Expenditures - General Fund - 2010 Budget Message

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The 2010 Proposed GF Expenditure Budget is $52.2 million. This is lower than the 2009 GF Expenditure Budget by approximately -$586,000 (-1.1%). The 2009 estimated actual GF expenditures of $52.3 are $2.2 million (+4.4%) higher than the 2008 GF actual expenditures. In 2008, GF actual expenditures increased by +$0.7 million (+1.4%) as compared to 2007.

The key areas of increase and decrease for the 2010 Budget are presented on the following chart:

2010 GENERAL FUND EXPENDITURE BUDGET
INCREASES / (DECREASES) OVER THE 2009 BUDGET
 
Budget
% Change
2009 General Fund Expenditure (Adopted)
$52,744,637
 
2010 General Fund Expenditure (Proposed)
52,158,325
 
2010 Increase/(Decrease)
(586,312)
-1.1%
 
Expenditures
 
 
Salaries
816,036
3.6%
Employee Benefits
205,187
2.5%
Machinery and Equipment
99,339
54.3%
Other Compensation
89,345
4.0%
Office Furniture and Equipment Replacement
43,579
13.0%
Other Personal Services
43,407
7.3%
Communication Expenses
35,978
4.6%
Office Furniture and Equipment
29,535
27.2%
Contributions
19,500
1.1%
Other Charges
13,157
0.8%
General Business and Operating Expenses
10,510
13.3%
All Other Expenses
8,819
4.2%
Subtotal 
1,414,392
3.8%
Partially offset by:
 
 
Building Maintenance and Repair
(10,825)
-13.6%
Utilities
(12,672)
-0.7%
All Other Expenditures
(14,104)
-1.6%
Office supplies
(17,020)
-38.1%
Transfers
(26,384)
-0.3%
Materials and Operating Supplies
(30,500)
-3.4%
Insurance and Bonding
(135,792)
-25.0%
Professional Technical Services
(155,052)
-9.6%
Internal Service Equipment Rental Charge
(288,354)
-14.8%
General Fund Subsidy to Solid Waste Fund
(1,310,000)
-99.2%
Subtotal 
(2,000,703)
-11.9%
 
Net Budget Decrease Total 
$ (586,311)
-1.1%

Salary and Wages:

The 2010 Proposed Budget includes a reduction of four full-time and one part-time positions. These personnel changes result in a net decrease of -5.5 fewer full-time equivalent (FTE) positions than the 2009 Budget levels. On a budget basis, it is estimated that salary and wages will increase approximately +$0.8 million (+3.6%) in 2010 compared to the 2009 budget. However, this is an expense category in which the Township has historically experienced budgetary savings from employee vacancies throughout the year. Personnel costs and employee labor contract provisions for 2010 are discussed in more detail under the Personnel section.

Debt Service:

The 2010 Budget for debt service (GF repayment of bond principal and interest) is $7.6 million. This represents a decrease of -$16,400 (-0.2%) from the 2009 Budget. The 2009 Budget planned for a $10 million new money bond issue; however, the Township sold $26.8 million of bank-qualified, 20-year General Obligation Bonds (Series of 2009) to provide $7.0 million in new funding for the Township’s 2009 and 2010 Capital Improvement Program projects, and $19.8 million to refinance portions of the Township’s outstanding prior debt at lower interest rates. This refinancing resulted in overall GF debt service savings of approximately $0.2 million in 2009 and $0.9 million in 2010. The Township’s Triple A bond rating from Moody’s Investor Service and Standard and Poor’s (reaffirmed in 2009), was a major factor in the overall pricing of the bonds, which came in at a True Interest Cost (TIC) of 3.25%, which was among the most competitive Triple A pricing on its sale date of April 7, 2009. The new money annual debt service cost is approximately $0.5 million with payments beginning in 2010. Debt is discussed in more detail under the Capital Projects section.

General Fund Subsidy/Transfer to the Solid Waste Fund:

The 2009 estimate for the Solid Waste Fund subsidy/transfer is $1.32 million, which is 2.5% of the total 2009 estimated GF expenditures. On October 21, 2009, the Board approved a new Solid Waste fee structure that will return the Solid Waste Fund to a fully self-sustaining enterprise fund. In the 2010 Budget, the Solid Waste Fund subsidy (projected to be $1.7 million for 2010) has been eliminated, except for $10,000, which will be used to cover costs associated with the Township’s Senior Citizens rebate program and disabilities waivers associated with the new $200 Rear Yard Collection Fee. On a budget basis, this represents a decrease of -$1.3 million from the 2009 Budget. In 2011 and beyond, the Township’s Solid Waste Fund operating expenses are projected to increase moderately and future Solid Waste Fee (SWF) rate increases are anticipated to maintain the fund at full cost recovery. The new Solid Waste Fee structure is discussed in more detail under the Solid Waste Fund section.

