1. The 2019 Budget leaves the Road Improvement Fund, Open Space Fund and Future MS4 requirements underfunded while holding a $900K surplus and proposing tax cuts.
2. By proposing a tax cut The New Finance Committee Chair moved away from predictable borough funding to a more volatile funding model making the borough dependent on the Real Estate Market and Future Development in the Borough.
3. The borough has not prepared a 5-year plan to assess if the tax cut will be sustainable.
Where did all the money come from?
Over the last 4 years Chester Heights Borough General Fund has acquired a revenue surplus of approximately $900,000 due to 2 factors:
Transfer Taxes
Development & Permit Fee Revenue.
The trend began in 2015 with the $53.5M sale of Madison Apartments which generated $267,500 in additional transfer tax revenues. The sales continued to climb each year thanks to Wawa’s acquisition of residential homes along Wawa Rd., and home sales at Brookefield & Lenape Valley.
The construction at Brookefield, Lenape Valley, Wawa Corporate, and Arbour Square further added a significant amount of Permit and Development Revenues to the surplus.
These 2 revenue sources, which account for 46% of the Chester Heights General Fund Revenue, are highly depended on the volatility of the real estate market and the CONTINUED DEVELOPMENT in Chester Heights.
The Finance Committee Chair has proposed a tax cut for the 2019 tax year to take advantage of the surplus currently held by Chester Heights without conducting any long-range planning to account for changes in the real estate market and the impact on the boroughs future ability to meet expenditures. COPY of GENERAL FUND BUDGET (11.29.2018)
What else is missing from the Budget?
As part of the General Fund budget historically money is allocated to funds established via resolution for future projects and for state mandated objectives:
The following have NOT been funded under the currently proposed 2019 budget:
$36,000 for the Road Improvement Fund – Established via resolution 11-13-A. Historically funded annually for future road projects.
$25,000 for the Open Space Fund - Established via resolution in 2017 it requires that if a surplus is generated, up to $25K of the surplus be set aside annually for Open Space.
$59,062 for MS4 (Municipal Separate Storm Sewer Program) – The mandate from the Commonwealth that will require significant capital expenditure by Chester Heights over the next 4-5 year and is estimated by the borough engineer to cost approximately $59,062 per the Chester Heights Pollutant Reduction Plan.
$21,070 of Permit Fee Liabilities due to the Borough Inspector – This is strictly a math issue the inspector is paid 50% of all permit fees over the course of 2 years. 25% in the first year and 25% in the second year. Based on the total permit fees of $230K paid to the borough in 2018, and the projected $148K of permit fees to be received in 2019, the projected amount payable to the Inspector should be $94,590 (25% of $378K), however the GF budget has the amount budgeted at $73,520, a shortfall of $21,070. Whether the Inspector takes the money in 2019 is irrelevant as it is a liability on the borough and should be funded, not just for 2019, but also kept in reserve for 2020 when the balance of the fee will be due.
That’s $141,132 that should be in the budget as an expenditures before a tax cut is considered.
I believe it would be fiscally irresponsible to approve a tax reduction before all the borough’s obligations are met regardless of the perceived surplus, but as always I invite you to make your own assessment. If you have any questions here are some links to the last available documents provided by the borough.
LINKS: