A township, a toilet, and a pot of gold
Updated: Dec 20, 2022
With capital reserves and the sewer fund also drained dry by the struggling Kennett Greenway, even the $2M recovered from the funds embezzled by Lisa Moore will barely dent the decade of debts
With the vote on the 2023 Kennett Township Budget scheduled for December 21, Kennett Township Board of Supervisors (KT-BoS) are poised to hike property taxes by 20%. Few probably realize, however, that this hike masks a much more significant problem: Township Manager Eden Ratliff's proposal to drain more than $3,600,000 from its reserves to pay construction costs for the 1.4 mile $7,000,000 Chandler Mill Trail (CMT) section of the Kennett Greenway.
In this post, we explore more consequences arising from KT-BoS' inability to rein in Ratliff's Greenway spending spree: no significant investments in a capital or sewer reserve can be made before 2031. Barring some unexpected windfall - like a pot of gold discovered in the basement of the Township building - desperately needed maintenance on essential township infrastructure will be pushed back by almost a decade.
But officials believe they have such a windfall: the millions recovered from their former manager, now serving time for embezzlement. The KT-BoS hopes to use the money recovered from one manager they failed to supervise to pay off debts incurred by another manager they are failing to supervise. So whether the millions recovered from Lisa Moore go towards Kennett's aging sewer infrastructure or go towards a greenway Kennett cannot afford and will never complete, the pot of gold will end up going down a toilet.
Consider the draw on capital reserves. The sums listed in the figure below represent direct costs to Kennett taxpayers after state grant funding has been applied, and after other operating and capital expenses that have been budgeted are accounted for. We project that Kennett will have spent close to $1,000,000 in design, permitting, and legal fees to date (including $90,000 on "unplanned meetings" in 2022) before a shovel has touched the ground. Kennett has only $45,000 left in its capital reserves - about 1% of $3,500,000 needed for construction of CMT. The proposed 20% tax hike for 2023 does not cover any of these costs, and so Kennett must “borrow” 99% of construction costs from its operating and open space reserves.
It is true that other major capital expenses contribute to the overall drain, but the Kennett Greenway will remain by far the single biggest drain for at least the next 5 years, constituting 56% of the major capital budget (see below). Greenway costs drop in 2025 and 2026 for the $1,000,000 Magnolia Underpass section because more than 65% of the cost is covered by state grants. Costs from 2025-2027 include the $3,486,295 Five Points project, 63% of which is covered by state grants.
The lack of planning for the Greenway is symptomatic of Kennett's broader failure to plan for other major capital expenditures. Kennett received its first CMT grant 5 years ago, but only begin to develop a capital reserve last year and only after we pressed our concerns despite angry pushback from officials. With the limited capital reserves set aside in 2022 soon to be drained dry by the Greenway, officials can only hint at many pending repairs needed to its 20 year-old township headquarters. As Heinrich noted in her report, “The current Township office building is not sufficient to meet the needs of a growing Township” (p. 23). After spending $80K in unexpected repairs in 2022, Kennett must also set aside another $50K in 2023 for other major emergency repairs (this includes remediation of public meeting rooms shut down last summer because of mold, with no end in sight). In this context, projections that renovations and repairs will drop to $30K/year by 2024 appear wholly unrealistic.
This is only only example of how the KT-BoS's decision to ignore residents' concerns about looming capital expenses plants the seeds for a future crisis .We shared concerns about the lack of a capital reserve at Longwood Fire in April 2021 when we questioned Longwood's sustainability following a review of its tax filings. What happened? After Longwood Fire Chief mailed an angry denial out to residents, supervisors completely dismissed these concerns at the recommendation of their public relations consultants. Barely 7 months later, supervisors were caught off guard by the 30% increase in Longwood's costs . With another 30% increase in the 2023 budget, Longwood now acknowledges the need for plan to replace aging equipment, and supervisors need to hike property taxes by 20%.
Kennett's failure to plan for infrastructure needs may soon result in an even bigger crisis in the Borough's sewer system, with complex and massive repercussions for future Township budgets. In his September 21st report to the Board of Supervisors, Ratliff dryly concluded that:
“In approximately 5 years, the Borough’s plant will be at maximum capacity and unable to serve any additional connections. This means that development in and outside of the Borough will be halted until the plant can be upgraded. Depending on the project, sewer plant upgrades can be tens of millions. A moratorium on sewer connections will have cascading effects on affordable housing, new development, redevelopment, and infill projects. The Borough and Township are in the early stages of planning for plant capacity increase.”
Despite these dramatic projections, Kennett has presented no plan to address sewer shortfalls, a fact noted succinctly by Heinrich in her 2023 budget presentation on p. 42: “Given that the Operating Budget is just $50K above break-even, we do not currently have a sustainable model to support capital investment”. We project that within 5 years, Kennett Township and the Borough of Kennett Square will have no choice but to sell to Aqua, who will profit handsomely from skyrocketing sewer bills passed on to residents, like to our New Garden neighbors.
Heinrich's solution? “Near-term, we will be dependent on ARPA grant funds for capital needs and potentially the liability owed from the General Fund (emphasis ours) to Sewer as a result of fraud by the former Township Manager”. Both solutions are problematic. No specific source or amount of ARPA funding has been identified. Moreover, a decision to direct limited ARPA funding to sewer upgrades effectively penalizes residents who bear 100% of the cost for their on-lot septic systems: they will now have higher bills because ARPA funds were unavailable to pay for other upgrades that would benefit everyone.
What about the funds recovered from former Township Manager Lisa Moore? Only $2,000,000 is actually available (sequestered in a separate fund outside of the current budget), because Kennett spent $1,000,000 to recover about $3,000,000. We understand that township officials have made no commitment about how it might be spent, or whether they have any obligation to replenish the fund it was stolen from. This could allow officials to redirect funds inappropriately; for example, dollars stolen from the general fund could be directed to the sewer fund. Regardless, the recovered funds fall far short of resolving the current crisis: these funds could only help maintain adequate operating reserves in the face of ever-escalating operating expenses OR cover barely half of upcoming Greenway expenses OR put a down payment on long-overdue infrastructure or sewer upgrades. One way or another, residents will be paying the price for Ratliff's Greenway for at least a decade, through property tax hikes and deteriorating infrastructure.