Remainder of Newtown Township's 2011 Budget May Be Depleted By November
Newtown Township Manager Mike Trio said the township may run out of funds as early as November at a supervisors meeting on Oct. 24.
NEWTOWN SQUARE–"We've been living on yesterday's earnings since 2008," said Larry Fischer, special assistant to Newtown Township Manager Mike Trio at a supervisors meeting on Monday evening.
Fischer, who has been temporarily evaluating the township's finances and budgets with Trio, said the township won't expect to see tax revenues until mid-February to March of next year. By the end of March, Fischer said the township can expect to see about $3 million and pay back the $200,000 short-term loan from the township's capital improvement fund that was approved on Monday night.
The Board of Supervisors approved, 4-1, for the authorization to permit a short-term loan of $200,000 from the capital improvement fund to the general fund for township operations. In addition, for the township manager to execute a corresponding loan document with a repayment date of no later than June 1, 2012, with an interest rate of 1 percent per annum.
Supervisor Linda Houldin, who held the lone nay, said she voted against the move of the funds from one township account to another because she was against paying that 1 percent.
The supervisors also approved, 3-2, the authorization for the township manager to identify banking institutions for a line of credit to fund short-term cash flow in lieu of 2012 tax revenues.
"We've initiated discussions with TD Bank, with PNC Bank, and with Bryn Mawr Trust to identify any kind of instrument to some sort of bridge between our zero budget out into the first quarter of 2012, which at this point is being identified as having a shortfall," explained Trio. "So we want to have funds available that will be paid back at the time of tax revenue coming into the township. We would propose to zero that line of credit out thereafter."
Trio described the remained of this year's budget as "very slim." Trio predicted the funds for this year's budget will run out in November. A crux of the funds that were spent
"We're trying to make the most of what funds are available," said Trio.
According to Fischer on Dec. 31, 2007, the township had a back balance of $2.5 million in the general fund which was then drained by nearly in half the following year with $1.2 million.
"Every year since 2008, there's been a deficit spending except in 2009–it was a balanced budget," shared Fischer.
Fischer said when he asked the township manager if there was still $200,000 fund left in the fund, the answer was yes, but after this Monday's evening, the supervisors identified another unanticipated expenditure which went to municipal authority fees as well as replacing the township's computer system which failed this summer.
"These items weren't budgeted items but were necessary to pay," said Trio.
Supervisors Chairman Joseph Catania explained that a $100,000 bill to pay the municipal authority engineer and a $44,000 loan taken out by the municipal authority because they didn't have any funds needed to be paid for by the township.
According to Trio, $400,000 of surplus money was carried over into this year's budget, in which the township no longer has any surplus money left to dip into for future budgets.
Supervisor George Wood vocalized he was opposed to borrowing the money, Houldin with the other nay, and believed the board was spending money on items that they shouldn't be spending on in the first place–mentioning the recent hiring of two new officers.
"It seems to me that we're borrowing money to pay for things that we're buying that perhaps we should have not bought in the first place," said Wood. "I'm just concerned, now that the township borrows money just to survive. All these expenses are increasing. There's something wrong here."
Supervisor Ed Partridge also shared his opinion in that the current state of the budget's shortfall was held in the hands of its previous administration, particularly former Township Manager Jim Sheldrake. Partridge alluded to the fact that the current administration now openly discusses the financial activities of the budget and township, where the previous administration had not.
"It seems to me that the deficit that we face right now is not due to reasons that have happened in the past three months," said Partridge. "It's due to prior poor internal controls. Ultimately the Board [of Supervisors] is responsible but the chief executive that runs the township on a day-to-day basis is the township manager."
Despite Houldin and Wood opposing Partridge's claims, Catania also backed up Partridge, sharing the same sentiments.
"Budget problems such as what we have now are not created in a month, they're not created in two months, and they're not created in three months," said Catania. "It's a problem that's been inherited by this township manager, this board, and the township of Newtown."
Regardless of the reason, Catania said what really mattered was what could the township do now going forward.
But Catania disagreed and said expenses are in fact not increasing at all.
"In fact, Mr. Trio and Mr. Fischer has actually saved us money going forward and we're actually saving money on at least the township's sid of personnel by either attrition, or cutting salaries, or not replacing people who have left us for whatever the reason is. So, expenses are actually going down."
Houldin suggested that the township should not only develop a short-term plan for the budget but also a long-range plan.
Wood responded to Houldin's suggestion that the supervisors are at fault for not developing that plan soon enough, but was hopeful with Trio's budget analsyses and strategies.
"That's our fault for not doing that planning," said Wood. "I think the board needs to take heat for that because we could've done it and we haven't done it. So, hopefully Mr. Trio brings new light to the board and I hope we can look forward to good things from him, especially what he's demonstrated so far."
The next three budget workshop sessions have been scheduled for Oct. 26, Nov. 2 and Nov. 9. The meetings will be held at 7 p.m. in the municipal building.