1998 Budget Message

November 14, 1997

President and
Members of the Board of Commissioners

Township of Lower Merion, Pennsylvania

Pursuant to the provisions of Article X (Finance and Budget) of the Township’s Administrative Code, transmitted herewith is the 1998 Proposed Budget for the Township of Lower Merion.

The purpose of this budget message is to highlight key information pertaining to projected revenue and expenditures in the 1998 Proposed Budget and to summarize the allocation of resources. It is also intended to serve as a means of informing the Board of Commissioners and the citizens of Lower Merion of the fiscal challenges that we have overcome as well as those that lie ahead.

For the past several years, the Township has prepared for and taken many definitive steps to address long-range financial problems and issues. There are two items of specific note which have been addressed in the development of the 1998 Proposed Budget. The first is the rebasing of the real estate tax millage rate in response to the implementation of a County-wide property reassessment effective January 1, 1998. The second is an increase in the Solid Waste Fees aimed at offsetting a portion of the annual $1.4 million loss in Montgomery County solid waste disposal subsidies effective December 31, 1997.

From the outset, the Board of Commissioners indicated that it did not intend to use the County-wide reassessment as means to automatically generate additional revenue. It was the Board’s desire to remain "revenue neutral" by simply adjusting the millage rate so that the Township will continue to collect the same amount of real estate tax revenue in 1998 as it would have under the 1997 millage rate. As a result, the 1998 Proposed Budget reflects a re-based millage rate for 1998 of 2.62 mills.

To help make up for the loss of the $1.4 million subsidy from Montgomery County, the 1998 Proposed Budget reflects a $600,000 increase in Solid Waste Fee revenue. After two public hearings on the 1998 Proposed Budget, the Board of Commissioners will make the ultimate determination on the specific method to be used to generate this increased revenue. It is important to note that even with the proposed Solid Waste Fee increase, the Solid Waste Fund will still require a subsidy of $1.3 million in the form of a transfer from the General Fund in 1998.

The 1998 Proposed Budget for the General Fund also reflects an appropriation from the Township’s fund balance of approximately $2.8 million in order to bring the budget into balance. Only through effective long-range financial planning has the Township positioned itself to have sufficient reserves to support this planned draw-down. This will be possible while still maintaining the Township’s ongoing fiscal policy established in 1990 which requires the minimum level of fund balance to be maintained at no less than ten percent (10%) of anticipated annual revenue.

All citizens of Lower Merion Township can rely upon the fact that the Township’s conservative fiscal management practices will continue in 1998 and beyond. This does not mean, however, that we are contemplating moving to a status quo operational philosophy. In fact, there are many forward-looking and visionary goals that are to be undertaken in 1998 and beyond. These goals are evidence of the Board’s commitment to the future.

Whether it be planning for capital improvements, open space land management, fire protection services, community-oriented policing, economic development, or recreational and athletic facilities, the Township is continuing to focus on desired outcomes in partnership and consultation with a broad cross-section of the community.

I am even more pleased that our Township organization is increasingly coming to understand the need to improve and expand upon its strategic planning capability. This will require a greater emphasis on policy orientation and priority setting in order to ensure that the outcomes we desire are consistent with our willingness to pay. As long as we stand fast to this commitment, all bodes well as we look ahead to the year 2000 -- the Township’s 100th year of incorporation.

The Township, like all other organizations, is affected by surrounding economic conditions. Some recent key economic trends that may have a direct impact on the Township include:

Short-term interest rates over the last twelve months have been erratic but generally rising. The three-month Treasury Bill yield as of October 1997 was 5.06 %, up slightly from last October’s yield of 5.01%, providing opportunities for higher investment income.

Longer-term interest rates have been falling in 1997, most recently as a result of the movement of cash from the stock market into bonds. If this market persists into next spring, it will have a positive effect on costs when issuing General Obligation Bonds which we are projecting will be needed to finance the 1998 Capital Improvements Program. The Bond Buyer Index for tax-free municipal bonds as of October 31, 1997 was 5.58%; at the end of October 1996 the index was 5.72%.

The Consumer Price Index (Philadelphia Urban Wage Earner) showed a twelve month increase of 2.6% in September 1997, compared to a 2.4% increase at the same time last year. This indicates that the costs of goods and services in our region are stable. Over the past several years, the Township has benefited in its purchases from low inflation rates. Recent trends in the local construction industry indicate that bid prices are higher reflecting that contractors are busy. The low inflation rate has been a factor in controlling total expenditures. To the extent that goods and services increase in cost, pressure is exerted on expenditures.

The local business economy appears to be performing well as witnessed by the Township’s mercantile and business privilege tax collections. The consistency of the Township’s annual collection of occupational privilege taxes points toward very stable or slightly growing employment levels in the Township.

The local housing resale market for 1997 is extremely active. Transfers through September 1997 are 13% higher than during the same period last year. With current mortgage rates now at relatively low levels, and predicted to remain so into 1998, resale activity should remain high. The Township’s deed transfer tax collections are directly related to this trend.

In summary, over the past year, the local economy has maintained the momentum established in 1996 with continued business growth, increasing short-term interest rates bolstering investment income, and lower long-term rates providing opportunities for financing business expansion and undergirding the real estate market. Inflation has remained low alleviating pressure to increase budgets in order to maintain purchasing power. All of these positive economic trends are helpful as we look ahead to 1998.

The 1998 Proposed Budget does not reflect a change in any rate of taxation for the taxes imposed by the Township, although the real estate tax millage rate will be re-based due to the implementation of the County-wide reassessment in 1998. This new millage rate will be "revenue neutral." 1998 will be the fifth straight year without any tax rate increases.

