Newtown Township feeling the squeeze on EIT revenues; proposes $12.62M budget for 2017, including property tax hike


NEWTOWN TOWNSHIP >> The proposed $12,627,809 general fund operating budget for 2017 calls for a slight property tax hike to help balance the township’s fiscal coffers and to pay for road paving and repairs, as well as other township expenses.

At its Oct. 17 supervisors’ work session, township manager Kurt Ferguson unveiled his recommended operating budget for the coming calendar year noting that the township “continues to face financial pressures,” and that increased millage rate on property owners will help fill that gap.

At the heart of the fiscal squeeze, according to Ferguson, is the surrounding communities which have or will soon enact Earned Income Taxes (EITs).

Unlike many municipalities, Newtown relies mostly on the EIT for its revenues instead of traditional property taxes that many other municipalities have.

In 2017, the EIT is expected to haul in about $6.33 million, representing nearly 54 percent of the township’s overall revenue collections.

The earned income tax is the largest revenue generator in the budget and is collected on the wages of residents, whether they work in or outside the township, as well as those non-residents who are employed in Newtown Township.

Under state law, the EIT cannot exceed one percent of a person’s pay, and anything less than one percent can be split among local governments and school districts that have enacted earned income taxes. There are exceptions. For example, Wrightstown Township levies .15 percent above the one percent for open space.

Newtown Township’s EIT is one percent, and if a non-resident’s home municipality doesn’t have one, then Newtown gets the entire one percent.

But Middletown Township has recently passed an EIT of a half percent, so Newtown and Middletown split the tax of a Middletown resident working in Newtown Township, as long as the total doesn’t exceed one percent.

Because of Middletown’s EIT, Newtown will receive about $198,000 less each year in revenues from those non-residents, according to Ferguson.

He also noted that Bensalem’s recent enactment of a one-percent EIT will cost Newtown roughly $202,376 in lost revenues in fiscal year 2017.

And to make matter worse, Yardley Borough is now also grappling with passing such a tax, which could mean that Newtown could lose at least some or even all of the $28,479 was collected in 2015 from Yardley Borough residents working in the township.

“If Yardley Borough enacts an EIT, the total loss to the township in a little over three years will be approximately $1,078,849 in non-resident EIT,” Ferguson commented in his half-hour budget presentation to the board of supervisors.

To help stem this loss of non-resident earned income taxes, Ferguson is recommending an increase in the current 2.5 mills that Newtown Township property owners pay each year.

However, none of this property tax goes into the general operating fund.

Of the 2.5 mills, 1.635 mills are dedicated to paying off debt on township-issued bonds with the remaining .875 mill going into the fire fund.

Under Ferguson’s plan that millage rate would more than double to 5.50 mills to raise substantial new revenues.

At 2.5 mills, an average homeowner whose property is valued at $400,000 pays roughly $100 each year to the township.

If that amount were hiked to 5.50 mills, which Doylestown Township currently has, then the average Newtown Township homeowner would pay about $220 a year in property taxes.

In Newtown Township, one mill equals roughly $340,000 a year in revenue.

According to the township’s manager’s recommendation, if the supervisors approve the higher millage rate, then one additional mill would go to the debt services fund and two mills into the general operating fund.

Those two added mills in the operating fund would help pay for essential township services, such as police, as well as parks and recreation.

Meanwhile the additional mill for debt service, Ferguson explained, would not be used to pay off the township bonds, but instead go towards generating $1,000,000 more for road paving and repairs in 2017, with another $1,000,000 to be used every three years for road improvements.

Currently the township allocates about $500,000 for road projects with most of that funding coming from the state Liquid Fuels Fund.

Ferguson noted that the township will end the 2016 fiscal year on Dec. 31 with a roughly $43,000 deficit, but that red ink is projected to rise to about $340,000 by the end of the 2017.

But state law mandates that all enacted operating budgets must be balanced.

The expected deficit in next year’s proposed operating fund will be filled by taking some of the anticipated $2.9 million in ready cash known as the ‘fund balance forward,’ an accounting tool representing money that is carried over year-to-year.

With fiscal belt tightening, the township manager hopes that next year’s projected deficit will be mostly erased.

The proposed budget package contains some capital spending for the police department, including buying three new police cars, six Kevlar vests, portable speed signs and several Tasers.

A used fire engine for the township’s Emergency Services Department is also on the list, as well as a new pickup truck for public works and installing security cameras in the township complex.

A number of repairs and upgrades for the township’s parks is also proposed, as is extending the trail system.

“I have budgeted $1,590,000 for trails in 2017 with 75 percent of that cost coming from state grants,” the township manager said.

According to Ferguson, he also would like to hire another police officer in mid-2017 at a budgeted cost of $60,000 for salary and benefits.

“The last time we hired more officers was in 2002, when we added two,” he pointed out.

Currently, the township police department has 28 full-time members, including the chief and command staff.

Overall, the estimated $12.62-million proposed operating budget is about $927,000 more than compared to 2016’s expected spending by the end of this year.

Revenues projections are expected to be $11,745,936 in the next fiscal year, roughly $446,838 higher than in the current 2016 operating budget.

As with most municipalities, running the police department takes up the lion’s share of an operating budget.

In 2017, about $4.91 million will be allocated for township police services, with more than $3 million of that going towards the salaries of officers, commanders and staff members.

The next biggest expenditure is for the township in 2017 will be the public works department which would be allocated $1,130,680.

Emergency services is budgeted at $946,288.

Parks and recreation would receive $621,653, with a good portion of that amount going towards township recreation programs.

Code enforcement and zoning would get $409,899.

During the budget presentation, the supervisors peppered Ferguson with few questions.

Over the next several weeks, several public budget hearings will be scheduled to tweak the operating plan, which will also be discussed at the regular supervisors’ meetings.

Under state law, the board must wait at least 30 days after approving the preliminary budget before a final package is put in place, which must be by Dec. 31.

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