The Honorable Mayor and City Council
Citizens of Gaithersburg
I am pleased to submit to you the adopted Fiscal Year 2010 budget.
Budgeting in a recessed global economy has called for unprecedented measures here in Gaithersburg, and this is certainly one of the most challenging budgets we have encountered in quite some time.
Faced with declining revenues and stalled growth, I challenged our very capable and creative staff with the task of reviewing every program and procedure in an effort to maximize revenue and minimize expense without unduly burdening any one segment of the population. This thorough review of our operations has resulted in many changes, and yet we have focused our efforts to ensure that the budget is fully aligned with the strategic directions that were adopted by the Mayor and Council earlier this year.
The City of Gaithersburg is facing a structural deficit that will impact us for several years to come. Expenses are predicted to exceed revenues if we continue at the current pace, and our reserve fund will be depleted in just a few short years if steps are not taken now to resolve the deficit. Fortunately we have a window of opportunity to make smart decisions that are based on the values of our community and elected officials. As a result, we are aggressively exploring grant opportunities, looking for new revenue sources and reducing our expenditures in every area possible.
I look upon the FY 2010 budget as Phase I of a multi-year approach. In this budgeting cycle, we focused on closing the gap while protecting our core services, ensuring no staff layoffs, and maintaining a stable tax rate. Even in the face of declining revenues, we have developed a budget that does not include a tax rate increase. As adopted, we have maintained the real property tax rate at $0.212 per $100 of assessed value. The ad valorem tax on tangible personal property remains at the rate of $0.53 per $100 of assessed value. It is important to note that our real property tax rate is already the lowest of any major municipality in Maryland, and our personal property tax rate is also among the lowest in the state.
Now that the FY 2010 budget is adopted, we have immediately begun work on Phase II. Every aspect of how we do business is being scrutinized. All possibilities will be explored. Very tough questions need to be asked and answered as we lay the groundwork for sustainable budgets in years to come.
With change comes opportunity, and while budgeting in this environment is one of the toughest tasks we are facing as administrators, there will undoubtedly be many rewards as we take these opportunities to improve the Cityís operations. The entire community must be involved in this effort. It is essential that we reach agreement on core City services, that we identify our priorities for the delivery of those services, and that we have a healthy discussion of how we will share the burden of paying for those things that we all agree are necessary.
The FY 2010 total budget of $48,013,042 represents an 8% decrease when compared to FY 2009. The operating budget of $41,972,403 is 0.2% less than FY 2009. The contribution to the Other Post-Employment Benefits Trust (OPEB) calculated by our actuaries is $910,000, which is the same budgeted amount as last year. This year we adopted a Capital Improvements Plan of $5,130,639, which represents a 45% decrease over the amount funded in FY 2009.
In order to balance the budget we utilized reserve funds in the amount of $3,493,485. This amount is consistent with our budgeted use of reserve funds in previous years ($3.6 million was allocated in FY 2009) but does exceed the approved undesignated fund balance policy. The current economic conditions certainly represent the type of situation the reserves were designed to accommodate. Unfortunately, we cannot count on our reserves to sustain us indefinitely. Key revenue and/or expense changes must be implemented over the next couple of years to sustain current service levels.
Revenue, as adopted, is projected to decrease by 9% in FY 2010, with total revenues of $44,519,557 anticipated.
While local taxes are up slightly due to the three year cycle of property assessments, we anticipate decreased revenues in just about every other category. Stalled development is resulting in a decrease in revenue from licensing and permits.
The adopted FY 2010 budget shows a reduction in grants from the federal government. In FY 2009 the City received one-time program income in the amount of $1.6 million from the sale of the Sanders property on East Diamond Avenue.
The City is receiving benefits from the federal American Recovery and Reinvestment Act (ARRA). Our Community Development Block Grant (CDBG) allocation has been increased by $120,000 and we are receiving $578,000 in federal funding from the new Energy Efficiency and Conservation Block Grant program. The City is aggressively pursuing additional funding opportunities through the ARRA.
