After two months of debating ways to limit the impact on taxpayers in this year’s municipal budget, what appeared to have been an impasse between council members seemed to finally be resolved at the May 24 meeting.
Heading into the fourth budget session of the season, Township Council President George Borek came up with an 11th-hour proposal to remove more than $600,000 in funds received from the sale of two liquor licenses in this year’s budget originally earmarked for a renovation project at the municipal building and use it to offset taxes.
Combining the $200,000 in savings from cuts to overtime and nonessential part-time staff and the use of the $600,000 from the liquor license to offset taxes, the council slashed $800,000 from the budget in a 4-1 vote.
The proposal came at a time when it appeared there would be no consensus, and therefore, no introduction of the budget, as time ran out for introduction. The council has to allot four weeks after introduction of a budget before it can hold a subsequent public hearing and adoption, which needs to occur before July 1. Failure to do so would have shut township government down.
With the support of all of his colleagues, except Charles Morgan, Borek was able to drum up enough votes in support of his proposal. Under his plan, this year’s tax rate would increase by 1.4 cents per $100 of assessed value over last year’s rate. That translates into an increase for the average homeowner of about $75.
A special session for introduction was scheduled for Friday, May 28, at 9 a.m. in council chambers at the municipal building.
“We’re coming to the end of the year, and we don’t want to see the government shut down,” said Borek, who had reportedly worked all week to gain the support of individual council members for his proposal.
Not everyone was on board. Morgan, who has advocated dipping further into the surplus to reduce taxes, said Borek’s proposal was “a dumb idea.”
He said a general rule of the budget process was that “you don’t mix a capital item with an operating budget.”
Business Administrator Robert Hary warned the council that regardless of whether it took money from surplus or from the liquor license, both scenarios presented one-time sources of funding that would not be available in next year’s budget, when caps on the increases could be even more stringent.
“Using any one-time revenues, whether it be liquor licenses or fund balance, does have significant impacts on future budgets,” he said. “Whenever you use one-time revenues, that becomes the norm. You use that to balance your budget. And, it really is a basic concept that you never want to use additional amounts of fund balance.”
Since March, council members have been analyzing and debating ways to cut down the budget, with various members proposing differing solutions.
In March, the administration sent a $37.1 million proposed package, representing a $626,000 increase from last year’s $36.5 million budget. The tax levy, however, was projected to increase from $20.6 million to $21.8 million, a 5.8 percent increase, the original package proposed.
Along with the original proposal came the original tax rate of .357 — a 2.7-cent increase. Originally, the owner of a home assessed at the average of $534,782 would have paid $1,909 in municipal taxes, an increase of $139.
Council was able to drop that increase from $139 to $110 by cutting $200,000 by eliminating leaf and brush collection on weekends and slashing overtime and nonessential part-time personnel. Borek’s most recent proposal further lowers that increase to $75.
Having already called for the use of $200,000 more in surplus than it did last year — for a total of $4.4 million being used from surplus to offset taxes — the council avoided dipping further into the surplus through Borek’s proposal.
Members of the council opened the meeting with a review of a list of part-time nonessential employees outside of the police, fire, and emergency services personnel. At an earlier meeting, council had agreed to cut the overtime and nonessential part-time employees to save money.
Councilwoman Linda Geevers, however, said that the list provided by Hary did not include every part-time employee.
Borek told her the council had agreed to cut all nonessential employees, but that it had left it up to the discretion of the administration to “determine which positions they still needed versus those who are not essential and could be removed.”
Councilwoman Diane Ciccone, who had voted against cutting part-time staff because she felt the part-time staff could be used to account for the work lost in the overtime cuts, confirmed Borek’s response. Morgan also confirmed it.
Said Morgan: “We said we were not taking nonessential employees that would generate overtime.”
Morgan suggested council look at bringing in more part-time employees to reduce overtime costs even more. And even in the case of letting go of part-time staff, “we need to be diplomatic, if not caring, in implementing these changes.” He said he wanted to see the list of staff members proposed to be cut, including their responsibilities, and what the implications would be.
Still, the cuts discussed by council up to this point had only generated a total of $196,164 in savings — enough to bring the tax rate down to about a 2.3-cent increase.
Foreseeing an impasse on any further cuts, Borek put forth his proposal. “Instead of taking the money out of surplus, take $600,000 out of the liquor license,” he said — an idea that would also preserve the current services the township provides to residents.
The township had received a total of $1.3 million in revenue from the sale of two liquor licenses this past year that was to be used in the capital budget toward renovating the former police wing attached to the municipal building. The trailer is the current home to the Health, Recreation, and Emergency Services departments.
Ciccone, who pushed for a zero percent increase throughout the process, said she “certainly can support” the idea, even though she acknowledged the administration’s long-term position against using “one-shot” sources of money to balance the budget.
Ciccone said that “$1.3 million into the capital budget to renovate a building” is similar to “renovating your house when you have no budget.”
“I don’t want to increase the use of surplus,” Ciccone added. “It is a win-win situation because it is found money. I think it’s an excellent idea.”
