Middle Township Budget Retrospective

COURT HOUSE – Middle Township Committee adopted its $20.9-million 2017 budget April 17. The budget included a 4.93-percent increase in the local purpose tax levy, the first such increase in five years. 
The budget was adopted on a party-line vote with Democrats Mayor Michael Clark and Deputy Mayor Jeffrey DeVico, voting for it, and Republican Committeeman Timothy Donohue voting against. 
DeVico expressed the view of the majority that another year with no increase was not sustainable especially in the face of increases in mandated expenses over which the township had little or no control. Those expenses included the annual state pension payments or the increased health insurance premiums. 
DeVico said he much preferred referring to the tax levy increase as a two-cent increase which better shows what he considered the minimal nature of the added tax rather than referring to it as an almost 5 percent growth in the levy.
“It was time for a little increase,” DeVico said.
Clark joined DeVico in defense of the budget which Clark called “a good and sustainable budget.”
Both Clark and DeVico defended the current budget’s inclusion of raises for non-union staff. They each said it represented an attempt to make Middle Township more competitive in the search for talent, and rewards employees for excellent work in the public interest.
Dissenting View
Donohue dissented on the budget as a whole. For him a budget that exceeded the spirit if not the rules of the state 2 percent cap on tax levy increases was unnecessary and dangerous. 
He pointed to a record of five years without such a tax increase. Donohue did not argue specifically against any tax increase, but he strongly voiced an opinion that any increase, if necessary, should be kept within the spirit of the 2 percent cap.
Technically the cap has exceptions which can allow for an above 2 percent increase. Also, the cap bank, an accumulation of revenues from the 2-percent cap limit in previous years that were not needed in those budgets can be used to exceed a cap limit in any given budget.
Thus there is no violation of formal cap limits in this year’s budget since both expense exceptions and cap bank funds were used.
For Donohue, the argument is that exceeding the 2-percent cap in a given year opens the door to increased spending.
It removes, he said, the ability of the township to use the 2-percent limit in future union contract negotiations.
He was most strident on the issue of dipping into the cap bank which he believes should be reserved for catastrophic occurrences that suddenly present the township with significant unexpected budget outlays.
Donohue did not argue against the raises for non-union employees, but he did express an opinion that the increases should have been phased in over more than one budget year to reduce their impact on the tax levy.
Donohue also pointed to increases in the budget for equalization of salaries for three statutory employees, the clerk, tax collector, and assessor. 
Three Key Salary Hikes
The need for those raises was brought about when the new chief financial officer (CFO) was hired at a higher salary than the previous CFO. State regulations set up rules about the relationships that must exist in the salaries of statutory employees and the CFO salary set up a situation where the other statutory employees had to have increases as well.
Despite some questions from the public, no one fully explained why this added pressure on the budget did not appear to be fully taken into account at the time of the CFO’s hiring; and why a lawsuit needed to be threatened before a settlement was reached on the increases for the other three.
Different Look at the Numbers
Grants are an unpredictable element of any budget. They can distort the view since a good grant year makes a budget seem larger even though the added funds arrive restricted to a particular use. One example is Open Space funds from the county for extension of bike paths.
If one removes grants from the last five budgets, it is clear that the operating budget of the township is consistently between $20 million and $21 million per year.
The property tax each budget expects from the local tax levy is also consistent at $12.3 million each year except for the rise to $12.9 million in the recently adopted 2017 budget.
Each year for the five-year period, around $8 million needed to be generated from sources other than the local tax.
Between 2016 and 2017 that amount varied by only one-tenth of one percent.
$8 Million Standard
In short, the township has consistently shown that it has about $8 million per year available from a combination of state aid, prudent fund balance use, and miscellaneous income. What is also clear is that these sources will not produce much more than that consistent $8 million.
The $600,000 increase in the overall budget without grants between 2016 and 2017 must be covered by the local property tax.
In the years of zero rate increases, the non-tax revenue hardly varied except in an unusual year, in 2014 which saw the introduction of the accelerated tax sale process.
Once the 2017 budget contained that almost $600,000 increase in expected spending, there was no place for it to be covered except as an increase in the tax rate.
The total budget without grants grew $598,548, and the amount due from taxes increased $606,715. There was no place else for the increase to go.
13 Items, 72 Percent
In the budget presentation that preceded the public hearing on the 2017 budget, much was made of the fact that 13 line items comprise 72 percent of the budget with the remaining 80 line items driving only 28 percent of the spending.
The implication is that the large line items account for the increase that required raising the local tax rate. The numbers do not support that seemingly intuitive assumption.
While the bulk of the increase is in the 13 line items highlighted in the presentation, a full 40 percent of the growth in the overall budget is in the 80 line items that received very little attention in the presentation. 
Also, a close look at the 13 line items that were highlighted shows that only two account for 55 percent of the total budget year-to-year growth.
Two Key Factors
Those two items are the increase in the employee group health insurance and police salaries.
Health insurance premiums are largely outside the control of the township except when new contracts are negotiated.
Police salaries are the product of a decision made to move the manpower of the department to its level before the 2008 financial crisis.
That is accomplished in this 2017 budget. It is also worth noting that police salaries, unlike those of any other township employees, must account for 24-hour-a-day, seven-days-per-week coverage.
Looking at the budget in this way suggests that what level of discretion that exists for lowering the tax rate rested with the 40 percent of the total increase that is contained in a large number of line items not highlighted.
PILOT in Play
A part of the increase in those 80 line items came from the decision to budget payments from the township to the school district and the fire districts for PILOT (Payment in Lieu of Taxes) funds received from the Conifer developments in Rio Grande and Court House.
Another area of increase across many of those line items is the decision to provide salary increases for non-union employees which Donohue argued should have been spread over two or three years.
An added impact on the increase came from the settlement with statutory employees following the decision to hire a new CFO at a higher than previously budgeted salary.
The budget grew in part, but only in part, due to increases in expenses over which the township has little control.
Most of the budget’s growth is due to decisions made by the governing body, even though it is not always easy to see which ones they were.
To contact Vince Conti, email vconti@cmcherald.com.