Mayor Cohen Responds to Claims About Tax Increases ~ Annapolis Capital Punishment

Friday, May 21, 2010

Mayor Cohen Responds to Claims About Tax Increases

Yesterday we posted a letter being circulated by Annapolitans for a Better Community about possible tax increases. Today we present Mayor Cohen's response, which is also posted at :

As the City Council moves toward finalizing a budget for fiscal year 2011, my goal remains to balance the budget in a responsible way without raising the property tax rate. In working to achieve this goal, I have had to propose unprecedented cuts including laying off 33 employees and cutting services. These cuts have made significant progress in closing the deficit, but more work is to be done.

Options to close the deficit

To fully close the deficit, the City Council and I are exploring a wide range of options that include cutting more positions and services, offering retirement incentives to employees, negotiating unprecedented concessions from employee unions to reduce payroll, eliminating departments and consolidating functions, seeking assistance from our federal, state, and county partners, and reviewing fee increases such as bus fares and other fees for services. The last resort would be to raise the property tax rate, but I still believe we can balance the budget without resorting to that.

Public participation and accuracy of information

Citizen input is vital to this process. I am encouraged that all over town people are expressing support for this fiscally responsible approach. Many members of one group in particular, Annapolitans for a Better Community (ABC), are strongly supportive of measures my administration has been taking. Certainly, not everyone agrees, and I value legitimate, factual differences of opinion.

Unfortunately, the ABC group’s leadership recently sent out an email with some inaccuracies that are so glaring that they require correction. For instance, the email claimed that “the Mayor has been clear that a tax increase will be necessary…” and that I was among a group of alderpersons “moving rapidly toward a 25 – 35% property tax increase.” These statements are wholly inaccurate. I hope that in the future, the ABC group’s leadership will be more careful to confirm the accuracy of their information before sharing it with their group’s members.

What led to this unprecedented deficit?

How did the City get into this unprecedented budget crisis? The first reason is that the current fiscal year 2010 budget had a structural deficit of $4.5 million. The budget was balanced on paper but it relied upon $4.5 million in one-time surplus money from the prior year, so the budget wasn’t truly balanced to begin with. The second reason is that loss of State aid and the slowdown in economic activity has resulted in more than $4 million of projected revenues failing to materialize. This combined drop of $8.5 million is almost 10 percent of the approved FY10 budget of $86.5 million.

By comparison, Anne Arundel County’s proposed FY11 budget is only 0.2% smaller than its current FY10 budget. A 10 percent budget cut in local government, even in recessionary times, is almost unheard of and we’re still not where we need to be yet.

Next steps

Throughout this budget process my goal has remained consistent: to balance the budget without raising the tax rate. Once we right the ship, then over the next couple of years we can replenish the cash reserves which had also been depleted. This will not be an overnight fix, but by bringing our expenses into alignment with our revenues for FY11 and then replenishing our reserves over the next couple years, we will restore the City’s financial footing in a responsible way.

The City Council is scheduled to finalize the Fiscal Year 2011 budget on June 7th. The final budget picture is not yet clear. I do not yet know exactly how the City can best close the budget deficit, and many variables are still unknown. Two of the four unions have not yet ratified their contracts, and a variety of service cuts and fee increases are still being considered. The City Council and I will likely be working up until the last day to achieve a balanced budget in the least impactful way. Still, in the words of Alan Greenspan I am cautiously optimistic that we can do it without raising the tax rate. I still subscribe to the following statement I made in the State of the City address when I presented the proposed budget on March 7th:

“As I committed to last year during the campaign if it was at all possible, I would avoid asking taxpayers to pay more through an increased property tax rate, and part of it is, I do not want this city’s first budget when we encounter financial difficulty to be solved by going to the taxpayers to ask them to pay more. We need to do what we can in-house to control costs because everybody in this city is experiencing the effects of this recession, whether they are residents or business persons.”

As always, I welcome your feedback and thank you for your support.
(The Mayor's Office also provided the following:
Separately, two figures in the blog post from ABC need to be corrected:

1) The average salary for the City’s 607 full-time employees is $60,380, excluding benefits.
2) In fact, $9.2 million is committed toward debt service in the mayor’s proposed FY2011 budget. (Separately, the interest on the line of credit is $40,000; that amount will be returned to Bank of America as part of the full repayment in October.)

submitted by: Phill McGowan
Public Information Officer
City of Annapolis

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1 Comment:

Debbie Yatsuk said...

607 full-time employees for a small city? WOW! That is much higher than others. And the average salary is high (60K) and benefits add 12-15K more.

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