What is the General Fund? The General Fund Budget is the fund most familiar to residents as it is the principal operating fund for the Township. On the revenue side, it anticipates tax receipts (among other revenue sources like interest, grants, and permit fees). On the expenditure side, it is expansive. It covers costs for a variety of services – police, fire, ambulance, building permits, trash and recycling, road maintenance, traffic signals, hydrants, park maintenance, and more. It also includes operational costs – salaries, benefits, professional services, facility costs, fleet maintenance, insurance, and more. And, it supports programs like recreational events and community resources. This list is not intended to be exhaustive, but rather to illustrate the diversity of the General Fund.
What are some of the principal sources of revenue? The Township acquires its revenue from several sources – most notably from earned income taxes (52%) and property taxes (18%). The Tax Enabling Act (Act 511 of 1965) limits the earned income tax rate to the one percent (shared 50/50 with the local school district) (there is one exception – there is an additional 0.25 percent specifically designated for open space preservation). The real estate transfer tax rate also is limited to one percent (again split with the school district). The property tax is discussed more below.
What is the current Township Property Tax? East Bradford’s 2019 property tax rate is 1.00 mill (mill stands for millage). You can use this formula to calculate your property tax: Assessment x millage = tax (face amount). So, the Township tax (1.00 mills) for a property with an assessed value of $200,000 would be calculated as follows: $200,000 x .001 = $200.00 (face amount) [Note: 1.00 mill is equivalent to a millage of .001 – the decimal is moved three places to left.] It is important to note that the Township tax is only one of three property taxes – there is also County tax and West Chester Area School District tax. Chester County’s tax rate is 4.3690 mills and the School District is 21.2723 mills. So, to expand the scenario above, a property assessed at $200,000 would pay the following taxes:
Township = $200.00
County = $873.80
School = $4,254.46
So, East Bradford’s property tax is only about four percent of your total tax obligation. If you are unsure of your assessed valuation, it is on your tax bill. You can also use the ChesCo Views tool to look it up or contact the Chester County Assessment Office.
What are some of the principal expenditure categories? The Township’s most significant expenditure categories include emergency services (36%), administration and insurance (27%), and public works (14%). About 12 percent of the general fund is allocated for capital assets and the remaining 11 percent is distributed among engineering, planning, zoning, codes, parks, and recreation.
Is the 2019 General Fund Budget balanced? Yes. However, it’s balanced using $163,827 in fund equity. Without the fund equity receipt, expenditures would have exceeded revenues. The practice of using fund equity to balance the budget is detrimental and a signal of instability – much akin to using savings to pay the bills. A look back at the last three years illustrates how the General Fund balance has declined.
Is there a correlation between tax revenue and land use? Absolutely. Population density and land use characteristics have a direct relation to tax revenue. Over the last two decades, East Bradford has become known and recognized as an open space municipality. Voter referendums on the need for open space preservation in the late 1990’s and early 2000’s laid the foundation for a policy decision to preserve the open space character of the Township by limiting development. With less development, population density is lower. As a result, total tax assessment valuation and the number of earned income taxpayers is (permanently) limited. To be more specific, we estimate that over 500 residential lots have been preserved as a result of the open space program. If we assume that each lot would have been assessed at $250,000 and that each household generated an income of $150,000, the retirement of these development rights represents deferred revenue in the neighborhood of $500,000 per year. To be fair, the math isn’t quite this simple – there are costs associated with the municipal services that would have been provided to these lots. However, the exercise illustrates the financial impact of the program. Additionally, East Bradford has a comparatively low percentage of commercial, retail, office, and corporate development, which can generate considerable revenue while requiring little in the way of service.
Is the Capital Reserve Fund related to the General Fund? Yes. The Capital Reserve Fund is funded by the General Fund. So, as the General Fund goes, so goes the Capital Reserve Fund. The estimates and projections in the Capital Reserve Fund are informed by two planning documents – The 5-Year Capital Reserve Schedule and the Capital Reserve Plan. The Capital Reserve Plan provides a detailed inventory of existing assets (in excess of $10,000 in value), including useful life and replacement estimates. The Plan is a long-term depreciation guide that spreads replacement cost out over the life of each asset. There are several advantages to saving for these large assets over time. For one, it is a proactive approach that enables the Township to anticipate and plan for large expenditures. It also ensures that the budget remains stable when large purchases are necessary. Finally, in the event the Township does need to respond to an emergency (the Broad Run Bridge for example), the reserve provides the means to do so without having an immediate and negative impact on the budget. However, despite the benefits, The Township presently does not fund depreciation of aging assets. The annual cost to do so would be about $200,000. Just this alone would require a tax millage increase in the range of 0.15 to 0.30 (to learn more, skip to the alternatives section).