July 1, 2012
To the Citizens, Honorable Mayor and City Council and Employees of the City of Gaithersburg:
It is my pleasure to submit to you the adopted FY2013 budget.
The adopted budget was developed utilizing the direct feedback of our residents and stakeholders, obtained through surveys, public testimony and correspondence. This budget aligns our funding with the priorities identified by our elected officials in the FY2013 Strategic Plan, a document that was adopted by the Mayor and City Council on June 4, 2012. The Strategic Plan underwent considerable revision this year, with highlight areas now including City Administration, Communication, Community Services, Economic Development, Infrastructure and Facilities, Parks, Recreation and Culture, Planning and Development, Police, Sustainability, and Transportation.
In conjunction with adopting the FY2013 Strategic Directions and the FY2013 Budget, the Mayor and Council also adopted a schedule of all City fees on June 4.
The FY2013 total adopted budget of $51,504,183 represents a 7.3% increase when compared to the FY2012 budget. The operating budget of $46,637,273 is 12% higher than the operating budget for FY2012. The Capital Improvements Plan (CIP) is budgeted at $3,956,910, which represents a 27.2% decrease from the amount budgeted for the CIP in FY2012.
Several projects have been completed and thus were removed from the CIP. We have also received state funding for some elements that were previously funded by the City, and have reallocated funds within the CIP, thus reducing the need to dedicate monies from general fund revenues.
The contribution to the Other Post-Employment Benefits Trust (OPEB) calculated by our actuaries is $910,000, which is the same as was budgeted in FY2012. It is important to note that our post-employment benefits are funded at the recommended level.
Gaithersburg's real property tax rate stands at $0.262 per $100 of assessed value, which is among the lowest of the 20 largest municipalities in the state of Maryland. There is no real property tax rate increase in the FY2013 budget.
In the five year plan, we had originally projected a decrease in property tax revenue in FY2013, which would have necessitated an allocation from our reserve fund to balance the budget. The current state projections have City property taxes remaining relatively flat, however. With additional revenues anticipated in other areas, this budget is balanced without the use of reserves.
Local tax revenue for FY2013, which includes real property taxes, personal property taxes, hotel taxes, admissions and amusements taxes, and penalties and interest, is budgeted at $26,175,000, down only 1.2% from what was budgeted in FY2012.
The developments that are underway throughout the City will add significantly to the revenue budgeted under Licenses and Permits. Activity continues at Crown, Archstone Gaithersburg Station, the Residences at Hidden Creek, and the areas surrounding Watkins Mill Road east and west of I-270, including The Spectrum, Monument, and Watkins Mill Town Center/Parklands neighborhoods. Development generates increases in revenue for accompanying activities such as building, mechanical, electrical and fire protection system permits. We anticipate Licensing and Permitting Fees of $3,587,890 in FY2013, a 19.2% increase over what was budgeted in FY2012.
We continue to advocate for the restoration of Highway User Funds from the state of Maryland. 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. As the recession began to affect state budgets, Highway User Funds to municipalities were drastically cut. By FY2011, our portion of that fund had been reduced to a low of $155,859. Although it rebounded in FY2012 to $475,032, we are estimating a 33.4% reduction in FY2013 to $316,000. Legislators and municipal associations are working hard to restore these funds, recognizing that local municipalities have limited ways to raise revenue. Although we are hopeful that the funds will be restored as the economy improves, we are budgeting conservatively in this category.
Federal grant revenue is a particularly volatile category, with funds fluctuating from year to year based on the timing of grant allocations. In FY2013, Federal grant revenue is projected at $1,503,850, a 180.9% increase over FY2012. While Community Development Block Grant funding is expected to decrease by 10%, we are anticipating $1,007,800 through the Transportation Enhancement Program, to be used for the construction of Teachers Way in Olde Towne.
State grant funding (exclusive of the Highway User revenue), is projected to be $2,464,100, a 355.7% increase over FY2012. $1.7 million is anticipated through Program Open Space for additional enhancements to the Gaithersburg Water Park. We also received $750,000 in state bond money, payable over a several year period, to assist with the installation of an artificial turf field at Lakelands Park. We will realize $37,500 of that bond money in FY2013 for the design phase. State bond money in the amount of $200,000 has also been allocated to assist with renovations to our Upcounty Senior Center. Revenue from county government grants and shared taxes is up 2% from FY2012, totaling $9,218,595.
Service Charge revenue is expected to increase by less than 0.1% in FY2013, to a total of $5,107,700. We are anticipating slightly increased revenue from our sports, recreation and cultural programs, and facility rentals.
Fines and Forfeitures are expected to increase by 117%, to $2,711,500. Photo radar program revenue has been budgeted conservatively in the past, assuming that revenues from any given camera will decrease as behaviors change. The FY2013 budget reflects the historically higher pattern of revenues we have been realizing from this program. It is important to note that photo radar revenues are mandated to be used for public safety enhancements in the community.
Miscellaneous Revenues are expected to decrease by 45.8% in FY2013, to $959,640. This is primarily due to a $1.2 million contribution to the City's general fund as part of the Crown Farm annexation agreement, realized in FY2012. Also in this category is interest from investments. With an economy that continues to be unpredictable, we are conservatively projecting only $90,000 in investment interest income for FY2013, down 48.5% from last year's budgeted amount.
