Catasauqua achieves first balanced budget since 2015 as finances improve

Catasauqua has achieved more milestones as it continues to recover from years of financial difficulties, including the first balanced budget in nearly a decade and a new positive credit outlook.

“It feels great,” Borough Manager Glenn Eckhart said of the change. “[Borough Treasurer Catherine VanDyne] and I have worked so hard, and we’ve tried to instill in all the employees how important this was going to be, to get to this point. Without their help and buy-in to what we were trying to do here in the borough, we couldn’t have done it.”

While the borough still has a “BB+” rating from S&P Global Ratings, the credit rating agency has revised its outlook for the borough from negative to positive, according to a July 11 report.

“The positive outlook reflects the borough’s improved general fund financial trajectory following a significant tax rate increase, as well as our expectation of improved financial performance in the enterprise funds,” the report stated.

Catasauqua Borough Council increased the tax rate from 7.35 mills to 15.05 mills in December 2022. One mill is equal to $1 of property tax for every $1,000 of assessed value.

The S&P report states that an audit for fiscal 2023 isn’t available yet, but that Catasauqua estimates a roughly $700,000 general fund surplus, making it the borough’s first year of a balanced budget since 2015.

However, S&P Global Ratings is maintaining the “BB+” rating, which the agency defines as being “less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions,” according to its website.

“While significant progress has been made, in our view, the ‘BB+’ rating reflects the borough’s still-limited liquidity across its general and enterprise funds, recent history of structural imbalance, pressured operations in enterprise funds, with significant capital needs, and very weak debt profile,” the agency said in the report.

The agency also said it’s concerned about the borough’s limited ability to increase revenue given the minimal population growth and below-average income in the community.

Eckhart said that to increase the rating, which can’t change until 2026, the borough will have to pay about $1.1 million to the sewer fund, demonstrate another two years of balanced budgets, and create a rainy day fund of about $850,000.

“So if we’re able to accomplish those three things in the next two years, then we will be upgraded to what’s called “investment-grade bonds,” where it’s like you’ve [gotten] out of the cellar, basically,” Eckhart said.

He emphasized the importance of increasing the rating so that it will cost less money for Catasauqua — and its taxpayers — to borrow money for potential expenses such as fixing a bridge or purchasing a new fire truck.

VanDyne said that other outstanding amounts the borough needs to pay include about $9 million from a loan to build borough hall as well as the police and fire stations; roughly $7.3 million that the sewer plant owes for improvement bonds from 2016 and 2021; and about $1.8 million that the borough owes after taking out a loan at the end of 2022 for bills and payroll.

“It feels good to be a part of righting a sinking ship,” she said. “We have made great strides in curbing unnecessary spending, but there are still many items that need to be addressed as the borough has aging infrastructure and equipment.”

In other Catasauqua news, Eckhart said the borough will privately interview two applicants for the police chief position on Aug. 1 before naming the next police chief during a public meeting on Aug. 5.

Former police Chief Douglas Kish retired in February after a state report identified multiple problems with his department .

The Lehigh County Redevelopment Authority also will begin negotiations with the VM Development Group on Friday regarding the redevelopment of the former Iron Works site in the borough.