Reading’s financial outlook is good, the city’s financial advisors said in a report to City Council.
Council met with representatives of FSL Public Finance and PFM Advisors Monday during a committee of the whole meeting.
“The (city’s) portfolio sets up very nicely,” said Michael Vind of FSL. “You’re almost debt free in nine years.”
Vind, who has been advising the city since 2004, provided an overview of the city’s debt policy and portfolio.
The city is projected to be nearly debt-free in nine years, if no new debt is taken on, he said.
Reading last borrowed $7.9 million for capital investment in 2009, he said, noting all subsequent debt issuances were due to refinancing at lower interest rates.
The city’s total debt stands at about $90,871 of outstanding principal, Vind said, and the interest rate on that debt is below 3.5%.
Vind said he did not count the $100 million spent in 2014 to upgrade the city’s wastewater treatment plant because that was the result of a consent decree with the U.S. Department of Justice and Environmental Protection Agency, and the state Department of Environmental Protection.
As part of its plan for exiting Act 47 state financial oversight, the city adopted a debt management policy, he said. The policy calls for annual updates to council on the debt situation.
In addition, he noted, the city’s credit rating has improved since its exit from the Act 47 process. The current A- rating gives the city about $145 million of available borrowing power.
“So, you do have a lot of room for investment,” he said.
The city’s current financial position is the result of council, the administration and the city’s advisors working together, Council President Donna Reed said.
“We’ve worked really hard to make the city as economically viable as it is today,” she said. “It’s been a lot of lot of pain along the way, as you know, for the last 20 years, but it’s all to the good.”
The city now has the ability to make changes and improvements and take out additional debt if it is required, she said.
Lauren Sukovich of PFM said since exiting Act 47 in July 2022, the city has been maintaining robust reserves. It has also consistently posted surpluses in its general fund over the past five years, and the fund balance exceeds the city’s policy goal of $22 million or 20% of expenditures.
On the revenue side, she said, the city has experienced strong growth in its earned income tax, EIT grew by 17.3% in 2022 and 15% in 2023. This has been the primary driver of revenue, she said.
The real estate transfer tax has also consistently outperformed budget expectations, she noted, with revenues closer to $7 million annually, exceeding the $6.2 million planned for 2024.
Revenue from real estate taxes, however, has remained flat, reflecting a common trend across municipalities. It is expected to remain in this state unless changes are made to tax rates or collections, Sukovich said.
In the area of expenditure trends, she said the salaries and wages paid to city workers have shown steady growth, with a brief spike after exiting Act 47 due to union-negotiated wage increases.
While health insurance costs have risen, she said, the city’s strategy of increasing employee contributions has helped stabilize net costs.
Gordon Mann also of PFM outlined the city’s financial planning approach and emphasized the importance of adopting a multi-year perspective in budgeting. The budget is not just about the next year, he said, but sets a long-term course for the city’s operations. A multi-year perspective would allow the city to make adjustments before issues become critical, giving more flexibility in decision-making.
Given the city’s strong financial position, there is room to invest in infrastructure or other key areas, Mann said, emphasizing the importance of making strategic decisions about where to allocate funds and whether to borrow for large, impactful projects.
By maintaining a multi-year focus, using reserves wisely and strategically planning investments, he said, the city is well-positioned for future success.
“The key take away is the city has successfully navigated our fiscal challenges,” said Jack Gombach, city managing director. “We’ve managed surpluses and now it’s time for us to plan for sustainable growth so that we can continue on this trajectory.”
Gombach and council thanked the advisors for their work.
“Now is the time for us to start thinking bolder and bigger about our city’s future,” Gombach said. “We have the capacity. Let’s, let’s roll up our sleeves and get to work.”
