ED. NOTE: This is the third in-depth 2023 budget article exclusively for online subscribers. You can read the first two installments, on Stone Harbor here and on Cape May City here. Read about all 16 municipal budgets in Cape May County here.
As a precursor to the 2024 budget process, the Herald recently looked in-depth at 2023 budgets in the resort communities of Stone Harbor and Cape May City. Considering aspects of those budgets highlighted some of the financial vulnerabilities and strengths of the two municipalities.
A look at a mainland town like Middle Township brings out some very different issues.
The township is the 11th-largest municipality by land area in the state and contains almost 30% of the total square miles of land area in the county. The township is also the second-largest in the county in population, and the only municipality that grew appreciably in the decade between census counts. The township’s size presents challenges for service delivery.
Revenue
Unlike many of the island communities, Middle Township has a very limited set of sources for municipal revenue.
The largest contributor next to the tax levy in 2023 was state aid, at $3.8 million. The funds came largely from energy tax receipts from utility facilities within the township. The state collects the tax and returns a portion of it to municipalities under the header of state aid. Those tax receipts have shown very little movement over the last decade. In 2014 state aid to Middle Township was $3.6 million.
Local revenues are limited to sources like fees and permits, the occupancy tax, cable TV and franchise fees, and interest on investments. Together they totaled $1 million in 2023.
Grants are uneven from year to year, and while they can amount to significant money, they are generally directed to specific purposes and offer little budget flexibility.
The township does hope for a new revenue source from a tax on retail cannabis sales, but thus far no state license has been issued to an applicant who would set up shop in the township.
Middle is looking to increase its tax base through growth in its assessed valuation, but that is a slow process. The total assessed valuation used in the 2023 budget was $2.8 billion, with over $570 million in a tax-exempt status. The township’s high percentage of tax-exempt property stems in large part from its status as the county seat.
The township routinely uses more than 75% of its general fund surplus as revenue in order to limit the tax levy. The surplus has become a bigger challenge of late. Each municipality that uses surplus in its budget does so with the expectation that the funds will be returned to surplus, hopefully with additional monies, at the end of the budget year, with the monies coming from unexpended funds.
In Middle that has not always worked out, and the surplus shrank as a result. In 2023 the township used 96% of its surplus balance as revenue in the budget, a higher percentage than it ever used in the past. It was imperative that 2023 came to an end with adequate unexpended funds to pay back the surplus.
All of this comes down to a heavier reliance on the tax levy as the revenue source for necessary increases in budget appropriations. In 2023 the tax rate increase was 4.8 cents per $100 of assessed value, or 9.2%. In 2022 the local purpose tax rate rose by 5.5%.
The impact of the pandemic followed by the loss of pandemic funding hurt the township. High inflation, soaring employee health plan premiums from the state and a rise in mandated pension expenses all imposed burdens that the tax levy had to absorb.
Appropriations
According to the Middle Township user-friendly budget format, the township budgets for 122 full-time and 45 part-time positions. Total personnel costs, including pensions, health benefits and employment taxes, amounted to $14.6 million, or 58% of the general fund budget, in 2023.
That same budget format shows 54 full-time and nine part-time positions in the police department, which accounts for almost 60% of the total personnel costs for the township. Staffing levels for policing 24/7 all year long are partly dictated by the time commitment and also by the 70 square miles of township size.
Debt service is $1.2 million, or a low 5.1% of the general fund budget. That places Middle in the bottom tier of townships in terms of debt service as a percent of budget.
Middle’s challenge is maintaining service levels and retaining employees while lacking flexible sources of funds outside of the tax levy.
Another challenge is dealing with aging infrastructure, especially in some of the oldest sections of town. That challenge is especially evident in the township sewer utility.
Sewer Utility
Middle Township has one self-financing utility, for management of its sewer system. The system has aged, and a major overhaul of pump stations is underway. Past payments to the county’s Municipal Utility Authority were inflated by stormwater leakage into the sewer system, increasing flows to the county authority. Improvements to the pump stations are already having a positive impact on the flow and MUA expense.
The 2023 budget for the sewer utility was $5.5 million, of which better than half were MUA fees, which were budgeted at $2.8 million, or 53% of the municipal utility’s total revenues. Over 85% of revenues to the utility come from charges to direct users of the system. A high 28% of revenues goes to debt service payments, which totaled $1.5 million.
The $1.2 million that remains after MUA and debt service payments is for the actual operation of the sewer system. It includes an indirect cost charge to the utility from the township general budget of $340,000 for support provided by township employees for utility functions. Those funds are considered revenue to the general budget.
