teetet Waynesboro Borough Strategic Management Planning Program Final Presentation October 28, 2020 PENNSYLVAN ECONOMY LEAGI Information, Insight, Integr Pennsylvania's leading independent, nonprofit, public policy research organization for over 80 years PEL provides technical assistance and consulting to municipalities of all sizes and types throughout the state PEL works to foster good government that provides the most efficient core public services that meet local residen needs at the lowest cost We believe healthy local governments assist in creating a sustainable Pennsylvania economy that can keep and attract residents and businesse Pennsylvania Economy League Strategic Management Planning Program Scope of Work u. Analyzed Waynesboro's financial history and demographics Projected revenues and expenditures Reviewed administration, public safety, public works and labor/collective bargaining Compiled areas recommendations for all ia Demographics Population 1970 to 2010 Waynesboro population declined from 1970 to 1990 and then experienced growth Franklin County experienced steady growth during same time period 11,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 10,500 10,000 9,500 9,000 8,500 1970 1980 1990 2000 2010 Waynesboro -Franklin County Demographics Population by Slight growth in proportion of working age population and under age 18 Slight decline in under age 65 population 18to 64 population are primary taxpayers Age 12,000 10,000 8,000 6,000 4,000 2,000 1,588 1,904 1,689 6,438 5,523 5,707 2,151 2,218 2,542 0 1990 2000 2010 Under 18 18-64 65 & over Increase in population is the result of natural growth (births greater than deaths) Pattern shows residents leaving borough Demographics Net Migration despite population growth 1990 to 1999 9,578 9,614 36 2000 to 2009 2010 to 2017 10,568 10,793 225 1990 to 2017 9,578 10,793 1,215 Total Population (start) Total Population (end) Total Population Change (a) 9,614 10,568 954 Births Deaths 1,448 1,102 346 2,035 1,060 975 1,433 1,021 412 4,916 3,183 1,733 Natural Pop. Change (b) Net Migration (a minus b) -310 -21 -187 -518 6 Slight increase in owner-occupled; decline in renter-occupied Demographics Housing Units Number of vacant units more than doubled 3,000 2,500 2,000 1,500 1,000 500 a 2,373 2,177 1,845 1,913 2,051 2,139 405 457 209 1990 2000 2010 Owner Occupied -Renter Occupied Vacant $200,000 $180,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 Demographics Median Home Value Waynesboro median home values are lower than both the state and Franklin County as a whole $0 1990 2000 2010 Waynesboro $63,000 $85,500 $157,100 Franklin County $70,500 $97,800 $175,00 - Pennsylvania $69,700 $97,000 $159,30 $60,000 Demographics Median Household $50,000 Income $40,000 Same pattern in household income Waynesboro is below both the state and the county as a whole $30,000 $20,000 $10,000 $0 1990 2000 2010 Waynesboro $22,972 $31,574 $41,155 Franklin County $28,805 $40,476 $51,035 Pennsylvania $29,069 $40,106 $50,398 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Demographics Poverty Level 8.5 8.1 8.2, 7.8 7.0 Borough's percentage of families in poverty steadily increased from 5 to8 percent 5.7 5.0 5.4 5.2 Franklin County poverty trend was flat to declining Borough's poverty rate remains below the state in contrast to other wealth measurements 1990 2000 2010 Waynesboro -Franklin County Pennsylvania Population has rebounded after decline from 1970 to 1990; increase is due to natural growth Growth in proportion of working age and under age 18; decline in over 65; positive sign for tax base Positive trend of owner-occupied housing just under 50 percent of total and increasing compared to Demographic Findings and Tax Base Implications renters Vacancies bear watching; borough has focused on code