Ray Clarke

Notes from TESD Finance Committee Meeting – Do we borrow $18 million or $24 million to pay for District capital projects?

I attended the first 2015 meeting of the TE School District’s Finance Committee this week that focused primarily on the preliminary 2015-16 budget.  According to the District’s capital sources and uses report, there is a projected capital need of $24 million over the next five years.  The Finance Committee discussed options to fund these planned facilities projects … either to borrow $18 million or $24 million. Citing the District’s stellar credit rating and the historically low-interest rates, the committee members supported this borrowing approach to help pay for the new construction and needed renovations to existing buildings. However, because TESD currently has a $32 million fund balance, some in attendance at the meeting questioned adding debt in this way.

Another topic that received some discussion from audience members was Dr. Gusick’s proposal to add a couple of new director positions in the District. Gusick explained that Robin McDonnell, Director of Assessment and Instructional Technology for the District, will be retiring in June and thinks that the job requirements are such that they now require two people, a Director of Technology and a Director of Assessment. I don’t know that anyone would question Gusick about the need for the positions, but may question the suggested salaries — $160k/yr. for each position.

Ray Clarke also attended the Finance Committee meeting. Following the meeting, he emailed comments to the school board and sent me a copy for Community Matters.  Below is an excerpt from those remarks:

First, I would like to thank you for the presentations at last night’s Finance Committee meeting proposing to restructure the Administration team and to make a $18 to $24 million bond issue.  We are at the stage in the budget process where many worthy proposals are on the table.  Dr Gusick’s idea for qualified Directors of Technology and of Assessment is one of them, but the compensation gives pause: salaries of $160,000, plus 30% PSERS, plus $20,000 healthcare, plus ……?  Unfortunately, accepting all of them – even with the maximum 3.7% tax increase – leaves the District with an unsustainable deficit approaching $2 million.

This makes it all the more important for you to critically examine the one discretionary spending item that defies understanding – raising $18 million that the District does not need, and will cost taxpayers over $28 million to repay.  Further, you propose to eliminate the annual $300,000 savings from last Fall’s bond re-financing rather than giving taxpayers some offset to the otherwise continual expense increases.

The proposed financing is driven by a capital plan for the four years from 2015/16 to 2018/19 that calls for spending $30.7 million, while only $6.9 million will remain in the Capital Project Fund at the beginning of the year.  The assumption is that the $24 million gap has to be filled by 75% bond funding because “that’s the way we have always done it”.  However, we have not always had a General Fund Balance of $32 million earning negligible interest.

Instead of contriving financial schemes to defer interest on the new borrowing beyond the $300,000 of lost savings (and increase total borrowing costs), I believe that it is your fiduciary duty to present and analyze other options that show some fiscal restraint.

For example, a transfer of $16 million from the General Fund to the Capital Fund would take the District through 2017/18 and even through 2018/19 – if just $2 million of capital spending was deferred.  At that point the 2014 bonds are repaid and there is leeway for bond financing without a premium for a convoluted structure that defers interest and principal repayments.  You avoid the three quarter of a million dollar annual expense (loaded on future generations) for the unneeded 4% bond money sitting under the District mattress.  And there is still $16 million in the General Fund for contingencies that you can not tax for (contrary to the $10 million “committed” to PSERS, which you can and do raise taxes for).  There is already over $5 million “committed” to Capital Projects.

In the last five years, TESD taxes have risen at twice the rate of inflation and this is forecast to continue in the preliminary Budget.  Radnor is finding a way to limit next year’s tax increase to the State Index 1.9%.  There is great risk to the value proposition that brought many of us to Tredyffrin.  As taxes rise relative to our neighbors, the more likely that existing communities and new ones like Wayne Glen will be unaffordable to those without families, the more children will enter the school system and the worse your problem will get.

Cut a Vine, Save a Tree! Open Land Conservancy Needs Your Help on Saturday

pruning sheers

VOLUNTEERS NEEDED FOR VINE DAY

CUT A VINE — SAVE A TREE!

