Proposal after proposal from Republican commissioners for spending cuts in the 2011 proposed budget was struck down by the majority of the Lower Merion Board of Commissioners on Wednesday, Nov. 17, in a five-hour meeting.

Following a lengthy public comment period at the first public hearing on the proposed budget, the Republican commissioners offered up a series of motions aimed at reducing the proposed spending, budgeted at a 5.5 percent increase over 2010 levels.

No Earned Income Tax

Out of a total of 10 proposals, the only motion accepted by a majority of the commissioners was Commissioner Philip Rosenzweig's request that the board make a statement that "the 2011 budget will under no circumstances implement an earned income tax (EIT)."

Board of Commissioners President Bruce Reed said that there are merits to an EIT, including keeping tax revenues on pace with cost of living increases, and allowing residents who are underemployed to receive a break in their local taxes, which would not occur if assessed on a fixed property value. Reed also said there was not an adequate amount of time to discuss an EIT in this year's budget, and would therefore support the motion.

All four Republicans spoke in strong opposition to an EIT in Lower Merion. Commissioner Jenny Brown said, "You cannot cure a spending problem by finding new revenue. This discussion is more time than this board should ever consider again for an earned income tax."

The motion passed by a vote of 11-1, with Commissioner Steven Lindner casting the lone dissenting vote. Commissioners Jane Dellheim and Cheryl Gelber were not in attendance at the meeting.

Linder said after the meeting that he did not want to take anything off the table for 2011 because he believes the township will be right back in the same position the following year. "I have a large senior population in my district who would be dancing in the aisle right now if we moved to an earned income tax," Lindner said. An EIT would not tax investments, social security payments or similar revenue sources.

Send the Budget Back

The next nine proposals made by the board's minority did not gain enough support to pass. Rosenzweig offered two more motions, both failed along party lines in 8-4 votes.

Rosenzweig proposed that the commissioners reject the proposed budget and send it back to the township manager to limit spending to a 1.1 percent increase, equivalent to the change in the consumer price index (CPI) from January to the end of September in 2010, according to Rosenzweig. In tying the spending to inflation, Rosenzweig said he hoped to bring spending in line with the current economic realities.

When the motion failed, Rosenzweig offered a 2.75 percent increase in spending as an alternative, or half of the currently proposed 5.5 percent increase. The second motion was also defeated.

Democratic commissioners cited contractual raises to police officers of 3.75 percent and an open contract negotiations process with another 40 percent of township employees as reasons why Rosenzweig's proposals would not work. "Those numbers are baked into this budget," Commissioner Mark Taylor said. "We can't just abrogate everything in our employees' contracts by fiat." Taylor said he felt that the burden of cost cuts at the level Rosenzweig recommended would be born by too small a portion of the township's workforce.

"There has been a somewhat circular argument amongst the board about our involvement," Rosenzweig said before his spending motions. "If individuals on the board make specific motions, some on this board perceive that as inhibiting the township manager and his staff, yet when we give general direction to the manager, we are criticized for not giving specifics. Tonight we are going to do both."

After two rounds of motions to send the budget back to the township manager for his staff to determine where to make cuts failed, Rosenzweig said the Republicans will make specific recommendations for cuts instead.

Extend the Useful Life of Township Equipment

Commissioner Scott Zelov made three proposals, the first of which would eliminate a transfer of $400,000 from the general fund to the township's equipment fund. The money would be invested and saved for future vehicle and equipment purchases made by the township. Zelov said that he would like to see the township extend the useful life of its equipment to compensate for the loss in reserves to pay for new gear.

The effect on the 2011 budget would be reducing the proposed 12.7 percent tax increase by about 2 percentage points, according to Zelov.

Township Manager Doug Cleland said that the township is already budgeting $710,000 below 2009 levels for equipment fund contributions, and he expects that major purchases for shade tree and highway maintenance equipment will have to be made in 2013-14, as well as new radios for police in the coming years.

"Because of the cost of inflation, the advantage of equipment fund is that it allows us to avoid the peaks and valley of expenditures," Reed said. The board president opposed the motion on the grounds that it would irrevocably hurt the township's ability to purchase replacement equipment without major disturbances to the budget.

The vote failed in a 7-5 vote. All four Republican commissioners, Rosenzweig, Brown, Zelov and Lewis Gould voted in favor, as well as Commissioner Brian Gordon.

Reduce the Non-Police Passenger Vehicle Fleet

Zelov's second proposal was to instruct the township manager to reduce the number of non-police passenger vehicles to only those that are deemed absolutely essential. The manager would be left to determine which vehicles meet that criteria.

The township currently operates about 20 vehicles for use in the highway department, by inspectors and administrators, and as department vehicles, according to Cleland. Zelov said that by reducing the number of vehicles the township operates, the equipment fund would last longer because it would have to buy fewer vehicles, thereby saving the taxpayers money.

Concerns over parking space and efficiency were among the reasons given by the board's Democrats for opposing the motion. Taylor said he would be in support of exploring the option, but because the motion did not include specifics about which vehicles would go, he would not support it.

