The 2009 budget message and financial outlook address I present today is slightly different than my last two.
As you know, we are living through a changed economy, not only across our nation but here in the Lehigh Valley. We are in a recession. There is nothing else that it can be called. The seemingly unbridled growth of the previous five to eight years in the Lehigh Valley has slowed, and in the residential markets, it has ground to a halt. Along with that, the cost of living here has continued to rise. Home heating, energy, gasoline, food, milk, and most other staples of life have risen at rate that far exceeds growth in wages and the increased cost of an individual’s health care. People simply have less money.
This means two simple things to local and county governments: 1) tax revenues will be down and 2) now, it’s even more important than ever to keep tax rates stable – and not take more money from our residents and businesses.
That translates to one simple thing: we need to do more with less. Now, is not the time to let government employment grow or to increase spending on non-core functions of government. We don’t have the luxury this year to grant costly pension increases or borrow money to increase capital spending. It’s imperative that we keep our operating costs well below the rate of inflation, which is about six percent here.
The budget I present today reflects the changing economy of Lehigh County. It projects no revenue growth for next year – that means no overall increase in our real estate tax base. That is the first time in at least a decade that a Lehigh County budget has forecasted that outlook.
Understand, we budget conservatively. For the last three years, we’ve beaten our projections, saved money and created surpluses or fund balances. That work will help us next year. So, will our approach to live within our means, squeeze out unnecessary costs and keep spending in check.
Our proposed 2009 budget is 405 million – or just 1.1 % higher than this year’s budget of $400 million. Most importantly, it contains no tax increase.The tax rate will remain at 10.25 mills for the fourth straight year – and county taxpayers will get their sixth year without a tax increase.
Also, despite the changed economic times, I continue to believe we can meet our 2006 five-year financial plan forecast that predicted stable tax rates through the life of the plan. It is my belief that tax rates should be kept stable for as long as that can be done without imposing a burdensome increase when the period ends. This county can never again repeat the debacle of 2003 when it raised taxes 70 percent.
We are able to keep our spending in check and taxes stable for two reasons: 1) a very conservative and diligent management team led by Director of Administration Tom Muller and Budget Director Brian Kahler, and 2) the help and support of all the elected officers of this county’s government, its employees and its union leadership.
County government is a large and diverse operation. While I oversee many of its functions and oversee and present a consolidated budget, the government has many independently elected officials who share a commitment to fiscal responsibility in managing their operations. The Judiciary led by President Judge Bill Platt, District Attorney Jim Martin, Sheriff Ron Rossi, Clerk of Judicial Records Andrea Naugle, Coroner Scott Grim and Controller Tom Slonaker. All of their work is represented in this budget that now goes to the Board of Commissioners for review and adoption. I want to thank all of them – along with our unions, AFSCME, SEIU, UFCW and the Deputy Sheriffs Association – for their work. This budget is truly a partnership.
It is a budget that overcomes many challenges. As I said, it reflects the recession that has begun. Since we have the earliest local budget cycle, this may be the first governmental indicator of what is happening in the Lehigh Valley economy and how it will affect government revenues.
We project lost real estate tax revenues of $2.2 million and another $325,000 in losses from the drop-off in real estate deed transfers. In addition, the state’s budget cuts at least $2.6 million in support of our nursing home and our child welfare system. In total, this is lost revenue of about $5.2 million.
At the same time, a weaker stock market has made it impossible to fund pension costs with just fund growth. We need to budget $6.3 million to subsidize the pension fund next year, along with $5.4 million to cover lifelong, fully-paid health benefits that most of our retirees enjoy. Fortunately, those medical benefits were eliminated for new hires nearly 20 years ago. This county could never continue to afford that benefit.
In total, legacy costs in 2009 will be about $11.7 million next year for the roughly 1,300 county retirees. While realizing the pressure of inflation on county pensioners, it’s simply not possible to increase pension benefits under these conditions, as had been requested. That said, we will continue to fund the commitments made to our retirees who gave us their service and we will not back down from it.
Much has been said of Lehigh County’s budget reserves. Let me bring some clarity to that.
We hold $20 million in untouchable reserves. This money can’t be touched without Commissioner approval – a rainy day fund, if you will. This is a fiscally responsible practice and gives us reserves consistent with public accounting recommendations for a budget of our size. This is the county’s true reserve fund.
