Dear Mt. Lebanon Friends & Neighbors,
Yesterday, the Commission unanimously passed the 2009 budget with a small tax cut and after restoring several programs that were cut in the proposed budget. Many of you have contacted me to express your opinion on the budget, particularly the cuts that were proposed. I wanted to wait until the budget was formally approved before I provided you with an update and a “behind the scenes” look at what happened. Most of the cuts have been reinstated back in the budget that was approved yesterday. Please feel free to contact me for clarification on any items in the approved budget.
Here is a summary of what happened:
* On Nov 1st, Steve Feller, the Municipal Manager, proposed a 2009 budget that was balanced and without a tax increase but with some services (like Teen Center, First Fridays, Dave Hornak’s position) eliminated.
* Since the release of the proposed budget, I have gone through the budget line by line and created recommendations focused on increasing revenues and reducing expenses. I worked with Commissioner Joe DeIuliis who came up with additional savings (particularly with his expertise in the Public Works area). My initial recommendations were emailed to the Commission and Steve Feller on Nov 20th. The Municipality provided their feedback during the budget review meeting on Dec 2nd. I reviewed the feedback and provided final recommendations during the final budget review meeting on Dec 8th.
* My recommendations provided savings of about $720,000 from increases in revenue and reduction in expenses. After adding back services that were cut (Teen Center, First Fridays, Farmers Market, Historic Society funding, Dave Hornak’s position, etc) and including a 5% tax cut in millage, there was still about $52,000 left over as bottom line savings.
* At the final budget review meeting on Dec 8th, the Commission went through these recommendations line by line in a 13 page spreadsheet that I provided to the Commission and the appropriate Municipal Managers. The Commission made updates and added items that reduced these savings to about $178K based upon the preferences of a majority of the Commission. These savings are now being passed back to the residents as a millage reduction.
I have been discussing improving efficiencies and coming up with tax savings for some time now. The economic conditions that we face today are extraordinary and I am glad that we have been able to find a way to not only restore key services that were cut, but also pass along a small tax cut.
I appreciate the help of the entire Commission and the Municipality in making this possible. I want to thank all the Citizens who took time to email, speak and write to the Commission. Not only did the Citizens make it clear as to what services were critical, they were instrumental in providing several solutions that I included in my recommendations.
Mt. Lebanon is probably one of the first communities to pass a tax cut while restoring cut services in these difficult economic times. In my experience, initiating a new change (i.e. tax cut) is probably the hardest part. Considering that the tax rate has increased 24.6% over the past 5 years, the small tax cut is a good example of change and of collaborative participation between the Residents, Municipality & the Commission.
If you are interested in reading the details on how this was achieved behind the scenes, then read on. I have been asked to provide a write-up on the details for a publication and I am providing this in a draft MBA case study format. I solicit feedback from the Commission, Municipality and the Residents so that I can update with any suggestions prior to submitting the final version.
I welcome discussing with you any of the particular details and look forward to your responses. This is available online at www.joinraja.com and I can be reached via email raja@mtlebanon.org or at 412-341-7252.
Wish all of you and your families a wonderful holiday & Happy New Year. Thanks.
Raja
Commissioner, 1st Ward, Mt. Lebanon
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How Mt. Lebanon was able to reduce taxes while restoring key service cuts during these tough economic times?
Draft, December 16, 2008
Introduction:
Mt. Lebanon is a #1 community that is known for its outstanding services (ex: great public safety). Taxes have been flat for years and expenses have increased in the past several years which resulted in tax increases of 24.6% over the past 5 years. This year, Mt. Lebanon took on this challenge and, with fiscal discipline, found a way to restore service cuts from a proposed budget and also pass along a small tax cut to the residents.
The Challenge:
From a macro level, and as a starting point, here are some facts from the 2009 Recommended Budget released by Steve Feller (Mt. Lebanon’s Municipal Manager):
• Mt. Lebanon’s tax revenues have been flat for a couple of years and are expected to continue through 2009.
• On the expense side, there been increase in costs to the tune of $1,412,700 in 2009. (Details provided later.)
Steve Feller, the Municipal Manager, came up with a balanced budget for 2009 without tax increases. However, several cuts such as Teen Center, Ice Rink Assistant manager’s (Dave Hornak’s) position, First Fridays, etc were proposed and the Commission heard loud and clear from the residents about the importance of these services.
As we went through the budget review for past several weeks, the challenges were clear and there seemed to be no clear solution. At one point, one of the other Commissioners stated in a public discussion session that he would be inclined to raise taxes to restore some of the services that were cut in the Manager’s proposed budget.
