Suburban governments wrestle with deficits

A few weeks into January, veteran Easttown Township Manager Gene Williams knew his 2009 budget was already in deep trouble.

"Our real estate transfer taxes didn't just slow down, they stopped," Williams said.

To stanch the red ink, at least half of Easttown's employees were put on a four-day workweek, starting in April. But the Chester County township still faces a $1 million budget shortfall heading into 2010.

Neighboring Tredyffrin Township last month laid off 11 workers, cut eight open positions, and has had a citizens commission working all year to find other savings. Radnor Township let 12 employees go in June, hoping to save $1 million in 2010.

Warrington Township imposed a couple of layoffs last year and still needed a tax increase. Now it is talking with neighboring Warminster about merging police services - political heresy in some provincial suburbs.

So take heed, Gov. Rendell and Mayor Nutter: Times are tough in the townships, too.

In a trend expected to dominate the fall municipal budget season, some suburban governments are wrestling with unprecedented deficit projections, the product of a lengthy recession that has shriveled revenue sources while adding to costs.

For the first time in many towns, the "L" word - layoffs - is threatening previously bulletproof municipal jobs. Pink slips have reached the land of the gold watch.

"I've been in this work for 35 years, and this is the first year that so many different municipalities have laid off employees," said Lower Gwynedd Township Manager Larry Communale, immediate past president of the Association for Pennsylvania Municipal Management. "It's very unusual."

Township finance experts repeatedly use the "perfect storm" cliche to sum up this year's predicament.

A dormant real estate market has dried up commercial and residential transfer-tax revenues, a staple of most local tills. Rising unemployment has put an added hit on earned-income taxes levied by many municipalities.

Building permits are in the tank, pension obligations are soaring, rainy-day funds are being depleted, and residents - their personal budgets similarly strapped - are in no mood for tax increases. In fact, many are seeking lower assessments as the values of their homes plummet.

And down the road, hefty increases for electricity loom as state-imposed rate caps are scheduled to be lifted.

"The U.S. economy has been slowing down for about three years," said Robert J. Sabatini, a former township manager in central Pennsylvania who now works as a municipal consultant. "Only this year have we started to see it impact municipalities. We are a little behind the curve, and so we are probably going to be slower getting out of it."

For municipal workers and managers, this has meant extra duties - taking on work of colleagues not replaced, usually for no additional pay.

"It's a tough job when there's no money," said Warwick Township Manager Gail Weniger, whose assistant manager left recently and was not replaced. Givebacks, no wage increases, and layoffs are foreign to many public-sector workers, she said.

"They say, 'We've never laid off here before,' " said Weniger, who is wrestling with a $625,000 projected deficit in her Bucks County township. "Well, we've never had this economy before, at least not that anybody here today would remember."

Neighboring Warrington laid off a couple of employees and raised taxes last year, having already eaten through its reserves. Between the layoffs and attrition, the nonuniformed workforce dropped from 52 to 45, said Township Manager Tim Tieperman, who has also assumed the duties of the departed public works director.

"It's a few more gray hairs," Tieperman said. "I think a lot of townships this year are going to be in the same shape we were in last year."

Those townships will also be forced, he said, to consider options deemed unthinkable in previous years. For Warrington, that includes fledgling talks with Warminster about combining their police into a regional department.

Among the area's largest staff cuts have been Tredyffrin's, where 20 of 128 positions were cut Sept. 30 via layoffs and eliminating vacant positions in public works, police, libraries, and township administration.

"As far as I know, this is the first time we have had layoffs in Tredyffrin Township," Manager Mimi Gleason said. "It was a very difficult decision."

Last fall, despite numerous cuts, Tredyffrin faced a $2.7 million deficit that was bridged largely with reserves, Gleason said. Unlike many municipalities, Tredyffrin has no earned-income tax or gross-receipts tax on its businesses, but surveys showed residents strongly hostile to any new or higher taxes.

Easttown, meanwhile, faces an estimated $1 million deficit - 25 percent of its operating budget - despite its months of staff furloughs. The township has scheduled a public hearing Oct. 19 on a possible earned-income tax.

"There's going to be some pain and suffering from the community in terms of costs," Township Manager Williams said. "We have cut back an awful lot this year to where the pantry has been somewhat emptied."

Tom Colman, a management consultant who heads a volunteer citizens budget task force in Tredyffrin, said he thought his township made the right call with layoffs.

"Some townships have taken temporary steps such as furloughs," Colman said. "But I don't think there is much evidence that this economy is going to rebound fast enough to let you overcome all of the problems with temporary cost reductions."

Colman's group has been working with township officials to find greater operating efficiencies to cover the work of the laid-off employees.

For instance, he said, inexpensive computer software will help the township building inspector answer questions instantly in the field, saving hours of time back at the office going through maps and other records.

"There are a lot of those things you can do," Colman said. "The point is, you don't have to reduce services when you reduce costs. Sometimes you can reduce costs and provide better service."