The Honorable Mayor and City Council
Citizens of Gaithersburg
I am pleased to submit to you the adopted Fiscal Year 2011 budget.
It is not business as usual in Gaithersburg. Despite the most valiant of efforts, in this economic environment it is simply not possible for us to sustain the level of service we have traditionally delivered.
With that being said, the adopted FY 2011 budget faithfully reflects the City's values and preserves the core services that our residents expect and deserve.
Preparation of the FY 2011 budget was an exhaustive process. Knowing that we are facing the second worst economic decline in U.S. history, and the worst fiscal crisis in local government history, we began the budget process much earlier than usual. Starting in the summer of 2009, staff explored cost containment, expense reduction, revenue enhancement and capital fund prioritization strategies not only for the coming year but looking five years into the future. We know that we will continue to face economic uncertainty for several years to come.
This is a results-oriented budget. It is aligned with the strategic directions identified by our elected officials. It takes in to consideration the outcomes of our bi-annual citizen survey and the direct feedback of the community, making it truly collaborative product.
I would venture to say that never has each individual element of the City's operating and capital budgets come under such scrutiny. Staff literally examined every single line item and every single dollar in an effort to ensure our economic recovery over the next five years. It became obvious during our public hearings and work sessions that significant sacrifices would have to be made throughout the organization and throughout the community in order for us to balance not only this year's budget, but to sustain us in the face of declining revenues in the years to come.
It is important to note that the financial impacts of the unprecedented winter storms in FY 2010 are still unknown. We are awaiting news of possible emergency reimbursement funds; however, these funds will not fully compensate us for the extraordinary expenses we incurred. I have instituted immediate cost containment strategies and have asked staff to carefully consider all spending for the remainder of the FY 2010 fiscal year to minimize the impact.
I do want to take this opportunity to commend all of those involved in restoring this City to some semblance of normal operations as quickly as we did. It took the supreme effort and dedication of City staff in all departments to manage a weather crisis of this magnitude. I could not be more proud of how Gaithersburg handled this emergency.
Painted for you in this narrative is a new Gaithersburg - one that is at once familiar yet vastly different. It is safe to say that all stakeholders are being impacted at some level by the modifications we have made. And yet, as a community, I know that we will continue to work together to ensure the viability and prosperity of the place we call home.
The FY 2011 total budget of $44,193,920 represents an 8% decrease when compared to FY 2010. The operating budget of $40,692,188 is 3.1% less than FY 2010. The contribution to the Other Post-Employment Benefits Trust (OPEB) calculated by our actuaries is $455,000, which is half of the amount budgeted in FY 2010. This year we have a Capital Improvements Plan of $3,046,732, which represents a 40.6% decrease from the amount budgeted in FY 2010. This amount is consistent with what we actually project to spend in FY 2010, however.
The Mayor and City Council approved a five cent increase in the real property tax rate for FY 2011. The FY 2010 rate of $0.212 per $100 of assessed value had stood since 1964. It was the lowest rate of the 20 largest municipalities in the state of Maryland. We were unable to craft a budget that did not significantly hinder our ability to deliver core City services without receiving this additional revenue.
With the inclusion of the 5 cent real property tax rate increase, anticipated revenue in FY 2011 is budgeted at $47,644,450. The tax rate increase accounts for $4,400,000, or 9.2%. However, of the total revenue budgeted, approximately $3.5 million is being reappropriated to our reserve fund to help us sustain economic viability over the next five years. This effectively reduces the FY 2011 total revenue to $44,193,920, a 7.9% decrease compared to FY 2010.
Some previously stalled development projects, including Casey East and West and the Crown Farm, will see some level of activity in FY 2011. This development generates corresponding increases in revenue for accompanying activity such as building, mechanical, electrical and grading permits. Combined with a permitting automation fee, allowing us to recoup some technology expenses associated with making the process more efficient, Licensing and Permitting Fees of $2,840,530 are budgeted in FY 2011. This represents a 46.2% increase over the $1,943,500 budgeted in FY 2010.
We are taking the greatest revenue hit in the form of reduced shared revenue and grants from the county, state and federal government, totaling just $10,743,745 in FY 2011. Combined, the decrease in grants from these sources is $2,630,202 less than the $13,373,947 we budgeted to receive in FY 2010, a decrease of 20%. Governments at all levels are engaged in the same cost reduction strategies that we are, and funds are being withheld at unprecedented levels. As a result, we recognize that our long term strategies must anticipate continued reductions in this area, and we must move to eliminate our dependence on these sources of funds.
Of most concern to Gaithersburg is the loss of "State Shared Taxes" in the form of Highway User Funds. Generally in the neighborhood of $1.7 million annually, the FY 2011 budget accounts for the state withholding 90% of these funds. It is possible the funds could be withheld for the foreseeable future. Highway User Funds are given to local municipalities based on a formula and provide us with funding for road construction, maintenance and repair.