While not included in the FY 2010 budget due to uncertainty, we currently have a grant application pending with the Department of Justice for $156,140 for Community Orientated Policing Services.
State grants as well as county government grants and shared taxes appear stable for FY 2010; however we anticipate that funding from these sources may be reduced for FY 2011. We are very pleased that the General Assembly approved a $250,000 bond bill for the Gaithersburg Community Museum. The City continues to pursue grant opportunities at the state level.
Revenue from service charges is also decreasing slightly, despite minor adjustments in fees that will see higher charges for some activities. As we examined all of our programs, it became evident that we did not always capture the true cost of doing business, nor did we keep our fees comparable to surrounding jurisdictions. For example, in calculating the cost of the Cityís recycling program we did not, in the past, factor internal administrative expenses into the total cost of the program. In FY 2010 we adopted a per household recycling fee increase of $2.31, which allows us to recoup some of those administrative expenses. This raises the per household recycling fee from $65.92 to $68.23, a 3.5% increase. We also adopted nominal increase fees for some activities such as Winter Lights admission, Senior Center membership, and some recreation classes.
We have budgeted a significant reduction in revenue due to the success of our speed camera program. The program is working - with slower traffic noted in each of the seven locations. In FY 2009 we projected $2.4 million in revenue from this activity based on experience during the first year of implementation. In reality we will end FY 2009 with revenue of approximately $375,000. In FY 2010 we have conservatively budgeted speed camera revenue of $250,000.
Miscellaneous revenues are also expected to significantly decrease in FY 2010. We anticipate receiving roughly half of what we realized on our conservative investments in FY 2009. Additionally, a $2.1 million sale of City-owned property which was completed in FY 2009 artificially raised the budget for this category last year. We have not identified any property sales for FY 2010.
Without a doubt, the operating budget is the area that required staff to be the most thoughtful and creative. I am proud to report that while there are no significant additions to the personnel budget in FY 2010, we did not have to resort to furloughs or layoffs in this budget cycle. Our talented staff is intact and poised to continue to deliver the highest level of service possible.
Significant sacrifices are being made by our personnel in this budget cycle. There are no cost of living or merit increases in the FY 2010 budget. Rather, all full-time and applicable employment agreement employees are receiving a one time stipend of $2,000 each. The stipend provides a financial incentive comparable to a consumer price index increase of approximately 2.5% for all of the Cityís full time personnel. During these economic times, those employees making the least are benefiting the most from this approach. This enables us to reward our employees and provide our own stimulus incentive while minimizing the long term impact to the Cityís personnel expenses.
Effective with the start of the new fiscal year, all full time employees will work a 40 hour work week, with no corresponding increase to pay rates. Some employees currently work a 35 hour work week, others 40. From an equity standpoint, this change is necessary, and brings us in line with the majority of jurisdictions surrounding us. Productivity gains resulting from this adjustment should help us reduce expenses related to overtime and address the requirements anticipated from a significant number of new positions requested but not funded. It is important to note that previous salary and compensation studies have been based on comparable jurisdictions working more than a 35 hour work week. However, we did not reduce our salary recommendations to account for Gaithersburgís 35 hour work week policy.
In the adopted budget we eliminated double time pay for work on Sundays and we have mandated that all departments reduce their overtime budgets. Contributions to the Retirement Health Savings Plan for those full time employees who do not take the City-sponsored health plan have been reduced, and this budget eliminated the payment of 401 retirement contributions on overtime. Some amenity programs such as Employee Wellness Day have also been eliminated. Due to the number of health and wellness activities and support provided to staff, this $4,000 expenditure was not justifiable in the current fiscal environment.
What follows are a few highlights from the FY 2010 operating budget.
