Tredyffrin Township’s Proposed 2013 Preliminary Budget Indicates 5.5% Tax Increase

The proposed preliminary 2013 budget was unveiled at Wednesday’s Board of Supervisors meeting to a sparse audience – I didn’t count but there must have been fewer than a dozen residents in the attendance.  As stated in an earlier post, three of the seven members of the Board of Supervisors were absent from the BOS meeting, including Chair Michelle Kichline, Vice Chair John DiBuonaventuro and Phil Donahue.  Supervisor Paul Olson presided over the meeting as acting chair.

Acting Township Manager (and Finance Director) Tim Klarich presented the proposed 2013 preliminary budget, which includes a 5.5% tax increase, from 2.308 to 2.435 mills. Supervisor Mike Heaberg was the only representative from the Finance Committee in attendance at the BOS meeting and assisted Klarich with questions on the proposed preliminary budget.

According to Klarich, the 2013 expenses are slightly lower than the 2013 budget, but 7% higher than the 2012 forecast.  I noted that the 2012 forecast is more than $1M lower than the budget for 2012 due to vacancies and a mild winter.   The proposed 2013 budget indicates that the greatest expense increase next year, at 69%, is in salary and benefits category.  The 2012 budgeted salary and benefits at $11.4 million, however due primarily to unfilled vacancies the forecasted 2012 amount is $10.7 million.  Budgeted for 2013 in salary and benefits is $11.5 million which indicates the 69% increase. Currently there are 13 vacancies in the township, with the township manager vacancy to be filled shortly.  As to how many of the remaining 12 vacancies are to be filled in 2013, I am not certain. In the reviewing the proposed preliminary 2013 budget, it appears that there are police vacancies that will not be filled.

An open issue that I hope will be addressed prior to finalizing the 2013 budget is the results from the police department staffing study.  If you recall, this $49K consulting study was discussed at the June BOS meeting and then approved 6-1 at the July BOS meeting.  The one dissenting supervisor vote  was from John DiBuonaventuro; his non-support of the support of the study was that he thought that the money could be better spent on bringing the staff level in the department up to projected 47 officers (from the current 41 officers as of July 2012) or for police department equipment.  Police Supt Tony Giaimo appeared to supportive but asked that the consultant expedite the study and that the final report take less than 125 days.(Presumably, so that the results would assist in the 2013 budget decisions).  The consulting contract was approved in July, so it would seem that there should be results by this point.

However, based on the response given by Klarich and Supervisor Heaberg at Wednesday’s BOS meeting, it appears that the results will not be public prior to the Nov. 17 BOS meeting, when the final  preliminary 2013 budget is presented.  To be clear, I do not like the idea of paying more taxes (5.5% tax increase proposed) but I am more troubled that this tax increase may not include filling all police department vacancies.

 Is it my imagination or lately does there appear to be an increase in crime (auto, house break-ins, and robberies) in Tredyffrin and some of which have occurred in broad daylight?  So, if this is correct and that there is an increase in crime, how is it that the township can consider decreasing the size of the police department?  If anything, wouldn’t an increase in crime suggest the need for an increase in the police department? I would think that the report from this $49K police department staffing study would be vital to understanding the police department needs so that the BOS can make an informed decision for the 2013 budget.

According to Klarich without a real estate tax increase, the 2013 revenue be flat compared to 2012.  With the proposed 5.5% tax increase, 2013 revenue is 3% higher than 2012. Klarich explained that the four General Fund changes in 2013 are: (1) staffing and compensation; (2) Retiree medical funding; (3) Repair and maintenance funding and (4) Real estate tax increase.

According to the proposed 2013 preliminary budget, some (but not all) of the vacancies will be filled. Again, I am unclear how many vacancies will remain unfilled in 2013 and of those that remain unfilled; exactly how many are in the police department. There is a new health care plan that will save money but as Klarich explained, the new plan cannot be put into place until the police arbitration is completed.  He spoke as if arbitration may be close to resolution but will be it in time for the budget approval – I do not know.  There are raises in the 2013 budget – per contract and merit-based raises and bonuses for non-union staff.  There was no background information provided on the formula for bonuses/merit-based raises.  I would like to understand the criteria for employee bonuses.

