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North Huntingdon panel tries to resolve overflowing reserve fund

How it happened

North Huntingdon township accrued a $3.4 million surplus between 2007 and 2011 because of a growing tax base from an increase in housing plans, an increased collection of delinquent earned-income taxes and frugal spending, according to township manager John Shepherd.

Shepherd said the commissioners no longer should count on large delinquent income-tax collections because the state's tax-collection system now requires employers to deduct local taxes from their employees' paychecks.

“A number of people just didn't pay over the years, and ultimately, it was collected,” Shepherd said. “There were times where we'd try to estimate how many delinquent taxes would be collected, and the actual collection would be double what we expected.”

Wednesday, April 3, 2013, 9:00 p.m.
 

The North Huntingdon commissioners plan to continue spending down the township's $5.8 million reserve fund — cautiously.

This year, the township started with a general fund balance of $11.4 million and reserve fund of $7 million. In February, the commissioners established a policy requiring the township's reserve fund not to exceed 25 percent of its general fund balance, which would be $2.8 million. So far, the board has reduced the fund by $1.2 million.

That leaves the panel in a unique situation — trying to decide how to spend an extra $3 million — and its limitations in doing so.

“There are really no rules or restrictions on how we spend the money, as long as it's used toward township needs, such as public works, police or infrastructure,” township manager John Shepherd said.

The commissioners began by dedicating an additional $400,000 to the 2013 road program, paying off a $1.8 million mortgage on the public-works building, purchasing a new street sweeper for $217,000 and reducing the property tax rate by 1 mill for 2013.

The average assessed value of a home in the township is $25,000, and after reducing the tax rate by 1 mill, the average taxpayer's annual bill from the township went from $313.75 to $288.75. Each mill generates about $350,000.

North Huntingdon's large reserve fund is an anomaly for townships across the state, according to Elam Herr, assistant executive director of at the Pennsylvania State Association of Township Supervisors.

“Each community is different, and there are not any requirements or recommendations for how large a reserve fund should be,” Herr said. “Municipalities should always have some type of reserve fund because even with the best planning, something unexpected could pop up.”

Townships across the state keep different amounts in their reserve funds, depending upon their needs, Herr said.

North Huntingdon officials' policy to cap the reserve fund is commendable, Herr said.

“They're being fiscally conservative, even when they're at the point of trying to lower the fund,” Herr said. “Keeping it around 25 percent is commendable because they don't know what could happen, but they'll have money available in case of an emergency.”

The commissioners have their own ideas about the best way to reduce the fund.

President Lee Moffatt said he expects the reduction in the reserve fund to take several years. Instead of making purchases, he suggested it could be used for another tax reduction.

“We could use funds from the reserve as part of our operational budget, so we don't need as much tax dollars,” Moffatt said. “I just don't want to spend it on something that will become a reoccurring cost down the road, but it's not always too easy to find purely one-time expenditures.”

For example, Moffatt said, he would be wary of purchasing additional vehicles for the police department because eventually, they would need to be replaced.

Shepherd said the commissioners plan to continue spending the reserve on one-time expenses, such as infrastructure updates or flood-mitigation projects, such as building the storm-water-mitigation facility at Lion's Park.

Moffatt cautioned commissioners not to use reserve funds to cover projects that could be covered by grants, such as flood mitigation plans in Jacktown Acres.

“We shouldn't stop applying for grants because we have funding available in a surplus,” Moffatt said. “We need to see what funding we can get from grants.”

Commissioner Rich Gray said it's important for the board to avoid making any extravagant purchases. Instead, the board should look at making long-lasting improvements, such as additional road repairs, he said.

Gray likened managing the surplus to overseeing a household budget.

“We have to do this carefully because if we spend more than we take in, it will eventually catch up with us,” Gray said. “Once the surplus is gone, it's gone, and the only way to recover it is to raise taxes, which we don't want to do.”

Brad Pedersen is a staff writer for Trib Total Media. He can be reached at 412-856-7400, ext. 8626, or bpedersen@tribweb.com.

 

 

 
 


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