City Managerís Office: To ensure that our budget reflects actual spending, we added $20,000 in the City Managerís Office budget for charitable activities such as tables at annual dinners and galas and support of select special events. Consistent with discussions during the Strategic Directions retreat, this budget also includes $60,000 for neighborhood and school playground matching grants, allowing us to help our communities who are investing in their own improvements. This amount was increased by $10,000. We have also reduced the Cityís contingency fund by $200,000 to help balance the budget.
Human Resources: Several expenses associated with employee recruitment have been reduced or eliminated as no new positions were added in FY 2010. Through careful negotiations and restructuring of benefits, we experienced only a 5.9% increase in health care, down from the 10% increase that was initially projected. There is no change in the percentage that employees are asked to contribute to their health coverage (15%). We also reduced the amount of money set aside to support the employee housing stipend to a more realistic number based on anticipated usage.
Economic Development: There is $248,000 in the FY 2010 budget to fund an Economic Development Opportunities program. It became obvious during the Strategic Directions retreat that there was interest in the City placing more emphasis on supporting and promoting businesses already located within our community, as well as efforts to attract new business and development to our City. We are also exploring federal grant opportunities for demolition of blighted properties through CDBG funds.
Community Services: Expenditures in this category were held harmless as a result of the significant priority established during the Strategic Directions discussions and subsequent meetings. Contributions totaling $706,500 were adopted in FY 2010. This represents a $1,421 or 0.2% decrease, which is offset by the increase in CDBG funds, when compared to contributions funded in FY 2009. Overall, grants to nonprofit organizations remained flat while reductions were mandated in every other service area.
Information Technology: Although it impacts the FY 2009 budget, it is worth noting that by temporarily moving from a three-year to four-year replacement cycle for City-owned computers and monitors, a savings of $79,000 has been realized. These savings increase the Cityís reserves. IT is also working closely with the Finance and Human Resources Departments to fully implement a new time and attendance accounting program, providing for increased accuracy, streamlined operations and significant efficiencies.
Police: Due to cost saving measures and low participation, we allotted for the restructuring of the National Night Out event. Conducting this event at one rather than multiple sites reduces overtime and event-related costs. Other changes include reduction in overtime, reducing the use of outside consulting services, and reducing rental fees for indoor firearms range use.
Planning and Code Administration: One Animal Control Officer was added in FY 2010, while two part-time positions that are currently vacant have been eliminated.
Public Works: The funding schedule for replacement of vehicles and equipment was extended by one year. For example, police cars are on a six year replacement schedule instead of five. In the FY 2010 budget, there is a $725,000 transfer of funds from the Capital Improvements Projects budget to the Public Works operating budget. Maintenance expenditures traditionally funded through the CIP now appear as operating budget line items to more accurately reflect the nature of the expenditure. Funds have also been added to the Public Works operating budget to begin a City-wide Facility Assessment Study. It is imperative that we maintain and protect the physical assets we currently have in order to minimize future outlay for repairs and replacement.
Parks, Recreation and Culture: Through a combination of fee increases and program restructuring, cost savings and/or revenue enhancements are being realized in every division within the Department of Parks, Recreation and Culture. Lower demand programs such as the RecMobile have been eliminated, while contributory fees for Gaithersburg seniors to attend recreation classes have risen from $25 to $35 per class. (Note: Seniors who reside outside of the City of Gaithersburg pay the full fee.) This fee was last adjusted in 2005. We also approved a Senior Center annual membership fee increase of $10, from $30 to $40. Even with the increase, the Gaithersburg Upcounty Senior Center has the lowest membership fee of all senior centers in Montgomery County.
To establish entry fees consistent with similar programs statewide, we have increased the admission price to Winter Lights. We have restructured the Stroll through the Lights program, which debuted in 2008, from a Sunday to a Monday evening, thus decreasing the need for weekend overtime pay for Public Works and Police support staff.
