PRINCETON: Surplus can help borough to avoid tax increase

By Victoria Hurley-Schubert, Staff Writer
   Although its initial budget presentation included a potential 1-cent tax increase, that increase is not likely to happen because Princeton Borough officials can choose to make cuts or they can dip into more than $4 million in surplus funds to offset increased costs.
   The borough is looking at using about $1 million of its surplus in the 2011 budget, said Sandra Webb, the borough’s chief financial officer.
   First looks at the $25,828,638 budget include a spending increase of $1,016,503 and a potential tax increase of $206,000. The tax increase works out to roughly one penny per $100 of assessed value.
   For a true look at figures, the borough is waiting to close its 2010 books when the last bills and bank statements come.
   On the revenue side, the borough has about $2.25 million in surplus funds coming from an unaudited balance of about $1.3 million in capital surplus and $954,000 in unaudited operating surplus. The operating surplus is the highest it has been in the 13 years Administrator Robert Bruschi has been with the borough.
   ”That’s a good thing, it puts us in a good position to offset what could have been tax increases,” he said. “It also allows you choices in the budget process because you’re not only limited to raising a couple hundred thousand dollars in taxes. At least you can make choices, keep programs alive, do special projects because you have the financial wherewithal to do that.”
   Not everyone was thrilled with the idea of dipping into the borough’s savings.
   ”Are you suggesting we eat into surplus in order to get us through the next budget year?” Councilman David Goldfarb asked. “In that case we are headed in a path where we’re not going to be able to do that anymore.”
   Mr. Bruschi agreed with that sentiment, adding it then becomes a matter of how long that process would take, and if the borough would be able to replenish the money it uses from the surplus down the road.
   ”Replenishment is truly key,” said Mr. Bruschi. “At some point you can run out of your savings and we don’t want to do that.”
   The administrator also said it may be difficult to justify $3 million in surplus in these tough economic times.
   ”When you’re carrying $3 million in surplus (as the borough did at the end of 2009) its very difficult for me to justify why you carry that when we’re still in a really difficult economy … and that’s the only reason,” he said. “Especially coming off the revaluation where certain parts of our town were hit pretty hard, it would be hard to sit here and justify why we would look at a tax increase when we have $4 million in surplus. I’m going to tell you not to take it.”
   In 2009, the borough had just under $3 million in surplus funds, said Ms. Webb. It used $800,000 of that money in the 2010 budget, which leaves the $2 million surplus.
   ”I don’t see how you justify not (using surplus money), unless you really have a service you really feel is unnecessary,” Mr. Bruschi added.
   To consider using surplus funds, Councilman Goldfarb suggested the administration develop a plan and decide upon the lowest acceptable amount of surplus it’s willing to retain and work its way to that.
   ”So we don’t have a year where our surplus is gone,” he said.
   The administrator wholeheartedly agreed with the idea, praising, “That’s very smart, that’s absolutely the way we have to go.”
   The borough may recoup some additional surplus money as it looks at bond ordinances for projects that have been completed to see if there were any unspent monies. Those funds would then revert to the capital budget, said Mr. Bruschi.
   ”Continuing to grow it will be difficult in this economy,” said Mr. Bruschi. “Once we get audited numbers, we can go back and see what our history has been and where we’ve grown it from and then see what steps we can take to keep it stable or continue to grow it.”
   Funding from Princeton University is also a key factor in the budgeting process. Currently the university contributes $1,180,495.74 to the borough.
   ”If we know we have an agreement with Princeton University lined up to carry us forward, even if it’s just for the one more year, there could be a Princeton Borough, depending upon what goes on with consolidation, it’s important for you from a financial, decision-making point of view, I would urge you on being much more cautious on using surplus if you didn’t know where we were going with our negotiations with the university,” said Mr. Bruschi.
   The borough is currently in negotiations with the university about future payments.