Lansdale: not so fast on supposed surplus

Just weeks after hearing about a possible surplus in a borough bank account, Lansdale officials are saying: Not so fast.

“We’re still working with the 2022 audit results, because 2023 is not completed. This will be an ongoing discussion, in the next few months, while we complete more research,” said Councilwoman Carrie Oglesby.

In July borough council heard a report from the town’s new finance director that he was starting to develop new guidelines for the town’s fund balances, spelling out how much the town should keep in reserves for its general fund and/or other enterprise funds, such as the separate accounts for the electric department and sewer plant.

At that time, the finance director said 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, and based on the 2022 figures Lansdale’s balance for their general fund was much higher.

That discussion is still ongoing, Oglesby reported after the latest administration and finance committee meeting on Aug. 7, as staff work to finish the 2023 audit within the next few weeks, and identify if any of those reserves are already allocated, including as matches for grants for projects funded elsewhere.

“The GFOA standard is to have 35 percent, and we were going to be cautious and do 40 percent, in the general fund policy. We have no policy, so the first thing we need to start with, is a policy,” she said.

“Then we need to focus on, how much does council want to put in that policy? And not just the general fund: we have funds in other departments: electric, wastewater treatment — are those funded? Are they at the amount they should be?” Oglesby said.

Councilman BJ Breish said as the chairman of the public works committee, he’s led talks for years on road paving, pipeline replacement, and sinkhole repair projects around the borough that could cost in the tens of millions, and could require a long-term bond borrowing to fund.

“We were $20 million behind on fixing roads, and fixing critical infrastructure, that we own, that we are not able to maintain. So even if we ‘found’ money, it’s been spent. We have projects we want to do,” he said. “We do not have too much money.”

Council President Mary Fuller added that having the reserve policies in place, and clear compliance with those policies, could ultimately result in savings if the town does seek to borrow.

“I think that will make us more effective, and efficient, and economically sound. It also puts us in a better position to have a higher bond rating, should we still move in that direction,” she said.

Councilman Rich DiGregorio asked how staff did not notice the large general fund surplus during any of the four finance directors the town has had since late 2020. Borough Manager John Ernst said that turnover may be part of the reason.

“Every time there’s a finance director that starts on board, they bring in their own policies, their own procedures. And I don’t feel that, over the past two years, with all of the changes going on, that we’ve had a real good sense of where we are financially,” Ernst said.

“Along with several projects being funded, maybe not all of the necessary funds that we allocated, were used. So there is money left over in accounts that were never reconciled at the end of a project. We’re reconciling all of those numbers,” he said.

As part of that process, the manager added, staff are looking into whether any accounts have gone “for lack of a better word, dormant,” and could be combined or consolidated to make financial tracking simpler and more transparent. One example: roughly $850,000 has been dedicated as the borough’s match for the East Main streetscape project finally underway, which dates back to a federal grant awarded in 2014.

“The money could be all allocated, and we were aware of it, and we thought it was part of this pool, but it looked like part of that pool — still some digging to do, to find that out,” Fuller said.

In prior years, Breish answered, he’s gone through the annual borough budget to examine each line item for possible savings, in order to minimize any tax increase on residents.

“I’ve gone line item by line item, trying to find that money, so we can balance the budget and didn’t need to do tax increases. And I’ll do it again every time that conversation comes up. But we didn’t see that,” he said.

“If there is money out there, it needs to go to fixing the roads, to fixing the infrastructure, it needs to go to a lot of these projects we already have keyed-up, that are shovel-ready, that we need to make in current infrastructure,” Breish said.

Stock sale could help

Staff have also found a possible asset that could give the town’s bottom line a onetime boost: roughly $160,000 in stock with financial company Prudential that the borough has held since the late 1980s.

“We’d like to move forward and sell this stock, since the borough isn’t in the business of holding private equities,” Oglesby said.

Fuller added that the stock was “not something that the borough ever purchased, it wasn’t like they decided they were going to invest in stock,” but was obtained when leftover funds in a policy holder account were converted into stock when that company went public.

“The borough isn’t in the business of speculation in that way, so the committee is recommending we move forward in liquidating that stock,” she said.

Lansdale’s borough council next meets at 7 p.m. on Aug. 21 and the administration and finance committee next meets at 6:30 p.m. on Sept. 4, both at the borough municipal building, 1 Vine Street. For more information visit www.Lansdale.org.

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