Employee Healthcare Insurance:

Insurance premiums for employee healthcare benefits are a major cost and one of the more volatile expenditure categories in the budget. The Township closely monitors this category for cost containment opportunities. Over the years, employee cost sharing for healthcare benefits has increased and recently the Township negotiated additional healthcare cost containment and savings in the new 3-year FOP labor agreement (2010 – 2012). All employees contribute to their healthcare premiums, pay deductibles and receive incentives to opt out, select lower cost prescription drugs, or select lower cost health care plans. New hires have fewer choices for health care coverage and pay a greater portion of their healthcare cost than longer-term employees. In spite of these cost containment measures, healthcare costs have risen significantly higher than inflation in this decade. For 2009, the Township healthcare premium costs increased over +20%; however, the healthcare plan is experience-rated and in recent years prior to 2009, the premium costs had only increased moderately. Also, a $0.4 million retrospective refund was received by the Township in 2009 (based on better than expected actual experience in 2008). The 2009 estimate for total healthcare insurance is $4.7 million, which is net of the $0.4 million refund (and -8.8 % lower than the 2009 Budget). As compared to 2009, overall healthcare costs have stabilized in 2010 and the Township’s primary coverage premiums (Personal Choice) will decrease by -2.7%. Approximately 80% of the Township’s total fringe benefit costs (healthcare, prescription, vision, life insurance, payroll taxes and workers’ compensation costs) are expenditures of the GF.

Internal Service Equipment Rental Charge:

The Township’s Equipment Fund (an internal service fund) vehicle/equipment rental charge is allocated to the Township’s departments and is comprised of two components: (1) a depreciation charge to gradually pay for the use of vehicle/equipment during its useful life and provide funding for the replacement of that assets; and, (2) an operating component to cover maintenance, repairs, materials, fuel and overhead. The Equipment Fund projected 2010 deprecation charge for the General Fund is approximately $860,000. However, the 2010 Budget includes $430,000 or a 50% reduction of the normal amount for the GF’s depreciation charge. As a result, the 2010 Budget for equipment rental charges ($1.7 million) has decreased -$0.3 million (-15%) as compared to the 2009 Budget.

Property and Casualty Insurance:

The Township is a member of the Delaware Valley Insurance Trust (DVIT, which is a risk sharing pool owned, operated, and controlled by 34 units of local government from Bucks, Chester, Delaware, Lancaster and Montgomery Counties. The Trust offers comprehensive coverages for property and liability insurance, and maintains a conservative premium-to-surplus ratio. All excess funds are returned to the members in the form of dividends or rate stabilization fund premium credits. Since joining the Trust in 2003, the Township’s insurance premium costs have stabilized and over $0.7 million of dividends and rate stabilization funds have been returned to the Township GF. The 2010 total insurance premium costs are projected to be stable and the Township anticipates receiving approximately $136,000 of dividends in 2010. As a result, the 2010 Budget decreased (-25%) compared to the 2009 Budget. Also, the Township is a member of the Delaware Valley Workers’ Compensation Trust (DVWCT), which provides cost-effective insurance coverage for work-related injuries for employees.

Other Expenditure Highlights:

In recent years, the Township has utilized outside consultants to assist Township staff with certain projects that are one-time in nature. However, beginning in 2008, the use of outside consultants was decreased significantly with the trend continuing through 2010. The 2010 Budget for professional technical services is $1.5 million, a decrease of $155,000 (-9.6%) as compared to the 2009 Budget. The 2010 Budget includes staff’s update of the Comprehensive Plan by cooperatively utilizing staff services from the Montgomery County Planning Department (final year of a 3-year agreement). Also, the Township’s business tax collection program will continue to utilize outside business tax consultants to provide special counsel and additional audit services. An actuarial study will be performed to update the Township’s Other Post Employment Benefit (OPEB) liability for financial reporting purposes and financial planning in 2010.:

In 2009, the Township will complete a multi-year capital project, which upgraded traffic signal and street lighting to more energy efficient luminaries, resulting in a lower utilization of electricity kilowatt hours. As a result, the 2010 utilities budget will decrease approximately, -$13,000 (-0.7%). The Township is currently reconciling new billable rates for 2009 and beyond with its energy provider (PECO Energy) and is hopeful that budgetary savings will be higher in 2010. :

Over many years, the Township has provided the six volunteer fire companies with an annual operating subsidy adjusted upward with an annual CPI increase (+5% for 2009 Budget). The Township contributed a total of $1.6 million (base contribution) or $269,000 to each of its six volunteer fire companies in 2009. Although the CPI factor typically used for the 2010 Budget purposes is -1.2% (as of August 2009), it is recommended that the Proposed 2010 Budget include a +1% increase or +$16,200 ($2,700 for each of the fire companies) of fire company contributions.

Summary:

The Proposed 2010 GF Expenditure Budget is $52.2 million, of which nearly 92% is comprised of personnel costs (67%), debt service (14.5%), utilities (3.6%), contributions to outside agencies and volunteer fire companies (3.5%) and GF’s Equipment Fund rental charge (3.2%). Overall, the total 2010 GF Expenditure Budget has decreased $0.6 million (-1.1%) as compared to the 2009 Budget. As shown, the majority of GF expenditures are fixed and predictable, however, the Township continues to implement and further evaluate cost containment and savings alternatives in all areas. The economic recession (and deflation), have provided an easing of costs for materials, energy and services in 2009. This trend is expected to help contain costs in 2010 but with increasing cost pressures expected for the future.

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