2011 Budget

The Manager's budget message begins below. Use the following links to jump to a section:

• The Budget Process
• 2011 Revenues/Expenses
• General Fund Revenues
• Real Estate Tax
• Earned Income Tax
• Business Privilege Flat Tax
• Other Taxes
• Fund Balance
• General Fund Expenditures
• General Fund Expenditure Highlights
• Capital Reserve Fund Expenditure Highlights
• Expenditure Highlights from other Funds
• Conclusion

The Hatfield Township 2011 Draft Budget is respectfully submitted to the Board of Commissioners and citizens of Hatfield Township. As prepared through the detailed and open budget process, the following budget represents maintain the existing Level of Service for the community while restructuring the dependency on new development in the community to create a balanced budget. Restructuring predictable revenues for the Township, to equal the desired level of service for the community, the 2011 Draft Budget proposes the adoption of a debt service millage to support the annual expense of existing debt, and to adopt the Business Privilege Flat Tax modeled after Warrington Township. Similar to efforts made in the 2010 Final Budget, this proposed budget creates greater equity and fair share among the residential and non-residential community with respect to their usage of Township services and protections.

The Budget Process

The preparation for the new fiscal year budget commences each July, with Department Heads reviewing their current budget and developing operating and capital budgets for the next year. By August, each Department Head has met with the Finance Director and Township Manager to review their proposed operating budget and capital budget as well.

After working with the various department heads, the Finance Director and the Township Manager create a draft budget for each department for review by the various Hatfield Township committees. Below you will find a list of the dates when the committees convened and discussed future projects, staffing, initiatives, fees and/or the proposed budget for 2010.

• September 2 – Administration Committee
• September 7 –Park and Recreation Committee
• September 14 & October 12 – Pool Advisory Board
• September 22 – Public Safety Committee
• September 22 – Public Works Committee
• September 28 – Planning & Zoning Committee
• October 6 – Finance Committee

Comments from each committee are incorporated into the budget by means of future capital projects or amendments to the proposed operating and capital budgets. The committee process allows for citizens, commissioners and staff to discuss the budget, but furthermore, the opportunity for public input is invaluable to the process to assist with the budget process.

After presentation of the 2011 Draft Budget occurs, then the following schedule would be recommended to formally adopt the 2011 Draft Budget:

• October 27, 2010 – Presentation of 2011 Draft Budget to Board of Commissioners and citizens of Hatfield Township
• November 3, 2010 – Authorization to advertise adoption of Debt Service Millage & Business Privilege Flat Tax (Advertised 3 weeks prior to adoption)
• November 25, 2010 – Advertisement for public inspection (20 days prior to adoption)
• December 1, 2010 – Adopt by ordinance Debt Service Millage & Business Privilege Flat Tax
• December 5, 2010 – Advertisement for public inspection (10 days prior to adoption)
• December 15, 2010 – Official adoption of Final 2011 Budget

After adoption, the budget serves as a guideline for spending for the coming year. Even though the creation and adoption of the budget is complete by December, the implementation of the budget continues through into the next year. The Board of Commissioners review monthly expenditure reports at their monthly meetings, and the Finance Committee meets quarterly to gauge the budget compared to actual revenues and expenses.

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2011 Revenues/Expenses

A total of $11,639,967 in revenues is anticipated in 2011 with $10,804,255 proposed in expenditures over all seven funds, leaving a total fund balance of $835,712. The breakdown of revenues and expenditures is listed below: Click a fund name to view details.

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General Fund Revenues

To provide a breakdown of the major revenues, the following demonstrates the source and percentage of the General Revenues Fund:

• Earned Income Tax: $2,225,000 (26.7%)
• Real Estate Tax: $1,890,000 (22.6%)
• Intergovernmental: $985,600 (11.8%)
• Business Flat Tax: $980,000 (11.7%)
• Local Services Tax: $600,000 (7.2%)
• Charges for Services: $592,000 (7.1%)
• Real Estate Transfer: $160,000 (1.9%)

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Real Estate Tax

The 2010 adoption of the Homestead Credit, Act 50 of 1998 facilitated the first step in restructuring of the Real Estate tax and equity among taxpayers. The $55,000 Homestead Act Credit approved in 2010 is recommended in 2001, along with the adoption of a subset of the General Use Mills, a Debt Service Millage. The addition of the Debt Service Millage would provide stabilized revenue funds in the General Fund for debt expenses, and could be eliminated upon the maturity of Township debt. The following representing the proposed millage rate:

The Real Estate Tax of 3.185mils is broken down as follows

As of the budget presentation, Montgomery County has yet to update the Median Assessed Value home in Hatfield Township, therefore the 2010 assessment of $145,570 will be utilized in calculations for the 2011 Draft Budget. Applying the $55,000 Homestead credit towards the assessed value of the median home, along with the rate of 3.185mils, the median assessed value translates into a $288.47 local tax liability.