Federal Grants revenue is budgeted at $764,600, a 43.2% decline from FY 2010. State grant funding (exclusive of the Highway User revenue), is budgeted at $712,000, a 28% decline from FY 2010.
County Government Grants and Shared Taxes total $9,103,045 in FY 2011, down 3.1% from FY 2010. This includes a withholding of 15% of the tax duplication funds traditionally provided to municipalities to cover services which would otherwise have to be provided by County government. In addition, we are particularly concerned about the elimination of $100,000 in grant funding to help us operate the Gaithersburg Upcounty Senior Center. This facility, which has long been a joint project of the City of Gaithersburg and Montgomery County, serves hundreds of seniors in the surrounding community. Under a Memorandum of Understanding that has been in place for years, City residents (which make up only 33% of the membership base) and County residents have been charged the same membership fee to use the facility. With the lack of County involvement, Gaithersburg must recoup an appropriate level of the Center's operating expenses from those who do not pay City taxes. The FY 2011 Upcounty Senior Center membership fee structure includes a new level for nonresidents, set at $115 annually. Six month memberships will also be available. This increase is reflected under "Service Charge" revenue.
Service Charge revenue increased from $4,504,460 in FY 2010 to $4,877,185 in FY 2011, an 8.3% increase. The proposed budget included new fees for bulk pick up and vacuum leaf pick up. These recommended fees were removed during the budget work sessions. Organizationally we have established a policy that moves us towards cost recovery while ensuring that our pricing remains competitive. Fees for many of our sports, summer camps and recreation programs have been raised. We are also aggressively exploring partnerships and sponsorships in an effort to help us underwrite the costs of our special events.
Finally, Miscellaneous Revenues decreased from $1,717,150 in FY 2010 to $1,151,990 in FY 2011, a 32.9% decrease. We have budgeted for a $200,000 decrease in interest realized on our conservative investments. Additionally, developer and economic development funds in escrow are budgeted at a $410,000 reduction.
Cost containment strategies in FY 2010 focused heavily on personnel-related items, including a significant reduction in overtime, an increase in work hours and the elimination of some amenity programs. I vowed not to balance the City's budget on the backs of our employees any further. In the FY 2011 budget there are no layoffs or furloughs of full time personnel. In fact the budget includes $538,000 for a stipend for all full-time employees meeting performance standards. This may appear surprising since many of our neighboring jurisdictions are not including increases, and some are including furloughs and layoffs in their budgets. Gaithersburg operates a very lean organization and we expect a lot from our employees. Our full time staff will be doing even more with less with the significant reduction in part-time staffing reflected in this budget. It is imperative that we remain competitive in order to retain the quality of staff necessary to run this organization under very challenging conditions.
While I have preserved jobs and benefits as much as possible, there are personnel-related changes that will impact our staff.
There are seven vacant full time positions that are being held open, including: Assistant City Manager, Environmental Services Director, two Police Officer I positions, and three Maintenance Worker positions.
Part time positions within the City were thoroughly examined. Through job reassignment and program modifications, we have reduced part time salaries by $538,398, which represents a 21.5% decrease. Such a large reduction in part time salaries equates to 14 full time positions. This will have a significant impact not only those whose part time positions have been reduced or eliminated, but on the remaining staff who must absorb the responsibilities. With the exception of public safety issues, we fully anticipate slower response times and delayed service delivery as a result.
We have eliminated all in-service staff training programs not required by law or necessary for continuing certification, and have reduced conference and travel budgets by 50%. We have also reduced some benefits associated with vacation leave, employee recognition events, and health and wellness amenities.
What follows are a few highlights from the FY 2011 operating budget.
Human Resources: Expenses associated with employee recruitment have been eliminated as positions are not being filled in FY 2011. We have eliminated the annual employee picnic and the annual flu shot program for employees and their families as well.
I am very proud of the creativity and tenacity that our Human Resources staff has shown in negotiating a change in health care plans that will allow us to offer enhanced benefits at no additional cost to either the City or the employee. Entering into the budget preparation process we initially projected a 17% increase in the City's share of employee health care costs. Through a cooperative program with Local Government Insurance Trust (LGIT), we are partially self-insuring a plan that will have lower premiums, lower doctor visit deductibles and lower prescription drug costs than our current plan. The employee contribution to health care costs remains constant at 15%.
Economic Development: Encouraging businesses and helping them thrive remains a key component of our economic recovery and one of our top strategic priorities. We increased our reserve fund for economic development initiatives to $2 million, which includes funding for a new full-time staff member. It is imperative that we position ourselves to successfully recruit businesses and to expand and increase jobs. Going forward, we anticipate annual allotments of $500,000 per year to ensure that our Economic Development "Tool Box" is adequate to spur development. This strategy is of the utmost importance.