enforcement Most wealth measurements below state and county 11 Historical Financial Summary 2017 surplus is result of one-time grant funds Deficits in two out of five years $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 -$2,000,000 2014 2015 2016 2017 2018 Revenues Expenditures $4,771,926 $4,837,884 $5,116,966 5,926,250 5,167,977 4,901,925 4,732,464 5,100,411 5,695,288 5,867,976 Surplus/(Deticit, -129,998 105,420 16,555 230,962 -699,999 400,000 Surplus/Deficit and 200,000 Adjusted Surplus/Deficit -200,000 Removing one-time revenues and expenditures results in: Deficit in 2017 instead ofa surplus Larger deficit in 2018 Adjusted revenue growth is 6 percent Adjusted expenditure growth is 18 percent -400,000 -600,000 -800,000 -1,000,000 2014 2015 2016 2017 201 Surplus/(Dericiy Adjusted Surplus/(Deficity Market VS. Assessed Value 2001 to 2018 $500,000,000 $450,000,000 $400,000,000 $350,000,000 $300,000,000 $250,000,000 $200,000,000 $150,000,000 $100,000,000 $50,000,000 Increased 74% Increased 21% $0 2001 2003 2005 2007 2009 2011 2013 2015 2017 - Assessed Value Market Value 14 Taxes are just under half of total revenues Real estate is main revenue source but Historical Tax Revenue shows little growth Largest growth is in EIT Per capita and mechanical devices taxes eliminated in 2017 Change 2014t to2018 $ 2014 Actual 2015 Actual 2016 Actual 2017 Actual 2018 Actual % Real Estate Taxes Real Estate Transfer EarnedIncome Tax Local Services Tax Per Capita and Mech. Dev. Total Tax Revenue $1,181,995 $1,167,461 $1,206,414 $1,248,662 $1,228,148 46,153 3.9 104,906 837,014 174,249 100,139 867,706 171,447 143,955 892,050 217,408 135,546 137,690 32,784 31.3 891,983 1,010,642 173,628 20.7 163,278 180,422 6,173 3.5 15,021 17,635 17,937 7,232 2,600 -12,421 $2,313,185 $2,324,387 $2,477,765 2,446,701 $2,559,502 246,317 10.6 15 Interfund transfers from sewer and water are largest non-tax revenue source Historical Non- Tax Revenue Refuse fees are bulk of historical charges for services; moved to own fund in 2019 2014 Actual 2015 Actual 2016 Actual 2017 Actual 2018 Actual CHANGE 2014-2018 $ % Interfund Transfers Charges for Services intergovernmenta. Rev. Other Financing Licenses and Permits Fines and Forfeits interest, Rents Total Non-Tax Rev. 1,112,887 1,129,549 1,234,921 1,367,745 986,089 -126,798 -11.4 1,109,204 1,131,166 1,175,126 1,004,836 1,022,338 -86,866 -7.8 34,130 50,431 35,953 43,666 18,360 796,887 140,043 105,913 310.3 51,508 115,959 281,714 231,283 458.6 91,042 105,466 52,103 8,945 98,998 128,580 49,960 10,328 97,142 6,100 6.7 59,361 8,336 55,039 10,502 66,873 14,770 28.3 14,276 5,331 59.6 2,458,741 2,513,497 2,639,201 3,479,549 2,608,475 149,734 6.1 16 Transfers account for 40 to 45 percent of Historical Transfers borough revenue Transfers offset water and sewer expenditures that are paid from the General Fund 2014 2015 2016 2017 2018 CHANGE 2014-2018 $ Actual Actual Actual Actual Actual Trans from Water Fund Trans from Sewer Fund Street Light Fund Transfer Total Interfund Transfers $639,574 $641,154 $742,479 $770,501 $634,693 -4,881 473,312 488,395 492,442 577,243 351,396 -121,916 -25.8 0 0 0 20,000 0 0 0.0 $1,112,887 $1,129,549 $1,234,921 $1,367,745 $986,089 -126,798 -11.4 17 Public safety including police and fire is the largest cost center; experienced most growth Police expenditures grew from $1.1 million Fire expenditures grew by around $400,000 Next highest cost centers are employee Historical to $1.4 million Expenditures benefits and public works 2014 Actual 2015 Actual 2016 Actual 2017 Actual 2018 Actual CHANGE 2014-2018 $ % Gen. Government Public Safety Health Public Works Culture & Rec Employee Benefits Transfers Total Expenditures 1,000,883 1,163,067 982,625 1,079,117 1,155,594 154,711 15.5 25.5 1,587,652 1,590,357 1,875,440 1,858,936 