The Municipal Budget Process - Part II

            I intend this article to better inform those interested in our public budget process. Although it is a bit choppy with dates and descriptions, I hope that by the end of the article, the reader will be more informed about what we do and when, and maybe prompt them to participate or follow along more closely.

            Here we go:

            By mid-January, the CFO (Peter Kiriakatis) prepares a detailed municipal budget after reviewing the departmental budgets and having multiple meetings with me that provide him with the necessary budget forecasting to accurately determine costs (i.e., appropriations) and revenues anticipated for the coming year. From this process, Peter prepares the 2023 Recommended Budget. This document contains all the budget details (broken down line by line), so anyone can identify the expenses and revenues involved in running the municipal government.

            At the January 17 council meeting, I presented the Recommended Budget to the elected officials (i.e., council members), and Peter provided a presentation identifying specific factors that impacted us this year. We then made the Recommended Budget available on our website and social media pages. 

            On January 20, 2023, I published an article, "A Story About Our Budget Process and the Lawrence Community," on my blog, website, and social media sites. The Lawrence Gazette also published it so we ensured it reached as many people as possible. The article intended to give the reader a broad sense of our budget preparation process. Part two explains how we involve the public.

            From when I provided the Recommended Budget to the council members to when we formally introduced the 2023 Municipal Budget in early March, the budget is revised as we receive information that more accurately presents the picture of 2023 municipal finances. During this time, I provide our elected officials with updated information as they go through their process.

            On January 24, 2023, I provided council members with a document titled "The 2023 Budget Message." It explains the thought process and factors considered that helped determine what we believe is the most fiscally responsible budget for the coming year. Since the budget changes (over these early months), I modified the budget message multiple times and released the final version to the public at the formal introduction of the budget at the March 7 public meeting.

            Adopting the municipal budget is the most important authority our form of government grants to the council members. The voters elect the council members, who are responsible for thoroughly reviewing the budget, questioning it, working with the Municipal Manager on modifying it, and ultimately adopting a budget they can support and believe to be in the community's best interests.   

            There are five council members, and a majority vote is required to adopt the budget. Of course, there are times when some members disagree on budget matters, but the majority rules whether to adopt or reject the budget.

            From late January through February, the department heads present their budgets to the council members at open public meetings. These occurred on February 7 and February 21. If a department head cannot participate in the meeting, the presentation is available on our website for the community to review.

            On March 7, 2023, I formally introduced the 2023 Municipal Budget to the council members at a public meeting with a decreased tax increase at the request of council members. At my request, our CFO attended the January 17, February 7, February 21, and March 7 meetings and was ready to answer any questions the public had. According to NJ Budget Law, we must adopt the municipal budget by April 28, 2023. We have scheduled our public hearing to adopt (or reject) the budget for April 18, 2023.

            When the council members appointed me, they made it clear they wanted our process to be more transparent and for me to step out from my office and engage the public more meaningfully through social media and any other means possible. With this in mind, the budget process we engage in allows any interested resident to be better informed. In addition to how we put information out, any resident may contact me to ask questions. I am happy to meet with anyone should a phone call or email not satisfy them. My predecessor often met with residents regarding the budget. However, I believe the information we provide to the public on the website, social media sites, local newspapers, public meetings, and my blog reduced the need for those types of meetings. To date, I received two telephone calls regarding this year's budget, and both were a "thank you" for the article in the Lawrence Gazette.

            As for our budget this year, the tax increase of 2.50 cents (1 cent = $470,635) is driven by several factors. First and foremost, we are not immune from the higher costs of almost everything due to post-pandemic inflation. In addition to inflation factors, we identified serious public safety issues to address this year. Our Fire Chief and Police Chief at the public meeting on February 7 thoroughly explained these issues.

            We are hiring three firefighters, two emergency medical technicians, two civilian employees for the LTPD (to return police officers to doing police work), and two public works employees to better manage our parks and township lands.   These additions to staff represent 1.0 cent of our (2.50 cent) increase. Also, due to the NJ Budget Law, we could not claim (or add to our revenue) $450,000 of the cannabis tax we will receive in 2023. Our inability to claim this revenue makes our budget 1.0 cent more than we actually need. So we are up a cent for the 2024 budget!

            If we didn't have a serious public safety issue to address or could have claimed the cannabis tax revenue, we would be down to a .005 cent increase. The remaining half cent increase over last year is primarily explained by contractual increases (salaries, township share of pension contribution, ELSA, health insurance, 911 dispatch, and garbage collection) totaling more than one million dollars which we were able to offset by increased revenues.  

            The township's finances are strong. Each year we reduce our debt (and expect to be debt free in 2027), increase our Surplus Fund (so we borrow less), and enjoy the highest credit ratings that allow us to get the best financing terms when needed. We also remain the 3rd lowest tax rate in Mercer County while seeing the values in houses increase.  We have rebuilt our staff to better meet the services that our community expects and demands. For those who want us to use more from our Surplus Fund to reduce this year's tax increase, the answer is that is shortsighted and simply fiscally irresponsible. When you use more Surplus than you can regenerate, you trigger a downward financial spiral that leads us to areas we have been before not so long ago (2009 through 2015)  – and I won't allow us to go back to those troubling times without a fight.  

REVISED 2023 Municipal Budget Message

Below is the revised version of a previously released budget message.  The revised message provides for a reduction of the tax increase from 2.75 cents to 2.50 cents.  This is what is in the budget introduced to the governing body at the March 7, 2023 meeting.

Key facts to help you understand the budget comparison from 2022 to 2023.  First, the 2023 Municipal Budget Amount is $61,763,587, which is $8,983,314 more than the 2022 Municipal Budget.  However, the growth in the budget is driven primarily by two factors: 1) $4.9 million in grant funds received; and 2) the transfer of $3,350,000 from our Surplus Fund to our Capital Improvement Fund.   These two factors total $8,250,000, and both have absolutely nothing to do with an increased burden on our taxpayers but must be included in our budget as required by law.  

The difference in the Amount to be Raised by Taxation from 2022 to 2023 is $1,259,547.27.  This translates to an increase of $18.75 (or $75 annually) quarterly to a taxpayer with a home assessed at $300,000.   The increase is more fully explained in the message below.

2023 Lawrence Township Budget Message

            The challenges we face in our 2023 municipal budget are the challenges we all face as individuals; the rising costs of all things across many industries in a post-pandemic world otherwise known as inflation.  Fortunately, we are well positioned to meet this challenge because our budgets over the past several years have conservatively addressed our needs, reduced our debt[1], and maintained the services to the community at the levels we expect and demand.   This year we planned a budget and our future on fiscally solid ground.

            With inescapable increases across all categories of appropriations (i.e., costs) partially offset by an increase in ratables, a half year of a new cannabis tax, and a successful grant program,[2] we are still able to address serious public safety needs by funding three new firefighter and two new EMT positions[3] and recommend a budget that provides for a 2.50 -cent tax increase.  We continue to maintain and increase our Surplus Fund[4] by using only as much as can be regenerated by year-end.  By doing this, we can better maintain our high credit rating and enjoy the benefits of the best rates for financing our essential community projects and infrastructure improvements. 

             Additionally, this year we plan to transfer $3,350,000 from our Surplus Fund to our Capital Improvement Fund to fund our future capital improvement projects to avoid paying higher financing charges from bonding for the work.  Importantly, this transfer does not factor in the amount to be collected by taxation. 

            The recommended municipal tax rate for 2023 is .6520 [".6270], which represents a 2.50¢ increase^[5].  One (1) cent = $470,635.

            The Amount to be Raised by Taxation in 2023 is $30,686,650.90 [$29,427,103.63], which is $1,259,547.27 over 2022.

ü  The Levy Cap Bank available from 2021 and 2022 is $1,978,355 [$1,353,473], and we will use $0 to remain within the 2% tax levy cap.  NOTE:  The 2023 Recommended Budget is $3,595,303 [$895,916] under the Levy Cap and is available for "Banking." This addition to the 2021 and 2022 banks will leave a usable "cap bank" of $5,573,658 [$2,249,389] for future budgets.         
 

ü  The 2022 year-end Surplus Fund balance is $20,687,139.52 versus a 2021 year-end balance of $17,529,312.69, an increase of $3,157,826.83 

ü  The Surplus balance remaining available after applying an amount as anticipated revenue will be $10,772,139.52 [$10,679,312.69], an increase of $92,826.83 over the 2022 remaining balance.   

ü  The cash reserve balance for tax appeals is $6,219,491.18 [$6,219,491.18].

ü  The decrease in outstanding debt continues.  The 2010 closing balance was $30,797,000.  The 2022 closing balance is $13,210,850 [$15,631,000].   

            Fiscal strength is evident as $9,915,000 [$6,850,000] in Surplus Fund used in the 2023 budget has been regenerated at the close of 2022.  Surplus Fund is the excess in the following Balance Sheet categories:  Amount to be Raised by Taxation, Miscellaneous Revenues Anticipated (MRA), Delinquent Taxes, Prior Year Appropriations Lapsed, and Miscellaneous Revenues Not Anticipated (MRNA). 

            In 2023, we recommend utilizing $9,915,000.00 from Surplus Fund, $20,331,936.67 in MRA, $830,000 in Delinquent Taxes and $30,686,650.90 in Amount to be Raised for Taxes.  The total of these balance sheet categories equates to the municipal budget of $61,763,587.57.

 s/Kevin P. Nerwinski                                            2/27/2023

________________________________________

Kevin P. Nerwinski, Esq.                               (Date)

Municipal Manager/QPA

Township of Lawrence

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[1] We are on schedule to be debt free at the end of 2027 if no new debt is taken on.

[2] 1) ELSA increase; 2) Health Benefits increase; 3) Contractual increases to Salary & Wages; 4) New Hires (i.e., three firefighter, two EMTs and two PW employees); 5) Increase in Uncollected Taxes; 6) Increase in Debt Service (principal and interest/Capital Improvement Funding); 7) Increase in solid waste collection; and 8) Increase in Public Employee Pension contributions; and Emergency Dispatch Service incease.

[3] Multiple hires for Fire and EMT positions is required so that we can create an additional shift for each department. Less than these numbers will not accomplish our goal.  At this point, it is either all or nothing to address this important need.  NOTE:  We are also adding two new Public Works laborers to address increased responsibilities to maintain Brunswick Avenue Streetscape, Hero Dog Parks, and our other community parks.

[4] This is also known as Fund Balance on our General Ledger.

[5] NOTE:  Figures in [ ] are 2022 amounts included for comparison.