiler for summer loads
• Replacement of the 50 yr. old boiler at the Lincoln Fire Station
• Building envelope improvements at the Government Center that include caulking, weather-stripping, and sealing outer wall plenums.

In addition to the savings paying the debt service for the project, the City will be eligible for PA Act 129 energy rebates for the work completed.

Knowing that the bulk of our 40+ year-old facilities equipment is at or beyond its useful life, this project allows us to update the buildings to the latest energy efficient technologies.

These proposed improvements combined with the $702,000 ARRA work completed, or soon to be completed, will allow the city to reduce its operational carbon footprint by 25% from our baseline year of 2005.

• $500,000 City Hall Window Upgrade
  • 392 Windows
  • Two Store-front Connectors
    
• Public Safety
  • $121,109 – Ambulance Replacement
  • $ 98,265 – Two EMS Response Vehicles
  • $115,000 – Emergency Response Vehicle Replacement
  • $500,000 - Fire Pumper
  • $1.3 million - 911 Console Upgrade
  • 9 Vehicles for Police Department
    • Six Patrol Vehicles
    • Three Investigations Vehicles
  • Two Vehicles for Fire Department
    • Two Inspections Vehicle

As you can see this budget includes significant investments in Public Safety. Public Safety has been and continues to be a priority for my Administration. I want to confirm that the Administration has in fact, decided to close the Dewberry Fire Station, as soon as immediately feasible. And the Administration will be recommending a $463,000 upgrade to convert the Dewberry Station to a state-of-the-art EMS facility. We recognize the steady growth and demand for this EMS facility today and the future, which is why we are creating a facility that will meet our EMS needs for decades to come.

In past budget addresses I have repeatedly talked about the City aggressively paying down debt, even at times to the detriment of our annual fund balance. From 2004 through 2010 we did just that, paying down $78 million in principle and interest. Unfortunately given the declining revenues resulting from the Great Recession, paying down debt as quickly as we have in the past is no longer an option. Last year’s budget included a debt restructuring and refinancing plan along with a working capital borrowing. Through the restructuring and refinancing we have not extended the lengths of our debt payments - we just smoothed out how these payments are made, taking full advantage of the current low interest rates. This restructuring freed-up $2.7 million in 2011 and $1.2 million in the 2012 budgets to provide us with some additional relief as the economy recovers. And even with the $16 million dollar working capital loan, the City remains on pace to retire approximately $91.8 million in principal and interest over the next five years and $17.3 million this year alone. Our debt position and how quickly we were set to payoff our debt was noted as a positive by S&P. “Bethlehem’s estimated overall debt burden is moderate and rapidly amortizing,” Standard and Poor’s Credit Ratings – February 9, 2011.

We also looked at this budget from both sides of the equation focusing on both the revenue side as well as the expenditure side. We had included some modest increases in user fees to bring them in line with current costs, as well as in line with our neighboring municipalities. As part of this year’s budget, I am proposing a 17% increase in sewer rates and 10.4% increase water rates. These increases are due to increases in the cost of operation and capital improvements in our assets.

Our sewer plant was commissioned in 1953. Through the years it has evolved into a regional facility serving 11 communities. The plant is in need of expansion of its capacity and recapitalization and has been needed for quite some time. These improvements are detailed in out Act 537 Plan which took over a decade to complete and is now pending before DEP for final approval.

Some modest improvements have taken place over the last year which includes a $2.2 million upgrade to our 4.5 MG aeration basin.

In 2012, we plan on constructing an over $9 million upgrade to our digester complex. We are also planning to initiate expanding our dewatering facility, and expansion of our effluent pumping capacity, relocating and improving our CSO outfall along with some additional technology improvements before 2013. These are critical investments to our plant that have been deferred for too long.

The last sewer rate increase was in 2006. Even with these increase to sewer rates, the city remains in the bottom 1/3 of rates when compared with surrounding sewer plants. The average quarterly bill will increase by $8.27, and the annual bill will increase by approximately $33.06.

On the water side, the City is still recovering from the lost consumption of the Bethlehem Steel. Approximately 1/3 of water consumption came from Bethlehem Steel. Since the last water rate increase in 2008, the city has made over $5 million dollars in capital investments to the system, which includes a $2 million investment in our storage tanks and other critical facilities, and a technology upgrade.

The proposed increase is 10.4%, which was already approved by the PUC for the outlying communities. The incremental quarterly bill for an average household will increase by $9.60. The total annual increase will be $38.40.

In closing I’m proud to present at no tax increase budget for 2012. Keeping taxes steady in an essential ingredient to enticing businesses to relocate to a community or stay in a community. I am proud of our record of achievement in driving economic development in the City and when businesses invest in a community, they bring jobs. More jobs and more businesses make it possible to grow our tax base and keep taxes steady, so city revenue increases without having to raise taxes.

Keeping taxes steady is only one ingredient to guarantee Bethlehem’s continued success. Tax dollars must be spent wisely in the areas where we need it most. As I have said before, the single most important job of City government is keeping its residents safe. Keeping our neighborhoods safe encourages people to raise a family here or build a business here. Small businesses and strong neighbors are critical to a successful City.
I’m proud to report that in Bethlehem we’ve held the line on taxes again. We’ve generated new economic growth again. We are on sound fiscal ground once again.

I want to once again thank my Business Administrator, Dennis Reichard and Director of Budget and Finance, Mark Sivak for the countless hours pouring over reports and projections to craft this budget and my department heads, who worked hard to prioritize their needs for the upcoming budget. The hard work of running an efficient City is in the details and my City team is dedicated to continuing the remarkable transformation of our great City.

I also want to thank City Council for the time that they will take over the next few weeks to review the budget. I will make my administration available to answer any questions they have regarding the specific details of the budget. Together we can continue to build a better Bethlehem for all of our children.