1,993,240 405,588 15,000 893,171 61,022 10,000 828,227 53,966 10,000 874,071 80,213 5,929 6,976 -8,024 -53.5 995,980 1,143,922 250,751 28.1 -6.0 16.6 202,795 57,382 -3,640 1,246,221 1,103,500 1,220,875 1,500,761 1,453,634 207,412 97,976 -16,654 57,187 51,771 57,228 40,748 -41.6 4,901,925 4,732,464 5,100,411 5,695,288 5,867,976 966,051 19.7 18 Revenues and Expenditures Per Capita 600.00 500.00 400.00 300.00 200.00 100.00 0.00 2014 2015 2016 2017 2018 Revenues Per Capita 374.63 365.16 378.99 429.91 410.62 Expenditures Per 498.95 420.89 438.26 418.39 467.48 Capita 1 2019 Actual includes sewer and water transfers approximately $300,00 higher than budgeted; increase in transfers meant borough did not have to use admin reserve Revenues include 3 mill General Fund property tax increase in 2019; total millage grew from 25.19 in 2018 to 29.68 including a 1.5 mill new levy for fire 2019 Budget VS. Actual 2019 2019 Actual Budget Revenues* $6,406,153 $7,202,007 Expenditures $6,448,648 $7,173,519 Surplus/(Deficit, -$42,495 -$28,488 20 2019 Millage Comparison MUNICIPAL SCHOOL TOTAL Waynesboro Borough 29.680 97.518 127.1 Quincy Twp 1.600 97.518 99.118 Washington Twp 6.400 97.518 103.918 MontAlto Borough 9.550 97.518 107.068 21 Four years of deficits since 2014 once one-time events removed Borough depleted its fund balance in 2018 Historical Property taxes show minimal growth Earned Income taxes up 20 percent Second largest revenue is interfund Findings 2014 transfers Public safety is the largest cost center 40 percent of total expenditures and accounts for largest growth through 2019 Limited property tax base growth due to outdated assessments Surrounding communities have lower taxes 2 Baseline Projection Revenue Assumptions 2020 to 2024 Tax rates and fees held at 2020 levels 0.5 percent annual increase in Real Estate Tax revenue based on assessment increases Realty Transfer Taxes held at 2020 level 1.5 percent annual growth in Earned Income Tax revenue 0.8 percent annual growth in Local Services Tax revenue Fees, certain other revenues increased by 0.5 percent to 2 percent annually Transfers from Water and Sewer Funds increased by 3 percent annually Transfer from Sanitation Fund increased by 2.3 percent annually Other revenues held at 2020 levels IMPACT OF COVID-19 NOT WELL KNOWN AT THIS TIME 23 Baseline Projection Expenditure Assumptions 2020 to 2024 Employee position count remains at 2020 budgeted levels Union employee wages and salaries increased at contractual rate through December 2020 and then 2.5 percent annually Non-union employees increased same as CBA with those eligible to receive performance-Dased step increases every other year Health insurance increased between 5 percent and 6 percent annually based on Center for Medicare and Medicaid Services' projected annual growth rates for state and local government insurance premium Debt based on debt service schedules with no new debt incurred Other annual expenditure growth rates were based on historical patterr and/or projected annual inflation rates USDA CPI Projection for 2020 is 2.25 percent and for 2021-2024is2.3 percent 24 2020 budget includes use of one-time admin reserve funds of $300,000 in order to Pre-Pandemic Projection Summary balance Considerable one-time capital revenues and expenditures are included in the 2020 budget 2020 2021 2022 2023 2024 Projected Projected Projected Projected Projected Revenues $7,134,750 $5,344,476 $5,394,370 $5,445,882 $5,459,388 Expenditures 7,134,385 5,505,427 5,662,250 5,919,935 6,053,153 Surplus/(Deficity $365 -$160,951 -$267,880 -$474,053 -$593,765 25 Methodology developed by University of Pittsburgh, PEL and western PAmunicipal managers estimating percentage loss for each Pandemic Scenarios revenue type Trend for municipal EIT loss in August has been on the lower