West Chester officials must pay attention to finances

I am concerned about West Chester’s finances. I was the Vice Chairman of the former West Chester Borough Financial Advisory Committee which was disbanded in 2022.

Last month, borough council wrote off over $2 million that it owed its Sewer Fund and $450,000 that was owed to its Highway Fund. The Sewer Fund loan goes back to 2016, when the borough’s expenditures exceeded the budget by $2.9 million! Of this, $2.5 million was for “insurance, employee benefits, and payroll taxes”. So far, no one has explained how these predictable expenses were so far over budget.

The borough has three major funds: the General Fund, the Parking Fund and the Sewer Fund. The General Fund is funded by taxes, service fees, grants and transfers from other funds. It pays most of the borough’s expenses. The Parking Fund is just that — its revenue is from the garages and parking meters, and it pays the expenses of operating them. Anything left over can be transferred to the General Fund, and this is one of the General Fund’s major sources of revenue.

The Sewer Fund collects user fees and pays the costs of operating the two wastewater treatment plants along with all the pipes and pumping stations. The General Fund can charge the Sewer Fund for allocated expenses. For example, if the Public Works Director spends 20% of his time on sewer issues, then 20% of his cost can be charged to the Sewer Fund. But any operating surplus cannot merely be transferred to the General Fund because it would be tantamount to using sewer fees to hold down taxes.

So, can the borough borrow money from the Sewer Fund, and then six years later “write it off”? I don’t think so. Nor does it sound proper to be writing off money owed to the Highway Fund, which is restricted to spending state liquid fuels tax funds on approved projects.

Another unanswered question is how did the borough pay for overspending its street repair budget by $1.4 million in 2019? Then Mayor Dianne Herrin assembled a 229-page review of this disaster and to this day, it’s not clear how the borough funded this big overspend.

A more recent problem is that the Earned Income Tax Increase in 2019, which exceeded the tax limits in the Home Rule Charter, is no longer being used to pay down pension liabilities. The ordinance specifically stated the purpose of the “increase” portion was to pay down pension liabilities. However, last year only $100,000 of the $1 million of revenue went to the pensions. Where did the rest go?

When this tax was proposed, a previous Finance Director told council that many townships had already increased their EIT rates above 1%. The Home Rule Charter’s tax limits are pegged to be the same as boroughs. His advice implied the statewide limits had been raised above 1%, but they had not. The townships he cited had all used a state law that allows township voters to approve an EIT rate above 1% to be used exclusively for open space preservation. No other borough or township in Chester County has an EIT rate above 1% except for open space preservation.

It’s not all bad news. The borough has $8 million in a Capital Reserve Fund and has been disciplined in preserving this balance. However, it does not invest this using a long-term strategy, and could be earning at least $200,000 more annually.

Council should get answers to these questions. It should also be paying more attention to finances. There was little discussion before the vote to write-off the loans from the other funds. Presently, there is no financial report at council meetings. Council should set aside time at its meetings, at least quarterly, for a financial report. It should also follow through on its intentions to hold hybrid meetings. Presently, meetings are broadcast but the public is unable to interact.