Sumpter Township Finance Director Scott Holtz presented an overview of the 2022-2023 budget to members of the Sumpter Township Board of Trustees during a March 8 public hearing.
Holtz told the board that while the budget is balanced, he needed direction from them regarding two issues.
The first “item of concern” he addressed was the projected spending of the entire $2.5 million in royalty funds as part of the budget.
“This is the first time we are spending everything we are taking in on royalties and it raises questioned regarding funding going forward,” he said.
His second request for direction concerned the funding of the township pension liability. Holtz explained that while there was no problem, the board members did have options regarding the liability.
“We've known about the pension liability for several years,” he said. He said the state approved Act 202 in 2017 which put “the onus on local municipalities,” for pension funding. State officials took the individual estimated annual contribution amount and amortized it over 25 years. The Sumpter annual estimated payment of $256,000 would continue for another 19 years. He said that the state recommended payment on the liability is $455,000 and the township has a payment of $380,000 in the budget.
“It's a moving target and always going up,” he said.
Holtz said there were four options the trustees could consider. The township could pay $1 million or $1.5 million from the royalty funds toward the pension liability. Holtz said, however, that benefit would not be seen until the next budget as the contribution is on a two-year cycle.
A second option would be to pay the obligation with the American Rescue Act Funds. Holtz explained that while direct payment for pensions is not allowed under the provisions of the act, the money could be transferred into the general fund and fall into the fund balance. He said this would protect the royalty funds.
Holtz said he did not favor this option as these are one-time funds meant for community projects, infrastructure and improvements. “I would rather see it go to the citizens of the community for one-time purchases,” he said.
A third option would be to utilize a combination of some funding from royalties and a Certificate of Deposit which will mature in April in the amount of about $200,000. “We could use that funding in combination with the budgeted funds,” he said.
The fourth option would be to continue making the yearly payments and “see where we are with revenues. But, as I said, it is going to take 19 years to pay this off,” Holtz said.
Trustee Matt Oddy reminded the trustees and the audience that the pension funding in Sumpter was not a problem or a critical situation.
“It is my understanding that the township pension is funded at over 80 percent,” he said, “which is what most communities in this state would love to have. We are not in critical need. We are way ahead of the game.” He noted, too, that the pension obligation continues to accelerates every year. “We are considering an option to better fund it for the future,” he said.
Holtz said he would also like the board to consider preparing a five-year strategic financial plan and a five-year capital improvement or investment plan to prepare for future expenses. He reminded the trustees that contract negotiations with the police unions are upcoming which could impact the budget numbers.
Trustee/Deputy Supervisor Tim Rush noted that the “impact of runaway inflation” could also impact the township funding and was a factor in the cost of everything the township purchases including gas for trucks and police cars.
Trustee Don LaPorte agreed that the township had “a lot of options” but said he felt the budget was good news.
“We are not in the business here to make money off our residents. There is a lot to review. When I hear we are spending about the same amount as we are taking in, that's to me a good thing because I don't think any resident wants to hear we are putting half a million dollars of their money in the bank for a rainy day,” he said.
Holtz reminded the board members, too, that decisions would have to be made concerning the amount the township charges residents for services such as water, trash and suggested the township policy of slow steady increases rather than a huge jump was more acceptable to residents.
Township Clerk Esther Hurst noted that the current 1 mill residents pay for fire services is augmented by more than $150,000 from the general fund and money from the royalty fund. Holtz noted that the police budget is also augmented by the general fund.
“If we didn't have the landfill royalties, we wouldn't be able to have the police force or the fire department,” Hurst said. She agreed with Holtz that any increase in service fees to township residents should be in small increments.
Holtz said the royalty fees are a good way to absorb the cost increases in township services without a “shock to residents.”
“If we want to use those royalty fees, we need to cut expenses somewhere,” he told the trustees.
