Twp. Manager Says No Property Tax Hike in '12; Won't Discuss Numbers With Union Talks Underway

No new taxes. Costs are down and belts have been tightened. The Township's blue-chip bond ratings remain in place. All would seem to be well with the Lower Merion Township financial picture.

Wednesday night, though, some of the Township's Board of Commmissioners expressed suspicion that the news was too good to be true. Some accused others of politial pandering in an election year. One commissioner suggested that Lower Merion Township Manager Doug Cleland was seeking leverage for his own contract renewal.

And Cleland himself refused to discuss certain specific numbers related to his projections, during a night entirely focused on finance. His reason: he didn't want to reveal strategic information while in dicussions with Township union workers.

Explain Something to Me

Cleland told the Board of Commissioners on Wednesday night that he thinks no increase in property taxes for 2012 is “reasonable at this time,” but the preliminary budget projection which was met with great skepticism—and accusations—from some board members, much to the bafflement of others.

Cleland spoke about the property taxes during a budget workshop which focused on a five-year financial forecast for the Township, and the preliminary 2012 budget planning. Earlier, in a special Board of Commissioners meeting, the Board approved the refinancing of $10.83 million of general obligation bonds.

After listening to the financial report, some commissioners wondered how a zero percent increase in property taxes could be achieved. Commissioner Lewis Gould Jr., for instance, said no property tax increase or a minimal one is a “laudable goal. ... but I don’t see in this forecast how it can be achieved,” Gould said. Gould said the Board had not received an explanation on how no property tax hike would be achieved.

Cleland said he would prefer not to be asked to quantify his statements because the Township is in ongoing union contract negotiations with the Lower Merion Workers Association.

Gould asked Cleland if he had at least quantified the dollar amount. Cleland again responded that he would rather not discuss numbers during union talks, but Gould continued to press him.

Prior to Gould’s comments, Commissioner Jenny Brown also expressed skepticism about the financial forecast and the projection for no tax increase.

“Really, I think what it comes down to is I’m trying to figure out how this is the same Township as last year at this time when we had an absolutely dismal forecast…”

Cleland responded that long-term forecasts are based on assumptions—and that assumptions change. What has changed, he said, is the level of staffing. Eliminated staff jobs are unlikely to come back, and he said there's been a change in thinking about long-term expenses for personnel costs. (He also said there is less money in the equipment fund.)

“We are realizing we have major costs and we’re trying to do everything we can to have costs minimized and contained,” Cleland said.

Rogan expressed surprise at her colleague’s comments. “I think it’s interesting that we get some tremendous news and it gets shot at,” Rogan said.

Commissioner Philip Rosenzweig began his comments by saying to Rogan, “If you are sincere in shepherding this Board toward a zero percent tax increase, then it will be a delight to work with you.”

Rosenzweig Accuses Cleland

Rosenzweig then went on to suggest that the projection for no tax increase was politically motivated by commissioners who are up for reelection (he singled out Rogan in his comments) and Cleland, who is up for a contract renewal with the township.

Rosenzweig said the tax increase which the board passed last year was met with “public outrage” and the public is “very much against another tax increase.”

Commissioner George Manos said that he found the financial report easy to understand, and he disagreed with Rosenzweig about taxpayers being unhappy about last year’s tax increase.

“I wish we as commissioners would not assume to speak for the entire Township,” Manos said. Manos, who represents residents of Bala Cynwyd, said his constituents understand the value of services and are getting concerned about their reduction.

Commissioner Brian McGuire, like Rogan, was baffled by some commissioners' comments.

“I’m frankly dumbfounded by the response I’ve heard tonight, the negativity and the suspicion of some of the Board members,” McGuire said. “You would think it (the projection for no tax increase) was just awful. You would think it’s just the worst news in the world.”

Commissioner David Bernheim called his colleague’s decorum into question and said he did not think anyone’s actions were based on running for reelections.

“The truth is I think everyone does this because they want to … We’re not here to attack one another,” Bernheim said.

