Comments by Doug Cleland - Budget Workshop 6-29-11 Thank you, Vice President McElhaney.

As you explained, I was asked several months ago by Board President Rogan to come tonight prepared to communicate on how the Township could reasonably plan for a minimal or no real estate tax millage rate increase for the Proposed 2012 Budget. I have done that and I am pleased to report to you tonight that I believe that this can reasonably be accomplished that we can - at this time - plan for a zero percent real estate tax millage rate change for the 2012 Budget. I believe this is reasonably feasible at this time - due to the hard work and determination by the Board, my staff and our citizens, and - of course some good luck and no major negative surprises in the months ahead. After all, we have only just begun our staff work to prepare proposed departmental budgets for the 2012 budget! My belief shared by our CFO Dean Dortone - is obviously measured at this time and is based upon Deans and my understanding of our service delivery level expectations, our financial condition, commitments, trends and projections at this specific point in time half-way through the 2011 fiscal year and forecasting for a period of time fiscal year 2012 which begins about six months from now and ends about 18 months from now. I believe my track record of a long career here at Lower Merion of accurate, accountable and accomplishable financial performance, budgeting and estimating gives me confidence at this time that such an outcome can be accomplished. As Deans updated 5-year financial forecast will show, the efforts we have made and continue to make to control our expenses continues to work and are substantive. Although we have not been in a formal hiring freeze, as you know, I have not replaced employees who have resigned or retired in recent years. In fact, other than a handful of police officer recruit hires and two recent hires (for a Human Resources professional and a Parking Meter Attendant), I have not filled any other full-time or regular part time vacancies in nearly 3 years. This has resulted in our operating our township service delivery levels with about 57 fewer employees 44 full time and 13 part time employees than we used to have employed as recently as 2008, or about a 10% reduction in the Township staffing. I have regularly reported to you that this reduced workforce while manageable has resulted in some cases with more frequent complaints by our citizens, but we have continued to manage our substantial workloads due to the fine workforce of our township employees and creativity and dedication by our excellent management and supervisory team. I cannot say enough about how these fine men and women rise to the challenges each and every day and they have earned the respect and appreciation from my senior staff, the Board of Commissioners and the community that we all serve. These 57 fewer employees today can be explained as follows: 17 eliminated in the combined 2009, 2010 and 2011 budgets (all of which became vacant positions that we did not then fill). Another 19 positions left vacant as of the end of 2010, but the positions were not formally eliminated from the 2011 Budget; however, we did not provide net funding for these 19 vacancies in the 2011 Budget because we included a negative budget appropriation of minus $900,000 of funding in the 2011 Budget, thus assuming that nearly all the positions would remain vacant for all of 2011. Since the 2011 Budget was adopted last December, an additional net 21 positions have become vacant (actually 23 total positions but we did fill two vacancies by hiring the two noted employees I just mentioned.) These additional vacancies are due to resignations, retirements and long term major illnesses. These 40 vacant positions for all of 2011 - or part of 2011 for those who have left more recently during this year - generate significant cost savings, significantly more than the anticipated

