Memorandum from Chief Financial Officer

TO:           Mayor and Township Council

FROM:     Himanshu R. Shah, Director of Finance

DATE:      September 15, 2003

RE:           SFY 2004 BUDGET

The proposed Municipal Tax Rate will be $0.76 in this budget. This rate is in reference to the present assessed values of all taxable properties in the Township. The rate is $0.03 per $100 of assessed value higher than the SFY 2003 rate of $0.73. On the average assessed home of $146,194, the increase will be $44.00. This is due to significant increases in Group Insurance($405,861) due to higher premiums, increased Salary & Wages for Public Safety($769,740) due to overtime, union increases and step increases, the allotment of $300,000 for Employee Termination, the budgeting of $350,000 for police settlement payouts, and $1,254,000 needed to cover Emergency Appropriations mostly attributed to Snow Removal and Police Overtime in SFY 2003.

The total amount of appropriations, including reserves for uncollected taxes, is $45,303,111; an increase of $3,591,321 from the SFY 2003 adopted budget. The following is the list of major increases and decreases in the Budget:

Had the Reserve for Employee Termination not been eliminated in recent years, these items would have had a smaller impact on this year’s budget.

The Reserve for Uncollected Taxes in this year’s budget is $2,687,332; a decrease of $448,869 from SFY 2003. The reserve for uncollected taxes is calculated based on the collection rate of 97.66%. This increase from last year’s rate of 97.07% could become problematic for next year’s budget if the tax collection rate falls.

Our collection rate of 99.52% is higher than the previous year of 99.00%. The continued lowering of the prime rate resulted in numerous refinancings, and simultaneously has fueled the increase in the collection rate. Relying on this high collection rate in future years could result in a problem with the Surplus Balance.

The increase in Appropriations was partially offset by the increased tax collection rate through Surplus Anticipated. We were able to increase this line item by $1,670,000 to $7,345,000. The increase in the Reserve Rate resulted in a $698,645 savings. Also, increases in the Assessed Valuation of the town totaling $90,952,438 resulted in savings of $691,010.

Please be advised that we have several one-time revenues in the SFY 2004 Budget further offsetting a potential tax increase. These one-time items include $200,000 from Reserve for Tax Appeals, $150,000 from Capital Fund Surplus and $307,500 for the Sale of Land. These amounts will have to be made up for through other means next year.

The position in the Arena, that has been the focus of much past discussion remains in this budget. In order to keep the tax increase down, payments of Notes were kept to a minimum of $100,000. This will cost future budgets in the form of additional interest payments. Also, Unfunded Capital was budgeted at $292,706 less than in SFY 2003, further burdening the Township with future interest payments. Lastly, the Finance Department does not feel $300,000 in SFY 2004 to payout Termination will be an adequate amount, and it is foreseen that Emergency Appropriations are very likely depending on retirements during the fiscal year.

Surplus Balance has been increased by almost $200,000. This is in accordance with assurances made to the Bond Rating Agencies in order to maintain our current rating.