We have included funding for the highly anticipated Book Festival and a new Summer Movies in the Park program is debuting early in FY 2010. These programs are funded through reallocations from other restructured events. For the first time in 18 years we are entering into a revenue sharing agreement with the Kentlands Citizens Assembly that allows us to recoup some of the program costs related to the Oktoberfest celebration. In addition, we eliminated the VIP reception for volunteers and distinguished guests at the Celebrate Gaithersburg in Olde Towne Festival. This change reduces the cost of the event by $12,500 and should encourage more food vendor sales at the Taste of Gaithersburg. We continue to honor and recognize our volunteers at the annual State of the City Dinner, held each spring.
CAPITAL IMPROVEMENT PROJECTS (CIP)
The focus of the FY 2010 CIP budget is on maintenance. In the current economy it would not be prudent to forge ahead with new projects that do not have readily identifiable, stable funding sources. We did not include any additional funding in FY 2010 for an indoor Aquatic Center on Route 28 or a new Senior Center; however we have maintained the existing funds in anticipation of an agreement with Montgomery County. We are continuing an open dialog with County representatives to explore partnership opportunities for these regional centers.
To protect our existing assets, we allocated funds to the CIP for road maintenance, resurfacing and reconstruction, sidewalks and handicap ramps, street lighting, facility maintenance, stormwater management and storm drainage, improvements to some existing parks and pavilions, and technology projects. Additionally, we closed several CIP accounts whose projects have been successfully completed, including renovations to Casey Community Center, historic district improvements, and Americans with Disabilities Act compliance initiatives.
Within the budget are detailed descriptions of each CIP activity. Extension of the CIP through FY 2014 appears in this budget, although please be advised that the FY 2011 through FY 2014 figures are estimates used for planning purposes only.
The FY 2010 budget contains several organizational realignments which take effect on July 1, 2009. These are necessary, positive steps towards improving our future effectiveness and efficiency.
The Human Resources Division, which was under the City Managerís Office, has been made into its own department, reflecting our desire to place greater emphasis on all matters related to personnel. This change was recommended as part of the last salary compensation study. I also created a new Department of Community and Public Relations. This department combines the existing Public Information Office and Cable Television operations with the Community Services Division, and is tasked with coordinating outreach, community services and engagement opportunities throughout the community. This change enables the Assistant City Manager responsible for Economic Development to focus primarily on economic development and policy related initiatives. Kentlands Mansion, which was under the City Managerís Office, has been moved to the Department of Parks, Recreation and Culture.
The Senior Accounting Technician for the Department of Parks, Recreation and Culture and the Community Development Director in the City Managerís Office now report to the Director of Finance and Administration. This allows for better alignment of these two financially-oriented positions. Due to the significant interaction and related job responsibilities between the Executive Assistant and the City Attorney, the Executive Assistant to the Mayor and Council has been renamed Municipal Clerk and now reports directly to the City Attorney. These changes allow the Assistant City Manager responsible for legislative affairs and Mayor/City Council relations to focus more on legislative and policy-related actions.
Many of these changes moved direct reports away from the City Manager and the Assistant City Managers so that time, energy and resources can more effectively be spent on higher level, strategic initiatives. With all parties involved, a thorough evaluation will be conducted in six months to gauge the effectiveness of the realignments.
I am very proud of the work we did on this budget. To say it was challenging is an understatement. Countless hours were spent analyzing our existing programs, exploring usage data, anticipating future trends, and looking at every single dollar that we spend. This budget is the very best effort of a bright, experienced and creative staff.
Because of conservative, prudent fiscal policies that have been in place for years, the City of Gaithersburg can face the coming fiscal year with a minimum of sacrifice. We must now focus on the state of our affairs two and three years from now. Unless the nationís economy turns around quickly and development once again moves forward, we will continue to see negative growth clashing with the need to maintain a high level of service. By making smart, tough decisions now and in the months to come, we can lay the groundwork for sound, municipal governance that continues to meet the needs of its citizens to the best of our ability.
Angel L. Jones