Tredyffrin Township’s unfunded liability of retiree medical funding currently stands at $40M; $31M from uniformed retirees and employees and $9M from non-uniformed retirees and eligible employees.  The non-uniformed union has agreed to changes but as Klarich again points out, the police department remains in arbitration so any possible changes that could help in the future are unknown at this time.  Klarich explained that it is recommended that $2M should be budgeted annually to ‘buy down’ the $4M unfunded liability.  In 2012, the budgeted amount was $250K and Klarich has budgeted $500K for 2013. At a rate of $500K per year, it will take the township 80 years to pay off this debit (and that assumes that the unfunded liability does not continue to increase.)

Here are some highlights in the repair and maintenance expense category contained in the proposed 2013 preliminary budget – – an increase of $114,500 for streets drainage.  Considering only $15K was budgeted for street drainage in 2012, this is no doubt an increase that is long overdue.  Building maintenance was budgeted in 2012 at $76K but has been increased by $63,320 in the proposed 2013 budget for a total of $139,320. No details offered  as what is included in the $139K line item, AC/heating system for township building, repair of township building front steps??  I was disappointed to see that the proposed 2013 preliminary budget decreases maintenance in the township parks from $50K to $46,600.  If anything, I think that Wilson Farm Park could use additional funding not less.

Real estate tax generates ½ of the General  Fund revenue.  Real estate tax is based on the assessed value of properties as set by Chester County. Tredyffrin’s tax base was only growing marginally before the recession, due to little development.  Unfortunately, since 2009 the tax base has been declining, primarily based on successful assessment appeals.  Therefore, it stands to reason that without a tax increase, the revenue will continue to decrease.

The proposed 5.5% tax increase for 2013 includes 3.1% increase in funding for the unfunded medical long-term obligations (doubling the $250K contribution budgeted in 2012 to $500K  for 2013 – remember, the current outstanding debt obligation is $40 million!) and 2.4% increased funding for services ( $198K increase).  The proposed 5.5% tax increase equates to a $448K increase in the $16.7M budget.

Following the presentation of the proposed 2013 preliminary budget, residents Carol and Raymond Clarke asked whether there would be public budget workshops, as held in previous years.  There were also questions about a budget summary as former township manager Mimi Gleason prepared in prior years. If you recall, Gleason remained on as a consultant to the township after her resignation, primarily to assist Klarich and the other township department heads with the 2013 budget.  The Clarke’s and other audience members were looking for background and supporting information behind the preliminary budget numbers. Supervisor and Finance Committee member Heaberg suggested that he would be available to discuss the budget with individual citizens.  However, to the credit of Carol Clarke, she requested a public meeting so that all citizens with budget questions could attend.

Kudos to Carol for her follow- up with Heaberg; as a result, a public meeting to discuss the proposed 2013 preliminary budget is scheduled for Tuesday, November 13, 8:30 AM at the township building. If you have questions about the proposed 2013 preliminary budget, you are encouraged to attend.

The timeline for the 2013 township budget is for the BOS to approve the preliminary budget  November 19 and to approve the final budget December 17, with a public hearing on either December 17 or January 2 to adopt the real estate tax increase. I do not recall a public hearing last year, regarding the 2012 tax increase. Someone help me here – was there a public hearing for the tax increase of 2012 and I am simply not recalling it?

In case you forgot, the preliminary budget for 2012 included a 6.9% increase which was ultimately revised downward (and approved) to a 3.5% tax increase.  The township amended the 2012 preliminary budget by reducing professional fees, decreasing funding for IT, department expense reductions and deferring the equivalent of two police officers’ salaries and benefits until July 1, 2012.  Holding off hiring of two police officer’s for 6 months added $127,400 to the overall budget expense reduction.  Unfortunately, it looks like the 2013 budget may also going to include a decrease in the police department staff … stay tuned.

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  1. Thanks, Pattye, for this thorough summary. As we went into Wednesday’s meeting the only public information was a dense collection of spreadsheets on the township’s budget website http://www.tredyffrin.org/finances/budget.aspx Only with diligence and experience could we discern that tax rates must be slated to increase significantly. Now the site includes the higher level Klarich BOS presentation and the “budget message” (dated 11/6) that we asked for. I hope that everyone gets a chance to read these, particularly the latter, and formulate their questions.