The Township’s ability to levy taxes is limited by State law. The State not only determines which taxes may be levied, but it also regulates the rates at which taxes may be levied. Currently, the Township levies five taxes: Real Estate, Business Privilege, Mercantile, Occupational Privilege and Deed Transfer. The State set forth a variety of categories under which the Township may levy real estate taxes -- each category having a different purpose and maximum limit. What is particularly noteworthy is that the Township does not impose the following taxes which are permissible by State law: Occupation, Per Capita, Earned Income, Amusement and Mechanical Device.

The Township’s real estate tax millage has remained at 56.5 mills since 1993. In 1998, the County-wide reassessment of all properties goes into effect. The new 1998 assessments have been established by the County at 100% of market value, compared to the current 1997 ratio of 5.3%.

To not raise taxes, the Township decided to remain "revenue and millage-neutral" and therefore to not generate additional tax revenue due to the reassessment. To do this, a calculation was necessary to convert the 1997 millage rate to the same effective rate for 1998. To accomplish this goal, the following calculation was made:

In the past, the Township levied real estate taxes under a variety of general and special purpose categories. With the new assessments, it is no longer necessary for the Township to use any of the special purpose millage categories. Therefore, the entire millage of 2.62 mills will be levied under the General Purpose millage category in 1998.

It should be noted that the total 1998 assessment of $6,955,900,324 reflected in this proposed budget is subject to change. Further analysis currently being conducted by the County could alter this number. In the event the total assessment is reduced significantly prior to the scheduled adoption of our budget on December 17, 1997, we may seek to adopt a higher millage than the proposed 2.62 mills so as to remain at our planned "revenue neutral" position for 1998.

As noted before, 1998 marks the fifth straight year without a millage increase. As shown below, the Consumer Price Index for the Philadelphia region has risen by +10.4% (from 1993 to 1997) since the last millage increase in 1993. In addition, the Township’s assessed value, which ultimately determines the income from the real estate tax, is not growing (including the October 31, 1997 interim assessment). From 1982 through 1991, assessed value in the Township grew from $279,061,230 to $323,585,489. However, since 1991, it has declined to $322,182,819 through October 1997.

Current Real Estate Tax collections from 1991 through 1997 (Estimated Actual) have also been relatively stagnant. In 1991, collections of Current Real Estate Taxes were 17,406,966. Despite a 1 mill tax increase in 1993, the Current Real Estate Tax collections for 1997 are estimated to be $17,600,000.

The Township’s real estate tax millage rate increases have historically been significantly lower than those of the other local governmental entities. In fact since 1990 the Township’s millage has increased 15.3% while the School District’s millage has increased by 68.3% and the County has increased its millage by 29.1%. During that time, the Township’s proportion of the total real estate tax millage (County, Township and School District) has decreased from 25.5% to 19.8%. This percentage will likely fall again in 1998 as the Township maintains its tax rates at 1993 levels.

The Township will continue to face limitations on raising revenues through all other levies that it does impose. Currently the Business Privilege, Mercantile, Occupational Privilege, and Deed Transfer Taxes are all levied at their maximum rates.

The long standing litigation involving spot reassessments is finally drawing to a close. The Court ordered the County to notify all Township residents of the preliminary settlement agreement and established September 30, 1997 as the final day for eligible property owners who believed they were spot reassessed to become part of the class settlement or to opt out of the settlement.

The preliminary settlement agreement will provide property owners in the class settlement with three years of real estate tax credits beginning in 1998. The agreement imposed a total cap on real estate tax credits from the Township of $750,000 or $250,000 per year. Each eligible property owner will be able to obtain the full amount of their credit as long as the cap is not exceeded. While a final count of members of the class settlement is not expected until next spring, it appears that those included in the class settlement will be able to receive the full amount of their credit as claims are projected to be less than the cap of $750,000. It is our current intention to handle any required tax credits in 1998 through existing financial resources.

Since its creation in 1992, the Solid Waste Fund has required a subsidy in the form of a transfer from the General Fund to fully finance its operations. Beginning in 1996, the subsidy/transfer to the Solid Waste Fund was increased beyond that needed to fund operations. This action was taken to "smooth out" the impact of the loss in 1998 of $1.4 million in revenue for waste disposal costs resulting from the expiration in December 1997 of the twenty-year intermunicipal agreement with the County. In 1996, the subsidy/transfer from the General Fund to the Solid Waste Fund was $719,829 or $245,000 more than was needed to finance operations; in 1997, it was $1,479,145 or $500,000 more than needed in the budget to finance operations. Without additional revenue, the Solid Waste Fund would require a subsidy/transfer of $1,900,000 in 1998.

To partially offset the $1.4 million loss in 1998, on November 5, 1997, the Board of Commissioners’ Finance and Economic Development Committee recommended the advertisement of an ordinance that will raise Solid Waste Fee revenue by $600,000 by increasing the two-tiered annual subscription rate across-the-board by +22%. The following summarizes the proposed fee increase:

Subscription Level	1997 Rate	1998 Rate (proposed)	Amount of Increase

One Container/week	$125	$152	$27

2-5 Containers/week	$190	$232	$42

As in the past, collection of unlimited recyclables will be included in the above fees. The Solid Waste Fee revenue increase will reduce the Transfer from the General Fund from $1.9 million to $1.3 million.

The Township’s comprehensive residential recycling collection program continues to be successful. In 1996, the total percentage of waste diverted from the waste stream was 40.4%, far exceeding the State Act 101 goal of 25%.

The Sanitary Sewer rental fee is set each spring after water consumption data is received from the Philadelphia Suburban Water Company. The major components affecting this fee are expected to remain stable. At this time, the City of Philadelphia does not contemplate a waste water treatment fee increase in 1998. Therefore, the Township has not projected a sanitary sewer rental rate increase for 1998. This would allow the fee to remain the same as it has been for the past five years -- since 1993 -- $2.75 per thousand gallons of water consumed.