Saturday March 8, 2014
9 AM to 12 noon
GEORGE LORIMER PRESERVE

Special Meeting Location at
1812 Hawkweed Way in Summerhill

Has this winter left you suffering from cabin fever and a need to get outside for some fresh air?  There’s a perfect opportunity this Saturday, March 8 to help the community and celebrate what we all hope is the end of winter!

The Open Land Conservancy of Chester County will be holding its Vine Day of the season on Saturday at George Lorimer Preserve, 9 AM – 12 Noon.  Lorimer Preserve is 88 acres of meadows, woods, ponds, stream, and extensive trail system are managed to provide a variety of habitats for wildlife in a beautiful rural setting. Vines will be cut back so you will need to wear appropriate gloves and protective (and warm) clothing.  Volunteers are asked to bring tools if you have those— pruners, saws, clippers.  But not to worry, the volunteers from Open Land Conservancy will have extra tools.  Open Land Conservancy invites you to give back to your community by helping with spring property maintenance.

For the second year, Trish and Stuart Gutsche are graciously hosting the Vine Day at the driveway on 1812 Hawkweed Way in the Summerhill Development.  Volunteers may park on Hawkweed and volunteers will use the Summerhill entrance to the Lorimer Preserve behind the Gutsche residence. The Open Land Conservancy appreciates the hospitality of the Gutsche family! The Gutsche’s outstanding refreshments made last year’s Lorimer Vine Day the most popular Vine Day of the season!

Directions:  Take Swedesford Road, turn onto Le Boutillier Road to Mill Road. Make a left on Mill and then a left on Summerhill Drive, and a right on Hawkweed Way to the end.

Volunteering for the Open Land Conservancy is a great way to make a difference for the lands and communities of this region while having fun and meeting new people! Visit Open Land Conservancy website for further details.

Any questions, contact Ray Clarke at 610-578-0358

TESD Calendar update — Students will have 179 school days & other updates

An article written by Yuge Xiao & Lavi Ben-Dorin in StogaNews online this morning, reports on the school board meeting and the updated school calendar, stating that“…  students now have 179 school days. Staff will still have 191 days, with the last being on June 30.  Originally, the Tredyffrin/Easttown School District (TESD) had scheduled 182 instructional days (the state requirement is 180). However, the district has chosen to not reschedule the two additional days.”

Thanks to Ray Clarke for attending TESD the meeting last night — Finance and Special School Board meeting — his notes are offered below:

Ray Clarke – Notes from February 10 Finance & Special School Board Meeting

1.  Off-off-the-presses Affordable Care Act changes.  The Board committed that the district will analyze the impact and report the results at the February 24th Board meeting.  This is a hard commitment.

ACA Change: Companies with 100 workers or more are getting a different kind of one-year grace period. Instead of being required in 2015 to offer coverage to 95 percent of full-time workers, these bigger employers can avoid a fine by offering insurance to 70 percent of them next year

2.  As suggested by some CM commenters, there are ways to save Spring Break and have the last day no later than June 20th: reducing instructional days from 182 to the state minimum of 180 and also counting three non-instructional days towards the 180.  At the moment (before the the next storm on Thursday!) there are two days that remain to be used in this way and thus preserve Spring Break. The explanation wasn’t the clearest and I didn’t have a good angle on the screen, so the public should check the TESD web site for the approved calendar.  Interesting here that the recently hired cafeteria manager was credited with bringing these ideas to the District from his previous public accounting (I think) experience.

3.  The preliminary Budget was approved, with the authorization to file for Exceptions, which – if approved by the State – the Board has the discretion to use to whatever extent they deem necessary for the final Budget, which has to be passed by June 30th.  Governor Corbett’s PA budget proposes reducing the increase in PSERS, which Art McDonnell stated would have the effect of reducing expenses by $600,000, if enacted exactly as-is.  (I think that benefit is net of the state’s contribution, and presumably therefore the allowed exception would also be reduced by this amount – giving an allowed exception tax increase of ~0.6% rather than the current 1.1%).  Many moving pieces here, and obviously important to make sure that the latest and best information is brought to bear on the final decision.  Much reference to the March and April budget workshops, which hopefully can include fine-tuning across the board, incorporating things like salary “breakage”, for example.