In addition, the last Administration and Board of Commissioners created a Tax Relief Fund in January 2006 for the sole intent of keeping taxes stabilized during periods of declined revenues. For the last three years, we haven’t used any money from that fund. Although it was projected to be depleted by 2009, none of it has been touched. Next year’s scenario changes that. We budget $5.5 million from that fund – interestingly, just about what we lost in tax revenues and state subsidies this year. And, as I said earlier, fortunately, our conservative budgeting and spending control during the last few years resulted in us not spending $7 million during those budgets. Those savings will come in handy this year. The Relief Fund and our savings will help us manage this “no revenue growth” budget.
In the end, the 2009 budget projects that Lehigh County will have $31 million in total reserves. Our fiscal house remains on solid ground. And, as I said earlier, we build our budgets with a conservative eye and we aim to, once again, beat our projections.
A government budget is much more than numbers, however. And, I’d like to take a moment to highlight my focus for Lehigh County next year.
I believe in government that focuses on the basics: excellence in all operations, investing in infrastructure and fixing what’s broken, improving public safety and quality of life.
While it’s true that we have a $405 million budget, about $245 million comes from the state and federal governments for required and designated operations, much of which is in the Human Services area, or for reimbursements, particularly for residents in our nursing homes. The other $160 million comes from local revenue streams such as real estate taxes, lease payments, licenses, and fees.
And, about 70 percent of this budget is spent on what we call Law and Order – the operations of the Courts, the District Attorney, the Coroner, our jails and juvenile detention centers and our anti-crime and anti-recidivism efforts. Nearly 70 cents of every Lehigh County tax dollar goes toward these operations and handling the result of crime.
Unfortunately, this is also a growth business. It is by far the biggest cost in our budget. So not only is it our duty to help from a moral perspective, but also from a dollars and cents perspective. That’s why for three years, we’ve been advancing projects to help our police departments and DA to try and prevent crime and not just adjudicate criminals.
Together with our DA Jim Martin, we proposed and have created a Central Booking Facility that now processes all bookings in Lehigh County, allowing police officers to get back on the street quickly instead of spending hours on paperwork.
We partnered with the DA and the Police Chief’s Association to give $1.2 million to local police departments to buy a common records management system. This will allow them to share data more quickly so we can one day realize a Crime Date Center in Lehigh County and, hopefully, the Lehigh Valley, where crime data is analyzed in real time across all police departments, creating a one-stop virtual police operation for data while each local department remains.
And, that’s why last year, I proposed making available $1 million in matching grants to local police department to hire community police officers to snuff out crime in hot spots. They are needed in Allentown and Bethlehem but they are also needed in Emmaus and other communities across Lehigh County. The “Safe Streets” program did not receive approval from the Board of Commissioners.
This 2009 budget once again proposes $1 million for police officers. We have taken a look at the commissioners’ objections and re-introduced the program in a way that I believe will allow them to support our efforts.
Community policing works, short and simple. The presence of a cadre of community police officers on bicycles and foot patrol will do more than another office building to bring people back downtown and to feel safe in all areas of our county. And, there’s no better way we can help our cities and towns than to give them the resources to put community police on the streets.
Employees are the key part of any government and one of its largest costs. We are blessed with a truly dedicate workforce in Lehigh County – and next year’s budget will provide an across the board 4% increase in wages, which is still below the rate of inflation in the Lehigh Valley. Increased employee contribution to health care has continued to help us maintain no overall growth in health care spending, which is a crucial advantage for next year’s budget.
Next year’s budget also continues no growth in our overall employment level of 2,197 employees, but it does shift positions through attrition to targeted areas. We will reduce 19 positions from vacancies and create 16 new positions, all in the area of law and order and public safety.
We are proposing 6 new deputy sheriffs, two adult probation officers and two new positions in the district attorney’s office and domestic relations, along with three grant funded positions in corrections. This continues a trend. In the last three years, we have added a total of 44 positions in public safety, while reducing slightly the county’s overall headcount.
In this area, next year’s budget also:
Creates the first phase of an advanced forensic investigations facility for Coroner Scott Grimm, moving the coroner’s operation our of crammed office space in the Old Courthouse and onto county-owned property near Cedarbrook.
Although budgeted over the last few years, it’s significant to note that 2009 will see the completion of our new, upgraded, state-of-the-art 9-11 communications and emergency management center, expected to open during the first quarter.
