The Warminster Township Budget for 2021 was published earlier this month and is expected to be discussed and approved at the Board of Supervisors’ meeting on Tuesday night. It is a complex budget, so we will try our best to break it down for you.
We will start off by summarizing the General Fund revenues and expenditures budgeted for 2021. The General fund is where most of the real estate taxes go along with all the business and Earned Income Taxes. This fund pays for most of the expenses in the township, including but not limited to Administration, Finance Police, Public Works, etc.
The good news in the 2021 proposed budget is that there will be no tax increase for 2021. After the current board raised taxes by over 35% in 2020, they felt there was no need to increase taxes again for 2021.
This chart shows the municipal portion of your real estate taxes from 2010 thru 2021.
GENERAL FUND REVENUES The overall general fund revenues are expected to increase in 2021 by $1.6 million versus the budgeted revenues for 2020. This is mostly due to a windfall of monies expected in 2021 from the sale of the storm water system to the Warminster Municipal Authority (WMA) for $6,000,000, of which $1.7 million was used to balance the 2020 budget and the remaining $4.3 million will be used to offset expenditures for 2021. This is a one-time injection of cash that will not be available in 2022. Without this money, the overall revenues would have decreased by nearly $2.7 million, which is how much will need to be made up going forward. In addition, the township received a $577k grant from the federal government in the form of a SAFER grant, which will be used to pay the salaries and benefits for 5 firefighters that will be hired in 2021. This is an annual grant that will last for 3 years, after which the township will need to pick up the tab for the firefighters. This is another half-million dollars that will need to be found for 2024 and beyond. Finally, general fund revenues are budgeted to increase by 49% for PILOT taxes. These are the Payments In Lieu Of Taxes that are paid by several non-profits in the township, like Christ’s Home, Ann’s Choice, etc. In the past, these taxes were shared between the General Fund, Parks and Rec, Library, etc. In 2021, all the PILOT taxes will go to the General Fund.
The following is a summary of the revenues budgeted for 2021 as compared to the revenues budgeted for 2020, along with the difference in dollars and the percent change expected in each category.
GENERAL FUND EXPENDITURES The Budgeted expenditures for the General Fund are expected to increase by just under $1 million in 2021 when compared to the 2020 budget. While there were cuts in nearly every department, mostly due to lower expenses for contracted/professional services, there appears to be a large increase in spending for police (+33%) and fire (+519%). Some explanation is needed for both departments. First, the police budget only appears to be increasing by 33% because the 2021 vs 2020 budgets are not an “apples to apples” comparison. The police pension payment of $2,667,704 was moved from the interfund transfers section directly into the police budget, along with the Police Professional Liability expense ($55,055) and the Heart and Lung payments ($18,191), which were moved from the Insurance budget directly to the police budget. If you had an “apples to apples” comparison, the police budget would be reduced by $161,456 in 2021, or about 2%. The fire services budget increased so dramatically because the township will hire 5 paid firefighters in 2021. But these increased expenditures will be covered by a federal SAFER grant for the next three years. Starting in 2024, the township will need to fund the salaries and benefits for these firefighters. The only other significant increase in spending is related to the administration budget, which is expected to grow in 2021 by $151,000, or 21.75%. This change is due to an increase for the Severance/Salary Adjustment line item, which is expected to double, from $150,000 to $300,000. We do not know if this means people are going to be laid off or someone is expected to get a big salary increase in the coming year. Guess we will have to wait and see.
The following is a summary of the expenditures budgeted for 2021 as compared to the expenditures budgeted for 2020, along with the difference in dollars and the percent change expected in each category.
PARKS AND RECREATION FUND REVENUES AND EXPENDITURES The Parks and Rec Fund is separate from the General Fund as it has its own source of tax revenue in the form of a 3.5 mill tax that property owners pay in municipal taxes. This mill rate was increased from 2 mills to the current 3.5 mill rate by the current board of supervisors in anticipation of additional expense to maintain the new features being added at the Community Park. The Parks and Rec expenses are paid for using those monies as well as revenues generated through normal operations in the form of rentals, fees and donations.