    The situation makes familiar reading for those that have been following the school district: reliance on a declining real estate tax base, forcing rising compensation costs to be offset by some efficiency gains but also the inevitable reduction in employment and service levels. Made all the more thorny by the fact that half the budget goes to compensation of a highly valued professional employee class (police/teachers).

    The $40 million retiree healthcare liability is perhaps the biggest problem. One approach, of course, is to ignore the number; just pay the retiree benefits as they become due and increase future taxes by whatever is necessary to provide the cash. With reasonable actuarial estimates of longevity and medical costs, what would this imply for future taxes?

    On the other hand, those future costs are part of the cost of providing the service today. If we were to fully allocate the pension and current and future healthcare costs (again with actuarial assumptions about length of career and its progression, inflation, longevity, etc.), what is the annual cost of a policeman? A scary number, I bet.

    So it seems to me that we should immediately begin identifying and funding the full current year employee cost. Let’s not delude ourselves any more. I’m not sure if that will help with the $40 million, but I do know that we have some $15 million or more in reserves. We can allocate a good chunk of that to the future compensation fund.

    Then, if we know the trajectory of the cash needs from the above analysis, we can decide whether any accelerated funding, as is implied by the increased contribution in the proposed budget, makes sense.

    A big caveat in all of the above, of course: what is the total compensation package to which our police (current and future) are entitled? Until the arbitrator opines (and is that the end of it?) we won’t know.

    The budget message has a provocative comparison of the tax burden of Tredyffrin and other regional townships, noting the availability of an EIT and a business privilege tax in other jurisdictions. However, the table compares the total residential payments assuming that assessed values and incomes in those other townships are the same as Tredyffrin’s. Not so, of course. One thing that is not mentioned is the ~30% of Tredyffrin residents that already pay an EIT to other jurisdictions.

    The good news is, the township is facing up to the issues and, after some encouragement, is now engaging the public. However, maybe it would take PA to follow CO and WA in legalizing marijuana for us to come up with a way for the township and the school board to get together, implement an EIT that shifts the burden a little from property taxes and translates to improved service levels rather than a compensation package for employees that outpaces that of the taxpayers that fund it.

    [Reply]

    Keith Knauss Reply:

    Ray,
    A few thoughts:
    .
    I live in E. Marlborough Township where we have 2 part time officers. Up until a few years ago we didn’t have a police force. I know this is an apples to oranges comparison, but having 47 officers in TE seemed high. As mentioned by many, the study would be helpful to see how a neutral party would rate TE’s law enforcement needs.
    .
    The supervisors use the metric Average Tax Payments of other townships to partially justify their 5.3% tax increase. With TE’s large commercial/industrial tax base one can understand why TE’s number is low. (this is the same false, but convenient logic used by the school board) I’m not sure how the police force should scale (population, traffic, proximity to an urban center?), but by household seems too simplistic.
    .
    The township can implement an EIT by fiat as opposed to a school district that requires a referendum. However, before implementing an EIT to bring in additional revenue I would hope the supervisors would explore whether there are efficiency gains to be had or whether residents need all the services they now enjoy.

    [Reply]

    Township Reader Reply:

    Thanks Keith. Just one clarification — it’s not “TE” — it’s T. E has its own government. Which is probably part of the problem….not sure how many are on their force, but they have a Chief of Police too, and their millage is higher because they don’t have the commercila base. Likewise, E only gets 1/2% transfer tax, but T gets 1%.

    [Reply]

    Ray Clarke Reply:

    As with any consultant report, I expect that the BOS have got updates along the way and so they have a sense of where the benchmarks are coming out, and that is informing the preliminary budget. No doubt, though, that they should get and release the final report immediately.

    Tredyffrin has gone through significant austerity over the last five or so years, partly counseled by citizen efficiency experts (the infamous BAWG). Compensation costs have been increasing while revenues have suffered from vanishing transfer taxes, the declining base and rates that average an increase of no more than ~2% per year over both the medium and long run.

    So there’s not much room. The one service that the residents do literally “enjoy” – the parks – is unfortunately the one easiest to cut, but it is the police that is half the budget. (Trash is private, and sewers, for those on the the system, are a separate fee).

    There is indeed the difference in the EIT process, but you’d think there’s a parallel universe somewhere in which the township and school board might be able to get together, especially since members of the same political party are the majority on both.

