York City's annual budget season kicked off Tuesday with more than one official warning the city is teetering too close to the edge of bankruptcy.
At a York City Council meeting, Councilman Henry Nixon said the city's current financial situation — particularly with regard to its annual pension obligation — "can't continue."
He called on the city's labor unions to consider concessions, "especially in the pension and health care arena."
"We're going to face some very serious issues and, most likely, some very serious cuts," he said. "I would hope our unions would look favorably on discussing some kind of concessions."
Councilman Michael Helfrich echoed concerns about the city's bleak financial outlook.
"It's hard to see light at the end of the tunnel right now," he said. "We all have to work together if we are going to get through this without doing something drastic, like going into bankruptcy."
York City officials have been able to balance the budget without a property-tax increase for the past two years.
But a major expense in 2015 is threatening that track record and spooking the council members.
Each year, the city is required to pay its minimum municipal obligation — an annual payment that fulfills a commitment to support retired employees with a pension fund.
For the past few years, York has paid 75 percent of that expense thanks to legislation designed to help cities cope with the recession.
That legislation expires next year, meaning York must contribute 100 percent of its MMO. Late payments trigger a substantial interest rate.
The amount owed to the pension fund in 2015 is nearly $8.2 million — an increase of nearly $2.5 million over the city's 2014 payment, according to Michael Doweary, the city's assistant business administrator.
"Your government is going to have to work really hard over the next three to four months to figure out how we're going to pay for this," Helfrich said Tuesday.
One option on the table is the distressed pension earned income tax, more commonly known as the commuter tax.
City officials have weighed the pros and cons of levying the tax since at least 2011, when Philadelphia-based consulting firm Public Financial Management recommended the tax in a 189-page report as one way to generate revenue. PFM predicted in the report that, without drastic measures, York City would face a $50 million deficit by the end of 2016.
Council President Carol Hill-Evans said she expects Mayor Kim Bracey will propose the tax as a way to generate revenue in 2015.
Bracey did not respond to requests for comment.
— Reach Erin James at firstname.lastname@example.org.