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Fiscal Issues
Fiscal responsibility is the most aspect of being an elected supervisor. It should be noted that Newtown Township has one of the lowest property taxes in the area, which is a good indicator that supervisors have kept costs down.
However, it is not possible to continue cutting costs every year. One respondent to a recent survey I hosted put fiscal responsibility into perspective: "Of course no one likes paying taxes, but so long as the services they pay for are desirable and clear to see, they are worth it. Progressive Taxes are the basis of a civilized society."
The following excerpts from minutes of meetings of the Board of Supervisors offer a glimpse into past discussions and decisions of the Board related to fiscal issues. You be the judge if the decisions were smart for Newtown!
Even with a 2021 tax increase, Newtown Township has one of the lowest property tax Millage Definition in the area. The following chart compares the 2018 property tax millage of Newtown to several other local municipalities each of which - like Newtown - has a 1% Earned Income Tax (EIT Definition).
Excerpts from Board of Supervisors Meeting Minutes
- The Truth About “Real Estate” Taxes
- 2018 Audit Report
- 2018 Pension Performance Report
- 2019 Budget
- 2020 Budget
- 2021 Budget
- Earned Income Tax Trends
- Five-Year Financial Plan
The Truth About “Real Estate” Taxes
What’s often quoted as Newtown's “Real Estate” tax millage is actually composed several components dedicated to specific funds or projects. These are (1) 2.625 Mills for debt services purposes (to pay off loans for road improvements, and other projects), (2) 0.875 Mills for fire protection (Fire Chief’s salary, health insurance, etc.), (3) 0.55 Mills for fire hydrant maintenance, and (4) 0.45 Mills for the Newtown Ambulance Squad. 0.0 Mills are collected for "general" purposes. Thus, residents know exactly what they get for their taxes.
Meanwhile, Council Rock School District’s real estate tax rate of 120.71 mills, which is 27 times bigger than the township's millage rate. The CRSD also collects one-half of township’s 1% earned income tax, as well as an occupation of $40 to $320 per wage earner, the revenue from which isn’t shared with the township.
2018 Audit Report
10-Oct-2019: Ed Furman of Maillie, LLP, the Township’s independent auditor, presented an overall summary of the final 2018 audit. He stated they issued a clean, unmodified audit report on financial statements along with a Statement of Auditing Standards 114 Report to the Board which reflected nothing negative. Mr. Furman reviewed the audit testing process and methods used to conduct the audit as well as the findings related to payroll, retiree medical coverage and pensions. He discussed revenue and expenses, taxes and government funds. He closed by saying the Township finished 2018 above recommended numbers with the fund balance being 22% of general fund revenue. In response to Mr. Mack’s questions on the earned income tax (EIT Definition), Mr. Lewis explained the residential EIT increased. Mr. Calabro asked about the overall status of the Township and Mr. Furman explained that bond rating agencies generally focus on the general fund and look for 8 to 12% revenue. Therefore, Newtown Township is well above average at 22%.
2018 Pension Performance Report
10-Oct-2019: Grant Kalson of Dahab Associates was in attendance at the March 13, 2019, Newtown Township Board of Supervisors meeting to review the performance of the Township’s 3 pension plans (Police, non-uniformed employees, Firefighters). He noted that the fourth quarter of 2018 was not good (pension assets were down about 9%) but by March 11, 2019, the numbers were back up. He reviewed the investment policy, which currently has 75% equities and 25% bonds. Experts feel that the current rapid growth will not be sustained long term and Newtown’s pensions have the highest percentage of equities among the 58 public pension funds that Mr. Kalson reviewed. Kalson said he was "scared to death right now." For these reasons he is recommending that the Board consider adjusting the equity balance to 68% as a hedge against market corrections. In response to Mr. Mack’s questions, Mr. Kalson explained that the pensions are currently underfunded in the range of the mid to low 80% range.
2019 Budget
15-Oct-2018: The preliminary proposed 2019 budget total revenues is projected to be $11,836,361. From Manager's Budget Letter: As presented last year, the Township continues to face shortfalls. This does become more prominent as we continue to face capital expenditures that we need to make to maintain the level of service our residents have come to expect. Our final numbers for 2017 did end the year better than we had anticipated. We ended the year with $3,143,456 versus the projected $2,903,381. The Earned Income Tax (EIT Definition) continues to be the predominant revenue source in our budget. For 2019, I have assumed a 3% increase over 2018 for both resident and non-resident EIT collections. I have estimated a 2018 year end total EIT at $6,938,236. For 2019 I have estimated a collection of $7,120,000. I have assumed an approximate 3% increase in EIT, resident and non-resident, over 2018. Delinquent EIT is set at a year- end amount of $140,000. This is a very unpredictable amount and can vary widely year to year. 2017 was abnormally high. Our 2015 and 2016 average was $86,207 with the last 3 years averaging $164,311. I have set our 2019 estimated Delinquent EIT collection at $100,000. The preliminary budget needs to be advertised for a minimum of 20 days before it can be adopted by the Board of Supervisors.