4.  Not discussed at the Board or Finance Committee, but there is an important Education Committee meeting tomorrow at 1:30pm.  Topics include a review of the Special Education program (which we have told will be over-spending this year’s budget by $850,000 [over 5%], for over 1,000 students receiving special education services in the District].  Also on the Agenda, enrollment projections.  At 12:30pm the Legislative Committee will be reviewing the Governor’s education budget and perhaps providing some insight on its prospects.

5.  The district’s transportation staff drove the bus routes on Sunday to check that the roads were cleared sufficiently to allow the schools to open today – quite an effort and accomplishment, I think.

Affordable Care Act compliance ideas for T/E School Board

AffordableCareAct-MainPhoto1I am passionate about our community’s history and the preservation of our historic buildings and the demolition of the house on Pugh Road has had my attention the last few days. The discussion on the township’s historic resources will continue but I want to get back to other issues, including the TESD budget and the District’s compliance of Affordable Care Act.

The school district held a special meeting on January 6 to present the preliminary budget proposal and for a ACA presentation by Rhonda Grubbs, Wisler Pearlstine attorney and Art McDonnell, District’s business manager. (See Community Matters related post).  Following the ACA presentation, many questions remained.  School board president Kevin Buraks told the audience that the ACA discussion would next be discussed at the Finance Committee meeting on Monday, January 13.

I attended the January 13th Finance Committee expecting further discussion of the ACA.  However, the decision was to postpone any additional ACA discussion to the next full school board meeting — upcoming on Monday, January 27. Although it was the decision of the school board members attending the Finance Committee meeting to postpone the ACA discussion, Pete Motel actively reached out to the community and asked that we provide our own ideas for compliance to the school board.  Remember, all TESD employees are not currently offered health care benefits – facing the ACA compliance deadline, the  Board needs to decide what to do about the aides, paras and substitute teachers, the employees not currently receiving health benefits.

The Finance Committee meeting is not videotaped so probably few in the community are aware that Motel encouraged ideas and suggestions about ACA compliance from the public. If you want to help keep the jobs of the aides and paras from outsourcing, they need to have health coverage.  This is important and the Board needs to hear from the public.  Send your suggestions, (be specific) to schoolboard@tesd.net and share those ideas for discussion on Community Matters.

Compliance with the ACA is not an easy task for the Board. There are many factors to consider and I think the Board left the ACA presentation with as many questions as members of the public.  The ACA presentation gave a negative, ‘cannot be done’ slant to the compliance situation.  However, there are people in the community that believe that there are other options for the Board to consider.

In an email, resident Ray Clarke suggests that it is important for the Board, “to base the analysis on reasonable estimates of any underlying variables (family vs single status, % opting out in favor of cash, etc. while of course, recognizing that the actual outcomes could be different (back up with budget contingencies, fund balance commitments).  The values for these assumptions should be published along with the impacts.”

Taking school board member Pete Motel’s suggestion to heart, Ray sent a list of ACA ideas to the Board and they are included below:

–  Provide the “current” healthcare plan to full time aides, paras, subs, and so make the non-discrimination test moot.  Make reasonable estimates for and publish all the assumptions: premium share, family status, coverage provided, wage adjustment, coverage waiver bonus, etc.

–  Provide a minimum “basic-care” employee-coverage-only plan to full time aides, paras, subs and Admin.  Deal with the Admin group as Keith has suggested on CM.  Make assumptions as above.

–  Facilitate the formation of a union/bargaining group for either the Admin group or the aides, paras, subs so that their benefits can be bargained separately and avoid the non-discrimination test.

–  Cap hours/days of all aides/paras/subs at 27.5 hours/3.5 days.  Flesh out the impact on students and management overhead and provide realistic estimate of any partially compensating salary increase.

–  Outsource as needed.  Provide guesstimate of impact based on rates paid for current out-sourced employees and from last year’s discussions with vendors.

I think that the Board should also have a table comparing compensation rates and all benefits (including PSERS) for aides, paras, subs in neighboring school districts.

