Mayor calls for tax hike in Allentown budget

Spending plan would boost wages 3% for nonunion employees.

BUDGET HEARING SCHEDULE

For the first time in more than a decade, Allentown residents could face a property tax increase if city officials approve the proposed budget released to City Council Friday.

Mayor Ray O'Connell, in his first year in office, is calling for a 1.5 mil increase in the real estate tax, which would generate an extra $7.6 million in revenue for the city annually.

For a property with a building assessed at $150,000 and with $20,000 in land value, the tax bill would increase from $903 to $1,139 under O'Connell's plan.

The nearly $116 million spending plan also calls for a 3 percent increase in wages for all nonunion city employees and a one-year deferment on a loan payment to the city's solid waste fund. O'Connell also proposed adding two firefighters to the city's payroll.

As it has for the last several years, Allentown faces a deficit in 2019 — the difference between expenditures and revenues. The final budget will need to plug that hole. O'Connell's plan would cover the deficit and also set aside some money to refill the city's depleted cash reserves.

Allentown's reserves were tapped by O'Connell's predecessor, Ed Pawlowski, who held the line on property taxes for the duration of his 12 years in office. Pawlowski, who resigned in March after he was found guilty on more than 40 public corruption charges and recently began serving a 15-year prison sentence, used $3.9 million in reserves to balance the 2018 budget and another $3.6 million in 2017.

The reserve money was coupled with increases to the earned income tax rate, which is paid by city residents and commuters, and also one-time borrowing solutions such as a $4.5 million loan the city took from the solid waste fund in 2016.

The proposed 2019 budget calls for the city to defer a $680,000 payment on that loan.

Multiple unforeseen expenses worsened Allentown's financial situation in 2018. In May, $3.5 million was moved out of cash reserves to correct a budgeting error made more than a decade ago. Another $596,712 was taken in April to pay for remediation of a virus that struck city computer systems. And in August, $600,000 was used from reserves when the city put extra money toward legal bills that already had exceeded the budget.

Those legal fees continue to mount as Allentown engages in several high-profile lawsuits. The city is being sued by the Lehigh-Northampton Airport Authority over the newly instituted stormwater fee. Allentown is also being sued by Good Shepherd Rehabilitation Network over efforts to collect more than $700,000 in business privilege tax from the nonprofit.

At the same time, Allentown is suing the Lehigh County Authority over the authority's attempt to hike water and sewer rates to city customers.

Diminished reserves, the deficit and the potential for legal liability led ratings agency Standard & Poor's to downgrade Allentown's bond rating in October from A+ to A.

O'Connell's proposed tax increase is likely to be a contentious issue for residents and City Council, which must approve or amend the budget plan by the end of the year. Three seats on council are up for re-election next year, and O'Connell also will head into an election cycle.

As interim mayor, O'Connell's term ends at the end of 2019. A primary election to choose new Democratic and Republican mayoral candidates will be held in May. O'Connell has not yet announced whether he will seek re-election, but he has not ruled it out.

O'Connell is scheduled to publicly present his budget to City Council at 5:30 p.m. Monday in Council Chambers. Budget hearings will begin at 5:30 p.m. Wednesday, with a discussion about the city's Parks and Recreation department and municipal golf course.