An expanded and upgraded men’s and women’s community correction facility will be built on the current site in Salisbury Township that will see an increased effort at training and preparation to reduce recidivism rates to our prisons
Equally important to public safety in maintaining our quality of life is the continued investment in our farmland preservation, open space and park programs. Last year’s shift of $12 million of reserve money to the Green Future Funds program will continue to pay dividends. Lehigh County now ranks as the third leading county in Pennsylvania for the number of preserved farms and in the top ten with our 18,222 preserved acres. Our Administration has directed more money to farmland preservation in the last three years than in all the previous years of the program.
This commitment includes development of a passive recreation park on the 1,100-acre Trexler Nature Preserve, scheduled to be complete by December of 2009. Next year’s budget also targets $245,000 to begin developing an 11-mile county-owned walking trail along the Lehigh River and building a boat launch at the Lehigh Gap in the process.
Next year will see us launch an agricultural incubator located at the former Seem Seed Farm that will be cost the county very little but will ensure that there will continue to be a training ground for new farmers for the Lehigh Valley.
In 2009, we will begin and complete the first $5 million phase of our energy savings projects at our nursing homes. This marks the first step in a series of projects to renovate and add new technologies to our facilities to reduce energy usage, upgraded our facilities to newer technologies for more efficient energy consumption during these difficult times of utility and energy cost increases.
With oil topping out at more than $150 per barrel, it’s clear we need to do more in the area of mass transit. Consumers are speaking with their feet or bus tickets. LANTA has seen a marked increase in riders as gas prices skyrocket. Once again, we have budgeted an increased operating subsidy. In addition, we have budgeted $75,000 for a feasibility study to explore the possibility of developing a passenger rail line from New Jersey into the Lehigh Valley. Therefore, mass transit will see more than $100,000 more in 2009.
Next year’s budget also continues our record breaking commitment to maintaining and replacing the worst of our 47 long-neglected bridges in Lehigh County. Well before the tragic bridge collapse in Minnesota, we embarked on an aggressive bridge program. It will continue next year.
Over the next few months, we will open 2 new bridges---Lyon Valley Bridge in Lowhill Township, and Kline’s Bridge in Allentown. In fact, by the end of 2009, I am proud to say that all of the Lehigh County-owned bridges that were closed or partially closed when I took office will be fully open and fully functioning. Next year, we’ve allocated $750,000 for continued work on a number of bridges, mainly the Pine Street Bridge over the Jordan River, the Bittner’s Corner Bridge and 4th Street Bridge over the Jordan River. This adds to the more than $10 million we’ve spent fixing bridges the last three years.
While our residential growth has slowed, creating flat tax revenues much continues to happen with commercial development and quality of life/recreational growth.
Just yesterday, we hoisted the last steel beam into place on the renovation and expansion of the County Courthouse, a scaled back project to be completed in 2009, which shaved a very important $20 million in cost from the previous plan.
And, although I’d rather see them winning a little more often, the IronPigs already have become a cherished regional treasure as they play in Lehigh County-owned Coca-Cola Park. Another county-owned regional treasure, the Veledrome, got a new investment this year when we resurfaced the track at our world class bicycle racing facility. We are hopefully that we can lure the United States bicycling hall of fame to be built right next door on county land.
And, despite the disheartening announcement last week of the loss of the Mack Trucks corporate office, this year has been a growth year in the private sector that continues to bring jobs and new business. International Battery chose Lehigh County for a $20 million manufacturing facility as did Boston Beer, creating its largest brewery for the production of Samuel Adams, bringing life back to a dormant facility.
B. Braun Medical decided to expand its medical equipment manufacturing right here as did Nestle Water with the expansion of its bottling facility. And, Amgen pharmaceutical chose us for an advanced climate–controlled storage facility bringing nearly 50 jobs and another major corporation to Lehigh County.
Right now, Lutron is in construction on an expansion of its regional headquarters -- a $60 million dollar project that will create five hundred jobs. And, as you know, just recently Olympus America chose us for its new national headquarters, an $84 million dollar project that brought 750 jobs to the Lehigh Valley.
And, the silver lining in the Mack Trucks announcement is that the Macungie plant will see an expanding workforce and be the only Mack assembly plant in North America.
So, while we may go through some rough times as the residential economy slows and we see the results of lost tax revenues, Lehigh County remains a vibrant place for new business and a great place to live. I’m optimistic that we will continue to weather this national recession better than most places in Pennsylvania and America – and we will see improvements again in growth projections. In the meantime, we will continue our focus on keeping our community safe, our quality of life preserved, working to create new jobs and keeping our budgets balanced and our tax base stable.