Councilman Kamal Khanna said the only other way to reduce taxes was to reduce the costs, which was further complicated because “I have not seen yet a comprehensive study of the total operations in every department.” Last year, Khanna had suggested the formation of a task force from members of the administration to evaluate every department for efficiencies.
While his idea failed to gain support from his council colleagues, the administration has included $25,000 in the 2010 budget to pay a consultant to conduct an efficiency study to find areas of savings this year.
Khanna said he supported Borek’s idea because “one thing I am deadly against is laying of people without a comprehensive study,” of how it will affect the township.
Morgan criticized the administration for failing to take a close look at his calculations. According to Morgan, Standard & Poor’s, which provides the township’s credit ratings, has said that the township would need to only maintain a surplus worth 15 percent of its overall budget in order to maintain a Triple A bond rating.
Currently, the township maintains a surplus worth 20 percent of the overall budget, he said. Most municipalities maintain surpluses around 8 percent, he added. So, in having a surplus of 15 percent, the township would still maintain a level that is nearly 50 percent higher than other municipalities while also being able to maintain a Triple A bond rating.
At the same time, Morgan also challenged the administration’s comments that the township would probably see a decline in its ability to replenish its surplus because of the economy. “The sky is falling scenario isn’t quite accurate if you take the numbers,” said Morgan, holding up a chart in which he compared the rates at which the surplus was replenished, compared with how much surplus was used, over the past few years.
Responded Ciccone: “It’s realistic to say we’re not going to replenish it at the same level” because of the recession.
Joanne Louth, the township’s chief financial officer, agreed: “We don’t expect to replenish it in full.”
However, Morgan argued that the worst economic environment occurred in 2008. He also argued that the administration has not been able to provide specific evidence to back up its assumptions that show a declining replenishment scenario. Nor has it responded to his chart showing flat replenishment, he said. He asked the township to take the lowest possible replenishment and the best possible replenishment and come up with an average.
“You should not do an average at all,” said Louth. Rather, “the assumption is that it is going to decline. We have no way of telling how much that is going to be.”
“We’re at a point right now where time is of the essence,” said Borek.
Still, Morgan said, the council has been asking for specific numbers and information since September, and hardly any of it has been provided. “We keep saying we need answers to these questions, and when we don’t get answers, we say let’s go with the flow.”
Before moving forward with Borek’s proposal, the council asked Hary about the condition of the trailer that was earmarked for renovation. Hary told the council that the railer building served as an old police wing, with former areas that were used as jail cells. There have been some mold issues, but township officials have kept on top of removing it. The set-up of the building, however, is used inefficiently and needs to be renovated.
The proposal included using a total of $604,836 from the liquor license sale and a total of $196,164 from the cuts to total a flat $800,000, effectively removing the renovation of the police wing from the 2010 capital budget.
Geevers wanted to try to cut more to bring the tax rate to an even 1-cent increase (as opposed to the 1.4-cent increase), but that would have required $243,524 more in cuts or further dipping into the liquor license.
Despite using the one-time funding, Ciccone said she was optimistic the township could find more savings in 2011, based on the lengthy discussions during the 2010 budget, including reductions to the garbage collection contract that could not be realized this year, with only two months remaining in the township’s own fiscal year. In addition, there will be contract negotiations next year and an efficiency study that officials hope will provide more areas of savings.
“It’s not zero (increase), but I think it’s a compromise,” said Borek, referring to some of his council colleagues’ adamant demand that there be no increase this year.
“I do believe the one-shot deal is imperative,” said Ciccone. “We just need to keep the surplus.”
Ciccone commended Borek for his hard work in pushing his proposal forward. “He worked very hard behind the scenes to try to get to a consensus,” she said.
This drew criticism from Morgan, who said he hoped there were no legal implications associated with his colleagues’ work behind scenes. Ciccone maintained that no Open Public Records Act violations occurred because Borek had simply phoned her in the days before the meeting. Violations occur when three council members (enough for a forum) meet at the same time behind the scenes, which they say did not happen in this case.
“It was his responsibility to talk to each one of us to come up with a consensus,” said Ciccone. “I complied completely with the law.”
Still, Morgan said, “I don’t know how any of you folks can move forward without getting any of the answers we asked for.”
Before council deliberations, a few residents called for the council to introduce the budget, even with the projected 3.8 percent increase. “The government has a 4 percent cap, and we’re close to that at 3.8 percent,” said Paul Eland. “I think we need to retain a full-service community.” He said the township was in a position where it could forgo a “blood-letting,” as seen at the state level. “I recommend that the budget, from what I know, should be passed at this point.”
The same residents commended the council after the meeting for building a consensus.
Not all residents advocated a budget without using surplus. Resident Bob Akens, before the council deliberations, said the council should have a budget with zero increase, especially when social security payments have not increased this year, and many residents are already suffering. He asked the council to take a year to implement various suggestions from around the dais “where you build back the surplus if you use it this year and put the increase at zero percent.”
Officials had argued using surplus would create a “slippery slope” for future budgets. However, said Akens, “The slippery slope could be stopped in one year.”