The Insurance Trust Fund was established in 1986 to provide a source of funds for the Township’s retention of risk in general liability matters. This was a prudent decision that has served the Township well over the years. As a result of this year’s excellent "buyers market" for general liability insurance coverage, the Township was able to secure general liability insurance coverage as of July 1, 1997 for a very attractive premium. At the same time, an actuarial valuation was performed on current reserves in the Insurance Trust Fund . This valuation concluded that the total reserves are sufficient to cover the Township’s liability for claims which have yet to be reported or closed. As a result, it was unnecessary to make the $500,000 contribution/transfer from the General Fund budgeted in 1997. Furthermore, no contribution has been budgeted for 1998.

Fund balance in the General Fund is the cumulative amount of money retained after all expenses have been paid and all revenue has been received. In 1990, the Township established a formal fiscal policy that requires the maintenance of a fund balance at a minimum of 10% of projected annual revenue.

Maintenance of an adequate fund balance is important because it provides a financial "safety net" in the event of emergencies or unforeseen circumstances. Fund balance maintenance is also a big factor considered by the bond rating agencies when evaluating the Township's credit worthiness.

Over the past seven years the Township has taken a planned drawdown on its fund balance only twice (1990 and 1991). It is also projected that for 1997 and 1998 approximately $1.5 million and $2.8 million respectively will be needed to meet budgetary requirements.

It is projected that the Township’s 1998 year-end fund balance will be approximately $6.9 million. While this fund balance level continues to meet our minimum 10% policy, it is evident that deficit spending cannot continue indefinitely.

The 1998 Proposed General Fund Revenue Budget is $30,515,000. This is higher than the 1997 Revenue Budget by $573,830 or 1.9%. The primary reason for this increase is recognition of the strength of the local economy as witnessed by our excellent estimated actual revenue results for 1997. Revenue in 1998 is budgeted to decline slightly from 1997 estimates based upon taking a fiscally conservative view of the likeliness of sustained current economic conditions.

For the past four years, receipts from the real estate transfer tax have been quite strong, reflecting the healthy local real estate housing resale market. 1996 was particularly solid, bolstered by a few very large property transfers, one of which occurred in December. Through September 1997, real estate transfers are almost 13% higher than for the same period in 1996. 1998 collections are projected to remain strong.

Mercantile and Business Privilege Tax collections are occurring at a record pace in 1997 and will exceed the 1997 Budget by $275,000 or 9%. This is a reflection of the strong local economy plus the Township’s efforts in locating unregistered businesses and collecting delinquent payments. We expect to maintain a high level of collections in 1998.

Fees for Licenses and Permits are also projected to exceed the 1997 Budget, particularly Building & Electrical Permits, Plumbing Permits, and Franchise Fees. Building & Electrical Permits are projected to exceed the 1997 Budget by over 15%, and Plumbing Permits by over 20%. Departmental Earnings are also expected to exceed the 1997 Budget in earnings from Parking Meters (+8%) and Zoning & Subdivision Fees (+47%). Other Revenue is also higher than the 1997 Budget, primarily due to increases in Investment Income (+10%).

All revenue items reflecting increases are sensitive to the local economy in which employment, sales of goods and services, and real estate transfers are continuing at an exceptional pace. In addition, revenue reflects various minor increases in fees and rates which were increased July 1, 1997, on the basis of a fees and rates study conducted during the past year. Approximately $200,000 per year in additional revenue is expected to be generated through implementation of the fees and rates study which brings fees for certain services closer to full cost recovery.

Under the Other Revenue category, Reimbursed Expenses are diminishing as a result of the expiration of the County’s share of debt service on the now retired bonds which financed the solid waste transfer station at the Township’s Public Works Complex. Reimbursed Expenses also assume the continuation of the same level of voluntary contributions from the Township’s hospitals, private educational institutions and other applicable non-profit organizations. The voluntary contributions help to offset the cost of Township services to these tax-exempt institutions. Grants and Gifts - Police primarily includes federal grants for community policing under the COPS Ahead program and state grants for drug awareness education under the DARE program.

The 1998 Proposed General Fund Expenditure Budget is $33,380,438 which represents a reduction of $34,424 when compared to the 1997 Budget.

The key areas of change are an estimated $550,401 for previously negotiated salary increases for the FOP and Workers Association, and increases for all other non-union employees including management. Although there is only one upgrade of a part-time position to a full-time position in 1998, there is $54,000 in personnel reclassifications and additional hours of service; $56,000 in reassigning stipends from Other Charges and Transfers to Wages; and $156,000 in longevity and step increases for attaining additional years of service such as police officers attain when they complete their probationary period.

Fringe benefits are increasing by $287,295 of which $62,456 is the estimated amount of FICA and Medicare attributable to the salary increases described above. The increase in the Township’s self-insured paid prescription plan is $221,427 which reflects actual recent experience of utilization and prices. All other changes in benefits net to only +$3,412.

Other budget increases include $20,258 for increased technical training for police officers and $34,410 for enhanced organization-wide training for all Township staff. Other increases include $49,368 as the net increase in insurance after savings in several coverages and purchasing General Liability Insurance to replace the self-insured program with first dollar coverage for general liability. These coverages were implemented on July 1, 1997. Contributions are increased by approximately $40,000, with a $10,000 reduction to Community Health Affiliates being offset by a contribution of $50,000 to support the capital campaign for the new headquarters facility of the Volunteer Medical Service Corps. The increase for the six volunteer fire companies is $23,862 which reflects the +2.6% increase in the local consumer price index. There has also been a $100,000 allocation included in the budget to fund economic development initiatives in the Township. A Canine Unit for the police has also been proposed at an estimated cost of $21,259.

