Lansdale Borough Hall. Photo by James Short.
Town could cut down, set rules for general fund balance
As budget season approaches, Lansdale could take up talks on an unusual topic.
Does the borough have too much in reserves? And how much is too much?
“Right now, your fund balance is just the rainy day fund of the borough, and it can grow or shrink, but there’s no real direction on what happens to what,” said new Finance Director Jim Lathrop.
During his first administration and finance committee report since taking over as finance director in June, Lathrop told council in July that he’s hoping to take up talks on the town’s financial policies, in addition to the year-to-year budget that’s discussed by each committee in September and October, then voted ahead by council in November and finalized in December.
First on his to-do list is a discussion on the town’s fund balance policy: the Government Finance Officers Association recommends that towns keep roughly 35 percent of their annual operating expenses in reserve, in case of an emergency such as the COVID pandemic or a sudden need. Based on Lansdale’s latest numbers, their balance is much higher.
“You have a fund balance of nearly 90 percent. So we’ll be recommending in a future meeting, to create a fund balance policy. We’ll be recommending 40 percent, so if it goes over that, you’ll be using that money for onetime expenditures. So that way, we’re not charging the taxpayers too much,” he said.
“In the same way, if the fund balance grows too low — and we’re recommending a limit of 25 percent — then the (borough) manager and myself have to present a plan of how we’re going to raise that fund balance over time,” Lathrop said.
The second topic he plans to discuss was brought up last year, and tabled temporarily after the prior finance director left: should the town pursue a long-term capital project bond, similar to several done in the early 2010s, to tackle road repairs and other long-term infrastructure needs?
“We’ve met with our financial advisor for possible bond (borrowing) in the future. Currently, you are A1 rated. We really believe that you should be AA rated, which also gets us out of some of the requirements for insurance on your bonding, to lower some of your costs,” he said.
“These types of things are what the rating agencies look for: that you have some governance in how you manage your finances. Lansdale is doing a great job, but that there’s real defined roles” that could be spelled out in policies and help boost the bond rating, Lathrop said.
Budget breakdown
Last December, council adopted a 2024 budget with total revenues and expenses across all funds balanced at just over $59.1 million, no tax increase, and a sewer rate hike staff said could be the first of several in upcoming years. Removing the roughly $21 million from the electric fund, $6.4 million from the sewer fund, $7 million from the capital fund, and smaller enterprise funds, the general fund revenues and expenses were balanced at $19.6 million, and that number includes roughly $6 million in interfund transfers using $5 million in revenues from the electric department, and $1 million more from the sewer fund for general fund expenses.
“If we have so much money, we should be using it, and not raising taxes. That’s my belief,” Lathrop said.
“There’s a lot of needs here in Lansdale, from roads to the pools. That’s why we’re looking at the bonding, but we also have some of these funds to address some of these issues,” he said.
Councilman BJ Breish asked if Lathrop had specific dollar figures to go with those percentages, and Lathrop said the borough’s current unassigned general fund balance is about $11 million, and specific numbers will be discussed in upcoming administration and finance committee meetings.
“We’re talking about a decent amount of money. I know we have a lot of projects on our mind, like our pool project, and different things we want to do. I would like to make sure that we’re a part of the conversation about what we do with those funds,” Breish said.
Council President Mary Fuller agreed: “100 percent: that’s a nine-council-member task, amongst department heads, and we invite the public, taxpaying residents, to weigh in as well.”
Councilman Michael Yetter asked how long the bond rating process takes, and Lathrop said the early talks between staff and the bond advisor have floated the tentative idea of borrowing this fall and seeking a new rating as part of that process, and included a question of whether the town could benefit by switching their rating agency.
“Currently you use Standard and Poor’s, which is a little bit more convoluted on how they figure out their ratings. Moody’s is very clear, they show you how they do most of the calculations,” he said.
“And we’re having that discussion: that it may be beneficial to go to Moody’s: one, because of that reason, and two, you’ve been with Standard and Poor’s so long, maybe it’s time to have someone else look at us in a fresh sense,” Lathrop said.
Resident Alex Sickler made a suggestion: could some or all of the surplus be used to find or create a place to stay for those currently living in the town’s parks?
“We have a bunch of abandoned properties, and a bunch of money. Why can’t we, as a town, put our literal money where our mouth is? We have a problem, we have the resources, we just need authorization to use those resources to fix the problem,” he said.
Lansdale’s administration and finance committee meets next meets at 6:30 p.m. on Aug. 7 and full borough council meets that night at 8:30 p.m., both at the borough municipal building, 1 Vine Street. For more information visit www.Lansdale.org.
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