John Mack - Newtown Supervisor
Finances Category

Tough Time Ahead for Newtown Township

“Extraordinary times call for extraordinary measures.” These are indeed extraordinary times with many businesses forced to close and millions of people out of work due the measures necessary to contain the Coronavirus pandemic. And municipalities like Newtown Township that depend upon business and job related taxes face financial difficulties if the shutdown continues and people do not get their jobs back.

It is unknown to what degree the COVID-19 shutdown will affect the Township's finances. Obviously, Earned Income Tax (EIT) Definition will likely take a hit due to the temporary or permanent closure of businesses. Real Estate Transfer Tax Definition will also likely be, or become, compromised as people brace for a potential financial impact.

In addition, charges for public safety (permits) may decline if building and construction drop off, and the township's Parks & Recreation programming revenue stream may be significantly less if the township has to cancel summer camps.

These are major sources of revenue that fund the day-to-day operation of the Township as well as projects such repaving roads, which may be cut back to save money.

Also, Keystone Collections, which manages municipal and school tax administration, collects local EIT Taxes. Keystone extended the Individual filing deadlines to match the State and Federal date of July 15, 2020. This delay in collecting EIT will also negatively impact Newtown Township’s ability to carry out needed services.

Given that many Newtown Township residents and non-residents who work in Newtown may be laid off for weeks, if not months, it is likely that Newtown will take a hit on EIT revenue in 2020. How much of a hit is uncertain at this time. But as little as a 10% reduction in EIT (see chart) could mean bad news regarding the township’s fund balance and consequent bond rating.

What You Need to Know About EIT

EIT is a tax for general revenue purposes in the amount of 1% imposed on earned income including salaries, wages, commissions, bonuses, incentive payments, fees, tips and other compensation received by residents of Newtown Township and by nonresidents of Newtown Township for work done or services performed or rendered in Newtown Township. This includes 1% of the net profits received from businesses, professions or other activities conducted by residents of Newtown Township and by nonresidents of Newtown Township. For Newtown, this tax represents 61% of the total General Fund revenue projected for 2020.

NOTE: 0.5% of Resident EIT goes to the township and 0.5% goes to Council Rock School District. The full 1% of Non-resident EIT goes to the township.
How Have You Been Impacted by COVID-19?

Given the fact that the Township heavily depends upon tax revenue from local businesses and the employees they hire, the closure of these businesses and the subsequent employee unemployment may have a big impact on the township’s financial health, delay major public improvement projects, and may even lead to a negative general fund cash balance.

To prevent that, as a Newtown Township Supervisor, I will continue to be called upon to make critical decisions in the coming weeks in response to this situation.

Consequently, it is important that I get feedback from local businesses and employees that have been impacted by COVID-19 to help me determine the likely worst-case scenario and make informed decisions to prevent that.

To get that feedback, I am hosting two COVID-19 Impact Surveys – one for local business owners and one for local residents/employees.

If you are a business owner, please take my COVID-19 BUSINESS Survey 

COVID-19 Business Survey

If you are/were employed by a Newtown Township business, please take my COVID-19 EMPLOYEE Survey 

COVID-19 Employee Survey
Another casualty of COVID-19: Open Government!

 

Posted on 10 Apr 2020, 01:38 - Category: Finances

2020 Estimated Real Estate Tax Revenue & Expenditures

Newtown Township's Real Estate tax millage Definition is composed several components dedicated to specific funds or projects. These are (1) 2.625 mills for debt services purposes (to pay off loans for road improvements, and other projects), (2) 0.875 mills for fire protection (Support for the Newtown Fire Association, Fire Chief’s salary, health insurance, etc.), (3) 0.55 mills for fire hydrant maintenance, and (4) 0.45 mills for the Newtown Ambulance Squad. 0.0 mills are collected for "general" purposes. Thus, residents know exactly what they get for their real estate taxes.

For an average Newtown Township home assessed at $40,000, the yearly real estate tax is $180 (4.5 millage X $40,000/1,000).

According to the 2020 Preliminary Budget (here), the total Real Estate Tax Levy for Newtown is estimated to be $1,558,345 based on a total assessment of real estate assets of $346,298,840 (see table and chart below).

Numbers from 2020 Preliminary Budget, Schedule A

Debt Service Tax for Town Center & Roadwork

The township is paying off a general obligation bond for the construction of the town center and a $1 million loan for the paving of roads. The total expenditure for those two items is $1,012,160 (see page 19 of 2020 Preliminary Budget).

Approximately 5.5 miles of roads will be repaved in 2020 thanks to $686,194 to be received from the 2020 State Liquid Fuels Program Definition and the aforementioned $1 million loan, which will be paid back over the next 3 years.

According to the September 20, 2018, "Preliminary Report on Newtown Township’s Municipal Finances" prepared by the Newtown Township Finance Committee, the current tax millage dedicated for repayment of the township building construction annual debt service will "not meet mandatory increased yearly payment amounts possibly as soon as 2020. The dedicated millage rate will need to be increased or supplemental revenue found" (view the video of the presentation of that report here).

Fire and Rescue Squad Taxes

The revenue collected via the Fire Tax will cover the $175,000 that the township gives to the Newtown Fire Association plus pay for the Fire Chief's salary and benefits and other fire-related expenses. The $185,000 Fire Hydrant Tax pays for fire hydrant maintenance by the Newtown Artesian Water Company.

Last, but not least, is the Rescue Squad Tax, which pays for the $151,000 that the township pays to the Newtown Ambulance Squad (NAS). You may recall that in October, 2017, Evan Resnikoff, NAS Chief of Operations, asked the Supervisors implement an EMS millage of 0.5 mill, which would generate about $172,000 of funding for the squad (see the video here). The Supervisors went on to approve the current 0.45 mill tax.