Community & Public Relations: We recognize that the economic crisis has taken a very heavy toll on residents of all income levels throughout our community. Combined with decreasing support from county, state and federal sources, our nonprofit organizations are struggling to meet even the most basic of human needs. Especially for our most vulnerable residents, it is more important than ever that we continue to offer the strongest safety net we can. With that commitment we have maintained essentially the same level of contributions to nonprofit organizations as we did in FY 2010. Our support covers seven priority areas including food assistance, health assistance for the uninsured and underinsured, mental health assistance, workforce and positive youth development, homeless prevention and emergency assistance, homeless assistance for families, and homeless assistance for singles.
Information Technology: We reduced vehicle, furniture and equipment replacement budgets across the entire City by 50%. During our budget analysis we determined that there are sufficient replacement reserves to meet the most essential needs. However, we left funds intact for software replacement. Work is going on now to replace our time and attendance and payroll software, to fully automate our permitting software, to keep our operating systems current, and to update our website with a new content management system and new functionalities. These upgrades are vital to gain maximum efficiency as we continue to challenge our staff to do more in the face of declining resources.
Police: Public safety remains the top priority, and as such the Police department budget has been essentially preserved. Our goal is to maintain an environment that allows us to continue to recruit and retain the highest caliber of law enforcement officer possible. Police officers not at the top of their pay grade will receive step increases, and the adopted FY 2011 budget anticipates filling the two vacant Police Officer I positions midway through the fiscal year. Within the budget we found cost efficiencies by reducing overtime, eliminating items such as fees to test new equipment, and eliminating a planned outside management consultant review of the overall operations of the department. Enhancements to the Police department's operations are being explored through partnership with the Gaithersburg Police Foundation.
Public Works: While the City prides itself on its distinctive beauty, the level of landscaping and maintenance to which we are accustomed cannot be sustained in the current fiscal climate. Spring flowering bulbs are no longer being planted in median strips and right-of-ways, and annual flowering plants are only being planted in the highest visibility areas. Perennials are replacing annual plantings. You will also see the effects of not mowing roads for which we are not reimbursed. We have long had the tradition of taking care of the medians on state and county roads such Route 28, Route 124, Great Seneca Highway, and Sam Eig Highway to maintain a consistent look in our community. In this economy, it is not appropriate for us to do the work of other government agencies. As a result of the reduced transfer of funds from the state and the county, we will no longer fully maintain the mowing and landscaping on these roadways. However, we will continue to mow at a reduced schedule and in select areas where impeded sight lines could cause safety problems.
Parks, Recreation and Culture: Special events, cultural arts opportunities and recreational amenities add greatly to the quality of life in our community. From playgrounds to sports leagues to opportunities for the entire community to come together at parades and festivals, these activities help define our City.
However, as many of these activities are not among our core City services, it is prudent for us to examine how we conduct our activities and where modifications can be made to reduce expenditures. Several programs have been eliminated, including two sports clinics and the School of Basketball, the free family theater program held each spring, and Halloween at the Concert Pavilion. Other programs have been significantly scaled back, including free summer performances at the Concert Pavilion, backyard concerts, and outdoor movies.
The Community Museum will be shuttered for three months during the winter, we have eliminated two of the City's four art galleries, and we are retooling all of our parades, festivals and other special events to reduce staff expenses and overtime.
CAPITAL IMPROVEMENT PROJECTS (CIP)
The FY 2011 Capital Improvement Projects budget is funded at $3,046,732. The vast majority of the projects are related to street and road improvements, including street lighting, sidewalk and pathway construction/repair, storm drains and stormwater management, street resurfacing, and street reconstruction. Together these five elements account for $2,149,930 of the CIP.
We have abandoned, for now, the concept of building a stand-alone aquatic and recreational facility. We are still positive about a partnership with Montgomery County for a joint recreational facility and we are open to continued dialog; however, we recognize that the significant financial challenges that exist at this time may delay any progress.
Part of our strategy for sustained recovery involves the reallocation of CIP funds over the next five years. We will be reallocating a total of $5 million between Fiscal Years 2012 and 2015.
Every employee in the City had an opportunity to participate in crafting this budget, as did our elected officials, concerned businesses and organizations, and an active, passionate and vocal citizenry. The decisions that we made were arrived at strategically, thoughtfully and collaboratively. It is our budget, and while individually we may have disagreed on those elements we held most dear, collectively we have approved a viable plan to weather the economic crisis, to sustain the highest level of quality and service possible, and to position ourselves to emerge even stronger in the years to come.
Angel L. Jones