Offsetting these costs are reductions to the budget such as the elimination of the $500,000 contribution/transfer to the Insurance Trust Fund. This decision was based on the recommendation of the Township’s professional insurance consultants who advised the Township that there were already sufficient reserves in the Insurance Trust Fund. The transfer to the Sinking Fund for debt service is also reduced by $446,752 as a result of expiring debt from the 1967 and 1977 bond issues and the benefit of the refinanced savings from the January 1996 bond issue. The budget also reflects a potential savings in electricity costs of $27,581 from deregulation (net of additional volume for street lighting). There is also a $161,047 reduction in consulting services resulting from the completion of several contracts including the open space and stewardship study, automated indexing of the Township’s Code Book, the economic development study and business survey, and cable television negotiations. The Township also made the final payment in 1997 for the purchase of a portion of the Penn Wynne Park from the School District resulting in a reduction of another $50,000 in 1998.

The General Fund’s subsidy/transfer to the Solid Waste Fund reflects a reduction of $179,145 as a result of budgeting $1,479,145 in 1997 to lessen the impact on the Solid Waste Fund of the loss of $1.4 million county subsidy in 1998. The transfer in 1998 would have been greater than the $1.3 million reflected in 1998 but an additional $600,000 in revenue from a fee increase has been anticipated in the Solid Waste Fund.

As with most service organizations, the Township's single largest expenditure category is personnel costs, which comprise 61% of the General Fund budget.

Over the past several years, the Township has carefully scrutinized the addition of new positions in order to contain costs. Through operational analysis and program consolidation, a total of 26 full-time positions were eliminated through attrition during the 1992-1996 period, reducing the number of full-time employees from a high of 446 in 1991 to 420 in 1996 (-5.8%). In 1997, seventeen new full-time positions were added. Ten of these positions were hired in the Police Department under the auspices of a three-year federal community policing grant program which provides reimbursements of up to $25,000 per police officer per year for three years. The remaining seven positions were added to meet increased customer service demands and long-term operational needs in several departments.

The 1998 Proposed Budget provides for upgrading one Maintenance Technician position in the Facilities Maintenance Division of the Public Works Department from part-time to full-time. It is anticipated that the costs associated with this upgrade will be fully offset by a reduction in the amount of work that is outsourced, thus having no financial impact on the Township This upgrade increases the number of full-time employees to 438, which is still eight positions below the 1991 full-time employment level of 446.

Historically, the Township's part-time labor force has remained fairly constant. From 1990 through 1996, the total number of full-time equivalent (FTE) positions ranged from 55.2 to 55.9 FTE. In 1997, the total number of FTE positions increased by 1.8, primarily in the Public Works Department to accommodate special projects, resulting in a total of 57.7 FTE positions budgeted. The 1998 Proposed Budget provides for a total of 57.9 FTE positions. This increase of 0.2 FTE positions reflects a more recent trend toward fluctuation as the Township strives to meet its changing services demands by adjusting its part-time labor force. Notable part-time position changes for 1998 include:

1998 will be the final year of the current negotiated labor agreements with the Fraternal Order of Police (FOP) and the Workers Association (WA). Salaries and wages in 1998 are budgeted at +3.5% for uniformed officers and +3.75% for all non-uniformed employees including management.

The 1998 Proposed Budget provides sufficient resources to accomplish the Township's goals and responsibilities.

While the actions we have taken during the past seven years in regard to long-range financial planning and tight management of our budget have significantly helped delay our projected financial predicament, long-term budgetary solutions have not yet been achieved. Fiscally, the Township is faced with a flat revenue stream and expenditures budget that must generally increase, at least incrementally, as a matter of basic economics. This simply means that, despite all our efforts, we will need to contemplate further budget-balancing measures in the immediate years ahead. Our recent experience of budget gaps (annual expenditures exceeding annual revenue) in 1997 and budgeted for 1998 points to the need to reverse this position soon, as our General Fund fund balance cannot sustain us indefinitely.

Solid waste disposal costs also pose a fiscal challenge, especially as we must now absorb the budgetary loss of approximately $1.4 million per year to the Solid Waste Fund beginning in 1998 due to the expiration of our twenty-year intermunicipal solid waste agreement with the County. The proposed $600,000 Solid Waste Fee (SWF) rate increase for 1998 only partially addresses the problem. Additional SWF rate increases or other revenue raising measures must be considered in the next few years to fully address this budgetary loss and address the growing refuse disposal costs at the County’s trash-burning facility in Plymouth.

We also look with pleasant anticipation towards the Township’s upcoming centennial celebration in the year 2000. Efforts are currently underway by the Centennial Committee to lay the groundwork for a memorable year in recognition of the Township’s decision, in March of 1900, to incorporate as the Commonwealth’s "first" First Class Township.

With the November 5, 1997, approval of the Homestead Exemption referendum positioning local governments to adopt a real estate taxation exemption for a portion of the value of a property used as a primary residence, we can anticipate the probability of the State Legislature moving towards the development of a comprehensive local tax reform bill. While much work is yet to be done on this matter, it appears that tax reform will focus upon creating new options, such as local personal income or sales taxes, to replace tax revenue which may be lost from enactment of a homestead exemption. As this legislation unfolds, the Township will carefully study its possible effect upon our community. Broad public input will be essential before implementing any State-legislated provisions in the years ahead.

As in years past, the key issue facing the Township Board of Commissioners is how to balance the obvious preference for no tax or fee increases versus the broad demand for enhanced service levels in order to maintain the quality of life for which Lower Merion has built a strong reputation. These two competing desires are both impractical and economically irreconcilable. As we look ahead this means some very difficult choices will need to be made.

