Annapolis Capital Punishment

CP appreciates Ross's efforts in providing this update. As readers may recall, CP thanked Mayor Moyer in an earlier post for clearly describing our long-term challenges in balancing our budget and in raising revenue. Ross's piece below adds clarity. We all better start figuring our way out of this, especially as property values stall or decline. As for CP's take, we don't mind taxes or government as long as as they are working to provide for the common good. and now, Alderman Arnett....

Well, It’s that time of year -- budget time. Not a very sexy topic, but oh so important to the City's well being and to your wallet. I apologize in advance for the amount of numbers sprinkled throughout this discourse. I tried to keep them to a minimum, but some numbers are necessary for context.


At just under $74.3 million, the Mayor has submitted a balanced budget, in that the revenues cover the expenditures [You can view the proposed fiscal 2008 budget online by going to the City website]. This was accomplished only by not funding several expenditures that are sorely needed by the City, but more on that in a bit.


I want to take a little space to address the revenue side of the ledger. Revenues come from two general sources, general funds ($52.2 m) and enterprise funds ($22.1m). The latter are revenues generated by fees we pay directly for such services as water, sewer, parking, docking, transportation, refuse, the market house and stormwater. By law, the fees for these services must cover their expenses. The City has been able to do a good job of keeping these funds in the black with just small positive cash reserves.



The general funds come from taxes ($28.2m), Licenses and permits ($2.9m), intergovernmental transfers ($12.7million, with $5.1 coming from State income taxes, $1.9m from State highway taxes, $1.9 m from hotel taxes, $1.2 from police protection, and many smaller transfers) with the remainder coming a variety of services, fines and earnings. The $28.2 million tax source draws the most attention because of the $25.7 million that comes from our property taxes.


The property tax is generated by applying a cents-per-hundred rate to the assessed value of property. Over the years, the City has been dropping the rate from a high of $1.15 per hundred to the current $.53 per hundred rate. Of course, much of this rate drop has occurred because of the dramatic rise in property values over the past few decades. While a direct comparison is not possible, it should be noted that our tax rate is the lowest of any municipality in Maryland by a considerable margin, and that includes many Cities, such as Rockville, in expensive real estate areas. I will return to this topic towards the end of this discussion. By the way, the one-cent per hundred rate equals about $486 thousand in revenue with the current level of property assessments.


Returning to the general fund expenditures, almost 83 percent of the $52.2 million goes to salaries, benefits and contract services, that is, staffing. Most of that amount, about $40 million is set by union contract agreements, both the level and the annual increases. Much of the remainder of the $52.2 million goes to supplies, maintenance and repairs, utilities and debt service. What’s the point? There is an extremely small amount of discretionary wiggle room on the spending side of the budget. Furthermore, the heavy preponderance of our spending is on matters of public safety such as police and fire, but also including public works and inspections. These are the fundamental services provided by a municipality and are not easily cut.

For those few who care to examine the details of the budget looking for cuts, one item that draws attention is the $2.5 million spent for contract services. To be sure, some of this could be reduced a bit, but most is to hire for services where we have no permanent staff. The alternative is to hire staff with the attendant fringe and retirement costs. It’s not clear that these are really budget cuts in the long run.


Another target for cuts is the City’s grant program, which this year totaled $382 thousand. The working mark for the current budget is $500 thousand, which returns funding back up to the fiscal 2006 level. The first thing to note is that we are looking at thousands, not millions of dollars. The current grants selected for funding, out of over 50 applicants, cover 24 wide-ranging programs. The City’s funding is only a small part of the total funding for these programs. In other words, our few dollars of contribution leverage many times more dollars coming from private philanthropic organizations or other governmental entities. This year we are giving priority to grants aimed at helping children and persons needing help in coping with a wide assortment of physical and mental problems. We are funding no new programs this year and are funding one grant for the full amount requested by the applicant.


In putting together the budget, the Mayor looked at millions of dollars of budget “enhancement” requests from each department. From my review, most of these looked not only reasonable, but also, often very desirable. The Environmental Matters Committee reviewed the Public Works enhancement requests and found $1.5 million in additional items they would fund over what the Mayor submitted. It goes like this throughout the budget; many worthy items did not get funded in order to keep the budget spending balanced with revenues.


So the struggle continues to hold the line on expenditures in fiscal 2008, when we have so many items where additional spending is sorely needed.


But here is the big rub. After fiscal 2008, we are headed for some significant budgetary difficulties. In FY 2009, revenues are projected to level off or possibly even to fall while expenditures are forecasted to continue on their current trend. Given the lack of discretionary flexibility to control spending mentioned above, this will put great pressure on the Council to increase of the cents-per-hundred rate applied to the property assessments possible by a large amount – not a happy picture. Though revenue picture is forecasted to improve in FY 2010, they don’t keep up with expenditures and we will face another potentially large shortfall.


By law the City must pass a balanced budget, so, we are either facing major cuts in City services or substantial property tax increases. The latter may be sustainable by many wealthier residents in Eastport and the City but has the prospect of greatly affecting the demographics of our neighborhood and the City at-large.


Obviously, there are things that need to change, and change quickly, to keep the City on a sound fiscal footing. The Council is work on a range of ideas, mostly involving expenditure cuts, and I encourage all of you to take a look at the budget and to share your ideas with me or any other Council Member. I realize this will sound like the typical bureaucratic response, but the Council is going to invite a “blue ribbon” panel to help us evaluate the situation and develop an array of fixes before the crisis is fully upon us.


In the meantime, crime continues to be a growing concern. There are many different groups working on the problem and each groups has its own set of plans to address the problem. The Public Safety Committee, of which I am a member, is planning to hold a meeting of all the different groups in June to see if there is some way to coalesce all the different ideas and energy into one united force to attack the problem. This is still very much a work in progress, with, sadly very little progress to report.


The Adequate Public Facilities Ordinance (APFO) issue is still working and progress is being made. Mike Christman and I are working with Dave Cordle to get a package together that address, in the City code, the Comprehensive Plan, the Capital Improvement Program and the APFO in a coordinated fashion and following the State Annotated Code (i.e., the State Law) and the guidance from the Maryland Department of Planning. We hope to have our work done this summer and have a Council vote, probably in September. One of the side effects of getting this passed is that the building moratoria will be removed and we can start getting permit fees and taxes from work in suspense, help for our impending budget problems.


There is much more going on, but this is all the room I have for this Notebook report. As always you can reach me at 410-295-9743 or EastportRoss@aol.com to discuss these or other issues.



Your Alderman,

Ross Arnett