07/07/2024
Fox & Friends for Lancaster County NAACP Lancaster, PA
Janet Diaz Saca Lancaster
Lancaster County Democratic Committee
[…] the center of Lancaster County is a 7-square-mile city that’s long been a hub for commercial, civic and social activity. Lancaster is the focal point of a thriving tourism economy, the county’s legal community, and essential health care and social services agencies.
But those activities don’t translate into lots of tax revenue to fund the city’s essential services, from public safety to water and sewer service to parks and recreation.
City government is projected to run an $18 million budget deficit in 2029 unless it raises taxes, cuts spending or both. A recent fiscal analysis conducted by Philadelphia-based consultant Public Financial Management showed a deficit as high as $10 million by next year without action.
Current and past city leaders often have worried about how the city would continue to pay its bills given the constraints placed on it by state law. As a third class city, Lancaster can impose little in the way of income taxes on residents and must instead rely heavily on taxing properties.
Revenue generated by property taxes accounts for less than half of Lancaster’s $73 million annual budget, bringing in $32.5 million. The rest of the budget is supported by a mix of income taxes, fees and grants.
The fiscal challenge is compounded by the fact that there are nearly 700 tax-exempt properties scattered across the city, according to the most recent available data from 2022. That includes properties that provide some form of public good to the community, such as churches, nonprofits, hospitals, schools and even cemeteries. The parcels comprise 30% of Lancaster’s land mass and, together, are valued at $1 billion, according to the city.
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If the tax-exempt parcels were taxed, the added revenue could balance the city’s budget, at least in the short run. But the city has never taxed these properties, so it’s not something Mayor Danene Sorace even mentions when she discusses the city’s fiscal problems.
“I don’t even think about it when I put the budget together,” she said.
An LNP | LancasterOnline review of city tax records shows about 170 tax-exempt properties house religious institutions, 94 properties are nonprofits that provide shelters and educational resources to the community, and 73 properties are recreational spaces, such as parks and walking trails.
Largest tax-exempt properties
Here's a list of the largest tax-exempt properties in the city by assessed value as of 2022.
Lancaster General Hospital, 519 N. Duke St.: $117,185,600
n Wickersham Elementary School and J.P. McCaskey High School, 401 N. Reservoir St.: $59,893,700
Lancaster County Convention Center, 25 S. Queen St: $59,660,800
Franklin & Marshall College, 600 College Ave.: $53,523,400
Lancaster Marriott, Penn Square, 25 S. Queen St.: $52,320,200
Lancaster County Prison, 625 E. King St.: $47,127,400
Penn Medicine Lancaster General Health, 534 N. Christian St.: $26,286,700
Lancaster County Courthouse, 50 N. Duke St.: $22,415,000
Thaddeus Stevens College of Technology, 750 E. King St.: $19,122,400
Lancaster County Youth Intervention Center, 235 Circle Ave.: $14,051,600
And many tax-exempt parcels are owned by local governments, like the Lancaster County Prison on East King Street, not to mention City Hall and the county courthouse.
City Properties 3.jpg
The Lancaster County Prison at 625 E. King St. is a tax-exempt building in Lancaster city as viewed on Monday, June 24, 2024.
SUZETTE WENGER | Staff Photographer
Residents would have more control around city decisions, laws under home rule charter
Local News
Residents would have more control around city decisions, laws under home rule charter
Payments in lieu of taxes
Lancaster does get some revenue from tax-exempt property owners who volunteer to make payments in lieu of taxes, commonly known as PILOT payments. Last year, the city collected $2.2 million through its PILOT program that Tina Campbell, the city’s director of administrative finances, said went straight to the city’s general account to support services such as road maintenance and firefighting.
City staffers send out a letter every year asking property owners to consider joining the PILOT program by paying at least 30% of what their organization would have paid if their property were taxed. Just 25 entities donate, or about 3.6% of the tax-exempt properties, according to the latest available data from 2022 provided by the city.
Most are religious institutions, though major contributors include Lancaster General Health, Franklin & Marshall College and the city’s Redevelopment Authority, which makes annual payments under a 2017 agreement with the city related to the Marriott Hotel Penn Square. The Redevelopment Authority’s donations are required to grow every year.
Top PILOT donors
Here are the top contributors to the city's Payment in Lieu of Taxes program as of 2022.
Penn Medicine Lancaster General Health: $1.5 million
Redevelopment Authority of the City of Lancaster: $398,616.11
Franklin & Marshall College: $185,797
Lancaster City Housing Authority: $60,805
Redevelopment Authority of York: $32,827.35
Jaycee HDC Inc.: $30,000
Ross Street United Methodist Church donated $800 in 2022, which pastor Fran Keller said is as much as a small congregation can provide, though the church contributes in other ways, such as hosting a free food giveaway every month.