When viewing the total Real Estate Tax liability for a Hatfield Township homeowner, the local township portion of the tax bill represents 9.5% of the total real estate tax. Montgomery County and North Penn School District translate to 10.1% and 80.3% respectively based on 2010 data.

The increase in predictable real estate revenue in the 2011 Draft Budget assists with the overall increase in revenues and eliminates the dependency for new development. In combination with the Business Privilege Flat Tax, the Real Estate Tax allows for the Board of Commissioners to take direct control of the level of service desired for the community. The minor increases in the Park & Recreation fund in 2011 (in 2010 it was 0.22) is a recommendation from the Finance Committee that supported staff’s position last year to migrate operation expenses into respective funds when feasible. This millage increase allows for the entire Park & Recreation staff to be paid via the Park & Recreation Fund.

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Earned Income Tax

Hatfield Township receives 0.50% of the 1.0% Earned Income Tax that the residents pay each year. This revenue source is expected to generate $2,225,000 in 2011.

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Business Privilege Flat Tax

Staff has monitored the legal case of Warrington Township and its implementation of the Business Privilege Flat Tax (BPFT), and based on its successful litigation, recommends adoption for 2011. As a community without the Mercantile Tax, Hatfield Township only levies the Real Estate Tax on the business community. With a growing inequity among revenues receives and services provided, the BPFT is a viable option to generate revenue to maintain Level of Service and fair share among tax payers.

The Board of Commissioners have the option to choose the deemed ‘ability to pay’ threshold by electing the monetary gross receipts cap, which exempts businesses under that cap. Warrington Township utilized the $1,000,000 gross receipts as an exemption level – the following three options were presented to the Board at the July 28, 2010 Board meeting:

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Other Taxes

Real Estate Transfer Tax
The Real Estate Transfer Tax is levied at 0.50% of 2.0% of the value of all real estate that transfers within Hatfield Township. With anticipation that sales would start to grow at the end of 2010, the 2010 Final Budget maintained a number that was not realized. Staff cannot recommend a budgetary number for 2011 beyond that projected for 2010, which is approximately $160,000. As a result the conservative estimate in the 2011 Draft Budget of $160,000 should be reach – staff hopes that the market trends spike and real estate transfers pick up.

Local Services Tax
This tax is levied on all individuals that work within a municipality and employers spread the withholding of this tax over the entire year, rather than collecting the full amount during the first pay period of the year. Anticipated total revenue for 2011 is $600,000, of which $100,000 from the Prior Year.

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Fund Balance

As the economy has shifted, and based on past revenue foundations, Hatfield Township has seen a reduction in its fund balances. A community should maintain a healthy fund balance to ensure services, but also to meet its fiduciary obligations for disaster relief. Future planning should take strides to maintain at minimum a 10% General Fund Balance, based on operating expenses. Other fund balances should be assessed on projected need, and a “rain day” fund for extreme need should be incorporated into the Capital Budget. The 2011 Draft Budget does provide a plan to address deficit spending, however it does not provide addition, predictable revenues to enhance fund balances and plan for the future. Staff recommends that future budgets should begin planning for fund balance growth.

Outlined below are the anticipated fund balances for year-end 2011:

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General Fund Expenditures

The following breakdown demonstrates the major expenses in the 2011 Draft Budget and the percentage of the budget each area represents.

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General Fund Expenditure Highlights

Pension
The Minimum Municipal Obligation (MMO) for 2011 is budgeted at $622,508 for the police and non-uniformed plans. This obligation is offset by $240,660 in revenue from the Commonwealth. Efforts were made in 2010, by options authorized in Act 32 of 2009, to offset the impact of actuarial assessments made in January of 2009. There is also pending ordinance changes that could further reduce liability to the Township if enacted prior to the end of 2010 for the January 2011 Act 205 Actuarial Assessment.

