Like many municipalities in Bucks County, Newtown Township is struggling to maintain its current finances. In 2018, the general fund balance decreased by more than $665,000.
Being blamed for part of downward trend is the loss of Earned Income Taxes as surrounding towns such as Bensalem and Middletown have enacted EITs of their own.
Real estate transfer taxes have also decreased in 2019. Factors affecting the volatile housing market include diminishing supply, rising costs, interest rates and demand. The township has reduced the budgeted figure for transfer taxes for the second consecutive year, this time from $800,000 to $750,000.
Where Newtown really runs into a budget shortfall is debt service. A 2020 municipal bond that was refinanced at TD Bank has allowed township officials to make payments to debt service without contemplating a tax increase.
In his presentation of the 2020 budget to the supervisors on Oct. 14, Township Manager Micah Lewis announced that the township’s current millage rate doesn’t cover the cost of future payments it has to make to its debt. The current fund balance will carry debt service payments through 2020. After that, Lewis said, the fund will fall short by more than $100,000.
Just days before the work session focused on the 2020 budget, Maillie LLP – Newtown’s accountant – announced a projected 2018 year-end general fund balance of $2.5 million. Just $1.286 million was projected, says Lewis.
This was accomplished, the manager said, by tightening township fiscal belts and higher than anticipated Earned Income Tax collection and delinquent EIT collection.
The $2.5 million represents 22 percent of the township’s general fund revenues. Maillie partner Ed Furman, who delivered the 2018 audit report to the supervisors on Oct. 10, said bonding agencies consider anything between eight and 12 percent acceptable.
However, the projected year- end fund balance for 2020 is just $1,342,706.
That said, Lewis reported that the township has significantly scaled back expenditures in its 2020 budget in order to offset projected shortfalls.
“Line item expenditures have been reevaluated and reductions have been applied where applicable,” said Lewis. “But, this practice is unsustainable as costs for services and personnel continue to rise.”
The township manager is recommending that future budgets contain revenue increases to support the diminishing general fund and offset the volatility of the current funding structure.
Some good news on the accounting front is that revenues from parks and recreation programs are on the rise, expected to approach $565,000 this year.
Parks and rec spending is expected to rise in 2020, jumping to over $1 million next year with the township anticipating construction of a new recreation trail along Lower Dolington Road. Construction will cost $922,000 not including engineering costs of $145,000. A little over $700,000 was budgeted for parks and rec this year.
And road paving in 2020 will cost more than $1.6 million as the township plans to repave more than five and a half miles of roadways.
New-hires have also taxed the township’s coffers in 2019 with the addition of a new police chief, the reestablishment of the finance director position and the hiring of a part-time zoning enforcement officer. The township also added an accountant, two police officers and a firefighter.
Currently, the township has 65 full-time employees, in addition to four part-time employees.
The Police Department accounts for $5.27 million of this year’s budget with 26 full-time officers in addition to a chief and two lieutenants.
Public works is the next biggest expenditure, budgeted at $1.61 million in 2019.
Expenses for labor are expected to rise in 2020 as township employees will average a raise of three percent, in addition to health care increases of seven percent. The police department is also adding an officer while restructuring the salaries of its two lieutenants and chief.
Capital expenditures for policing in 2020 are expected to approach $171,000 with the addition of three new police vehicles and some other equipment that’s needed.
Public works spending will surpass $48,000 with the addition of a new utility truck, a dump trailer and a milling machine. Some of that will be paid for with moneys from the liquid fuels program.
Technology expenditures are in the neighborhood of $19,000 with the addition of a police evidence computer server that will cost more than $12,000.
Lewis is also proposing to add a quick response vehicle to the Emergency Services department in order to replace an aging Ford Expedition with over 130,000 miles on the odometer.
The manager says the township also needs to spend $20,000 to upgrade HVAC equipment. The total projected expenditures for building and facilities maintenance is about $85,000.
Total capital expenditures in 2019 are expected to surpass $530,000.
The 2020 budget needs to considered by the Board of Supervisors on Nov. 13 in order to be scheduled for final adoption at the board’s Dec. 11 meeting.