2020 Budget
19-Nov-2019: Mr. Lewis updated the Board on changes to the Budget since it was presented. He updated the YTD information, adjusted some year-end projection numbers as well as the 2020 budget estimates in the general fund. The adjustments resulted in an increase of the projected 2019 year-end fund balance of over $100K for a total fund balance forward estimate for 2020 of $2,372,000. The total expenditures for the 2020 budget are $13,081,611 with estimated fund balance forward of $1,321,804 equating to 10.1% of total expenditures. Regarding revenue, due to the non-resident EIT not coming in as predicted, the estimate was downgraded to $2,000,000 from $2,078,500 and the 2020 budget estimate was decreased to $2,050,000 from $2,125,000. The delinquent EIT collection in October was better than expected so the year end estimate increased to $285K from $225K that was presented. Remaining revenues remained unchanged and there is no tax increase proposed to support the general fund.
[Jack Brod, member of the Newtown Township Finance Committee, offers his observations regarding the preliminary 2020 budget at the November 23, 2019, Newtown Township Board of Supervisors meeting. Brod pointed out that the proposed 2020 budget projects $12 million in revenue versus $13.1 million in expenditures, for a deficit of $1.1 million. He noted that the reserve funds are dwindling and suggested that at some point it will no longer be possible to draw from the reserve in order to make up for budget deficits.]
10-Jul-2019: Savvy Citizen: In relation to the 2020 budget, Mr. Mack proposed the Township consider the Savvy Citizen app [a text/social media based resident notification system recommended by the Newtown Technology Committee] to provide information to residents at a cost of $300 per month. After some conversation it was determined a Savvy Citizen representative could be invited to attend a future work session to review details.
[Listen to the presentation here.]
2021 Budget
22-Dec-2020: Mr. Oxley moved to adopt the 2021 budget subject to the following changes: Reduce the proposed general fund millage to 4.5 mills; Eliminate the hiring of a Zoning officer, both salary and benefits; Eliminate one police car; Eliminate the police building study; Reduce the Road paving budget by $50,000; Change the Non-resident EIT to $2,000,095, to reflect an unexpected payment; Add $200,000 to the building permits line item.
Mr. Mack seconded.
Discussion of motion: Mr. Lewis said that the total millage would be 8.49 mills, of which 4.5 is allocated to the general fund, 1 mil to fire, 1.845 to debt service, 0.5 to the rescue squad and 0.615 to fire hydrants. With the changes proposed, the year end fund balance will be $1,199,928, or 8.69% of total expenditures.
Mr. Fisher said that he was very comfortable with these proposed changes, many of them the result of public participation. Mr. Oxley agreed that residents' input helped shape the budget. Mr. Davis said he would have liked some additional cuts, including eliminating all new hires.
Earned Income Tax Trends
15-Oct-2018: Resident and non-resident EITs account for about 79% of Newtown’s total tax revenue and 55% of the Township’s yearly TOTAL revenue from all sources. As reported in the October 9, 2018, issue of Newtown News Update, Newtown’s financial situation, according to our auditors, is stable as long as the EIT revenue remains stable (read “All’s Well in the Garden as Long As…”). It is prudent, in my opinion, to examine the data for the past several years to determine if the trend verifies EIT revenue will remain “stable” in the future.
According to data from the 2017 Financial Report and Audit, there was a substantial increase in total EIT in 2017 compare to 2016 primarily due to better economic conditions with more people employed and/or making more money (see Figure below).
But can we expect that trend to continue? Compared to the high of about $8.37 million in 2013, the 2017 EIT revenue represents a 6% DECREASE. This was only partially due to an “unusually high” Delinquent Residential EIT Collection of $320,519.30.
According to the Manager’s Budget Letter submitted to the Board of Supervisors (BOS) at the October 15, 2018, Budget Presentation, the estimated total EIT collected by the end of 2018 will be $ 6.938 million – a decrease of 12% compared to 2017. The 2019 Propose Budget estimates a 3% increase in total EIT compared to 2018; i.e., $ 7,120,000, which is still 3% below the average of $ 7,320,692 for period of 2013 through 2018. It is obvious that EIT is a “volatile” source of revenue for the Township and the trend is downward.