Perhaps the Board can also be encouraged to get direct feedback from the affected employees.  There are web-based tools that could be used, for example, for a simple anonymous ranking of employee priorities (while of course recognizing that the priorities are not in practice independent and none can be guaranteed).

TESD Facilities Committee proposes fees for VFES tennis court usage

The monthly TESD Facilities Committee meetings are held at a time that makes it difficult for many to attend – Friday at 2 PM, and the Friday, June 15 attendance proved the point.   Ray Clarke attended the comittee meeting with 3 other residents and provided the his notes for Community Matters.  In addition, I spoke with him for clarification, specifically in regards to the infamous tennis courts at Valley Forge Elementary School.  If you recall, Zoning Hearing Board granted the variance last month so that the District could build the additional parking spots and leave the tennis courts intact.

I had assumed that once the tennis courts at Valley Forge Elementary School received their ‘stay of execution’, residents would continue to enjoy them free of charge.  However, based on Ray’s explanation, it looks like the District views the courts as a revenue source.  According to Ray’s notes, initially the Facilities Committee proposed two options for the tennis courts – an hourly rate for usage ($15-$25) or a flat annual fee of $28K to be paid by an association!  It is unclear what ‘association’ the District had in mind — the neighbors next to VFES?  Looks like tennis court neighbor Michelle Berger temporarily thwarted a PR nightmare for the Board with an agreement that the resident usage fee will not start until the fall.

June 14, Facilities Meeting Committee Notes … from Ray Clarke

Well, an audience of four at the Facilities Committee was treated to a detailed exposition of the process underlying the Infrastructure Plan.  On one hand, we were told the plan took 332 hours of Daley and Jalboot time at the bargain rate of $12,200 (plus $8,000 for mechanical engineering), using annually updated CAD drawings of every building, inspections of every building, meetings with the Maintenance staff, using cost projections updated for 4% annual inflation, etc.  Bbut on the other hand, we were told that we should pay no attention to the fact the resulting cost estimate is over $50 million, and in fact, that to even mention that number is inflammatory and “foolish”!

I wondered about the status of the Infrastructure report.  I was told it was approved in “the May Board meeting”.  I see that the minutes of the 5/13 School Board meeting includes the Facilities Committee report: “Also on the May 13, 2013 consent agenda is the infrastructure report, which is a ten year renewal of the plan”. However, there is no record in the published agenda or in the minutes of the actual item.  The only related item in agenda or minutes is “Daley + Jalboot 2013 Projects/Fee Proposal/Infrastructure Implementation”.  So, is it possible that the Plan was not only put on the Consent Agenda, but also added verbally at the meeting (and not recorded clearly in the minutes), so only those still awake at midnight would be aware of it?

I proposed that the Board and the community might benefit from a detailed discussion of a plan that sets the tone for the next decade’s capital spending – a discussion that might be needed once every 10 or maybe five years.  Perhaps the items could be prioritized — essential to nice-to-have.  Perhaps payback identified for those projects that would reduce costs.  These ideas were met with derision —  the Facilities Committee has managed things just fine for the last ten years, we spend an amount only equal to the auditors’ arithmetical calculation of depreciation, our debt service is constant at $6 million a year, most of the school kitchens are original (although equipment has been renewed), told I didn’t know the difference between capital and operating funds,  etc., etc.   It seems to me that the whole reason that there is such interest in the affairs of the District now is that in fact there really is a “new normal” where funds are not so readily available and trade-offs must be made.  Prudent governance should recognize that.

The discussion of the VFES tennis courts provided further indication that this Board leadership just doesn’t get it.  Two usage fee options were presented: a) fee of $15/hr. weekday, $25/hr. weekend, or b) an annual fee to an “association” of $28,000.  This was to be implemented July 1st.  The courts to be locked and monitored.  Thank goodness, for a sensible and articulate local resident, Michelle Berger, who was persistent and managed to get through to the Committee, suggesting that this approach would be a total PR disaster and that it was better to involve the community to figure out a practical approach than an abrupt implementation of a bureaucratic plan.  Tennis camps and any other organized groups will be charged right away – I think at the $30 per court hour that the township charges.  Fees for residents will start in the fall.

