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Shared Services: Can We Provide Property Tax Relief?

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Shared Service Agreements between governmental authorities is not new nor only a New Jersey idea. Shared Service Agreements are implemented throughout the U.S. and the world. As a result, we have many models to look at, consider, reject and adopt.

What are Shared Services? Shared Services are when separate organizations group together their resources to provide or receive a service or services in an effort to save money while also maintaining or improving the level of service(s) provided. The grouping of resources could be money, personnel, equipment, etc. Participants can act as Shared Service Providers (for a fee to the others they administer and provide services) or as a Shared Service Recipient (they pay a fee for having a service administered and provided for them by another group member).

There are a number of examples of Shared Services Agreements between municipalities throughout New Jersey. The New Jersey League of Municipalities provides a laundry list and posts the actual contracts of Shared Service Agreements that have been executed across the state. Those agreements can be viewed here:

http://www.njslom.org/interlocaladvisorycenter.html

The obvious argument in favor of Shared Services is that you become less top-heavy in management positions and thus reduce costs. The second argument in favor of Shared Services is that you will create efficiencies, eliminate duplication of service delivery and reduce material costs through some level of cooperative buying.

Critics warn that Shared Services create a centralized organization that by its nature is bureaucratic, slow to act and impedes the delivery of services. A good example of this is Britain’s creation of a Cabinet Level Position to oversee Shared Services and their implementation. Critics charge that the Shared Services effort was already in deficit due to the cost of building this Cabinet Level Department.

Overall, the message is that the potential for sizable cost savings and resulting tax reductions are available. However, careful planning must be made that will avoid the pitfalls associated with implementation and overly centralizing the administration of Shared Services.

So, where does Hamilton Township begin? Well, consider the option first.  Hamilton barely participates in any Shared Service Agreements and those that we do are arguably non-impactful on our budget.

Then investigate the options and determine the interest of other government authorities such as neighboring municipalities, the county, the Township’s Fire Districts and the Hamilton Township BOE. Then look at the areas in which all of those entities have duplicate services.

In fact, the New Jersey League of Municipalities provides a “road map” of sorts in a 2011 survey that they conducted. Of the 566 municipalities in New Jersey 171 responded. Whether this is an indication of resistance to the idea of Shared Service Agreements by the 395 that did not respond is not discussed.

http://www.njlmef.org/2011_MunicipalMgmtSurvey.pdf

What is alarming in these survey results are the preferred courses of action municipalities plan to take to address continuing budget shortfalls. Though many indicate that they will look at becoming a Shared Service Provider or a Shared Service Recipient many  more are considering eliminating or reducing the services that they provide to their residents or increasing fees – to name a few.

Hamilton Township began the process of Shared Services nearly a decade ago. But very little has been done since. Today, based upon OPRA requests fulfilled on March 13, 2012, Hamilton’s Shared Service Agreements consist of providing Health Clinical Services, Blood Pathogen Testing for Ewing, Lawrence, Hightstown, East & West Windsor, Hamilton BOE and 4 Hamilton Fire Districts.  We also allow Robbinsville to utilize our Purchasing Office for approximately $2,000 annually. Though the following are more Mutual Aide agreements they are catagorized as Shared Service Agreements Those items are an agreement to participate in a regional response to Bio-Hazard incidents. Finally, Hamilton participates in a records archiving service with Mercer County and we turned over responsibility for Weights and Measures to Mercer County.

These agreements amount to about $255,000 in added revenues for the Township by acting as a Shared Services Provider and another $70,000 in savings due to no longer performing the Weights & Measurement services. These amount to well under $400,000 annually. When compared to a $98 million budget, these existing Shared Service Agreements have little impact on the cost of government and do little in providing tax relief to Township residents.

So, let’s get serious.

Aside from Police and Municipal Courts, below are dollar amounts from the proposed 2012 Hamilton Township Budget for those Departments that approach or exceed $1 million in annual expenditures. Additionally, these are services and operational costs that are duplicated by these other agencies. I exclude Capital Budget items as those will be discussed in another post. Let me just note for now that many of the services below require significant capital expenditures that add to the Township’s growing debt burden ($5.9 million in 2012, which is $700,000 more than it was in 2008).

Public Works $            4,803,931.40
Buildings  & Grounds $            2,439,059.00
Solid Waste & Recycle Collection $            3,968,091.00
Motor Vehicles Maintenance $            1,681,255.00
Solid Waste Disposal $            5,318,694.00
Parks $            3,031,845.00
911 $            1,740,294.00
Uniform Counstruction Code Office $            1,968,355.00
Tax Assessment and Collections*  $           1,066,769.00

*Combined two Departments (Tax Assessments and Revenue Collection).

These total $26 million or 27% of our municipal budget. If we could reduce these costs by 10% that would equate to an approximate tax reduction of $90 per AVERAGE household. A 50% reduction in costs would equal an approximate AVERAGE household municipal tax reduction of $450.00 – now we are talking. Keep in mind that the above represents only 27% of the Hamilton Township Budget. If we were to participate with our other Hamilton Township Taxing Authorities (the Fire Districts and the BOE) on the majority of these items then the tax reduction opportunity for Hamiltonians is that much greater.

How do we reduce costs or increase revenues? As an example, either Hamilton Township turns over vehicle maintenance to the County or we could provide our Vehicle Maintenance capabilities to the BOE and other Municipalities.

The Township’s municipal government operates a less number buildings for its Buildings and Grounds Maintenance than does the BOE, which has a significant budget for it own Building Maintenance requirements. Would it be feasible for the BOE to perform for the municipal government the functions that our Buildings and Grounds Department perform today?

911 services provided by the municipal government is a complete duplication of services provided by the County, which has a very extensive 911 service. Consider that in Pennsylvania, much of 911 services are administered at the county level. Barring that option, Hamilton’s 911 services are extensive. To increase revenues for Hamilton and reduce costs for for Hightstown, Ewing, Lawrence and our other neighboring municipalities, why couldn’t Hamilton provide 911 services to our neighbors? Either are realistic options.

Overall, these are high cost areas and services that are duplicated elsewhere in the Township, in other municipalities and at the County.

Will these ideas work? I say probably. Unfortunately, the real answer is “Becasue no one has seriously looked at these Shared Service opportunities, we do not know if these will save dollars and lead to tax relief.”

The beginning point for determining if Shared Services are right for Hamilton is to simply have a conversation with the County, the BOE and our neighbors. If this Township is serious about property tax reduction then they should have continued the Shared Services initiatives that began nearly a decade ago.

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1 Comment

  1. Your way of writing is so good and really great …
    thanks for posting..

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