Minutes from

October 29, 2007

Board of Supervisors Budget Work Session

In attendance were Barbara N. Lyons, Chairman: E. Thomas Scarborough, Jr, Vice Chairman; Mark Glassman, David Nettina, Brenda Bray, Merril Peirce, Carolyn Pauloski: William Wightman, Director of Finance; Richard John, Director of Operations; Chief Stephen White; and Stephanie J. Mason, Township Manager. Barbara Eisenhardt arrived at 7:30 PM. Absent: Walter C. Berry and Cynthia Philo.

Presentation - Mark Glassman, Chairman of Ways & Means Committee.

Mr. Glassman provided the Board with a presentation regarding the proposed 2008 Budget. He reviewed the budget components of revenues with an unrestricted amount of $8,546,093 with a total anticipated revenues of $10,241,599. Operating Expenditures gross of $9,820,024. Net $8,957,018. Capital Expenditures, gross of $2,573,521. Net: $1,741,029. Fund Balance (Reserve), beginning balance $3,871,751. Ending balance $1,719,805.

Mr. Glassman described the operating expenditures as people and everyday expenses. The capital expenditures as the gross and net provided for capital purchases. The associated revenues assigned to expenditures as the net presentation and the impact on the net and the final balance. .. Indicated on page 3 of the handout provides for the net budget analysis. He believes that it helps analyze the revenues and operations, since revenues restricted for use or derive from pass through costs are matched directly to the related expenditure while the net surplus or deficit is always the same under either approach. The operating surplus or deficit can differ as highlighted on page 3 of the handout.

On page 4 of the handout, were some key assumptions that the committee made and those are outlined of a stable earned income tax base; increase of 4% in revenue vs. 2007 to reflect general cost of living increase. No change in real estate taxes. No change in local services tax. Soft real estate market negatively impacts transfer taxes. No change in fee structure for recreation programs or administrative fees. No significant changes to past programs or events. Private contributions minimal. Interest income negatively impacted by lower projected cash balances and no unusual or extraordinary sources of revenue.

Revenue key points:  total of $10.26 mm, up 7.1% over 2007, whoever $8.55mm is unrestricted, which is down 2.3% due primarily to a decrease in private contributions. $1.2 mm is restricted  which is up $592K, driven by state contributions earmarked for Destination Doylestown II Project. $693K in pass through revenue from the DTMA is up 71% which funds related operation expenses. Only 27% ($2.8 MM) of revenue are directly controllable re: real estate taxes, program and administrative fees and interest.

Financial considerations and potential risks – flattening of unrestricted revenues, the ability to generate new sources of revenues. General economic conditions, notably current real estate climate. Skewed distribution of earned, income tax base and the ability to secure county, state and federal monies.

Earned income distribution, earned income tax is the single largest source of revenues, comprising 1/3 of the total.

Based on 2006 Berkheimer data, 50% of taxpayers represent 8% of the total earned income while 17% of taxpayers represent 57% of the total earned income. This skewed distribution poses a potential financial risk to the Township’s earned income tax revenue base.

Operating Expenditures – Key assumptions: General cost of living increase of 4% vs. 2007. Police negotiations are still in process. Fringe benefits are up 7% vs. 2007. Medical based on consortium results, 3% increase. No employee contributions to benefit plans. No contribution to unfunded administrative pension plan liability. Fringe rate of 50.8% consistent with 2007. Those in attendance indicated that the medical piece was better than the national average and that 50% of base for fringe is also acceptable. There are three new employees proposed one each in Code Enforcement, Roads and Parks.

Operating Expenditures – total expenditures of $9.84 MM up 6.5% vs. 2007. About 70% covered by covered by employees and fixed payments. 60.3% wages and fringe benefits. 9.6  debt service and capital leases return of recycling funds. Net expenditures of $8.96 MM up 3.4 % vs. 2007. Fireman’s relief revenue of $190K up $15K. DTMA pass-through revenue of $693K up $288K.

Financial considerations and risks, escalating operation costs amid flattening unrestricted revenues. Declining fund balance and the ability to address uncertainty or unexpected events in a fiscally responsible manner.

Operating expenditures summary provided a comparison of  2007 – 2008 and provided the change.

Capital Expenditures – total expenditures of $2.57MM  up $978K (61%) over 2007. Net expenditures of $1.74MM, up $401K (30%). Township growth has spurred significant capital spending needs. Fully funded by fund balance reserve, categorizing them offsite $1,010,500 ($832,500 received from a grant), highway aid, $778,854. Capital funding is $679,475. State liquid fuels is $96,146. Other $9,000.

Fund Balance – Mr. Glassman explained what a fund balance is, why we need to maintain an unreserved fund balance, how much of a unreserved fund balance is prudent and provided examples that 5% - 10% of annual operation expenditures, 1 to 3 months’ operating expenditures. The 12/31/07 unreserved fund balance of $1.72MM equals 19% of net annual operating expenditures or 2.3 months.

