The 2008 Budget, Part I.

The annual ritual of budget preparation was worse than any of the several I have participated in. Commonsense was not present at the table. Indeed, the budget was viewed as a tool to offset the economic pressures we all face at home.

Brief history: the staff begin work on the budget as early a June, if not earlier. Throughout the year, the Borough Secretary collects and files budget related correspondence in the Budget file for use during the drafting process. Usually, they have some idea as to the will (or whim) of Council by August. Not this time. So, filling the leadership gap, they prepared the first draft.

This first draft required a two (2) mill increase. Personnel costs (payroll and benefits) drive some of the increase. Rising costs of utilities, fuel materials, and insurance also contribute to the tax increase. Mostly, it was a budget to continue borough operations at the level being currently performed.

I agree with the staff, there is no fat or luxuries in 2008 Budget Version 1. Yet my colleagues reacted in horror – OK, that is hyperbole, but the reaction was far off. Apparently the Borough became destitute sometime during the year and I missed it. Shame on me.

One of my colleagues believes that further cuts can be made. Another one wants to use money in another fund to balance this budget without the tax hike. The councilman who made the latter suggestion always makes this suggestion even though he is constantly reminded that this is a very bad practice that guarantees Auditor attention. The one who made the former comment, well, what can I say. I watched him open his package and and quickly review the budget for the first time – a couple of minutes of reading and he is an expert.

The most oft-repeated comment was that the people of Sayre cannot afford a tax increase. No basis in fact, just a firm footing in emotional innuendo.

The same councilman who wanted further cuts also is very concerned about our debt load, which is now nearly $9,000,000 after this year’s much needed sewer infrastructure project. Emphasis on our debt is foremost now due to the knowledge that the sewer plant must be upgraded to meet new discharge limits for nitrogen and phosphorus (see my November post, Surprise! ). As we are responsible for about 52% of the costs of the sewer plant, concerns about debt are now paramount.

So he proposes an increase in our quarterly sewer fee, which after some discussion, was established at $13/quarter. The same man who complained loudly about a 2 mill tax increase recommended and barely complained about this increase – go figure! Of course, it probably has nothing to do with his ownership of several properties in the borough; a tax increase comes out of his rental income, while a sewer increase is probably passed on to the tenant(s), as seems to be the case in the Borough among other landlords.

So, the budget was returned to the staff with instructions to cut – no guidance, no specifics. Just instructions.

2008 Budget Adopted – 0.2 Mill Increase, but not without some damage.

It’s over! It’s unsatisfactory, but the 2008 budget was approved by Council in a 4-3 vote. I voted against it. One of my colleagues said at the meeting that this budget was a gamble. Amen to that.

More on the topic later.

Budget Crisis?

The Morning Times published an article in their November 22nd edition entitled “Daly, Thomas weigh in on budget crisis.” (Thomas is Mayor Denny Thomas. Mayor Thomas is a former councilman having served on the council for the most of the last two decades). The author, Warren Howeler, asked Mayor Thomas and I three questions, noting that we were silent during the discussions that led to the failure to advertise the budget and the tax ordinance.

The three questions were (1)Were you surprised about the outcome? (2) The borough really has two options to make up the $103,849 that still needs to be eliminated — cut the money that was going to be transferred to capital reserve or eliminate employees. What are your thoughts on these two subjects and do you support either option? and (3) Are there any additional comments you would like to make on this issue?

Here are my responses, which were printed verbatim in Warren’s article:

1) Were you surprised about the outcome?

I was very much surprised since the outcome given the fact the Admin committee unanimously agreed at the November 7^th meeting to recommend a 1 mill increase in the real estate tax and $13/quarter increase in the sewer rate. Why they changed their minds or why they turned their backs on their decision is a mystery to me.

2) The borough really has two options to make up the $103,849 that still needs to be eliminated — cut the money that was going to be transferred to capital reserve or eliminate employees. What are your thoughts on these two subjects and do you support either option?

These are the only two options as I see it and I support neither option.

I believe we have the minimum number of personnel necessary for the Borough to continue to provide the services and programs I believe they want. Some of my colleagues have suggested that we need to cut personnel, but they have not been able to answer Borough Manager Jarrett’s challenge to identify which programs and/or services they want to cut to achieve that goal.

Maintaining an ongoing capital reserve program is most sensible action we must take and should not be compromised. If it accomplishes nothing else, these funds are used to reduce or eliminate the need to borrow, thereby saving interest costs over the long term. It does provide an easy, immediate solution to avoid a tax increase, but at what cost? Eliminating capital reserve activity in the next fiscal year is irresponsible and must never be considered. It hasn’t worked before and it won’t work now.

