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From financial standpoint, borough must look at police options: Kevin Zartman

Posted 12/11/19

Editor’s note: The following is the transcript of a letter written to Middletown Borough Manager Ken Klinepeter.

Nov. 20, 2019

Ken:

I feel that the time is right for me to draft this …

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From financial standpoint, borough must look at police options: Kevin Zartman

Posted

Editor’s note: The following is the transcript of a letter written to Middletown Borough Manager Ken Klinepeter.

Nov. 20, 2019

Ken:

I feel that the time is right for me to draft this letter to the borough’s leaders regarding an issue that is looming on the horizon and has the possibility of affecting the borough’s residents for many years to come. The issue is an emotional one and one that the political leaders of the town as well as the residents are divided on. The issue I am speaking about is that of a regionalized police force and whether or not it is the right choice for Middletown.

While I realize that there is an emotional/personal side to the issue, I am looking at it strictly from a financial perspective (numbers tend to make an issue more black and white and less gray).

As we know, currently the police department is budgeted to account for approximately $3.2 million of general fund expenses for 2020. This represents roughly 45 percent of the borough’s $7.1 million expenses within that fund. Earlier this year, we were presented with preliminary figures that showed the borough’s cost in some type of a shared-service agreement to be in the range of $2 million to $2.2 million. This would be an immediate and yearly savings of $1 million to $1.2 million (in 2019 dollars). This would not be a once-and-done cost reduction, but rather a savings that would occur each and every year.

From a finance director’s seat, that amount of savings would have a huge financial impact on Middletown now and for many years to come. As we know, due to the water/sewer concession agreement, water and sewer costs will continue to rise for the town’s residents each and every year. A regionalized police department and the financial savings that would come along with it would provide a positive offset and allow the town to fund many of the projects and necessary upgrades that are currently financially unaffordable (without a tax increase).

This is, quite possibly, the second largest financial decision that the borough has faced in the past 10 years. The first largest was the lease of the water/sewer system, and we know how that has turned out for the borough.

I would urge the borough to move forward and seriously explore the shared-service options as the issue is a time sensitive one for a number of reasons. First, each year that continues to go by with no deal in place is another year that the borough is spending $1 million to $1.2 million that it could instead be saving or using towards other necessary borough projects. Secondly, there are a finite number of viable partners in a plan of this type for the borough. The longer we wait and do not move forward increases the chances that those partners are no longer interested or form an alliance that does not include Middletown.

I fear that the divide we now see between the police department costs and what the borough’s residents can afford will only continue to widen. With each passing year, we see the expenses associated with the PD continuing to rise. The question becomes how to continue funding the increased costs each year. With a shared-services department the costs would be held in check due to it becoming an economy of scale, spread over a larger pool of taxpayers from several municipalities, and having a contracted cost each year.

I have seen the argument presented that since the general fund posted a surplus of approximately $900,000 in 2018, why do we need to consider such a drastic cost-saving idea as a shared-services police department? The borough has plenty of money, right? The immediate, short-term answer to that question is … yes, the borough is financially stable at this time.

But the main reason that the borough had such a large surplus for 2018 (and every year for that matter) is because we transfer approximately $1.6 million from our electric fund to the general fund.

If that transfer were to no longer exist (due to being legislated away or no longer affordable to the electric fund) then the general fund, in its current form, would be showing a deficit of approximately $700,000. Now, consider the approximately $1 million in savings that a shared-services PD could provide and that same $700,000 deficit turns into a $300,000 surplus with no tax increase or loss of services to the borough’s residents.

Another point regarding the transfer from the electric to the general fund is that while it is 100 percent legal, the PSAB (Pennsylvania State Association of Boroughs) does caution boroughs against leaning on fund transfer as a means to achieve a balanced budget.

As I said, I realize that there are issues to consider other than just the financial aspect of this decision. But, when viewed through the financial filter a police shared-services plan makes very good financial sense for the borough and its residents.

Lastly, while I do know that there are a number of options available under the umbrella of a shared-services department (regionalized or contracted services) I have not analyzed nor studied the specific differences between these. With that being said, I do not feel as though I have enough information to make a specific recommendation as to the agreement that would be best for Middletown, its residents, and police officers. But, the possibility of saving approximately $1 million per year is an opportunity that certainly should not be ignored.

Sincerely,

Kevin Zartman, director of finance and administration, Middletown borough, May 2017 through November 2019