The Township has traditionally taken a proactive approach in addressing the infrastructure and public asset needs of the community. Early in 1997, the capital planning process was enhanced to facilitate an earlier review of the Township’s capital spending plans by both the Board of Commissioners and the community. A 1998-2003 Preliminary Capital Improvement Program (CIP) document was created in July and distributed to the Board and made available to the public in the six Township libraries. In previous years, the CIP was not drafted until the fall when it was presented as the Proposed CIP in mid-November. This year, the Preliminary CIP was available for review from July to November. A public hearing was held on the Preliminary CIP on September 15, 1997. Public, Board and staff inputs and updates were then incorporated into the 1998-2003 Proposed CIP, which was completed and presented to the Board and the public on November 14, 1997.

The Township sets forth its CIP annually for the next six-year period. Projects to be undertaken during the first year (1998) of the next six years (1998-2003) are included in the Township's Capital Budget, with the remaining five years (1999-2003) comprising the Capital Plan.

The 1997 Capital Budget adopted last fall called for $18.1 million in spending plus $1.7 million for sanitary sewer projects for a total of $19.8 million. The Proposed CIP projects that actual 1997 spending will be $5.9 million plus $0.8 million for sanitary sewer projects for a total of $6.7 million. The primary reason for the lower estimates, compared to the original budget, is the delay and rescheduling of projects, many of which are being reappropriated to 1998.

Projects (and estimated costs) of note in 1997 included the Ardmore Fire Station Reconstruction ($1,370,000); Storm Water Facilities Management ($865,000 -- funded primarily through a no-interest County Infrastructure Loan Program); and Appleford Improvements ($375,000 -- final year of major program to address deferred maintenance problems). Further, the Township provided funding for the acquisition of two properties: $82,000 for the purchase of the Mahan Estate to add to the Harriton House historical site ($300,000 was also provided towards the purchase by the Harriton Association), and $110,000 for the purchase and related closing costs of additional space at the Bala Cynwyd Library.

The 1998-2003 Proposed CIP (excluding the positive impact of grants to be received) proposes nearly $56 million in spending for the six year period, a slightly lower amount compared to last year’s CIP of $57 million. For 1998, the Capital Projects Fund’s portion supported by bond issues calls for an appropriation of $20.0 million. In 1998, this includes completing some the 1997 projects which were deferred or continued to 1998, therefore requiring partial funding reappropriation to 1998 for their completion. The Sanitary Sewer Fund’s portion supported by bond issues calls for an appropriation of $997,000.

The Township typically finances the CIP by issuing General Obligation Bonds. The funds for repayment of these bonds and associated debt service interest costs are typically provided for in the Township’s Annual Operating Budget.

In 1996, the Township took advantage of the low interest rate environment to advance refund (refinance) its 1994 General Obligation Bonds, saving approximately $650,000 in net present value dollars against future debt service payments. In addition to this action, $6.1 million in new bonds were issued to provide sufficient funding for the 1996 capital projects and a portion of the probable 1997 capital projects. The Township again received a Triple A bond rating from both Moody’s and Standard & Poor’s, thus allowing Lower Merion to remain the nation’s only Township with a Triple A credit rating from the two largest rating agencies.

No bond issue was needed in 1997. We contemplate a bond issue of approximately $8.5 million will be needed early in 1998 to provide funding for the remaining portion of the 1997 CIP projects and for 1998 CIP projects. An evaluation will be made next year whether to also include additional funding for all or part of anticipated 1999 capital projects.

The 1998 Proposed Capital Budget shows 71 planned projects totaling $21.0 million, including a number of 1997 projects which require funding in 1998 for completion. The following chart (in millions of dollars) demonstrates the 1998 Proposed Capital Budget:

	CAPITAL PROJECTS FUND	SANITARY SEWER FUND	TOTAL CAPITAL BUDGET
1998 PROJECTS	$20.0	$1.0	$21.0

SOURCE OF FUNDS:
GRANTS	$11.6		$11.6
INVESTMENTS & OTHER	$5		$0.5
EXISTING FUND BALANCE	($0.3)	$1.0	$0.7
1998 BOND ISSUE	$8.3		$8.3
TOTAL	$20.1	$1.0	$21.1

Other major projects are proposed to commence in 1998, primarily with architectural/ engineering work, followed by construction in 1999 -2001. The total multi-year costs of these projects are as follows: Pennswood Road Bridge Reconstruction ($5.4 million), Union Avenue Bridge Reconstruction ($5.1 million), Public Safety/Administration Building Addition ($4.1 million), and Robert J. Koegel Public Works Complex Expansion ($2.8 million). Even with the 95% grant funding expected for the Union and Pennswood Bridges projects, this, combined with over $21 million in 1998 projects, represents a very significant short-term agenda for major capital projects. It will be important to carefully review the need for each project before beginning with architectural design. The Township Engineer is completing a master plan for the public works facilities. This plan when completed will become the basis upon which decisions will be made regarding several projects included in the CIP, most notably the above referenced public works complex expansion project.

I want to take this opportunity to express my appreciation and admiration for the Board’s willingness to make the difficult, sometimes unpopular, financial decisions essential to maintaining the fiscal integrity of our Township. It is no accident that Lower Merion Township is one of the few communities in our country to enjoy a "natural" Triple A credit rating (not requiring bond insurance). One of our key financial goals must be to protect and maintain this distinction, and with it, the financial and operational stability essential to truly being a first class community.

As we look to the years ahead, I am confident that, in partnership with an involved community, the quality and character of our Township will be maintained. The key will be vision, leadership, planning, and the willingness to apply good common sense and judgment to all that we encounter.

