I attended Tredyffrin Township’s 2014 budget open house yesterday. Although advertised and open to the public, the 8:30 AM meeting was sparsely attended. Of the five residents, four of us were there last year for the review including Ray and Carol Clarke and Bill Bellew. Supervisors Mike Heaberg and Phil Donohue who are members of the Finance Committee attended as did newly elected supervisors Murph Wysocki and Mark Freed. Township staff included township manager Bill Martin and business manager Tim Klarich.
The supervisors and staff could not have been more forthcoming and open about township business and the 2014 budget. We enjoyed the opportunity to ask questions and discuss strategies. My only regret is that there were not more residents in attendance. Both relative newcomers to Tredyffrin Township, the level of professionalism, knowledge and willingness to share information is unsurpassed in Martin and Klarich! Residents are lucky to have these two working for us! A special thank you goes to the supervisors (current and newly elected), who took time from their ‘day jobs’ to attend.
Thanks to Ray Clarke for providing his personal notes from the meeting:
Residents should be grateful for a few things about the Budget Open House. The Township Manager, Finance Director and Accountant and two Supervisors (Heaberg and Donohue) took a couple of hours to respond to residents’ questions. They were knowledgeable and forthright about the facts and the bases for their assumptions. Our incoming Supervisors were also there. Disappointingly, though, only five residents were able to attend.
It was clarified in Monday’s BOS meeting that the Township is in fact budgeting a deficit for 2014, and that the projected increase in taxes noted in the General Fund Revenue tables on, for example, pages 5 and 19 of the Preliminary Budget posted on line, is in fact driven by a $600,000 contribution from Reserves, equal to the projected surplus for 2013. Our officials support this decision by thinking in terms of a “24 month budget” and by pointing to upside in items such as general transfer taxes, which are currently projected to fall by $300,000 next year.
It’s a relevant observation here that the real estate tax rate that of course gets so much attention, determines only half of the township revenues, with the majority of the remainder (transfer taxes, permit fees) much more subject to the vagaries of the economy. So a percentage over- or under-shoot in the township top line is equivalent to twice that impact on the property tax rate.
So, as we look out beyond 2014, the built-in contractual 2-4% salary increases, pension fund contribution increases (we are sensibly ratcheting down the assumed rate of return), and increases in employee and retiree healthcare benefits, present a great risk of future tax increases if that $600,000 reserve fund contribution can not be replaced. Upsides that were mentioned included the transfer tax and ongoing property tax benefits of new developments, particularly from the old Richter property and Chesterbrook shopping center. Also, on a six or seven year horizon, most of the current bond debt should be repaid.
Our officials, though, were reluctant to think more than one or maybe two years ahead, citing uncertainties in both overall economic conditions and local development outcomes. This position seems rather alarming, but perhaps is bolstered by the fact that both our general and capital reserves are healthy enough to weather some adversity.
A few other random observations:
A large part our Township activity shows up as capital spending, and here property taxpayer dollars are even more leveraged – almost 1.5 to 1 with state and federal grants. The capital reserves seem well able to support the $10 million of township funding required by the five year capital budget with its accelerated road paving, some stormwater mitigation, Church Road bridge replacement, etc. One cited constraint on doing more was the finite capacity of our staff to manage more projects, which of course cycles back to the General Fund decisions.
The average cost per FTE for healthcare benefits for all township employees is $16,400, and this is after a change to a high deductible plan (for which the township picks up the deductible). For the 49 FTE in the Police Department (42 uniformed officers) the average health benefit is $19,743 per FTE. High numbers, even for those of us used to the School District plans (which are being managed down). And apparently these are not even considered “Cadillac” plans. The state-governed negotiating environment makes it difficult to change Police plans, as we saw last time around; it was suggested that our next contract, beginning in 2016, would continue to be challenging.
We need to remember that the police contract also provides for lifetime family healthcare benefits, a cost recognized in General Fund Expenditures as OPEB ($414,000, part of the liability incurred for current employees) and Retiree Health benefits ($655,000, up $75,000 over 2012, the cost of premiums for retirees). These two together are probably more than the yearly liability incurred for a current police employee, (say one year of retirement healthcare for every one year of employed healthcare?) so that’s comforting, but not as discomforting as the corollary that the previously incurred ~$30 million liability is only funded with $2 million. The BOS has a fine balancing act to keep this cost manageable, avoiding keeping today’s taxpayers responsible for all the omissions of the past. I would like to see the current full annual incurred liability clearly identified in the accounts.
Apparently state law is being changed to ensure that there are fewer ways for large commercial transactions to avoid the transfer tax, which should increase the value of that flow. At the moment, the Township policy is to reserve these revenues (~$1 million this year, projected $0.5 million in 2014 for vehicle and equipment expenditures ($0.35 million in 2014 and $0.6 million for the two years thereafter).