So common sense thankfully prevailed here.  But it’s really unfortunate that the Board has developed such a bunker mentality.  I wish I could offer a solution.  Perhaps the Board candidates will offer realistic commitments for change that we can hold them to.

The Chester Valley Trail … Open Land Conservancy to Offer Update at their Annual Meeting

Cheser Valley TrailToday, when I visited Wegmans in Frazer, the Chester Valley Trail, located next to the parking lot, was filled with walkers, runners and bicyclists  The glorious Spring weather had people of all ages out enjoying the trail — so how appropriate that Open Land Conservancy will use the trail as the topic for the annual meeting tomorrow night.

What is the status on the trail through Tredyffrin?

In describing the Chester County Trail, Open Land Conservancy offered —  “It seems like it would be easy – lay down some tar on an old railroad right-of-way for a few miles, and you have a nice multi-use trail. The reality: it takes years – hundreds of hours spent by local and state government officials, a huge financial commitment, countless hours of volunteer work, and pledges for decades of on-going maintenance.”   According to the Chester County website, the Chester Valley Trail project dates back to 1991, when representatives of Chester County, Montgomery County and PennDOT envisioned a soon-to-be abandoned rail line as a major trail.

For their 74th annual meeting, Open Land Conservancy has invited Owen Prusack, Chester County Regional Park Superintendent and responsible for the Chester Valley Trail.  Prusack will explain the  many challenges and rewards associated with the creation and preservation of the Trail.  Also hear about future plans for the trail, connections to the local trail network, and the importance of trails such as those on our preserves in helping maintain a high quality of living.

The Open Land Conservancy annual meeting is open to the public and interested residents are encouraged to attend.   The meeting is Wednesday, April 10, 8 PM at the Great Valley Presbyterian Church, on Swedesford Road, north of Paoli.  Following the meeting, refreshments will be served.

T/E School Board leaves option open for tax Increase — How much more can we afford?

At the same time as the Board of Supervisors organizational meeting last night, the T/E School Board held a special meeting to vote on using allowable exceptions to Act 1 for the 2013-14 budget.  By using Act 1 exceptions, provides the School Board the ability to raise taxes above the State index of 1.7%.   The School Board voted to apply for the Act 1 exceptions and the preliminary 2013-14 budget should be on the TESD website sometime today. The Board considers the preliminary budget at their regular meeting on January 28.

Due to a conflict with the township’s Board of Supervisors meeting, I was unable to attend TESD meeting. However, Ray Clarke attended the meeting and shared the following comments with me. His remarks suggest a rather strong position and I will be interested to know if others share his sentiments.

The School Board voted its usual 7-2 to publish a 2013/14 budget that includes tax increases of 1.7% from the Index plus another 1.74% from Exceptions.  This is preparatory to a vote at the next meeting (Jan 28th) to formally apply for the Exceptions.

There was slightly more than the usual Board commentary that tonight’s vote was “only to keep the options open”, and certainly the numbers would support a moderation in the rate of increase.  With a 1.7% increase the projected deficit is $1.3 million – just about equal to the one-time payment due to the teachers, which should absolutely not be built into the tax base.

Not only that, the projection model was positioned without the context of the 2011/12 actuals and 2012/13 forecast, which I have argued here would show an artificially inflated base.  Remember the unexpected ~$3 million surplus last year.  Also, there is no explicit consideration of the cost saving impact of retirements which have in recent past years saved $800,000 per year.

In addition, the administration did list a number of items that could have a significant budget impact that have yet to be quantified.  The majority of the Board wanted more details on these.  (I fear that the expense additions will turn out to total more than the subtractions).  The more courageous move, advocated eloquently by Dr Brake, would be to have signaled a leadership commitment to manage these opportunities and risks within a modest tax increase that does not continue to load up the property tax base, and to begin a serious dialog with the community about the form we want TE public education to take.

Anyone with an interest in limiting the extent to which their pockets can continue to be picked by this Board should attend the Finance Committee next Monday (7pm).