My many thanks to our fine staff whose efforts are well reflected throughout this budget document. It is their continuing professional growth and development that is the key to our ongoing improvement as an organization. We look forward to a productive 1998.

A guiding philosophy of the Board of Commissioners has been to plan carefully for the future and to anticipate and address problems and challenges. 1997 saw the Board of Commissioners and Township staff implementing plans and programs that had been developed in 1996 around such themes as Improving Contacts with Township Residents, Moving Towards Increased Efficiency, and Enhancing the High Quality of Service.

Lower Merion Township considers "customer service" to be a most desirable and essential goal. In 1997 the Human Resources Department embraced this commitment by conducting on-going quality customer service training sessions for all Township employees. This provided the work force with a better understanding of how to deal with the needs of Township residents and the community-at-large.

Traditionally customer contacts with the Township have been in-person, by phone, and by correspondence. The findings of the 1996 Township Customer Service Survey showed that 63% of residents have a computer in their homes and at least half of them expressed interest in accessing Township information over the Internet. Acknowledging the impact of computers in every area of its operation, the Township developed an Information Technology Master Plan based upon two key premises – enhancing customer service by improving contacts with Township residents and increasing efficiency within the Township. Accomplishments in 1997 included:

Providing for the health, welfare and safety of the community is key to the mission of Township government. Throughout the year the Board of Commissioners placed its support behind ambulance, fire, and police services. A $150,000 contribution, to be given over three years beginning in 1997, was pledged to the Volunteer Medical Service Corps of Lower Merion & Narberth for their new headquarters facility. For the first time in its 97 year history Lower Merion Township is building a new fire station on the site of the old Merion Fire Company firehouse in Ardmore. In seeking to provide the latest in safety devices for firefighters, the Township provided funding for, and the Ardmore and Penn Wynne fire companies took delivery of two, new 100-foot-long combination pumper/ladder trucks called "Quints." The Fire Department also spent the year preparing for the national Insurance Services Office (ISO) inspection of Lower Merion Township’s available water supply, fire defenses in the Township’s large buildings, and the fire service’s equipment, training and records. A resulting numerical rating will be applied to the insurance policy of every home and building owner in Lower Merion. The Fire Department’s goal is to maintain or improve the Township’s already excellent rating which provide significant homeowners insurance cost savings to Township residents.

The Township’s Police Department appointed nineteen probationary officers during the year, with ten of these positions partially funded by a three-year federal grant. Three new marked vehicles were added to the police fleet, bringing the total number of marked patrol cars to thirty-two. The department also concluded its investigation into the feasibility of installing an in-car video system in the police fleet, a project slated for partial implementation by the end of 1997. The eight-member Bicycle Patrol Unit completed its first full year of operation with deployment primarily in the more active commercial areas. To save time on the filing of reports and have officers spend more time patrolling, the department is moving to implement a records management/mobile-computing system in 1998. An additional instructor was added to the Drug Abuse Resistance Education (DARE) Unit in 1997, providing a specialized program to middle school children, designed to reinforce training and help children acquire skills for reducing violence and vandalism. The very popular Citizens’ Police Academy entered its third year of operation, giving local residents and businesspersons an "up close and personal" look at their police department.

Assisting residents in their pursuit of knowledge is an on-going goal of the Township’s Libraries Department. To better serve customers, the Lower Merion Library System obtained a $20,000 collection development grant through the State Library in 1997 to purchase network subscriptions of electronic reference products. Library users now have access to the Electric Library, the Encyclopedia Americana On-line, and a children’s product called SIRS Discoverer, offering access to thousands of magazines and newspapers. In July, the Township acquired 2,400 square feet of space from the Solomon Schechter Day School which adjoined the Bala Cynwyd Library. The new space is projected to house a new meeting room, a computer training lab and expanded children’s reference services.

The Building Regulations Department responded to the Board of Commissioners’ economic development initiatives with the development of an ordinance permitting restaurants to count off-street public parking spaces within 1,000 feet of a property to meet the parking requirements in the Zoning Code. This has enhanced the community by spurring new and expanded food service operations across the Township. Customer service was also at the root of such Building Regulations Department activities as the creation of an internal operations manual to assist employees in performing tasks usually performed by others. The Department is also developing a manual for external use to give residents and permit applicants a better understanding of the permit approval process and to provide them with the information needed to obtain required permits more efficiently.

The Finance Department moved forward aggressively to focus on locating unregistered businesses and pursuing delinquency payments -- an effort that produced record results. While the 1997 Budget had estimated collections of $2,925,000 for Mercantile and Business Privilege Taxes, current estimates indicate the collection of $3,200,000.

The Board of Commissioners’ support of the business community’s commercial enhancement initiatives was also supported by activities of the Department of Planning and Community Development. This year saw completion of the second phase of the Township’s economic development strategy as HyettPalma, a nationally renowned consulting firm from Virginia, completed a Township-wide Market Analysis of the commercial districts and an Enhancement Strategy for the Bryn Mawr business district.

In 1996 the Township was awarded a $150,000 Keystone Rehabilitation and Development grant from the Pennsylvania Department of Conservation and Natural Resources to implement the Master Plan for Rolling Hill Park. In 1997 the Department of Planning and Community Development made significant progress towards implementation of that plan. Early in the year a consultant completed a feasibility study for converting the historic bathhouses to restrooms at Rolling Hill Park. Design and construction details were also completed this year for a twenty-one car parking lot at Rolling Hill Park.

