During the Nov. 20 Catasauqua Borough Council meeting, Ryan Hottenstein, the borough’s municipal adviser, and Patty Moorhead, director of financial data and analytics with Pennsylvania Economy League, shared insight into the Strategic Management Planning Program (STMP) report.

“Nothing in this report will be a surprise, but it’s a starting point,” Hottenstein reported.

He noted the full report is approximately 100 pages.

The Pennsylvania Department of Community and Economic Development created the STMP to offer a pre-emptive step for municipalities to work on financial planning, according to the presentation.

The program’s original purpose was to provide matching grant funds to assist municipalities experiencing fiscal difficulties in developing comprehensive, multiyear financial plans and establishing short-term and long-term financial objectives. The program is open to any Pennsylvania local government or combination of local governments.

Plan development included a review of data and information about the borough, including various documents, audited financial statements, budgets, census data, financial reports and Bureau of Labor and Statistics data. They held meetings and conference calls with elected officials and employees. The process resulted in recommendations designed to improve the operational and financial performance of the borough.

The report overview showed a lack of a coherent set of objectives and an action plan in the borough, according to the presentation. This approach was described as haphazard, with projects being taken up sporadically without evaluating their potential return on investment.

Borough Vice President Howard Cunningham said there had previously been little financial oversight.

“But there is now,” Hottenstein added.

There was reportedly a deficiency in assessing the financial impacts of initiating or halting different projects.

“This oversight has negatively affected the borough’s financial health,” the presentation informed.

“The borough had been experiencing financial distress for some time,” according to Hottenstein.

However, borough council and the administration started taking a more proactive approach in acknowledging the fiscal realities of the borough in 2022, and they are working to improve the financial health of the borough.

“The borough had experience in significant operating losses in most funds for every year reviewed by the STMP consultants,” according to the presentation.

The presentation included information on Catasauqua’s financial history from the past few years, as well as past general fund and tax data and information.

According to the presentation, “Catasauqua Borough experienced deficits in three out of four years of the historical review period, ending 2022 with a surplus of $1.2 million. During the period, revenues grew by 76% compared to 2019, while expenditures rose by only 37.8%.”

It was noted the borough’s largest cost center is elected officials and administrative services. This includes salaries for council, the tax collector and administration; employee benefits, including health insurance and pension; and legal and engineering costs. Several non-personnel costs are also included, such as services, supplies and utilities.

“Under administrative services, other legal costs spiked in 2022 at $244,595, well over the historical average of $109,000. Engineering costs escalated from roughly $30,000 in 2019 and 2020 to $182,399 in 2021 and $284,506 in 2022,” the presentation reported.

Police expenditures spanned 14-20% of total expenditures and continued increasing steadily. The majority of the police costs are for salaries and wages.

Increases in contract property maintenance compensation led to increases in costs for planning, zoning and code enforcement. Highway costs dropped slightly from 2019 but largely remained consistent. Stormwater costs increased.

The closure of the municipal pool in 2019 and reduced personnel costs led to a decrease in parks and recreation costs.

Revenue assumptions say the 2023 budget serves as the baseline, and the tax rates and fees remain at 2023 levels. Base figures were adjusted to reflect current-year actuals as of Sept. 30. The real estate millage increased in 2023 from 7.35 mills to 12.55 mills for general purpose, with an additional 2.5 mills for debt service, for a total of 15.05 mills.

Other revenue assumptions say the real estate transfer tax was held at $75,000, local service taxes were held constant, and other nontax revenues held constant. The current earned income tax growth is 2% annually, and the state aid for pensions is increased by 3% annually.

Baseline projections showed an anticipated deficit for 2023, but the counts needed to be updated to include current numbers. The proposed budget approved at the Nov. 20 meeting showed a budget in the black, with general fund revenues at $8,197,356 and expenses at $8,197,224.85.

The largest anticipated increase in borough expenses is administrative services, which includes health care costs for employees.

“Personnel expenditures, including compensation and benefits, are expected to grow by $436,092 from 2023 to 2027,” the presentation reported. “Non-personnel numbers decreased from 2023 to 2024 based on nonrecurring expenditures in 2023.”

STMP recommendations for borough council and the mayor include applying for a state grant for STMP II to develop an economic development revitalization plan; establishing vision, mission and strategic planning; fiscal and financial planning; creating a five-year capital improvement plan; governance and oversight; working to limit the influence of broader political agendas in the borough to stay focused; collaboration and regional partnerships; and infrastructure and environmental development.

Recommendations for administrative services include procuring Enterprise Resource Planning software; investing in a municipal financial software system; switching to a modified or full-accrual basis of accounting; formal weekly staff meetings with the borough manager; creating clear expectations and definitive time frames for the completion of tasks; ensuring all nonemergency purchases greater than $1,000 are approved by the borough manager; establishing a clear and consistent record-keeping system boroughwide; and working to build stability and continuity in borough management and operations.

It was suggested the borough engage a website developer to review the borough’s page with a focus on allowing for more citizen action online, such as filing forms and making payments.

The report also included insurance and risk management recommendations, such as adding earthquake and flood coverage to the property policy; increasing to a minimum crime limit of $50,000; confirming cyber liability registration with the risk management vendor; implementing a safety committee for workers’ compensation and employer liability; and more.

Public works recommendations include procuring a public works software system that can be deployed in the field, continuing to fund street repair and maintenance as funds allow and developing an employee succession plan.

Water public works recommendations include procuring a Supervisory Control and Data Acquisition system and establishing a funding mechanism to procure an automated meter reading system.

Sewer public works recommendations include monitoring and ensuring bulk customers’ meters are working and reporting correctly and ensuring municipal customers are notified about anticipated next-year costs and billed timely.

Recommendations spanning across the public works department include increasing fees charged annually, establishing departmental goals and objectives, having employees participate in capital planning cross-training on enterprise operations throughout the public works department, considering incentives for employees who acquire additional certifications, developing a capital improvement inventory for the borough water and sewer systems and utilizing the borough’s financial adviser to complete a post-inventory analysis.

“It’s really good to see things we are already doing or implementing included in the list of recommendations,” Eckhart noted.

He and council President Brian Bartholomew reported there are already several new procedures and upgrades already in process or planned.

“The borough has taken a strong stance in righting the ship,” Hottenstein said.

He also noted the borough would have been in a stronger financial position in 2022 if they hadn’t been paying extra fees and penalties incurred from things not completed in earlier years. One such example, according to Eckhart, was the borough had to pay the 2021 pensions in 2022 with a “significant late fee” attached.

“This council is working to make sure we don’t need to borrow money to get through the end of the year,” Councilwoman Jill Smerdon said.

She reported the previous borough manager said this was a normal, regular municipal practice. Hottenstein responded it is often the case, but he does not recommend it.

According to Hottenstein, significant surpluses can be expected in the next four or five years.

“In the long run, we are moving forward at a good pace financially,” Bartholomew said.