end of the pandemic scenario but impacts are still not well known 2020 Medium Impact 2020 Projected 7,134,750 2020 Low Impact 2020 High Impact Total Revenues 7,134,750 7,134,750 7,134,750 -123,403 -330,173 -557,946 7,011,347 6,804,576 6,576,804 Est Revenue Loss Net Revenue 0 7,134,750 Expenditures 7,134,385 7,134,385 7,134,385 7,134,385 -123,038 -329,809 -557,581 Surplus/(Deficit) 365 Methodology based on the lag inherit in the various revenue types and assumption that employment gradually returns to pre-COVID-19 Pandemic Scenarios levels Question of 2021 property tax impact remains 2021 Liquid fuels reimbursement from state expected to be lower 2021 Medium Impact 2021 Low Impact 2021 High Impact 5,344,47 2021 Projected Total Revenues 5,344,476 5,344,476 5,344,476 Est Revenue Loss Net Revenue 0 -30,025 -117,378 5,314,451 5,227,099 -211,028 5,133,448 5,344,476 Expenditures 5,505,427 -160,951 5,505,427 5,505,427 -190,976 -278,329 5,505,427 -371,97 Surplus/(Deficit) 27 Revenue: Real Estate Taxes Consider lowering the collection rate assumptions Review delinquent taxes at year en For those not paid by escrow, consider casn flow impact from the later payment cycle COVID 19 Consider a millage increase Impact Earned Income Tax 2021 Budget EIT for 2021 may need to be reduced kept at 2020 levels depending on the amount received in November 2020; decrease has been around 3 percent Consider 2021 budget adjustment to 2020 revenue steady or decrease by 1 Considerations percent Expenditures Payroll is biggest expense Consider essential staffing levels Delay discretionary and/or capital COVIID 19 purchases Impact Budget Development 2021 Budget Consider developing two "budgets" Normal operating budget for adoption Contingency budget that plans only for vital Considerations and necessary services Projected Tax Revenues Property tax growth is projected to be relatively flat Largest growth is anticipated in EIT Change 2020-2024 $ 2020 Projected 2021 Projected 2022 Projected 2023 Projected 2024 Projected % Real Property Taxes Earned Income Tax Local Service Tax Real Estate Transfer Tax Total Tax Revenue $1,531,270 $1,538,676 $1,546,119 $1,553,600 $1,561,118 29,848 1.9 965,000 172,000 130,000 979,475 173,376 130,000 994,167 174,763 130,000 1,009,080 176,161 130,000 1,024,216 59,216 6.1 177,570 130,000 5,570 3.2 0 0.0 $2,800,270 $2,821,527 $2,845,049 $2,868,841 $2,892,904 92,635 3.3 30 Interfund transfers are the largest non-tax revenue source and second largest General Fund revenue after taxes at 33 percent of total revenues Intergovernmental revenues and other financing decline from 2020 mostly due to various one-time Projected Non- Tax Revenues revenues 2020 Projected 2021 2022 2023 2024 Projected Projected Projected Projected Interfund Transfers Charges for Services Intergovernmental Revenues Other Financing Licenses and Permits Fines and Forfeits $1,963,142 $1,695,838 $1,744,924 $1,795,442 $1,847,433 254,234 936,115 911,700 192,748 57,195 19,346 254,434 14,602 286,700 194,211 57,751 19,414 254,638 14,573 261,700 195,691 58,312 19,482 254,846 14,545 236,700 197,189 58,880 19,551 255,058 14,517 171,700 198,704 59,452 19,620 Interest, Rents and Royalties Total Non-Tax Revenue $4,334,480 $2,522,949 $2,549,321 $2,577,151 $2,566,484 31 Personnel is 80 percent of General Fund costs Personnel is projected to increase over $700,000 or Salaries expected to rise by 15.3 percent; health insurance anticipated to grow 25 percent Personnel currently compensated below market rate Personnel and Non-Personnel Expenditures 17.7 percent by 2024 for the area 2020 2021 2022 2023 2024 Projected Projected Projected Projected Projected Personnel $4,156,207 $4,327,963 $4,505,706 $4,693,759 $4,886,781 Non-Personne! 