For the year 2021, it is expected that the Parks and Rec revenues will shrink by $64,317, due mostly to the $35,000 in lost PILOT taxes mentioned above, as well as an expected $29,000 decrease in donations and other minor events related items in the coming year.
The budgeted expense for Parks and Rec will increase by $173,944 or about 12%, which is mainly due to removing the transfer of $112,400 from Parks and Rec to the Capital Reserve fund, as well as reductions in employee benefit expense and event related expenses for the coming year.
CAPITAL RESERVE FUND REVENUES AND EXPENSES The Capital Reserve Fund is used for, as its name suggests, capital projects. This includes things like buildings and other infrastructure expenses. The Capital Reserve revenues includes proceeds from grants and loans that are used for capital projects. For 2021, this fund will $12,691,025 in revenues, of which $12 million will be in the form of a general obligation note that will be payable over 20 years.
The Capital Reserve expenses for 2021 will include, among other things, the cost of the Warminster Community Park projects, much of which will be covered by two grants. Whatever is not covered (that amount is unknown) will be paid for with over the 20-year life of the $12 million loan mentioned above. Also included in capital expenses for 2021 will be the purchase and land remediation of Shenandoah Woods. The land cost is $1 million, of which $100,000 was previously paid. The remediation of the land is budgeted at $2.3 million. The question that we have here is why we are financing $2,000,000 for street paving and at the same time we are not using the monies in the Highway Aid Fund like we usually do. That fund is projected to have a combined 2020 & 2021 surplus of over $735,000.
The outlays from the Debt Service Fund in 2021 will include the following items:
DEBT SERVICE FUND Revenues and Expenses Like the Parks and Rec fund, the Debt Service Fund has its own source of funding in the way of a dedicated property tax mill rate. The current board, anticipating the purchase and remediation of Shenandoah Woods as well as the Community Park project, increased the mill rate for the Debt Service fund from 0.75 mills to 2.02 mills, or a 169% increase. In addition to this dedicated tax, monies can be moved from the General Fund to pay for short-term debts. In 2021, as was done in 2020, the township executed a Tax Anticipation Note (TAN). This is used to pay regular township expenses until taxes are collected in the spring. The proceeds show as revenue in the General Fund as well as an expense to move money from the general fund to the Debt Service fund.
Overall, the revenues for the Debt Service fund are budgeted to increase by nearly $1 million, even though no PILOT taxes will be shared with the Debt Service Fund. In 2020, the Debt Service fund received a little over $20,000 in PILOT taxes. The $1 million increase is due almost exclusively to the additional monies being transferred from the General Fund. In 2021, $3,000,000 will be transferred from the General Fund to the Debt Service Fund. This is double the amount of the TAN, which means in addition to the 2.02 mills we pay in direct tax to Debt Service our general fund taxes will also be used to pay $1,500,000 of the massive debt we are incurring in 2021. Speaking of the TAN, if we are expecting $4.3 million from the WMA for the storm water system, why can’t that money be used to pay bills until the taxes are collected?
The Debt Service Fund expenses are expected to decrease by nearly $274,000 in 2021 when compared to 2020. This is mainly because the 2021 TAN will be $500,000 less than the TAN taken in 2020. The $12 million loan will cost the township over $600,000 in principal and interest payments in 2021. Here is a graph of the long-term debt between 2013 and 2021. The 2020 and 2021 figures are unaudited figures, but based on the 2021 budget, they should be remarkably close to actual figures. Keep in mind that the golf course debt is not paid with Debt Service funds, but instead are paid with revenues generated by golf course operations. No tax dollars are used in the operation of the golf course or the debt incurred by the course.
Summary To sum up the 2021 budget, let us just call it a lot of smoke and mirrors. It appears the plan is to pave a few extra streets, not raise taxes, and that will make people happy. Well, that works if you can ignore the massive debt that we will be incurring over the next couple of decades. Also, even with the massive debt, none of this addresses the other long-term unfunded pension and “Other Post-Employment Benefits” (OPEB) liabilities. These items alone amounts to more than $30 million in long term liabilities. The sale of the WMA is looking a lot better, but the current supervisors would rather burden us with taxes and long-term debt than solve the financial crisis in the township.