TESD 2013/14 budget discussions underway; including outsourcing of services

Ray Clarke attended last night’s TESD Finance Committee meeting and provided his notes from the meeting.

Reading over Ray’s notes, it appears that members of TENIG (Tredyffrin Easttown Non-Instructional Group) are once again going to find themselves front and center for the 2013/14 budget discussion.  In prior years, it often looked like the TENIG custodians were the target in the school district’s budget woes.  Privatization through outsourcing was seen by some as a way to preserve the classroom and its programming, but at what cost?

Outsourcing services that historically have been in-house functions with long-time employees is a major shift in institutional culture.  How does the possible cost savings of outsourcing compare to the quality of job performance and productivity?  How does one measure the safety factor that comes with the connection that current custodians have developed with the schools and the students?  It is difficult to measure the ‘safety’ intangible to in-house custodial services, plus many of the employees live in T/E and their families are part of the community.

For the 2012/13 school year, the custodial workers offered a 10% reduction in their salaries and they did not take the 4.5% increase, which were contained in their existing contracts.  In real dollars, the cost savings to the District was $197K in salary reduction, plus the additional percentage contractual savings for a total savings of approximately $285K.  By giving back, TENIG’s custodial workers helped the 2012/13 budget and the additional bonus of saving local jobs.

Beyond the custodial workers, it looks like all of TENIG will be under the microscope for possible outsourcing in the 2013/14 budget. The plan is for separate RFPs for each of the various TENIG job functions – security, kitchen, clerical, etc. in addition to the custodial workers. The possible outsourcing of TENIG workers is still in the early stages of the budget process,

The following are Ray Clarke’s notes, along with his thoughts from the Finance Committee Meeting, 12/10/12:

The main topic of Monday’s Finance Committee meeting was the 2013/14 budget, in preparation for the January 7th Board vote on whether to apply for Exceptions.

The basic discussion framework is the projection model we’ve seen before, based off an estimate for the actual current year results.  Since this 2012/13 estimate drives every out-year, its accuracy is critical – yet the numbers do not inspire confidence.

Total 2012/13 expenses are estimated at $107.8 million, $2.5 million less than the budget.  The difference is driven by $1.5 million lower benefits cost (estimated by our benefits consultant), $0.4 million from the new TEEA contract plans, and $0.5 million net salary savings from “breakage” offset by 3 additional FTEs.  So the year’s imbalance turns from negative to positive, which is the good news.

However, expenses are still $6.1 million (6%) higher than the year just completed.  No-one at the meeting was able to provide a breakdown of this increase.  I think that the PSERS increase is about $2 million of the number.  Where’s the other $4 million going?

One clue might be that the total healthcare and benefits expense for the following year is projected in the model to be flat (0% increase), based again on the consultant advice.  Could it be that this year’s expense is overstated in the model?  I don’t think this can explain the whole $4 million, though.

So, it’s hard to put much faith in the projected 2013/14 imbalance of $2.8 million as a basis for discussion of next year’s tax rates.  Moreover, this number also includes the one time TEEA bonus ($1.1 million?), which should not be built into the tax base.

It hardly seems worth spending much time on the model for the years beyond 2013/14, except to note that refinements in the current version include:

  • Total healthcare costs increasing at 9% per year (previously 10%, 15%)
  • Special Education costs split from “other”, and projected to grow at 7-10%, vs 2-3% for other
  • PSERS expense will increase by $1.4 million next year, then $1.1 million, then $1.2 million, and then level off.
  • An additional 6.2 teachers are projected to be needed next year to meet enrollment growth

A number of “budget impact items” were listed but not quantified.  On the saving side, these include outsourcing not only TENIG functions, but also aides and para-educators.  Each TENIG job function would be bid separately in an RFP which would, for example, allow discretion to select a supplier that met standards for benefits.  I didn’t catch how the educational staff “out-sourcing” would work, but I gathered that it would allow the district to avoid the PSERS expense.  On the increase side, the topic of adjustments (in base salary or one time) for non-contract employees is on the table.