Aside from the impact of general economic conditions, the Town’s EIT revenue can be impacted by businesses moving out of town and by decisions of neighboring towns. For example, Newtown lost approximately $650,000 in EIT plus an additional loss of $44,000 in Local Services Taxes when Lockheed-Martin left town. Add to that the loss of $198,000 when Middletown Township implemented an EIT and a loss of $202,376 when Bensalem did the same and the result is a total loss of $1.1 million.
Five-Year Financial Plan
26-Nov-2019: Econsult Solutions: Jack Brod reported on behalf of the Finance Committee that Newtown Township was awarded a matching grant from the Pennsylvania Department of Community and Economic Development to hire a consultant to perform financial analysis and develop a five-year plan to help improve the Township's fiscal position. An RFP was developed, advertised and sent directly to a list of recommended consultants. The response was less than anticipated due to timing factors and other RFP's in progress, however one proposal was received from Econsult Solutions, a firm in Philadelphia with experience in developing five-year plans for municipalities. Mr. Brod shared additional information about the company and said their proposal was in line with the requirements and within the allocated budget. He said the recommendation of the Finance Committee is to select a date between now and year end to interview consultants from Econsult Solutions. Mr. Calabro asked Mr. Brod for his input on the budget. Mr. Brod offered his observation that the current budget reflects why the Finance Committee and the BOS are moving forward to look for a long-term plan, as the budget continues to be challenging. He said revenue continues to be less than expenses resulting in the need to tap into the dwindling general fund.
25-Sep-2019: RFP for 5-Year Financial Plan: Mr. Lewis reported the Township received one response to the RFP. He recommended forwarding the response to the Finance Committee for review and upon review come back to the BOS with a recommendation. Mr. Calabro agreed stating since the Finance Committee formatted the RFP, they should be involved in the vetting process. Mr. Mack questioned the receipt of only one proposal and Mr. Lewis explained that ten firms responded, however only one proposal was received. As the liaison for the Finance Committee, Mr. Fisher said the Committee would like to review the proposal. There was further discussion on whether to move forward with one proposal and the process on how to reissue if necessary. It was agreed that Mr. Lewis will pass the response to the Finance Committee to review and they will then report their findings to the BOS and possibly bring the candidates in to meet the Board.
14-Aug-2019: RFP for 5-Year Financial Plan: Mr. Mack stated since the Plan was written the EIP has changed its name and he is requesting the new name be updated in the Plan. Mr. Sander agreed to replace all appearances of EIP with STMP. Mr. Mack then read excerpt on page 4, paragraph G relating to discrimination and said the Township has a new anti-discrimination ordinance which expands the definition and he suggested the language that goes out to vendors and consultants should reflect our anti-discrimination ordinance.
24-Apr-2019: DCED Early Intervention Program Grant: Mr. Calabro reported the township has been approved for a $40K [DCED Definition] grant which will be put toward economic development. Mr. Calabro credited the Finance Committee and Mr. Fisher who made the proposal to the Board and Mr. Lewis for completing the grant application. Mr. Calabro said this grant will afford the township the ability to establish a 5-10 year plan which will permit the township to continue to be a healthy and thriving community.
27-Mar-2019: DCED Early Intervention Program Grant: The application for match grant was submitted on March 15, to the PA Department of Community and Economic Development (DCED Definition). Mr. Jack Brod, chair of the Newtown Finance Committee, reported the committee met with senior representatives from two agencies, Bucks County Redevelopment Authority and the Bucks County Industrial Development Authority. Both agencies are interested in helping Newtown Township attract employers/jobs and pursue economic development. Mr. Brod inquired if the RFI would be the next step to get to the stage to issue RFP's. Mr. Calabro raised concerns about issuing the RFI without knowing the scope of work and issuing RFP's without advertising them. Mr. Mack stressed that he would like to be more involved with the process including formulating questions for consultants and the grants in general. He wants to be sure that he and the supervisors have an opportunity to look over and edit all documents that carry their signatures. Mr. Brod said this is why the committee is not issuing anything directly.
23-Jan-2019: DCED Early Intervention Program Grant: Resolution making a supplemental appropriation of funds in the 2019 Budget to allow $40,000 to be allocated for the Department of Community and Economic Development (DCED Definition) Early Intervention Program (EIP Definition).
[Andrew Sheaf, Local Government Policy Manager at the PA Department of Community & Economic Development, answers Newtown Township Board of Supervisors' questions about the Early Intervention Program (EIP) at the November 19, 2018 Work Session meeting. The EIP helps municipalities develop a long-term strategic plan. To participate in the program, municipalities must apply for a 50% matching grant to cover the costs of consultants who develop the plan. Consultant fees could be as high as $80,000 requiring the Township to set aside $40,000 if it decides to apply for a grant.]
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