$900,000 in budgeted savings that was included in the 2011 Budget and, as I noted, an understandably somewhat lower overall level of productivity by our Township workforce, of course. As you also know, we are now nearing a full six months a half year of our 200-member Workers Association non-uniformed labor union workforce working without a labor contract their previous 4-year labor contract having expired at the end of 2010. As I have reported, my negotiating team and I have been meeting mostly weekly for over a year now with the negotiating team of the Workers Association in an effort to negotiate in good faith a new labor contract. Obviously, this has been very difficult to accomplish, as we have never had our employees work for so many months without a labor contract and under such uncertain and staffing reduction conditions. As I have reported, I believe we have made significant headway in hopefully crafting fair, but very lean, tentative new labor provisions and conditions that if ultimately approved will take into consideration the fine performance of our excellent workforce, but also the economic realities we face in our society today, including much reduced wage expectations and significant employee (and their dependants and future retirees) health care cost containment savings. It will be my intention to seek to implement for our non-union employees which are mostly our 80 or so management and supervisory employees the general wage and employee health care cost containment measures we are able to accomplish with the Workers Association. Fortunately, our non-uniformed employee pension plan remains exceptionally well funded, due to excellent long-term management - and solid investment of the plan assets by the Plans Trustees and moderation in our provision of pension benefits, especially for employees hired since 1996. Unlike many other governmental entities, our employee pension funds are very strong and we are not forecasting to have to provide municipal funding contributions for the years ahead. Not many organizations public or private can say this. However, that said, we have no non-uniformed labor contract in place - and it would be presumptuous of us to make too many assumptions regarding our labor costs now going forward until we can enter into a labor contract with our Workers Association labor union. And, I remind the Board, that next year, we will begin negotiations for a new labor contract with our 128- member police union, FOP Lodge #28 as their current 3-year contract expires at the end of 2012. So we, of course, have many unknowns in regards to our labor cost provisions going forward. For example, we do not know what our renewal rates will be for 2012 for our employee health care plans, which we will learn more about later this fall. Yes, we have saved important money by our switch from the Blue Cross health care plans in February to DVIT-Health coverage for our employees, thus joining over 70 other municipal-like entities throughout the Delaware Valley in a shared health insurance trust. Even with these savings, we all know that annual health care costs continue to rise significantly in our society, especially for an aging workforce such as our Township staff. Many of our other operational assets and trends continue to also be well aligned. Our liability insurance and risk exposures are well situated with stable insurance coverage costs. We operate a safe workforce with below average employee injuries, and our experience in the DVIT-Liability Insurance Trust is much better than the average of the 35 municipalities in that pooled risk trust. Our over 1,000 pieces of equipment in our fleet and radios are adequately funded in our unique internal services Equipment Fund, with funding identified to be available assuming we continue to contribute to the Equipment Fund each year - but at lower levels than we did prior to 2009 - to be able to replace some major pieces of equipment our highway and shade tree division trucks which are nearing the end of their useful lives, as well as our aging public safety

radio system our portable and mobile radios before the end of 2014. Until we can determine where we fit into the recently-reported major County 800 MHz radio replacement program plan, we will be unsure if our Equipment Funds retained reserves will be sufficient to be able to afford this important radio investment for our public safety officers. In addition, during these past several years, under the leadership of Vice President McElhaney, the Township has saved millions of dollars in our Capital Improvement Program our CIP by postponing or scaling back some of the many capital projects we would have otherwise wished to undertake to continue our regular re-investment in our aging infrastructure. We continue along a path toward addressing our six aging public libraries with the completion this fall of the $9M Ludington Library project, and we are preparing to go out for bids this fall for the $6M Bala Library project. And, after tonights 3rd bond refinancing in the past 15 months of some of our prior debt, we have saved millions of dollars in our future debt service costs due to historically low tax-exempt bond interest rates. As we reported, we successfully refinanced some of our prior bonds today, thus adding about $500,000 in one-time budgetary savings to our budgets. In addition, we saved significantly by borrowing new bond money in April 2010 to carry us through 2011 and hopefully well into 2012. Our Township spending has been well controlled in particular over the past several years as will be clearly demonstrated by Deans presentation tonight, and, even with probable budget overruns for 2011 for our snow plowing expenses due to our significant February snow storms (unless we have minimal snow storms in November and December this year), we are forecasting budgetary savings in many spending categories throughout our organization. Expected budgetary savings in our utilities expenses and for contracted services are two of such categories. Even with this significant accomplishment in recent months and years in controlling our costs, our General Fund revenues, as reported by Vice President McElhaney, have not performed particularly well and are not growing. Our general fund revenues are very flat, even with the real estate tax millage rate increases that we have implemented in recent years. Our revenue forecast is slightly less optimistic than our forecast last fall, at least for 2012 and beyond but, fortunately, we are and have been taking the cost containment measures to minimize budgetary structural imbalances last year for 2011 as budgeted and estimated and again forecasted for 2012. Obviously, even with this strong budgetary performance, our job is never done because our revenue picture appears to be very restrained for the foreseeable future. And our economy, both locally and nationally, is in mostly a scrambling mode with many fits and starts and great uncertainty. Although the stock market has been fairly strong in the past few years, and exceptionally low interest rates have provided credit, and construction prices have fallen, we have seen home values decline nationwide, significant numbers of home foreclosures, stubbornly-high unemployment levels, and fairly low overall national economic growth. I would like to now ask our Chief Financial Officer, Dean Dortone, to show you our updated financial forecast.