The township does not have a formal fund balance policy. The results are within the guidelines, however large decline since 2006 warrants considerable attention.

Reviewed the trends over since 2006 in the fund balance area. He also indicated that the committee is continuing to work on a format for the budget.

Mr. Scarborough commented that the committee did a great job and has been working very hard and has been very helpful in its evaluation to the Board.

Mr. Glassman indicated that they have done some refining and understand the departments in changing the budget and presentation making it easy to understand. He welcomes suggestions from the committee.

There was some discussion about the additional people, which was questioned by Mrs. Lyons. That went back to providing of services and needs analysis that was done based on operating models that the committee looked at such as having 58 employees and trying to measure per employees. So if there is 22 uniformed police they are able to serve 859 residents. 2 police clerical can serve 10 uniformed police officers, 8 administration can assist 2,362 residents, 8 road workers can handle 9.6 miles of road, 5 people in the water department can handle 480 water customers, 5 code enforcement employees can handle 1, 228 tax parcels, 4 park employees, excluding mowing, can handle 108 park acres, 2 recreation employees can handle 40 programs/events, one mechanic can handle 48 vehicles and 1 general maintenance employee can handle 58 employees in one building.

Mr. Glassman indicated that the revenue base is flat. It is not increasing significantly.

Mr. Nettina’s suggested that there are other ways to look at capital expenditures such as financing certain items. But obviously at the end of the day you have to pay for them.

Bonds were discussed. Mr. Wightman indicated that Mike Wolfe, who consults on bond issues for the township, indicated that we haven’t reached the area where a savings could be on two former issues.

Ms. Eisenhardt’s analysis of the budget is that the township can still pay its bill and live within its means, and questions if there would there need to be a tax increase. Mr. Glassman said “no” that there would not need to be a tax increase in 2008. The township can function fine without one.

Mr. Glassman commented that the two fundamental pieces are the operating, paying the employees and the capital piece. Reinvestments become necessary for capital plan and have to balance capital expenditures over the long term. That needs to be looked at on a ten-year basis and take what the township has done in the past and put it in a new format.

Mrs. Lyons look at prioritizing over a 5-year period for the capital expenditures. Over a ten-year for the building and perhaps pay it out. You have to have the plan in place. That should be developed with Ways & Means.

Ms. Eisenhardt commented about televising the meetings and having the equipment cost and expenditures but also the maintenance and staff to run such a system. The labor costs are high.

Mr. Glassman indicated that 70% of the costs are known. Its debt and people.  

Ms. Lyons asked about the extra people. Mr. Glassman indicated that the Committee talked about the road and the staff members. Mr. John indicated that as people are retiring and project and miles continue to increase, there is a need for staff. In fact, many years ago when we had less miles we had eight people, now we are down to seven staff on the road crew. We would like to bring it back up to eight. In the parks, again we’ve added hundreds of acreage to the park system and bike trails and having sufficient staff to maintain would be appropriate. When doing a road project you need two people watching traffic and three people working. It doesn’t leave many people to do anything else.

There was a question about police and signage the no smoking. Chief White indicated that he would provide some data, but yes, people have been ticketed for that item.

Mr. Scarborough indicated that he doesn’t believe that there is a need for additional people in Code Enforcement; perhaps a long range plan as people retire would be helpful for the Ways and Means Committee to analyze. Trying to keep the department up to date in what its doing.

There was also a list of capital items that were proposed. After discussion the Board agreed to hold off on the overlays for Foxcroft, Houk, Pheasant, removing $150,000.00, $60,000.00 and $75,000.00 respectively.  Replacing four computer work stations instead of $7,500 for a cost of six. Removing the video surveillance equipment upgrade of $1,850. Financing the cold storage and reducing the $25,000 offsite trees on Ash Way to something around $10,000.

Would create a savings and capital items would reduce to $1,270,520.

In terms of hiring additional people in the parks department, Mr. Scarborough suggested using part-time people for this area. There was a question about the Parks salary that was revised draft material that the committee looked at. It was suggested not to rely on that as it has changed.

The consensus of the Board was that there would be no additional staff in Code Enforcement. Parks is still under consideration. However, part-time staff might be helpful. In the Road Department another person would be a benefit.

Being no further discussion the Committee and the Board decided to hold another Work Session on November 19, 2007, at 7:00 PM. The Board determined that there would not be a quorum on November 20^th and therefore agreed to cancel their November 20^th meeting and move the regular November meeting to November 27, 2007 at 7:00 PM. The full budget book would be available for the meeting on November 19^th.

The Budget Work Session adjourned.

Respectfully submitted by
Stephanie J. Mason