2,478,742 1,065,709 1,043,266 1,111,341 1,049,947 Transfers 485,000 70,805 72,329 73,885 75,475 Debt Service 14,435 40,950 40,950 40,950 40,950 Total Expenditures $7,134,385 $5,505,427 $5,662,250 $5,919,935 $6,053,153 32 2021 Projected $5.5 Million Total Projected 2021 Departmental Expenditures Transfers 1% 2021 shown because 2020 public works budget includes one-time capital projects funded by grants and loans that skew actual costs General Governme nt 22% Employee Benefits 26% Public Works 10% Public Safety 39% Cultural & Recreation 2% Highest expenditures in personnel but wages remain below market for area Stagnate tax base struggles to pay for services Financial Highest cost center is public safety reflecting borough's robust services of full-time, paid police and full-time fire Findings drivers and Potential revenue loss from COVID-19 remains unknown Challenges Transfers from water and sewer funds are critical to Borough operations Pooled account prevents Borough from needing a Tax Anticipation Note 3 Administrative Review Some financial accounting practices unduly distort true General Fund costs in relation to the Water and Sewer funds Strong institutional knowledge, good working relationship with Waynesboro Borough. Authority and proactive approach to code enforcement. Need more proactive approach to day-to-day financial operations including access to financial system now under third-party management and stronger purchase order policy 3 Public Works Review iimt Robust day-to-day public works operations are carried out by several departments and encompass sewer and water functions. Largest issue is a lack of capital Borough has made steps in this direction by completing an internal road ranking. project. Comparative review should be extended to other needs such as equipment and facilities. planning 36 Public Safety Review Police 20 full-time officers in 24/7 department Proactive drug enforcement in response to opioids No-cost mutual aid to neighbors including overnight to Washingt Township Outdated facilities Regionalization talks stalled Fire Five full-time drivers; volunteer chiet/firetighters Fire protection agreements with Quincy and Washington Townships Unclear if agreements cover costs 37 Plan Plan for revenue losses associated with the COVID-19 pandemic Seek a comprehensive study through STMP Phase II to review options for providing public Seek safety services. Immediate Approach Franklin County about conducting a Approach reassessment Recommendations property Eliminate Eliminate interfund transfers and complete a cost allocation study Ensure provisions of the intergovernmental Washington Townships are followed Ensure fire services agreements with Quincy and Short-Term and Long-Term Financial Recommenendations Improve Improve financial management through transition to modified accrual accounting Add Add management discussion and analysis to annual audit Develop Develop multi-year Capital Improvement Plan and Budget Consider Consider home rule for tax flexibility Update Update all license, permit and service fees Seek Seek to control health care costs Short-Term and Long-Term Operational Recommendations Seek Seek technology upgrades including an enhanced purchase order system, and code enforcement and work order/fleet management software Develop a new Comprenensive Plan focusing on residential community development to grow tax base - parks, streetscapes, etc. Develop Draft Draft a rental registration and vacant property registration ordinance Continue with attempts at shared service agreements and intergovemmental cooperation; be mindful that such agreements do not place additional costs on Continue borough residents Finalize draft STMP report Recommendations indicate timeline and implementation responsibility Next Steps and Questions Work with DCED representative on STMP Phase Il funding Questions? 41