John Mack - Newtown Supervisor

Fiscal Responsibility

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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."

In January 2018, the Newtown Board of Supervisors approved a new budget that included a 0.45 mill tax dedicated to the Newtown Ambulance Squad and a 0.55 mill new tax dedicated to Fire Hydrant Maintenance. These new taxes cannot be spent on anything else.

Even with these new taxes, 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).

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.

Summaries of Fiscal Issues Discussed at Board of Supervisors Meetings

Details of important Fiscal related Newtown Board of Supervisors' decisions and discussions in last few years arranged by topic is reverse chronological order. You can find complete minutes of BOS meetings here.

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.

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).

TOTAL EIT, which includes both resident and non-resident contributions, increased by over $1 million in 2017 compared to 2016 but is estimated to decrease by 12% in 2018. The 2019 budget anticipates a 3% increase in total EIT.

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.

 

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The opinions expressed here are solely those of John Mack and do not represent the opinions of any other person or entity.
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