The Honorable Mayor and City Council
Citizens of Gaithersburg
I am pleased to submit to you the adopted FY2012 budget.
With national headlines being dominated by the dire budget predicaments of governments at all levels, I am happy to report that the outlook in Gaithersburg for FY2012 is optimistic.
Our relative health comes from our commitment to long range planning. Two years ago when the budget crisis loomed, the elected leadership of this City had the foresight to look five years in to the future, forging a plan that would meet the needs of the community while at the same time ensuring our economic solvency. Because of our conservative planning, our supreme efforts to reduce expenses, and our thoughtful consideration of future needs, we are on target to meet our five year projections, without municipal debt, while maintaining one of the lowest municipal property tax rates in the state.
But this does not come without challenge and sacrifice. We are not able to return to the staffing levels we experienced a few years ago and some vacant staff positions remain unfilled. Significant service cuts that were made to balance the FY2010 and FY2011 budgets remain in place.
Unfortunately we are still reliant on funding from other governmental agencies to balance our budget. That funding is tenuous at best as federal, state and county leaders face their own budget challenges. We recognize that this reliance makes us vulnerable, and as we plan for FY2012 and the years beyond, we continue to explore opportunities to generate additional revenue and hold the line on expenses, thus minimizing the effect of decreased funding from these governmental sources.
City employees are our greatest asset, and to the extent possible we must ensure that they are fairly compensated and continue to be motivated to do their best for Gaithersburg. The FY2012 budget includes a 1.6% cost of living adjustment for staff. Recognizing that increases of any amount are rare in this economic climate, the adjustment reflects our continued commitment to employing the brightest and most talented staff to serve our community.
This budget takes into account an uncertain future. Reserves have been set aside for the possibility of increased fuel and utility costs. Infrastructure is being maintained, with the understanding that short term investments will benefit us substantially in the long run. Equipment replacement has been considered thoughtfully, and we continue to look at our organizational structure so that our resources are properly aligned with community demand.
Despite our challenges we continue to offer our residents the highest level of service possible. Public safety remains a top priority. Our emphasis on economic development initiatives are starting to reap benefits as we begin to realize revenue from projects that are underway. We continue to support organizations that offer safety net services to our most vulnerable residents, and we are being creative with the use of partnerships to offer activities and special events for a broad range of interests.
There is true synergy in this results-oriented, collaborative budget. It is aligned with the strategic directions adopted by our elected officials, and takes into consideration the direct feedback of our constituency, making this the product of an entire community.
I want to take this opportunity to commend all of those who were involved in developing the FY2012 budget. Employees at all levels explored programs from every angle, analyzed and synthesized data, thought creatively about overcoming roadblocks, and provided feedback on how to continue to be effective with limited resources. I continue to be impressed by the fortitude and passion of our very dedicated staff.
OVERVIEW
The FY2012 total budget of $47,979,455 represents an 8.6% increase when compared to FY2011. The operating budget of $ 41,632,325 is 2.3% higher than FY2011.
The FY2012 budget includes a Capital Improvements Plan of $5,437,130, which represents a 78.5% increase over the amount budgeted in FY2011. A large portion of that increase involves construction of Teacher's Way in Olde Towne, as well as several other projects that preserve our infrastructure.
The contribution to the Other Post-Employment Benefits Trust (OPEB) calculated by our actuaries is $910,000, which is twice the amount budgeted in FY2011. It is important to note that our post-employment benefits are funded at the recommended level; we are not jeopardizing the future by underfunding these benefits to balance the budget.
REVENUES
Last year the Mayor and City Council adopted a five cent increase in the property tax rate, which now stands at $0.262 per $100 of assessed value. Even with that increase it is still among the lowest of the 20 largest municipalities in the state of Maryland. No increase was included in the FY2012 budget.
In the five year plan, we projected a 10% decrease in property tax revenue in FY2012, which would have necessitated an allocation of $536,000 from our reserve fund to balance the budget. The current state projections have City property taxes remaining relatively flat. With some additional revenue anticipated from previously stalled development projects, this budget contributes approximately $244,000 to the reserve fund.
Local tax revenue for FY2012, which includes real property taxes, personal property taxes, hotel taxes, admissions and amusements taxes, and penalties and interest, is budgeted at $26,500,000, down just 2.4% from what was budgeted in FY2011.
Our continued emphasis on economic development is now paying dividends. There are several projects that are currently underway, including Crown Farm, Archstone at Olde Towne, the Residences at Hidden Creek, and the areas surrounding Watkins Mill Road east and west of I-270. Development generates increases in revenue for accompanying activities such as building, mechanical, electrical and grading permits. The FY2012 budget includes Licensing and Permitting Fees of $3,008,100, a 5.9% increase over what was budgeted in FY2011.
Governments at all levels are engaged in significant cost reduction strategies, and funds are being withheld at unprecedented levels. We continue to see the erosion of shared revenue and grants from county, state and federal governments, totaling only $10,593,002 in FY2012. Combined, the decrease in revenue from these sources is 1.4% lower than what we budgeted to receive in FY2011.