Bottom line: we are clearly going into the next budget cycle with a smaller problem than in previous years (no contracted near double digit compensation increases).  At the same time, though, we seem to have been lulled into being much less prepared and thence likely to vote for an Exception application with information even more imperfect than it needs to be.  (Yes, Exceptions don’t have to be levied if approved ……) .

Separately, at the beginning of the meeting, Chair Fadem asked for the financials to be presented as more of a “vanilla” summary.  Not sure that’s the direction the district should be going in.

T/E School District: Surplus $3.9 Million in 2011/12

Ray Clarke attended T/E School District Finance Committee on Monday night and provided his notes for Community Matters readers.  After reading his notes, I spoke with Ray for clarification as I could not quite believe what I was reading.  The 2011/12 actual expenses of the T/E School District were $5.5 million less than the District forecasted in June 2012. The District revenues were also less than the June 2012 forecast.   Factor in the reduced expenses and reduced revenues and the District has a surplus of $3.9 million in 2011/12.  Wow!

How could it be that the District financial forecast was off by nearly $4 million!  We knew that the change in the medical insurance would be a cost savings but it is surprising that the surplus was so significant. The District has added the $3.9 Million to the General Fund Balance.

Ray’s Finance Committee Notes:

Monday’s Finance Committee meeting was most notable for a review of the full year 2011/12 finances in conjunction with a presentation of the draft audit.  It turns out that a number of things broke in favor of the district.

The table below compares the forecast for the full year 2011/12 when 2012/13 budget was approved in June with the actual outcome and with the 2012/13 budget (figures in $ million, rounded)

                                    11/12 Forecast          11/12 Actual       12/13 Budget

Revenues                     106.4                            105.6                109.2

Expenditures                107.2                            101.7                110.3

Budget Imbalance         (0.8)                            3.9                    (1.1)

So, expenses for the year to June 2012 turned out to be $5.5 million less than forecast in June 2012. (And about that amount less than budget).

Administration provided detail of the major drivers of the saving versus budget:

  • Lower Healthcare benefits:      $1.8 million
  • Fewer teachers:                           $0.4
  • Lower tuition reimbursement: $0.3
  • Less natural gas usage:              $0.4
  • Transportation savings:             $0.3
  •  “Breakage”                            $0.8
  • Other salary savings:                  $0.3

         Total                                          $4.3

“Breakage” is cost saving due to unexpected retirements, resignations, etc.; replacements are likely lower cost and there can be interim cost savings.

Clearly the final benefits accounting takes a while, but it seems quite likely that the 2012/13 budget and associated tax increase might have been predicated to at least some extent on an artificially high baseline.  As Neal Colligan pointed out to me, there needs to be strict oversight to ensure that the current year expenses do not inflate by a whopping $8.6 million to the budgeted $110.3 million.

The $3.9 million surplus goes into the now ~$25 million general fund balance, with the $1.8 million benefits saving planned to be committed to medical plan rate stabilization and the remainder to the ever-open PSERS rate stabilization fund.  On that score, it was announced that there’s a new GASB requirement that in 2015 districts  must recognize on their balance sheet their share of the $27 billion unfunded PSERS liability.  (Perhaps someone can work this out for TE, based, say, on TE’s % of teachers and a 50% share of the liability?).  [Note also that in the year to June 2012 PSERS returned 3.4% compared to the 7.5% built into the system’s accounting used to calculate that $27 billion].

And this continues on to the 2013/14 budget, which will be rolled out at the next Finance Committee meeting on December 10th.  It looks like we need to step up efforts to ensure that votes for tax increases are based on realistic projections.

On other matters, the Board continues with plans to harass tax-exempt non-profits.  An outside attorney is being used to review and identify property owners that will be sent a letter and questionnaire to confirm tax exempt property use in the light of changes in the state law.  This letter and questionnaire will be discussed at the January Finance Committee.  The Committee has already determined that the a large percentage of the total are parcels owned by government entities (like the district itself) and for rights of way.  Also, the district is planning to extend for six years the transportation agreement with Krapf; as presented, the terms looked reasonable.

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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