Sparta looks to axe bonding, reduce debts
SPARTA — Washington could take a cue from Sparta when it comes to reducing debt. Instead of continuing to borrow and bond to pay for expenses, Sparta plans to consolidate short term debts, get lower interest rates, and pay their debt down more quickly. This will create needed cash to pay for purchases without incurring more debt.
In essence, Sparta plans to cut up their credit cards and adopt a “pay-as-you-go” policy going forward.
Besides opting for a moratorium on bonding, the Township Council introduced, in name only, the proposed municipal budget for 2013-2014 at their meeting this week. The budget includes a projected tax levy of $17,026,866 and would raise municipal taxes by 1.82 percent.
Under cap for the first time
Although this proposed tax levy does not include increases for school and county taxes, it represents the lowest municipal increase in three years and the first time since the state instituted the two percent tax levy cap in 2010 that the municipal budget is under cap.
The 2010 tax increase was 5.92 percent. In 2011 it was a 5.23 percent increase and in 2012 the tax levy went up by 3.14 percent. The municipal budget was allowed to exceed the cap during those years because the township applied for certain waivers and exemptions and these were granted by the state.
Since the budget is under cap this year, the council introduced an ordinance Tuesday night to set up a “cap bank” which will hold funds not expended which can be used as cash in the following year’s budget. Surplus from 2011 will add $500,000 in cash to the current capital account.
State aid for 2013-2014 will remain flat but revenues are less, primarily due to property tax appeals. The township paid out $450,000 in property tax rebates in 2012. Sparta plans a town-wide reassessment for 2015.
Sparta in better shape
Township Chief Financial Officer Sam Rome said at the meeting this week, “Even though we’re in difficult economic times, the township is still picking up ratables, which offset some of the tax appeals.” Rome said overall Sparta is in better shape than the last few years. He said a full $1 million is available in the budget to fund capital projects, adding, “We won’t incur any debt this year.”
Township Manager David Troast said auditors strongly advise the town to maintain a surplus, or ‘fund balance’. He said the township is the collector for municipal, county, and school taxes and each quarter they must pay these out until the taxes are collected from residents. Troast said for this reason it is necessary to have a surplus available because if the town cannot meet these payments, they have to borrow to pay the tax bills.
The total property taxes in Sparta are around $87 million, of which only about 20 percent are municipal taxes. County taxes account for 25 percent of the total taxes, and more than 50 percent goes to the schools.
The municipal budget must be approved by the state’s Department of Community Affairs this year, as required of municipalities every three years. After state approval, the council can then vote to adopt the budget.
On Tuesday March 19 at 7 p.m. the council will hold a budget workshop, at which township department heads will be present. The public hearing on the budget is slated for April 9.