The Township’s Office of Policy and Program Development (OPPD) played a central role in several initiatives including continued negotiations with Comcast Cablevision for renewal of the cable television franchise. In response to emerging technologies, the Township prepared a wireless communications facilities ordinance to update its zoning regulations on cellular towers. With its adoption anticipated by the end of the year, the Township will turn its attention to addressing wired communications issues. Working with the Police Department, OPPD developed and costed out options for police weapons training as a result of the Board of Commissioners’ decision to terminate all live firing at the Township’s pistol range in Belmont Hills. In the Spring of 1997 Police began training and weapons certification at an off-site indoor range. This option was identified as a considerable savings to residents as compared to the Township enclosing its existing range.

In concert with the Public Works Department, OPPD developed an operational strategy and launched a comprehensive Natural Areas Stewardship Pilot Program, to restore and manage the sites listed in the Natural Land Trust’s 1996 Natural Areas Study. The new Natural Areas Crew stabilized Eco Valley Nature Park and Pencoyd Park by removing and/or controlling garbage, debris, and invasive vegetation.

The Township’s Public Works Department provided services to residents and co-workers alike during 1997 as noted by division.

Public education remained a top priority of the Health Department and the Board of Health in 1997. Residents were addressed via the annual message on health, food safety newsletter, topic specific informational flyers, and government access television spots on items such as tick borne illnesses. Acting on behalf of the public, Health Department staff inspected all restaurants, food stores, and public bathing places on a bimonthly basis. Such inspections are usually conducted only one to two times per year in most other jurisdictions.

The Department of Recreation improved services to residents by completing master plans for Bala Cynwyd and General Wayne Parks. A tremendous amount of time and effort went into the development of these plans including numerous meetings with residents and civic associations. Construction was completed on a pool house and comfort station facility at the Ardmore Avenue Pool, resulting in a 65% increase in the number of pool memberships that were sold for the pool in 1997. This directly benefited the adjacent Ardmore Avenue Community Center which receives the revenue from pool memberships.

In assessing the programs carried out and the range of services delivered in 1997, it is clear that Lower Merion has kept, and will continue to keep, "customer service" in the forefront of Township efforts and initiatives.

The Board of Commissioners has continued to set forth many visionary goals for the Township with the resources to achieve them provided in the 1998 Proposed Budget. As detailed in their individual budgets, the goals of each Township department reflect several themes.

When it comes to the services provided by Lower Merion, residents most often use the Township libraries. The Library Department’s goals for 1998 reflect the ongoing commitment to making visits more meaningful. Once the upgrade to the library system’s automated circulation and catalog system is completed in 1998, residents will have access to a new computer training lab at the Bala Cynwyd Library where training will be offered on basic computer literacy and the use of library workstations. In addition to these technical advances, the libraries will implement an educational program series for middle school students covering a wide variety of subjects. The Belmont Hills Library will be offering expanded hours of operation on a permanent basis -- the four hours currently being piloted on Fridays will be shifted to Wednesday and Thursday evenings. Just as the Belmont Hills Library will be open until 8 p.m. four nights per week in 1998, so will the Ardmore Library. The change will be nearly cost neutral, as hours will be shifted from other days of the week. In both cases, the communities will have greater access to their local libraries throughout the year.

The Police Department will expand its community policing programs through the establishment of a Shield of Confidence Program. Through this program, homes and businesses, on request, will be surveyed for their vulnerability to burglary. Those which comply with the recommendations for better security will be provided with a decal. This program is expected to have the immediate effect of lessening the potential for burglary and therefore increasing the resale value of homes. The installation of in-car audio and video cameras in every marked patrol vehicle will be completed in 1998. This "silent partner" will be a valuable tool to the officers in recording graphic information of their interactions with citizens and providing an opportunity to evaluate factual events from which issues of officer safety and public service can be addressed. Finally, through the purchase of a crime prevention/mobile command post vehicle, when the vehicle is not in use at a crime scene, police officers will be able to respond to advertised locations throughout the Township to present all of the community policing and crime prevention programs and receive direct feedback from residents.

In recruiting, selecting and training Township employees, the Human Resources Department will continue to build a capable work force to provide residents with quality customer service. The department will pursue enhanced testing modules when recruiting for positions to ensure that new employees possess emerging technological skills. Organizational training programs will be designed to improve customer contacts and will include sessions on telephone etiquette, cultural awareness, workplace violence, and safety as well as management and supervisory training certification programs.

The Public Information Office will expand the programming selection on cable Channel 7 during 1998 by producing more feature programs on new and emerging Township programs and services. To accommodate hearing-impaired viewers, the Township’s ADA Coordinator will implement ways to provide closed captioning for Township-produced cable television programs. The Public Information Office will also work with the Township’s recently establish Centennial Committee as it continues to plan for events in the year 2000 to celebrate the Township’s 100th anniversary.

During 1997, the Township developed an Information Technology Master Plan which prioritized the many pending departmental requests for new computer programs and set forth a course of action to bring the Township’s computer systems into the 21st century. Several cutting-edge technology initiatives were identified in the plan for implementation in 1998. The Information Services Department will install an electronic messaging system to improve and facilitate the exchange of information within and outside of the Township. All operating departments will work to provide a wide variety of information about their programs and services through the Township’s web site on the Internet, which should be established by the end of 1997. In conjunction with the upgrade of personal computers, employees will be trained on the latest office software, thereby making them more proficient in their jobs.

The Police Department will complete the installation of a state-of-the-art integrated radio and records management system. This system will replace the existing radio system and the time-consuming, handwritten reports that are generated by calls for police service. Once the installation and training process is complete, it is anticipated that there will be a 40% savings in report-writing time which will translate into additional time for patrolling and community policing activities. An electronic fingerprint scanning system will be incorporated into the department’s records management system. This technology will replace the cumbersome and time-consuming process of inking fingers and palms and ensure that accurate prints are taken every time.