The Solution:
Today’s economic condition is extraordinary. My belief is that we (i.e. the Commission, the Municipality and the Residents) needed to look at efficiencies and come up with a solution that not only restored the key services that were cut but also ensured that we provide a tax cut back to the residents of Mt. Lebanon.
Coming from the Private Sector, I have been on both sides of the budget i.e. as CEO and as part of the Board and have expertise creating and reviewing budgets for many years. I went through the budget line by line and focused on increasing revenue, reducing expenses and coming up with enough bottom line savings that we could restore key services and also provide a tax cut. I made an initial draft of the recommendations with savings of about $540,800 and met with Commissioner Joe DeIuliis who further enhanced the savings by about $194,000. The bottom line from increased revenues and reduced expenses was $734,800. Adding back many of the cut services like Teen Center, First Fridays, Farmers Market, Parades, Historic Society, Dave Hornak’s position, etc and providing a real estate tax cut of 5% (i.e. reducing the millage from 4.97 to 4.72), there was still $78,310 left over as bottom line savings.
I emailed the recommendations contained in an Excel spreadsheet to the Commission and Steve Feller on November 30th. The various items were reviewed with the different departments and Willy McKain CPA (Mt. Lebanon’s Director of Finance) provided a response back from the Municipality during the Commission meeting on Dec 2nd. I went through all the responses and met with several Commissioners to create a new version that now had $720,540 as bottom line from increased revenues and reduced expenses. With more of the cuts reversed and while also including a 5% millage tax cut, there was still $52,230 left over as bottom line savings.
The final budget review meeting started at 7pm and ended around 11pm on Mon, Dec 8th. I had provided hard copies of the updated spreadsheet with $720,540 in increased revenues and increased expenses to the Commission and the Municipal Managers reviewing the budget. I want to thank the Commission, the Municipal Managers, Directors & Staff for going through and responding to this spreadsheet line by line (roughly from 8pm to11pm). Steve did a good job in facilitating the feedback on each item to get the consensus of the majority of the Commission. Some items were passed at their original amounts in the spreadsheet, some were negotiated down and some eliminated. From a starting point of $720,540, these changes reduced the net savings to about $178,000. These savings will now be passed on the tax payer as lower millage from 4.97 to 4.89 in 2009.
20/20
My article “20/20” in the Mt. Lebanon Magazine (available online at www.joinraja.com) a few months ago highlighted my thoughts on increasing revenue and reducing expenses with a focus on improving efficiencies by 20% (with the objective of keeping the service level the same) and providing a 20% tax cut to the residents.
The millage tax cut of that passed by the Commission was only 1.6% (178K out of $10.575M). The economic conditions of today have had a clear impact on the potential savings. Just as an example, I want to hypothesize how this could have been 20%.
• The net savings from my recommendations (including Commissioner DeIuliis suggestions) with increases in revenue, reductions in expenses and with restoration of key services that were cut was $574.240.
• Increased costs faced by the Municipality were $1,412,700 (based upon the increases in fringe benefits primarily due to employee health insurance ($308,200), increase in pension costs (129,000), increases in refuse collection ($480,500), fuel ($105,000), utilities ($140,000), MRTSA ($94,000) and salt ($56,000) along with a need to increase the undesignated fund balance ($100,000)).
• In my recommendations, in many areas I had chosen to make reductions in the 2009 budget if they were notably increased over actual amounts for 2006 and 2007 (and 2008 year-to-date where appropriate) and maintained a reasonable and justifiable increase in 2009. By being more stringent on the 2009 budget (ex: keeping it more in line with prior year actual amounts), additional savings of $129,587 could have been generated.
The total of all the above items is $2.117 Million which could have provided marginally over a 20% reduction in millage. The economy has had an impact of all sectors including Mt. Lebanon and while we need to adjust to current economic factors, the hypothesis is just to show how a 20% millage tax savings could have been possible.
Summary:
Mt. Lebanon is probably one of the first communities to pass a tax cut while restoring cut services in these difficult economic times. In my experience, initiating a new change (i.e. tax cut) is probably the hardest part. Considering that the tax rate has increased 24.6% over the past 5 years, the small tax cut is a good example of change and of collaborative participation between the Residents, Municipality & the Commission. It is my hope that the Commission, Municipality and the Residents will continue to seek fiscal discipline and improve efficiencies to provide the best return to the tax payer in Mt. Lebanon in the future years.