Rough Road Ahead for Newtown Township
“Extraordinary times call for extraordinary measures.” These are indeed extraordinary times with many businesses forced to close and millions of people out of work due the measures necessary to contain the Coronavirus pandemic. And municipalities like Newtown Township that depend upon business and job related taxes face financial difficulties if the shutdown continues and people do not get their jobs back.
It is unknown to what degree the COVID-19 shutdown will affect the Township's finances. Obviously, Earned Income Tax (EIT) Definition will likely take a hit due to the temporary or permanent closure of businesses [see "UPDATE on EIT" below]. Real Estate Transfer Tax Definition will also likely be, or become, compromised as people brace for a potential financial impact.
In addition, charges for public safety (permits) may decline if building and construction drop off, and the township's Parks & Recreation programming revenue stream may be significantly less if the township has to cancel summer camps.
These are major sources of revenue that fund the day-to-day operation of the Township as well as projects such repaving roads, which has been cut back to save money [read "2020 Road Program Falls Victim to COVID-19"].
Also, Keystone Collections, which manages municipal and school tax administration, collects local EIT Taxes. Keystone extended the Individual filing deadlines to match the State and Federal date of July 15, 2020. This delay in collecting EIT will also negatively impact Newtown Township’s ability to carry out needed services.
Meet Mack Monday, April 20, 2020, on Facebook
In this Facebook Live session I discussed: diversion of tax funds from road repair to cover the general expenses of the township (salaries, consultant fees, supplies, etc.), what Newtown Township can do to help local businesses, and the next step in getting approval to alter the Newtown area zoning code to allow for a Wawa or Wawa-like convenience store to be located in Newtown, Wrightstown, and/or Upper Makefield.
Read "Summary of April 20, 2020, Meet Mack Monday via Facebook Live".
Given that many Newtown Township residents and non-residents who work in Newtown may be laid off for weeks, if not months, it is likely that Newtown will take a hit on EIT revenue in 2020 [see "UPDATE on EIT" below]. How much of a hit is uncertain at this time [see UPDATE below]. But as little as a 10% reduction in EIT (see chart) could mean bad news regarding the township’s fund balance and consequent bond rating.
EIT is a tax for general revenue purposes in the amount of 1% imposed on earned income including salaries, wages, commissions, bonuses, incentive payments, fees, tips and other compensation received by residents of Newtown Township and by nonresidents of Newtown Township for work done or services performed or rendered in Newtown Township. This includes 1% of the net profits received from businesses, professions or other activities conducted by residents of Newtown Township and by nonresidents of Newtown Township. For Newtown, this tax represents 61% of the total General Fund revenue projected for 2020.
NOTE: 0.5% of Resident EIT goes to the township and 0.5% goes to Council Rock School District. The full 1% of Non-resident EIT goes to the township.
UPDATE on EIT
In April, 2020, the 1.0 mill real estate tax slated to be used to borrow money to repave more than 5 miles of roads in 2020 was "re-allocated" to cover General Fund expenses - a drastic move in anticipation of an Earned Income Tax revenue shortfall of 8-11% due to the COVID-19 shutdown of local businesses. That shortfall, however, never materialized. According to Keystone Collections, which collects EIT, comparing earned income tax collections for 1/1/20 – 8/31/20 vs 1/1/19 – 8/31/19, Newtown Township specifically is up about $258,000.00 or 4.8%.
Posted on 10 Apr 2020, 01:38 - Category: COVID-19
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