Funding has also been included in the Police Department’s budget for the establishment of a two-dog canine unit. The implementation of this program will assist the department in situations where a dog trained in building searches and tracking would be invaluable and is expected to reduce the demand on limited police resources.

As the "research arm" of the Township, the Office of Policy and Program Development (OPPD) will work with various departments to evaluate current operations and make recommendations for improvement. OPPD will pursue a variety of goals such as undertaking a comprehensive study of the Township’s parking enforcement policies and methods, studying the Township’s delinquent business tax collection process, assisting in the management of the Natural Areas Stewardship pilot project, implementing improvements to the Township’s composting operations, and coordinating the Township’s initial foray into electricity deregulation. Other anticipated projects include developing a safety training manual, assisting with labor negotiations, developing an ordinance to regulate alternate wired telecommunications providers’ use of the public rights-of-way, and evaluating options and costs associated with the proposed capital project to expand the Township Administration Building.

The Township’s Fire Department is among the finest in the country. In 1998 it will focus its efforts on improving the fire fighting training facilities, searching for ways to improve the retention of volunteers firefighters, and coordinating the renovation project for the Belmont Hills fire station. The department will also update its Life Safety and Fire Prevention codes, and, if all goes according to plan, these updated codes will be available on CD-ROM for faster and easier access by the public.

The Police Department plans to present a comprehensive crime prevention ordinance for the Board of Commissioners’ consideration. If adopted, this ordinance will serve as the introduction of Crime Prevention Through Environmental Design through the establishment of minimal security requirements for all night businesses, parking garages, and ATM’s.

The Recreation Department remains committed to providing residents with quality opportunities for a variety of year-round activities. Staff will continue to review and implement the recommendations contained in the Comprehensive Recreation, Parks and Open Space Plan; continue efforts to enhance working relationships among organized volunteer service providers; and develop and/or expand program offerings for people of all walks of life. One of the larger undertakings will be the completion of master site plans for four Township parks -- McMoran Park, South Ardmore Park, Vernon V. Young Park, and Flat Rock Park. In order to improve swimming pool facilities, the department plans to install a slide and provide concession stand food services at the Belmont Hills Pool.

The Planning and Community Development Department will continue to promote sound land use and preserve community character through open space efforts. Through the administration of two State grants, the department will head a steering committee charged with overseeing the completion of improvements to the trails system and the installation of other needed physical amenities at Rolling Hill Park. The department also hopes to preserve the park’s historic mill workers housing ruins through a separate grant recently submitted to the State. The department will also apply for any reapportioned funds that may become available from Montgomery County’s Open Space Program.

Historic preservation efforts will continue to be a priority. Working with the Building Regulations Department, the Planning and Community Development Department will apply for two state historic preservation grants to help preserve the historic structures in the Township. The 1998 Proposed Budget includes funding to update the Township’s historic properties inventory and create an historic preservation ordinance.

Efforts will be made to reduce the storm water and erosion impacts of new developments through an update of the Township’s storm water management codes. In addition, the Building Regulations Department will amend its testing program for on-lot sanitary sewer systems. Currently, the department’s inspectors spend a significant amount of time observing percolation tests being performed by companies hired by affected property owners. Beginning in 1998, the Township will engage an independent company to perform the tests, thereby eliminating the need for Township oversight. This will allow the inspectors to spend their time on other duties and should decrease the cost to affected property owners.

The Public Works Department will continue to evaluate its refuse / recycling operations and complete a number of capital improvement projects. The department will also continue with its multi-year street sign repainting project and complete several needed regulatory sign repairs.

In addition to providing a myriad of basic services, the Public Works Department will continue its pilot program, established last year, for the management of natural areas. Having completed its initial work in Eco Valley and Centennial Road Parks during 1997, the department will begin the recommended work plans for Gulley Run, West Mill Creek and Henry Lane Parks in 1998. Ongoing maintenance plans will be developed for these parks as they are completed. The department will also continue with the renovation of athletic fields, the upgrade of playground equipment and the restoration of comfort stations at various locations throughout the Township’s park system.

In order to promote a healthy commercial base in the Township, the business districts will continue to receive special attention in 1998 as the Township advances its economic development initiatives. Recognizing that the Township’s role should be to help coordinate and facilitate the enhancement efforts of the individual business districts, the recently established Office of Economic Development will evaluate the business planning and assistance programs available through State and County agencies and refer businesses to these agencies as opportunities present themselves. Grants-writing and other technical assistance will be provided and standards will be developed to help determine the degree to which the Township can fund physical improvements in the commercial areas. The Office will also search for ways to streamline the Township’s commercial development review/processing systems and establish one-stop development teams within the Township to work with investors throughout the development process.

The Health Department will produce its third annual edition of the Food Safety newsletter to help educate persons in the food service industry on proper sanitation. The Department will continue to recognize those restaurants and food stores demonstrating superior sanitation and food safety practices, and acquire food safety videos in foreign languages to reach the growing number of ethnic personnel employed by restaurants in the Township. Pet owners will appreciate the department’s plans to institute a locally available animal rabies vaccination clinic due to continued rabies activity in the Commonwealth.

The themes reflected in the 1998 Proposed Budget’s departmental goals underscore the Township’s commitment to maintaining and enhancing the high quality of life which makes the Township of Lower Merion one of the most sought after communities in which to live and work.


1997’s Real Estate Assessment (at 5.3% market)	$322,182,819

Multiplied by the 1997 Millage rate of 56.5 mills	x 0.05650

Equals gross tax billings (excludes discounts, penalties, uncollected.)	= $18,203,329

In order to generate this same gross tax billing, we divide it by the new 1998 Real Estate Assessments (at 100% of market)	÷ by $6,955,900,324

Equals new re-based 1998 "revenue neutral" rate of 2.62 mills.	= 0.00262