The motion failed on a tie 6-6 vote. A majority of commissioners is necessary to pass any motion. Commissioner Rick Churchill joined all four Republicans and Gordon in support of the motion.

Tap Into Surplus Funds

Zelov's final motion was the subject of many of the public comments, and a petition signed by over 1000 residents. The township keeps a general fund balance, essentially a pool of surplus money, as required by state law.

The state statute required the balance to be equal to or greater than 12 percent of the total general fund expenditures of each municipality. In Lower Merion, a policy was adopted in 2007 to keep the fund balance between 15 and 18 percent of general fund expenditures. The higher amount was perceived to be prudent for a more substantial safety net, and also to continue the township's AAA bond rating, which gives the township favorable interest rates on the bond market, saving the township millions of dollars in the past.

The 2011 budget proposal calls for a fund balance level of 17 percent of general fund expenditures. Zelov and others called for a 15 percent threshold, a savings to taxpayers of $1 million, or about 4 percentage points of the 12.7 percent increase proposed.

Reed strongly opposed the motion, claiming that there was no way the township could know if the AAA bond rating would be affected, and it was too great of a risk.

Reed mentioned the township's recent bond refinancing that saved the township about $1 million by taking advantage of the current low interest rates. Radnor Township went to market on the same day as Lower Merion, but because they were Aa rated, a lesser rating, they saved about $546,000 less than Lower Merion on a similar amount of money, according to Reed. "That's why I don't like to play on the margins with this. It is something that represents a danger to what Lower Merion has been. We have a history of financial prudence in this township."

Brown strongly disagreed with Reed's arguments. "We adopted a ceiling (of 18 percent) in 2007 for the general fund balance exactly for this reason, so you could not continue to tax people on the fear that we are going to lose our AAA bond rating," Brown said. "There is no danger, none, posed by Commissioner Zelov's motion."

The motion failed 8-4 following party lines.

Cuts to Library-Related Expenditures

After Zelov's three failed motions, Gould proposed two motions to reduce costs associated with the Bala Cynwyd Library renovation project. Gould made a motion to delay all construction and renovation in 2011 except for that which the township manager deems absolutely necessary – $3.4 million is budgeted for the project in 2011.

Gould also proposed cutting $115,000 of new expenditures in the budget to help the township's library system pay for periodicals, databases and other subscription services previously paid for by the state.

Cleland said that because the township had already borrowed the money for the projects and is scheduled to make debt service payment on it in 2011, delays to the work would not immediately save taxpayers money, although it could have an impact in 2012.

Taylor said because the debt has already been acquired, and because he thought it would not be fair to renovate Ludington Library and then delay renovations to Bala Cynwyd Library, he could not support the motion.

The motion failed by a 6-6 vote. Commissioners Gordon and Lindner joined the Republican commissioners in support.

The second motion failed 7-5, after the Lower Merion Library System director was asked to explain the significant challenges facing the library after Pennsylvania cut $370,000 in funding for local libraries for 2011. Lindner joined Republicans in support of the motion.

Outsource Trash Pick-up

Despite the township's decision in 2010 to purchase a new fleet of refuse trucks, Brown proposed that the township issue a request for proposal (RFP) for private contractors to take over refuse and recycling collection duties in Lower Merion. Brown said that she thought the township ought to at least see what the potential savings were, which she said in her research could be as high as $2 million per year.

Because of the recent truck purchases, most of the Democratic commissioners were resistant to submitting the RFP. Commissioner Paul McElhaney recused himself from the vote because of a family tie to the local refuse department, and the motion failed 7-4 along party lines.

Revamp Healthcare Payouts

Brown also recommended a change to the township's opt-out policy for healthcare benefits to non-contractual employees. The township currently offers incentives for employees to opt out of township provided healthcare, a tactic that Brown said was passé in the private sector, and originally used to limit people who chose double coverage from a spouse's employer.

The cost to the township is about $10,000 on average per employee that opts out, according to Brown. To limit the cost, she proposed a motion to reduce the percentage of the opt-out premium covered by the township for non-contractual employees from 50 percent to 20 percent.

Reed said that his employer still offers an opt-out option, and that without more information about the effects of the proposal he would not support it.

Commissioner George Manos said that he could not philosophically support making changes to those workers' benefits simply because they are not protected by a contract.

The vote went 7-4 against the motion along party lines, with McElhaney out of the room.

Township Advertises for Tax Increase

Brown said she had other motions, but did not expect any of them to pass, and did not bring them to a vote.

Taylor brought his original motion to a vote, to advertise for the adoption of a tax increase between 0 and 4.26 mills (corresponding to a 12.7 percent tax increase) on Dec. 15, which passed along party lines.

What's Next

A second budget hearing will be conducted on Dec. 1 in the Township Administration Building at 7 p.m.

The final determination on the budget is schedule for Dec. 15, when the tax levy will be decided, as well as all spending plans for 2011.