Hempfield facing up to $1.4M budgetary deficit for 2020

Hempfield could see up to $1.4 million in lost revenues for 2020 and face an additional loss of $1 million in 2021 following economic impacts of the coronavirus pandemic.

With more than $15 million in obligations due over the next 18 months, as well as an additional $8 million needed to provide township services for the remainder of the year, supervisors are looking at ways to minimize damage to the budget.

“I think the time is now to take action,” said Melanie Phillips, director of finance for the township.

During a public work session last week, township leaders discussed options for saving money ranging from making permanent cuts based off freezes implemented in April, which would save $750,000, limiting 2021 purchases to essential items, enacting a hiring freeze and more.

If passed by the board of supervisors, budgetary cuts could impact engineer services, minor equipment purchases for EMS and fire, recreation wages, library contributions and public works projects. Suggested freezes include fire retention and recruitment, and public works maintenance funds, among others.

Supervisors directed department heads to report efficiency plans during the July meeting that would guide the possible cuts and freezes.

Last month, Phillips reported a $400,000 budgetary deficit based off revenues from the earned income tax, real estate tax, building permits and recreation fees. Updated numbers presented this month suggest revenue from the earned income tax has dropped $346,000 compared to the same period last year, or 11.67% between January and May.

The tax is affected by temporary and permanent job loss, which jumped to 16.8% in the township compared to the usual unemployment rate of 3.5% to 5%, Phillips said.

Expected revenue loss for the earned income tax this year is expected to be between $280,000 and $560,000, or 5% to 10%.

The real estate tax, the second largest revenue source for the township, is behind by 22%, Phillips said. However, most of the tax should be recovered by the end of the year after supervisors authorized the extension of the discount period to provide relief to residents.

Revenues brought in through building permits could be cut in half by the end of the year, resulting in a loss of $200,000 to $400,000. Permits are currently off 78.6% from the same period last year due to a lack of large projects. Phillips said several permits for small residential projects were received, resulting in little revenue.

The largest project that was expected to finish this year — a mini casino at Westmoreland Mall — is now delayed, Phillips said, resulting in a $40,000 loss of revenues for the township.

Recreation fees are also expected to be cut in half, with lost revenues amounting to between $150,000 and $200,000.

Other losses include the local services tax, which could drop between $50,000 and $100,000.

“It is important to note that the shutdowns and the costs associated with the virus will affect the revenues for 2020 and 2021 and possibly beyond,” Phillips wrote in her report. “To what degree remains to be seen.”

She noted that further budgetary impacts could be felt in the coming months, with second quarter earned income tax receipts received in August.

If recommended cuts are made to the budget, more than $1.1 million could be saved in the 2020 budget, or about 9%.