Insurance Costs
Hatfield Township participates in three municipal insurance pools: Delaware Valley Insurance Trust (DVIT) for general liability and property; Delaware Valley Workers Compensation Trust (DVWCT); and Delaware Valley Health Insurance Trust (DVHIT). All three trusts have provided stability to our overall insurance costs. In 2011, we project that insurance costs will be $920,500. As members of all three trusts, Hatfield Township is eligible for a multi-trust 3% discount on rates in each trust.

Participation in the Trusts affords Hatfield Township to have Rate Stabilization Funds (RSF) available for both the DVIT and DVWCT. These funds provide protection against unforeseen economic conditions and allow Hatfield Township to maintain excellent insurance coverage at an extremely competitive price. In 2011, the DVIT and DVWCT respectively have a fund balance of $208,126 and $138,157 to protect the Township and its premium costs, which will be partially utilized to limit our growth, and actually reduce our insurance costs in 2011.

DVIT and DVWCT also provide dividends annually, and in 2010, Hatfield Township received $54,895 and $18,989 respectively from each Trust.

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Capital Reserve Fund Expenditure Highlights

Public Safety

• Police Vehicles: Replacement of two police vehicles is proposed at $58,000
• Police Technology: $5,600 is budgeted to upgrade the in-car computers.
• Fleet Shelter: $18,500 is budgeted to construct a shelter to protect the vehicles from harsh weather conditions and impact the technologies in the vehicles.

Planning & Zoning

• Comprehensive Plan: $40,000 budgeted to carry-over and targeted for completion in 2011.

Parks & Recreation

• Fund Revenue: $50,000 transferred into Capital Fund by Park and Recreation Fund for future capital initiatives.
• Phase 1 – School Road Park Restrooms. $75,000 is allocated for utility work and pad excavation/construction for future restrooms

Miscellaneous

• Broad Street Streetscape: $48,000 budgeted to complete the pilot project, pending PennDOT authorization of $100,000 of Federal SAFETEA monies awarded by Congresswoman Schwartz.

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Expenditure Highlights from other Funds

Highway Aid Fund

• Streets/Bridges: $250,000 is budgeted in the Highway Aid Fund for street/bridge maintenance.
• Equipment: $75,000 is budgeted for equipment purchasing, including one (1) pickup truck; payment on 2010 street sweeper and procurement of brine equipment.

Pool Reserve Fund

• Leisure Pool resurfacing: $70,000 budgeted for commercial grade plaster; 15-year life expectancy/5-yeard warranty.
• Miscellaneous repairs: $10,000 budget for heater, filter, surface repairs and security gates.

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Conclusion

The preparation of this budget has occurred over the past several months and is the culmination of a collaborative effort – the Board of Commissioners, township staff, community volunteer boards and the citizens of Hatfield Township.

I would be wrong to not acknowledge the efforts and dedication made by staff, not only during the budget process, but also throughout the year to keep Hatfield Township fiscally sound. From top to bottom, Hatfield Township is filled with quality individuals that make this organization extremely professional and efficient, and with respect to a budget, manage funds as if they were their own. A special recognition to the Department directors is in order, for they are the individuals that aid the creation and implementation of this budget and Township services. It is my personal pleasure to work with everyone within the organization. I would also like to thank the Finance Director and Finance Committee for their respective effort and support with this budget and proposals of the debt service millage and the business privilege flat tax.

I would also like to express my appreciation to the Board of Commissioners for their dedication to the citizens of Hatfield Township. Their efforts to support effective policies and the staff, while asking critical questions during the budget process resulted in a comprehensive review of how we budget, and what we budget. The commitment to providing service excellence to the community was prevalent from all commissioners, and such levels are service are reflected in the 2011 Draft Budget. I also believe that the 2011 Draft Budget does making a concerted effort to bring equity and fair share to the taxing paying community.

I truly appreciate to opportunities that my job affords and honored to serve as Township Manager in Hatfield Township, and wish to extend my personal thanks to the Board of Commissioners for their ongoing support and confidence in me. I know that the positive relationships that we have built in 2010 will aid in making critical and difficult decisions to final the 2011 budget.

Sincerely,

Andrew S. Haines
Township Manager

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