Of most concern is the continued loss of “State Shared Taxes” in the form of Highway User Funds. Historically, Gaithersburg received about $1.7 million annually from this fund, which provides money for road construction, maintenance and repair based on a state-wide formula. In FY2010, that amount was reduced to $217,685. In FY2011, it was further reduced to $164,100. Legislators and municipal associations worked hard to restore a portion of these funds for FY2012, recognizing that local municipalities have limited ways to raise revenue. In FY2012 we will be receiving $475,032 in Highway User Funds, a 189.5% increase over FY2011. We are hopeful that the funds will be fully restored as the economy improves, and will continue to work with our legislators to achieve this.
Federal grant revenue is projected at $535,275, a 30.0% decrease from FY2011. State grant funding (exclusive of the Highway User revenue), is projected to be $540,700, a 24.1% decline from FY2011. We received word at the end of the 2011 legislative session that we will be receiving $205,000 in bond monies for the Gaithersburg Water Park. The funding will help with much-needed renovations and enhancements to this popular recreational facility. In this budget, revenue from county government grants and shared taxes is down 0.7% from FY2011, totaling $9,041,995.
Service Charge revenue is expected to increase by 4.6% in FY2012, to a total of $5,103,530. We anticipate slightly increased revenue from our sports, recreation and cultural programs, and some increased revenue in stormwater management and recycling fees as new developments come on line.
Finally, Miscellaneous Revenues are expected to increase by 53.1% in FY2012, to $1,769,079. The most significant increase in this category is a $1.2 million contribution to the City’s general fund as part of the Crown Farm annexation agreement. Also in this category is interest from investments. With an economy that continues to be volatile, we are anticipating only $175,000 in investment interest income for FY2012, down 78.1% from what we budgeted in FY2011.
OPERATING BUDGET
With our conservative planning we were able to craft a budget that does not require any furloughs or layoffs. And for the first time in three years, we will be awarding a 1.6% cost of living adjustment for qualifying employees. This adjustment recognizes the challenges our employees are facing as costs increase in just about every facet of their personal lives. This budget also includes the option of a $2,000 stipend or one week of administrative leave for each qualifying full time employee. The stipend is in recognition of the tremendous effort put forth by our staff as we continue to provide the highest level of service possible under extremely challenging conditions. I cannot emphasize enough my commitment to retaining the highest caliber staff as this lean organization strives for continued excellence.
Through reorganization and position reallocation we are ensuring that our staffing is aligned with our priorities. The FY2012 budget includes new staffing positions in Economic Development, Information Technology and Community and Public Relations.
The Economic Development Director position, while funded in FY2011, is included as a new position in the FY2012 budget. This budget also includes a new full time position for a Geographic Information Systems (GIS) specialist in our Information Technology Department, and two full time positions for a Communications Specialist and a Web Assistant in our Department of Community and Public Relations. The GIS position will allow us to establish a centralized support resource for all of the City's GIS users and expand and integrate geographic information across our software platforms. The Communications Specialist and Web Assistant will allow for additional written and electronic communications as we enhance our outreach initiatives and deploy a new website content management system later in calendar year 2011.
HIGHLIGHTS
Economic Development: Encouraging businesses and helping them thrive remains a key component of our economic recovery and one of our top strategic priorities. We continue to fund economic development initiatives at the highest level possible, adding $500,000 in FY2012 to enhance a fund that allows for quick response to emerging opportunities. While the delay in hiring an Economic Development director has been frustrating, we are confident that our renewed recruitment effort will result in a high level candidate who will complement our existing staff and bring exciting new skill sets to the table.
Police: Public safety remains our top priority. A recent reorganization within the department puts all 54 officer positions on the streets, as the Accreditation Manager position, which is heavily administrative, will now be filled by a civilian rather than a sworn officer.
We are also planning for the future by aggressively setting money aside in a replacement fund for the eventual purchase of new police radios. Our current radios, which are integrated with those of Montgomery County Police, will be rendered obsolete when the County moves to new equipment in 2015. It is prudent to set as much money aside now, when funds are available, for this critical expense.
Human Resources: Due to savvy negotiations and minor benefit modifications, we were able to hold the line on health care costs for FY2012. There are no health care premium cost increases for either the City or our employees in this budget.
The severe cost reduction strategies of FY2011 forced us to limit employee benefits. With a slightly more optimistic outlook, we have renewed our commitment to our employees, reinstating our Wellness Day and free flu shot programs. We continue to offer physical fitness benefits, financial planning workshops and other programs that holistically enrich the lives of our employees and help reduce absenteeism.
Public Works: Last year, with a significant reduction in part time staff, we undertook a plan to adjust our landscaping and maintenance efforts so that an acceptable level of service could be delivered with minimal resources. We realize that while we may not be at the beautification standards we were several years ago, we are able to continue Gaithersburg's reputation for environmental quality at the current staffing level.
Changes in current and future state and federal mandates with regards to stormwater management will be a constant challenge for us. We look to partner with Montgomery County and others to share resources wherever possible as we ensure our compliance. In this budget, we have identified an opportunity for additional staffing to address stormwater management through position reallocation and contract funding.