3) Are there any additional comments you would like to make on this issue?

I am bothered by the lack of trust in our Admin staff. They, in absence of any direction from Council, filled the leadership vacuum and developed a budget they felt was necessary to continue to operate the borough and its services at the level they believed necessary. As they are the people who are in daily contact with borough operations and residents, their viewpoints and the budget they prepared have a lot of credibility with me. The Public Works Committee made some substantive cuts at the October 22^nd meeting, hopefully cuts that won’t compromise our operations and I congratulate them, but I do not believe further cuts are possible without serious impact.

I am bothered by the lack of historical perspective. This council raised taxes twice in the last ten years, with the rate rising from 8.00 mills to 9.92 in FY 2007. This is damn good record. Compared to our neighbors, I believe we are providing more services for the cost. (2007 rates for our neighbors, Athens’ rate was 13.75, South Waverly’s was 11.50, the township was 10.00; Bradford County was 10.63 mills, and let us not forget the Sayre Area School at 40.50 mills).

I am bothered by the idea that the borough should use its budget to offset the increases in the cost of living that affect us all – presumption being the borough is immune to the same pressures. The supposition that we are reducing residents’ standard of living because of a tax increase is preposterous as we are providing the services and programs that directly impact that standard of living, e.g., police and fire protection; refuse collection; the recycling program (which we hope to substantially improve in 2008, depending on the success of our grant application); the borough parks; the sewer infrastructure program that improved the worst sections of our sewer system; flood protection system; and our annual road paving program, to name a few.

I am bothered by comments made during these budget discussions and at earlier meetings. Some of those comments directly impacted the moral, and probably the trust, of our employees, the very people we depend upon.

Finally, speaking for myself, I am retired military and living on a fixed income with annual cost of living adjustments that never have kept pace with the cost of living. I do not like the idea of paying more taxes, but I will pay for services I want, and the borough is providing them. I think it is money well spent. The propose tax rate increases my taxes by $32, hardly an amount that breaks the bank.

Here, quoting from the Morning Times, is Mayor Thomas’ comments:

The final decision on the budget does lie in the hands of the members of the borough council, said Thomas.

“I know that they are looking out for the taxpayers just like I am,” said Thomas.
Thomas said he is worried that the borough will fall into the same trap that Bradford County found itself in a couple of years ago where it didn’t raise taxes over a long period of time and then was forced to raise the millage by 3.5 mills in order to balance its budget.

“I would be in favor of doing a little bit at a time, maybe a mill at the time,” he said. “We’re running a business and we can’t run at a deficit.”

Thomas said he would not support the elimination of any money being transferred next year from the general fund into capital reserve.

“We have a fire truck to pay for in 2014,” he said. “We’ve been putting money away for that.”

The new fire truck that Thomas is referring to is for the Wheelock Hose Co. in Milltown.
The borough is also putting money away for a new police car a couple of years down the road, said Thomas, noting that the municipality did benefit from a donation from Guthrie Healthcare System that paid for the department’s newest vehicle.
“I’m not in favor of going into our capital reserve,” he said.

“It is up to them (the council) if they want to continue on or not,” said Thomas. “I really don’t think that one mill is that bad and I’m going to say what I said earlier – I don’t want this to be like what happened in Bradford County a couple of years ago where it went no tax raise and no tax raise, and all of sudden we get hit with a 4 mill tax raise.”
Thomas also noted that he doesn’t believe that department heads will be able to trim their budgets back to where they are this year.

“We cut the budget one time, and then they came back and we cut it,” he said. “We all sat there and there was nothing else we really could do. A lot of this in the budget is contractual with the unions and our employees. So I don’t know what they’re looking to do this time. I imagine they could go back and get a little bit more, but I don’t think they’re going to get another mill.”

Council Meeting – November 2007

Sorry for the late posting, but I’ve been reloading the operating system and various sundry programs onto my tablet for the last week.

This month’s council meeting was held on the 19th. After the usual actions (minutes approval, authorizing paying the bills, and reviewing committee reports), the council:

• Accepted Mrs. Mary Muffley’s resignation from the Planning Commission. Interested applicants must submit a letter of interest no later than noon on December 17th.
• Approved Howard Elmer Hose Company’s reservation request for Sayre Riverfront Park on June 28-29, 2008, for their annual car show.
• Approved Ms. Bonnie Maio’s request for the same park on September 27, 2008, for the Sayre High School Class of 83 reunion.
• Approved Ms. Katelyn Howland’s senior project. She will install a scoreboard at the girls’ softball field in Riverfront Park.
• Authorized advertising a request for proposals (RFP) for a “needs” assessment for the Department of Public Works building, pending final review by the Public Works Committee.
• Authorized advertising an ordinance adding language concerning need for food vendor licenses to Chapter 117 (Parks) of the Borough’s Code. This is essentially an informational ordinance, as the matter is controlled by state law.
• Included in this motion was an update to another section of our code establishing that no permits are required for certain activities in the parks. I’ll add more info when I finally see the ordinance.
• Council also authorized a payment of $214.00 to one Mr. Ferguson who claimed the roadway/driveway construction on Stevenson Street resulted in conditions where he lost two “jacks” used on his camper.

