Middle Introduces Budget with 9.2% Tax Hike

COURT HOUSE – Middle Township Committee April 3 introduced a budget for 2023 that calls for a 9.2% increase in the local purpose tax rate.
The tax rate per $100 of assessed value will move from $0.5190 to $0.5666, or almost 5 cents.
Chief Financial Officer (CFO) Neil Young said the average assessment in the township is $250,000, and such a property will see an increase in taxes for 2023 of $119.
The general fund budget is $25.3 million and has almost the same bottom line as the township’s 2022 budget set at $25.4 million. That 2022 budget, however, contained over $1.4 million more in grant revenue that offset expenses in the budget. In 2023, 64%, or almost two-thirds, of the budget relies on revenue from taxation.
When comparing the 2023 budget to its predecessor in 2022, a major difference is the loss of almost $1 million in Covid relief dollars. For two years running, the township was able to take advantage of significant pandemic relief dollars that were scheduled to disappear in 2023. That lost revenue is being made up largely by taxation.
New CFO Young, who arrived in January after nine years in Cape May, pointed to several factors that negatively impact the township budget. Among those was the hike in benefit premiums for the state health insurance plan, increases in mandated pension costs, the impact of general inflation on goods and services purchased by the township, and the loss of American Rescue Plan pandemic aid.
An error made in 2022 by the township’s previous CFO also had its indirect impact on the 2023 budget. The township had been forced to use an emergency appropriation of almost $400,000 in 2022. Before the end of that budget year, unused funds from several accounts were accumulated to essentially pay off the emergency appropriation. That was the good news.
The bad news in that scenario was that had the emergency appropriation not existed, the error not made, those funds accumulated to pay it off would most likely have allowed for a higher municipal surplus to aid in the 2023 budget.
Instead, when the township used approximately the same dollar amount of surplus in 2023 that was used last year, it left the surplus balance at less than $70,000.
This year, it will be critical for the township to end the budget period with enough unexpended funds to replenish that low surplus amount.
This is a budget that has revenue issues. With 64% of the budget dependent on current year taxes and another 7% dependent on the use of surplus funds, less than 20% of the budget comes from alternative sources of revenue. Even here, half of what there is in non-tax revenue comes from the energy receipts tax, which brings in $3.5 million from utilities that use the township land. Other forms of local non-tax revenue are not keeping up with growth in overall expenses.
The sewer utility budget for 2023 stands at $5.5 million. Debt service is up, but the phased repairs to sewer pump stations have begun to pay dividends in lower fees at the Cape May County Municipal Utilities Authority (MUA). For years, the township was paying unnecessary flow fees because its aging sewer system allowed significant stormwater infiltration into the flow on its way to the MUA.
In order to meet the cap requirements and still impose the hike in the tax levy, the township was required to use a considerable portion of its cap bank. The budget used almost $500,000 from the cap bank, leaving a balance of just $114,388 for future use.
The cap bank is funded in years when a municipality does not increase the tax levy by the full 2% allowed by state law. The amount not added to the tax levy is then available to be used in years when the municipality needs to exceed the cap.
With the cap bank below its previous balance and the current fund surplus balance at less than $70,000, the township needs a year without financial surprises. The budget will come up for a public hearing May 2 when there will also be a vote on adoption. 
Contact the author, Vince Conti, at vconti@cmcherald.com.