Energy costs are uncertain and fluctuating. Instead of adjusting each activity item for as-yet-undetermined fuel and utility costs, we set aside a contingency fund of $200,000 to cover any increases we might experience throughout the year. While the budgets for each activity code project similar expenses to FY2011, this contingency fund allows us to adapt in the event that energy prices spiral upwards.
Community & Public Relations: With Human Services added as a new category in the recently adopted FY2012 Strategic Directions, the Mayor and City Council reaffirmed their commitment to protecting the most vulnerable members of our community. In acknowledgement of this strategic priority we included an increase in funding to our nonprofit service providers. Through a hybrid process, we will continue to provide contracts that focus on safety net services for housing and emergency services, assistance for the homeless, physical and mental health, food, and workforce development. In addition, we will provide grants to select service organizations that are working to enhance our public safety initiatives by setting our young people on a path of positive development.
The rising cost of living and reductions in human service funding at federal, state and county levels will undoubtedly impact Gaithersburg residents, so in this budget we established a contingency fund, based on criteria approved by our elected officials, to provide up to an additional $50,000 in grants to nonprofits for emergency, emerging or innovative needs that may arise during the course of the year. All of these annual contracts and grants have defined parameters and outcomes, and are subject to review and recommendation by a volunteer oversight committee.
Funding was added to the Community and Public Relations budget to implement an aggressive communications plan designed to increase voter registration and voter turnout for the 2011 election. Funding is also available to implement a marketing plan for the new website content management system, allowing us to inform residents throughout the City of the features and opportunities that will be available on the revamped site.
In 2011 we will conduct our bi-annual citizen survey, an exercise that helps elected officials and City staff to prioritize strategic initiatives and direct resources. The survey will be conducted in the fall of 2011.
Information Technology: As we are doing with the preservation of our infrastructure for long term sustainability, we have also restored funding for equipment replacement. This includes computers, printers and other technology tools as well as vehicles and maintenance equipment. In FY2011, we reduced our replacement funding by 50%, relying on our contingency fund to cover any significant unfunded need that might arise. In this more optimistic budget, we have increased replacement funding to a more robust level.
While the projects are funded in FY2011, it is in FY2012 that we will see significant public-facing improvements as the Information Technology Department rolls out new permitting software and a new website content management system. Both of these will vastly enhance the way the public interacts with local government, providing new opportunities for engagement and improving the delivery of service.
Planning and Code: Renewed development activity demands that additional resources be allocated to site development review and oversight. Because of the fluctuating nature of development, which can come full force, as we are seeing now, or fleetingly, as we saw in the past couple of years, we felt it was prudent to establish a contractual position for site development. Funded through miscellaneous professional expenses, this arrangement allows us to easily ramp up or ramp down the hours depending on the work load.
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.
While no major program modifications were recommended for FY2012, we continue to explore creative ways to enhance our programs and maximize our resources. New partnerships are being established as we explore mutually beneficial collaborations. We are pursuing sponsorships to offset expenses for a wide variety of programs, from special events to sports, and we continue to raise funds for scholarships to ensure that residents of any means are able to access our programs.
CAPITAL IMPROVEMENT PROJECTS (CIP)
The FY2012 Capital Improvement Projects budget is funded at $5,437,130. It is imperative that we maintain and even enhance our infrastructure to the extent possible to prevent deterioration that will be even more costly in the long term. The majority of CIP funding is directed to street reconstruction and resurfacing, street lighting, and sidewalks, handicap ramps and pathways.
A large portion of the FY2012 CIP is dedicated to the construction of Teacher’s Way. $1,670,000 is allocated for this project in the coming fiscal year. Federal funding will help offset the expenses of the roadway, but those funds are received over a period of years, meaning that the City must “up front” the money to expedite construction. Teacher’s Way is an important element of the Olde Towne Master Plan, with the construction closely tied to the Archstone at Olde Towne development project.
In the FY2012 Technology CIP we have added $250,000 to advance the construction of a new television studio at the Olde Towne Youth Center. The Center, which opened in the fall of 2009, houses a state-of-the-art audio studio for youth. Since its inception it was designed to also serve as the studio for GTV, Gaithersburg’s municipal television station. For several years, we have been setting funds aside for equipment to outfit the studio. The additional allocation in FY2012 supports set design and construction. The studio will allow us the opportunity for enhanced video programming, providing a vital communication link to Gaithersburg’s constituency. When not in use by City staff, the studio will also be available for hands-on learning opportunities for young people.
CONCLUSION
While this budget is optimistic, we are not out of the woods yet. The economic future remains uncertain. And yet despite our challenges, the adopted FY2012 budget does not erode services, does not decrease staffing, does not foster the deterioration of our infrastructure, and does not borrow from the future to pay for today. Guided by a well thought out five year plan, the adopted FY2012 budget effectively keeps us on track to meet our long range objectives and allows us to continue to address the needs of a community that is accustomed to and deserving of excellence.
Angel L. Jones
City Manager