Water Street Mission gave $12,000 each in PILOT payments to the city and the School District of Lancaster in 2022, which collects its own share of property taxes. Matt Clement, marketing director for the homeless shelter, said the nonprofit wants to have a strong relationship with the city to best serve the community.
“We’re not in a situation where we’ve been in the red the past few fiscal years, so thankfully God’s provided for us and we’re able to be where we need to be,” Clement said. “We just feel like it’s kind of the least we can do to honor (the city) for all of the support that they give us.”
Becoming tax exempt
The Lancaster County Board of Assessment Appeals meets monthly to make determinations on tax-exempt status for properties across the county. According to its website, entities seeking an exemption must submit a letter of request as well as documentation to prove the charitable status of the building.
A handful of city residents also receive tax-exempt status because they are disabled veterans. That decision is also made by the board of assessment appeals.
Right now, city officials are brainstorming ways to advance the PILOT program to draw in more voluntary payments, Campbell said. As it stands, staff wait for a response from letter recipients and don’t reconnect until the next year when a new letter is sent out. Campbell thinks there may be room to squeeze out a few more dollars by sitting down face to face with owners of tax-exempt properties to better explain the program and answer questions.
Supporting essential services is a crucial part of the city’s pitch to tax-exempt entities to participate in the PILOT program. Property owners benefit from police, fire and maintenance services, Campbell said, even if they aren’t required to pay for them through taxes.
“It feels like if we can get the word out more about that, then people will realize it’s not that we’re just trying to tax for the sake of taxes. There’s really services behind them,” she said.
What tax breaks are on the table for low-income Lancaster city residents under home rule?
Local News
What tax breaks are on the table for low-income Lancaster city residents under home rule?
Many small churches and nonprofits don’t participate in the PILOT program because they simply don’t have room in their budgets. The same is true for some of the city’s largest properties. Kevin Malloy, executive director of the Lancaster County Convention Center Authority, said its budget regularly runs a deficit for the purpose of boosting local tourism.
The convention center, the third-highest assessed property in Lancaster at $59.6 million, contracts an outside company to conduct regular reports of its economic impact on the city and county. The most recent pre-pandemic study found the convention center generated $34 million in revenue for city businesses over a four-year period, Malloy said.
“What goes around comes around, because we use every nickel for people to come here,” Malloy said. “Our mission is to give back, and it’s not about making a profit for ourselves.”
City Properties 11.jpg
The Marriott, left, sits next to the Lancaster County Convention Center, 25 S. Queen St. which is a tax-exempt building in Lancaster city as viewed on Monday, June 24, 2024.
SUZETTE WENGER | Staff Photographer
Home rule as the only option
City leaders have different ideas for how to boost revenue from property taxes. Maybe that’s approving more real estate redevelopment projects to grow the city’s tax base, City Council member John Hursh suggested, or applying pressure to owners of large untaxed parcels to offer some kind of PILOT donation, council Vice President Jaime Arroyo said.
Sorace is skeptical of the city’s ability to find more creative ways to grow revenue with the tools it has available now, like its PILOT program.
“It’s a completely voluntary program. Because it’s completely voluntary, there’s not much more in the way that we can increase the amount of PILOT payments except to continue to raise awareness of revenue in the city, but most people really don’t think about the costs of services they’re relying on,” she said.
Again and again, officials come back to home rule. With state law limiting how cities can generate tax revenue, city leaders are rolling the dice on getting voters to approve a home rule charter as soon as the November election.
“I’m pretty adamant that we need a home rule charter and not just any one: We need a really good one that doesn’t put a burden on property owners to carry the revenue,” Arroyo said. “I hope (this) is a reality check for everyone involved.”
With home rule, the city could increase income taxes, which are currently capped at 1.1%. Nearly half of the city’s income tax revenue currently goes to Lancaster schools. This year, Lancaster will take in just $9.2 million in earned income tax, less than one-third of what real estate taxes bring in.
A home rule charter can’t change anything about tax exemptions, meaning it can’t force churches or nonprofits to start paying up to support the city. But the city doesn’t see that as its focus. With just a small bump in the local income tax, the city could bring in millions more without adversely affecting low-income property owners again and again, Campbell said.
Elected home rule commissioners are eager to see their work pay off in time to prevent a major deficit. They’re ready to introduce residents to a new plan for the city that they say opens doors for revenue growth that doesn’t force officials to keep scraping the bottom of the barrel.
“All we can do is focus on the things we can change,” Commissioner John McGrann said. “The 30% tax-exempt real estate and PILOT is unlikely to change in a meaningful way, and I don’t want to continue to rely on property tax as the primary source of revenue.” […] —30—
Reporter Nate Willison contributed to this report. His work is funded by the Lancaster County Local Journalism Fund. For more information, or to make a contribution, please visit lanc.news/
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