    Oh, wait, their paymaster 1% of income earners (who live in their own “parks”, secured by private services, with on-lot septic systems, and Range Rovers able to ford the floods) might have to pay more ….

    [Reply]

    Concerned Citizen Reply:

    Keith,

    Have you looked at how many calls East Marlborough handles per year, residents, businesses, highways, square mileage? Why don’t you look at the annual reports, and you will see that not only are you grossly misinformed, but how busy these Tredyffrin officers are, and how under-staffed they are as well.

    [Reply]

    Keith Knauss Reply:

    Hi CC,
    .
    Uninformed, possibly. Misinformed, no.
    .

    Regardless, I had a chance to speak with a chief of police from a neighboring township. He was familiar with the T and LM staffing levels and felt they were appropriate. The guideline for staffing used in the law enforcement community is 1 to 1.5 officers for every thousand residents. He would move toward the 1.5 multiplier if the township was close to an urban center.

    Ray Clarke Reply:

    Maybe, John. I am fond of my glasses, but I’m always looking to add to the collection. I put in an eBay bid on Karl Rove’s set, but even with the warranty from Fox News the price got too high. The Romney campaign had a bulk discount, but since those work best with their Orca GOTV software, and that is reportedly “harpooned on a beach somewhere”, I had to pass. (They could have used your IT and political science skills.)

    [Reply]

  2. $40 million in unfunded long-term medical liability, who is Tredyffrin ever going to dig out from under this burden. I agree with Ray, at what point does this government get serious about discussing the EIT.

    As for crime around here, Patty I think you are right, it does seem that there is an increase (or at least we are hearing about it more!) When people are desperate, crime increases and thats what we are seeing. And the answer to crime is not to cut the police department. Also agree that we need to see the consultants report before there can be a decision on the police department budget for next year. Cant the BOS provide a deadline for the consultant to produce a report. At least with the report, there would be someone from the outside weighing in on whether the 2013 should include an increase or decrease in the number of police officers.

    [Reply]

    Pattye Benson Reply:

    I intend to ask the question about the timeline for the police department consultant’s report at the budget meeting on Tuesday. I agree that this report should be public before making a decision about police department vacancies and how those vacancies factor in to the 2013 budget. A reminder that the public is invited to attend this Tuesday, 8:30 AM at the township building for a 2013 budget Q&A.

    [Reply]

  3. Pattye,
    Thanks for publicizing this budget information and the Q&A meeting. This meeting was supposed to be posted on Tredyffrin’s website last week – but I cannot find any mention of it. It is scheduled for this Tuesday at 8:30am. I encourage anyone interested to attend and invite your neighbors.

    These issues are too important to be quickly voted on by the BOS without input by the residents. There is no way anyone can make an intelligent decision without understanding the assumptions behind a tax increase, a decrease in our police department, funding a $40M liability, or the impacts on each of the township departments.

    If you can’t attend the Q&A meeting, talk to a supervisor, Tim Klarich, and/or raise your questions and voice at the next BOS meeting.

    [Reply]

    in the valley Reply:

    Big surprise that they want to keep the meeting quiet…

    Yes, these are important issues – but resident input is meaningless anyway with this crew…

    Maybe we can ask JD to get the meeting posted on the website….

    [Reply]

  4. quote:
    “The proposed 2013 budget indicates that the greatest expense increase next year, at 69%, is in salary and benefits category. The 2012 budgeted salary and benefits at $11.4 million, however due primarily to unfilled vacancies the forecasted 2012 amount is $10.7 million. Budgeted for 2013 in salary and benefits is $11.5 million which indicates the 69% increase”

    My math is a little rusty, but an increase from $10.7 million (actual 2012 projected) up to $11.5 million (budget 2013) as an increase of 69%.

    Isnt that more like a 7% increase?

    [Reply]

    Pattye Benson Reply:

    MA, Thanks for catching my ‘rusty math’ — the increase between the protected 2012 $10.7 million and 2013 budget for salaries and benefits is slightly more than a 7% increase.

    [Reply]

    Pattye Benson Reply:

    To clarify, 69% is the percentage of the township expenses budgeted in 2013 for Salaries & Benefits. Sorry for the confusion.

    [Reply]

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