The City conducted a biennial citizen survey in 2011 which pointed to both a high level of expectation and a high level of satisfaction with regards to municipal services. With the City's population and service areas expanding as new developments come online, it is important to continually review operations to ensure that our resources are aligned with resident expectations. Adding personnel in a strategic manner, while leveraging technology assets, will help us accomplish this goal.
Last year, for the first time in three years, we were able to implement a 1.6% cost of living increase to City employees. Given the more optimistic outlook, this budget includes a 3.6% cost of living increase in FY2013. We are restoring several full time positions that have been held vacant for several years, and this budget also includes funding for several new full time positions in the Police Department, Public Works, Finance & Administration, Community Services, Environmental Services, and the City Manager's Office.
Police: Three additional positions have been added in the Police Department, bringing its authorized strength to 57. The additional positions provide the flexibility to maintain an actual police presence of 54 sworn officers. The funding for these positions will be held in contingency until such time as they are needed. Associated with new positions are expenses for equipment and training.
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 FY2013 to enhance a fund that allows for quick response to emerging opportunities.
Human Resources: In late FY2012, we launched an organization-wide compensation study, looking at every position and every grade to ensure that we are positioned to recruit and retain the highest caliber staff. The study itself is funded in FY2012; however, any compensation adjustments that result from the study will impact the FY2013 budget.
The proposed budget anticipated a health care cost increase of approximately 20%, with premium costs increasing based on claim history. By adjusting our plan design during the negotiation process, we were able to keep the cost increase to just 10%. The adopted FY2013 budget absorbs this health care cost increase without passing along a higher pro rata share to our employees.
Public Works: During the leanest of budget years, we extended the replacement schedule for many items, including our fleet of vehicles and the replacement of playground equipment. With the relative health of this budget, we will be catching up to a normal replacement schedule, thus stabilizing our assets to maximize the life of our equipment and ensure continued, safe operations.
Energy costs are uncertain and fluctuating. Instead of adjusting each activity item for as-yet-to-be-determined fuel and utility costs, we are setting aside a contingency fund of $200,000 to cover increases we might experience throughout the year. While the budgets for each activity code project similar expenses to FY2012, this contingency fund will allow us to adapt in the event that energy prices spiral upwards.
Housing & Community Development: Per the terms of our annexation agreement with the developer of the Crown property, the City will receive $3 million in contributions over a four year period towards a Housing Initiatives Fund. An ad hoc advisory committee has been formed to evaluate and recommend programs that provide access to affordable housing and homeownership for qualifying residents.
Community & Public Relations: To ensure transparency and provide as many opportunities for citizen engagement as possible, we will be enhancing our communication strategies through printed and electronic materials, social media sites and new video programming. Funds have been budgeted to ensure that we reach our residents in a variety of ways.
Community Services: Continuing to protect the most vulnerable members of our community remains a priority, and we have increased funding to our nonprofit service providers by nearly $200,000. Through a hybrid process, we will continue to issue contracts that focus on safety net services for housing and emergency services, assistance for the homeless, physical and mental health, food, and financial self-sufficiency. In addition, we are providing grants to select organizations that are working to set our young people on a path of positive development, and enhancing funds to address needs that may arise throughout the year through.
Information Technology: As we are doing with our vehicle fleet and playground equipment, we are restoring funding for computer and other technology equipment replacement.
While the projects were funded in previous budget years, it is in FY2013 that we will see significant public-facing improvements as the Information Technology Department rolls out new permitting software, new meetings and agenda management software, and a new website content management system. 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. In this budget, there is increased funding for Inspection and Environmental Services personnel to help us respond to development in a timely fashion and address increasingly stringent stormwater management requirements.
Parks, Recreation and Culture: Special events, cultural arts opportunities and recreational amenities add to the quality of life in our community. There is funding in the FY2013 budget to expand our special event programming staff. While heavily supported by sponsors and volunteers, regional events such as the Gaithersburg Book Festival and the Winter Lights Festival require significant staffing to keep up with their growth. We have also included funding in this budget to enhance educational programming and take advantage of the train cars that make up our Community Museum and History Park.
CAPITAL IMPROVEMENT PROJECTS (CIP)
The FY2013 Capital Improvement Projects budget is funded at $3,956,910. The majority of CIP funding is directed to street reconstruction and resurfacing, street lighting, and sidewalks, handicap ramps and pathways. The City is committed to maintaining and enhancing our infrastructure to prevent deterioration that could prove more costly in the long term.
While maintenance of our infrastructure has been our focus for several years, we also believe that re-prioritizing the various elements of our capital plan needs to occur in the coming months. Funds are available within the CIP and in our reserve accounts to begin planning potential new and/or upgraded facilities to enhance our community.
Conservative and thoughtful preparation has resulted in a multi-year fiscal plan that continues Gaithersburg on a road to financial sustainability. This budget increases staff in key areas, maintains the market comparability and competitiveness of our personnel, restores replacement funds for equipment necessary for continued operations, enhances our economic development initiatives, and continues support for the most vulnerable in our community.
I want to take this opportunity to thank all of those who were involved in developing the budget. It is the product of creative and dedicated employees who have identified how to be effective with limited resources, how to overcome roadblocks, and ultimately how to continue the City's reputation for excellence.
Acting City Manager
Past Adopted City Budgets: