Delco borough's happy problem: A budget surplus in Norwood

Last year, officials in the tiny Delaware County borough of Norwood raised real estate taxes 34.7 percent, an increase they said was required to prevent the borough from going bankrupt by the summer.

Now, Norwood has a different problem, the kind that many a recession-ravaged municipality would love to have: a six-figure surplus.

The $327,000 surplus has led some residents to wonder if the council raised taxes too much.

George Fieo, treasurer in this borough of about 5,700 people, said he made the best fiscal guess he could, given last year's circumstances. And the extra funds will come in handy as a kind of reserve fund.

"We don't have a crystal ball," he said. "Did we oversolve it a little bit? Yeah. But I don't get to keep the extra, the borough does."

Still, the extra money has given some vindication to former Treasurer Dirk Delgrego, who asserted last year that Fieo was blowing the borough's problems out of proportion.

Politics spiced up the rhetorical stew: Republicans took over the majority of the Norwood council in the 2009 election, and Fieo replaced Delgrego.

Council President David Kowalski said it was not solely the tax hike that created the surplus. The borough's new manager has reined in overtime costs, he said, and borough employees were now contributing 10 percent to their health-care costs for the first time.

While the 34.7 percent property-tax increase was undoubtedly a bitter pill for Norwood homeowners to swallow, it has warded off any need for additional tax increases. This year, the council approved a $3 million budget with no tax increase, though expenditures outpaced revenue about $54,000, Fieo said.

The surplus made up the difference, he said.

But the party, if it can be called that, won't last forever. Borough employees' pension costs and health-care premiums continue to rise, and, as Fieo explained, officials in the largely residential community rely on one main source of revenue: property taxes.

"It's just going to keep growing," he said. "The revenue stream stays the same."

Though neither the state nor Norwood's borough code requires that the town carry a reserve or rainy-day fund, the state suggests municipalities keep from 5 percent to 15 percent of their annual budget in reserve.

The extra money could likely be spent on Norwood's aging sewer system, Kowalski said. The council is required to vote on any expenditure of the surplus funds.

While the surplus may irk some residents who had to pony up a bigger tax outlay last year, Kowalski said he was happy to have the surplus, at least for a little while.

The council president said, "I'd rather have a surplus than a deficit again."