Posted on 22 Nov 2019, 11:08 - Category: Finances

2018 Audit Presentation

Edward Furman, a partner at Maillie, LLC, presented a summary of the 2018 audit to the Newtown Board of Supervisors at the October 10, 2019, public meeting. You can download the complete audit here. Last year, I summed up Furman's opinion thusly: "As long as non-resident Earned Income Taxes are not severed, all is well in the Newtown Township financial garden."

Real Estate Taxes Remain Low

Newtown Township has one of the lowest real estate tax rate in the region (see chart below). Currently, the Township relies entirely on earned income tax, real estate transfer tax, and a local services tax to fund the general operations of the Township. No real estate taxes go into the General Fund to pay for things like the police department and the public works department. Here's how those taxes are used:

  • Debt Service (mostly to pay for the Administration building):  2.625 Mills
  • Fire Protection: 0.875 Mills
  • Rescue Squad: 0.450 Mills
  • Fire Hydrant Maintenance: 0.550 Mills 
Financial Challenges Ahead

In 2020, Newtown Township faces financial challenges including unfunded state environmental mandates (see Pollution Reduction Plan Approved), non-resident Earned Income Tax (EIT) uncertainties (the Township suffered a "tremendous" loss of EIT when Lockheed Martin shut down and the property remains underutilized), real estate transfer tax decline (fewer new houses being built), the need for additional staffing (especially in the Police Department and Public Works), and the need to improve infrastructure (e.g., road repairs).

Posted on 07 Oct 2019, 10:20 - Category: Finances

Attracting New Businesses to Newtown Township

I'm often asked, What will you do to attract new businesses and new jobs to our municipality?

This is an important question because to maintain a low 4.5 mill property tax while providing the excellent services our residents have come to expect, the Township depends on business-related sources of income such as the Earned Income Tax (EIT Definition), which accounts for nearly 80% of its tax revenue!

As a member of the Newtown Board of Supervisors, I voted to create the Newtown Finance Committee, which is in the process of helping Newtown Township attract employers/jobs and pursue economic development.

I also supported the Township’s application for a matching $40,000 PA Department of Community and Economic Development (DCED Definition) grant to implement an Early Intervention Program (EIP Definition) that will assess the township's financial condition and identify additional sources of income, including attracting new businesses with high-paying jobs to Newtown (read “Newtown Township Seeks Grant to Assess Finances”).

I will continue to work with local business associations, the PA Department of Community and Economic Development and Newtown Township's Finance Committee to promote our community as a great place to establish businesses with high-paying jobs.

We Need This Kind of Promotion!

Posted on 12 Apr 2019, 01:15 - Category: Finances

Newtown Applies for DCED Grant to Assess the Township’s Financial Condition

Newtown's Financial Garden

At the January 23, 2019, Board of Supervisors meeting, a resolution was passed authorizing the Township Manager to apply for a matching $40,000 Department of Community and Economic Development (DCED Definition) grant for implementing an Early Intervention Program (EIP Definition) that will assess the township’s financial condition and identify additional sources of income. 

This is a matching grant. If the Township is awarded a grant, it must match the amount with its own funds. $40,000 is the maximum grant applied for. That anticipates a total budget of $80,000. However, the actual expense of hiring consultants for the project may be less the projected budget.

[Listen to this podcast and learn more about the EIP and the grant process: “Andrew Sheaf Talks About DCED's Early Intervention Program”]

The following are the questions and answers from the EIP grant application submitted to the DCED on March 15, 2019.

What do you plan to accomplish with this project?

Newtown Township is currently facing stresses on Township finances. The Township will need to address fire protection and emergency response needs that will require additional capital resources.

In the past, the Township has relied heavily on the EIT Definition [Earned Income Tax] to fund a large portion of its budget. That may no longer be possible as neighboring municipalities are implementing the EIT to support their own budgets. [For more on that, read “Earned Income Tax Trends”.]

Long-term budget needs must be anticipated and addressed now if the Township is to continue to be able to meet the needs of its residents. There are several critical factors, which must be addressed: what has been the practice of using reserve funds to offset other current budget needs.

By 2020, the tax millage dedicated for loan repayment for the construction of the Township Building will no longer meet mandatory increased yearly payment amounts. It is critical that changes in the budget process be changed and new sources of income must be sought.

How do you plan to accomplish it?

Step 1: Financial condition assessment: a multi-year trend analysis of historic financial data and an assessment of current budget performance will be performed by the consultant as a means to establish a realistic baseline of the township’s historic and current financial condition.

Staff will provide the consultant with current budgeting and financial challenges and assist with creating a five-year fiscal projection, estimating revenues, expenditures and fund balance levels. Staff will also share current practices with the consulting team to provide a solid understanding of what practices are currently in place.

Step 2: The consultant will make recommendations to the township regarding the following:

  1. Possible changes to the operation of the township
  2. Proposals regarding establishing a multi-year budgetary process.
  3. Identification of additional sources revenue, including possible sources of economic development within the township.
How do you plan to use the funds?

The funds will be used to engage a professional consultant with experience and expertise in preparing a multi-year financial management plans under the EIP plan guidelines and terms. The consultant will also have extensive experience advising municipalities generally on public financing matters.

The main purpose of the program is to establish short-term and long-term priorities and objectives that will strengthen the managerial and fiscal capacity of the township.

A secondary, but, as noted in the “identified problem,” an extremely important objective of the purpose of this program is to identify additional sources of revenue for the township.

Posted on 18 Mar 2019, 12:59 - Category: Finances

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The opinions expressed here are solely those of John Mack and do not represent the opinions of any other person or entity.
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