We heard from one citizen, a resident of Sayre’s East Side who raised a number of issues relating to code enforcement and zoning with respect to his neighbor’s property. I promised to look into the matter for him, but it does look like this is a neighbor-on-neighbor dispute. He has complained to anyone who will listen to him at all levels of government. Ironically, I pointed out to him that he can talk to whoever he wants, but unless he makes us aware of it, there is nothing we can do. I did advise him that my investigation may result in a finding that doesn’t support his position.

The biggest surprise of the evening was our failure to authorize advertising of the 2008 tax ordinance and public display of the 2008 budget. The Administration Committee had recommended that council take such actions at its meeting the week before. However, when the matter was brought to the table, everyone backed down, including the three members of the Admin committee. I apparently was the only one who was ready to vote on the issue. So the matter will be discussed again at a budget workshop scheduled for this coming Wednesday.

Local Services Tax?

One of the biggest problems facing boroughs in Pennsylvania is revenue. Sayre collects tax revenue from Earned Income Tax and property taxes. And those are limited sources. The Commonwealth legislature is “working” on the problem, but no solution is in sight.

Our borough, as mentioned in an earlier post, is facing serious infrastructure issues. As an example, we began working on upgrading our sanitary sewers in late 2006. This was phase 1. It ended in late Summer 2007 and cost us around $3.2 million. The estimate for the rest of the borough is around $40 million – this is a generational project!

The big question: how are we going to fund it? There are grants and there are certainly loans available. I’m not too sure about grants as we are not the only community facing this issue; we have lots of competition. As for loans, there is a statutory limit on the amount of debt we can carry. I don’t know what that number is – it is based on a formula, but we haven’t calculated it as I write this.

So, given the challenge of funding, what are we to do. One possibility might the be Local Services Tax (Act 7 of 2007). This is a revamping of the Emergency and Municipal Services Tax (Act 222 of 2004). Act 7 fixed some issues with Act 222’s policies and procedures and changed the name. Under this Act, Council can enact a tax on individuals who work in our borough. The maximum amount we can levy is $52.00 annually. Under the law, 25% must be used for police, fire and emergency services. The other authorized uses are road construction and maintenance, and property tax reduction through the homestead and farmstead programs. (I don’t know how those work exactly – needs more research on my part).

The interesting thing about this tax, although it would hit residents who work within the borough, it also tags nonresidents. According to information provided by the tax office last year, about 4000 people work within the borough. Most of them are from out of town/state. These people benefit from the protection afforded by our police and fire departments, and they contribute to the wear and tear of the roadways. How many of them are eligible for this tax hasn’t been determined. There are exemptions, e.g., disabled vets, active duty military, and folks who earn less than $12,000.

It’s unfortunate that the tax would hit our residents, but perhaps we might be able to offset it with a decrease in a property tax increase dollar-for-dollar. The key question: how many people who do not pay taxes to the borough are affected and what would the amount of revenue be? Who collects it? Who handles all the paperwork? Do we share with the Sayre Area School District? How much should we designate? $10, $20, or $52? Can we bank it in Capital Reserve until we need it?

More info on the subject is at the Department of Community and Economic Development’s web site covering the topic.

Budget Time!

Council received the first draft of the proposed budgets for the General Fund and the Sewer Fund. There is a tax increase and a sewer rate increase. I will not identify the proposed increases at this time since Council has not had the opportunity to review it. That will happen next week. Sayre Borough’s tax rate for 2007 was 9.92 mills, a rate set two years ago. Some people claim we (the Council) are taxing the people “to death,” but the fact is borough taxes have risen only 1.92 mills since 1998. Our record is better than that of the county and the Sayre Area School District(4.422 and 13.5, respectively. The main reasons for the increases in the 2008 budget are the usual suspects: salaries, wages, and benefits for the General Fund, and the sewer infrastructure debt incurred by the recently completed Phases construction. My first inspection of the draft didn’t reveal anyplace we could make any significant cuts. However, my colleagues have yet to weigh in on this matter – stay tuned.