Paul McElhaney, chairman of the Finance Committee and vice president of the Board, said the discussions about no tax increases predates the election cycle. He too disagreed with Rosenzweig’s suggestion that Cleland’s own upcoming contract renewal had influenced his projection that no tax increase was feasible.

“His interest has always been in the best interest of the Township,” McElhaney said of Cleland.

During the budget workshop—which was held as part of a Board of Commissioners Special Finance Committee meeting—Cleland said he had been asked several months ago by Board of Commissioners President Liz Rogan to reasonably explain how the township could have no property tax increase, or even simply a small one, for the 2012 General Fund Budget.

Cleland said Wednesday that he was pleased to report that he believes it is “reasonable at this time” that there could be a zero percent real estate millage rate for the 2012 budget. He said that as Lower Merion Township Chief Financial Officer Dean Dortone’s updated five-year general fund financial forecast would show, efforts to control expenses have been working.

During public comment, David O’Connell of Lower Merion Citizens for Responsible Budgeting said the Township needs to control the expenses for the employees that it has-—such as what share of the cost employees pay for healthcare—and the township has not done so for the past 10 years.

10% Fewer L.M. Employees: Saves $2 Million

One of the ways the Township has controlled expenses is that its has reduced its staff by 10 percent, or 57 fewer employees (44 full-time and 13 part-time), by eliminating certain vacant positions, and not including other vacancies in the budget, Cleland said.

The township has saved $2 million in personnel costs by not filling the 57 vacancies, Dortone said—the bulk of the savings, as personnel costs account for 70 percent of the budget. 

In a presentation on the 2011 Financial Forecast Update, Dortone said that the actual revenue for 2010 was $1.1 million higher than the 2010 budget, overall 2010 expenditure savings were $1.5 million, and 2010 actual deficit was $400,000.

For the 2011 general fund, expenditures are $1.4 milllion less, or 2.5 percent lower, compared to the 2011 budget, Dortone said. In giving the 2011 forecast report, Dortone projected and reported the following for the overall 2011 total general fund:

• Revenues are projected to decline $123,000 or.2 percent, as compared to the 2011 budget.
• Real estate tax revenue has increased 10.8 percent, yielding $2.8 to $2.9 million in new revenue.
• Business taxes are up 7 percent from the 2010 actual, due to better performance across most industries. (But compared to the budget, the real estate tax is flat, he added.)
• Local services taxes increased 13 percent, or $200,000 higher than the budget, but the local service taxes are flat compared to the 2010 actual.
• Cable franchise fees are up $100,000 or 10 percent.
• Real estate transfer taxes decreased by $104,000, or minus-4 percent. (Affecting this, real estate transactions decreased in April and May, but real estate sales are typically better during the summer months, Dortone said).

Bond Issuance, Issues

The $10.83 million 2011 refunding of bond issues will result in debt service savings of $224,000 in 2011; $71,000 in 2012; and $142,000 in 2013, Dortone said, adding that the Township’s triple-A bond rating was reaffirmed and has provided historically low borrowing costs and two refunding opportunities for the township in 2011.

The Township has been paying lower costs for electricity but seen higher costs for overtime and materials, Dortone said. Also, he reported that the Township continues to save without significantly reducing services and continues to restrain new spending, Dortone said.

The refunding will save the township $241,170.96 in present value savings and $482,460.80 in cash flow, or budgetary, savings, said the township’s financial advisor, Daniel Kozloff of the PFM Group in Philadelphia. PFM also handled the actual auction.

Cash flow savings is the actual money saved, while present value savings is how much the money is worth in today’s dollars, Kozloff explained.

The Township held an online auction to sell its bonds Wednesday morning, and there were a total of seven firms which participated in the auction, placing 46 bids, Kozloff said.

UBS Financial Services won the auction, bidding an interest rate of 3.48 percent, Dortone said.

McGuire said that once again, with the refinancing, Lower Merion is seeing the benefits of having a triple-A bond rating from Standard & Poor’s and Moody’s. The Township is one of only four in the country that enjoys a triple-A bond rating from both of Wall Street’s major rating agencies, McGuire said, and he stressed the importance of maintaining it.