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Update 2: The video of this meeting is now available. Also, the City Manager has released a statement:

The Mayor called a special meeting of the Mayor and City Council on Thursday, June 21, 2007 to continue discussions on the FY 2008 budget. At issue was the amount of funding set aside in a line item for a homeownership assistance program. The original budget, approved by a 3 to 2 vote on June 18, included $397,000 for the program. The Mayor took no action on the budget prior to the special meeting.

At the June 21 meeting, Council Member Geri Edens proposed a compromise budget amendment which would set aside a total of $220,000 for the assistance program. This amount is equal to the amount allocated for a pilot homeownership assistance program specifically for the residents of West Deer Park Apartments, established in 2006.

Council Member Sesma recommended modifying Council Member Edens’ amendment, suggesting $300,000 for the program and noting that there are several redevelopment projects pending.

The Council unanimously approved the compromise amendment, allocating $300,000 for the homeownership assistance program, and adopted the revised FY 08 budget accordingly. The Mayor agreed to sign the revised budget.

A work session on the proposed homeownership assistance program has been scheduled for July 16, 2007 at 7:30 p.m. in the City Hall Council Chambers, 31 South Summit Avenue. For more information contact the City Manager’s Office at 301-258-6310.

Update: The Washington Post has a story on this, by Mariana Minaya: City Pledges Aid to Displaced Tenants

It took them around an hour of talking about it, but in the end the Council wound up finding a compromise. Council Member Edens led off with a motion to restore the homeownership assistance program to the $220,000 figure (which would include the $147,000 left from last year plus an additional $73,000; Mr. Sesma had asked for the $147,000 plus an additional $250,000, while Ms. Edens had not previously been willing to move past the $147,000 level) at which it had started out when they first enacted it for the West Deer Park redevelopment. She also asked that the others on the Council recognize her main point that — I’m paraphrasing here — the Council shouldn’t be wily-nilly funding programs without due consideration. Council Member Sesma acknowledged and accepted Ms. Edens’ point, and welcomed her offer of compromise. Mr. Sesma further made a counter-proposal of $300,000 in total funding. This resulted in much additional discussion, but ultimately they all accepted the $300,000 figure, Ms. Edens restated her motion with this new amount, and this motion carried 5-0. The budget, thus amended, passed on a 5-0 vote, and the Mayor — who, after this vote, took the opportunity to state that he had decided not to veto the budget even without the amendment — promised to sign it as amended. There was much additional discussion about the entire process and how it could be made better, and they generally agreed to have work sessions on this issue. I’ll put up a link to the video when it available tomorrow.

The next chapter in the budget crisis story will be played out tomorrow night, at a special session of the Mayor and City Council; the agenda is inserted at the end of this post. [Note that this agenda also includes the two items originally scheduled for that evening, a kick-off for the Kentlands Charrette, and the presentation of the concept plan for the new Olde Towne Youth Center, which, sadly, I’ll be giving short shrift.] The agenda includes a link to a PDF Background document, explaining more or less what they have in mind:

TITLE:

Resolution of the Mayor and City Council Authorizing the City Manager to Transfer Funds from the FY 2007 Capital Improvements Plan Fund Balance in Order to Allow for the Provision of City Services in the Absence of an Adopted and Ratified FY 2008 Budget.

SUPPORTING BACKGROUND:

The possibility exists that the FY 2008 budget may not be adopted and ratified by July 1, 2007. This would have the effect of causing all of the services provided by the City to cease.

The City Charter requires that we operate with a budget, allows for a veto and override, but does not provide a mechanism for operating if no override occurs. We believe that paragraph 47 of section 19 of the Charter provides the Council with sufficiently broad powers to allow for the plan anticipated by this resolution.

The attached resolution authorizes the City Manager to transfer a portion of the current Capital Improvements Plan (CIP) balance to fund operations. It would require approximately $3.25 million to fund the operating budget for the month of July. We are recommending that an additional $500,000 be authorized to account for unforeseen expenses. The total requested authorization would be $3.75 million. A series of purchase orders would subsequently be created to pay for the various categories of expenses.

These funds would be taken from the CIP #03-1 (Gaithersburg Aquatic/Recreation Center) and would be restored to that account after a budget is ratified. If a City budget is adopted and ratified by July 1, 2007, this Resolution would have no force and effect.

DESIRED OUTCOME:

Vote on Resolution.

So basically, they are proposing to take money they have sitting in the bank — money that they had previously earmarked for a specific capital project — and free it up so that they can use it to pay their bills over the next month. This, of course, raises all manner of questions. For example

• How they are going to get three votes to pass this resolution; this is designed specifically to deal with the consequences of the Mayor’s veto of a budget that is supported by three council members — why would any of them agree to subject themselves to another month of arm-twisting?
• Whence the authority will come to spend this money on specific items; they still will not have a budget — will the next month be a spending free-for-all?

The cited authority for this action is the Charter, Section 19 Paragraph 47, which states:

In addition to all powers granted to the council by this Charter or any other provision of law, the council may exercise any power or perform any function which is not now or hereafter denied to it by the Constitution of Maryland, this Charter, or any applicable law passed by the General Assembly of Maryland. The enumeration of powers and functions in this Charter or elsewhere shall not be deemed to limit the power and authority granted by this paragraph.

In other words, they can do pretty much whatever they want as long as it isn’t prohibited by the Charter or some other law. Note also that the proposed action is a resolution, not an ordinance, so it isn’t subject to the extensive notice requirements (public hearing advertised in the paper ten days in advance) required for ordinances. So the main open question here is, of course, whether what they are doing here is prohibited by some other law. The last thing I am is a legal expert, but I do note the following in the City Charter, Section 42:

No public money may be expended without having been appropriated by the council. From the effective date of the budget, the several amounts stated therein as proposed expenditures shall be and become appropriated to the several objects and purposes named therein. The council shall have the power, after the adoption of the budget, to approve transfers of funds from one purpose to another.

In this case, of course, they don’t have an FY08 budget, and this resolution cannot be considered a budget because a budget can only be adopted as an ordinance. I did not immediately see in the Charter any other mechanism for directly “appropriating” funds. Now, Section 44 of the Charter says:

All appropriations for operating expenses shall lapse at the end of the budget year to the extent that they shall not have been expended or lawfully encumbered. All appropriations for capital expenditures, to the extent that they shall not have been expended or lawfully encumbered at the end of the budget year, shall be deemed to be re-appropriated without inclusion in the budget for the subsequent year unless the council shall specifically provide that such appropriations are not re-appropriated. Any unexpended and unencumbered appropriations for operating expenses shall be considered surplus at the end of the budget year for which they were appropriated and shall be included among the anticipated revenue for the next succeeding budget year.

So it appears that capital appropriations generally carry forward from year to year unless specifically terminated by the Council. Thus, money left sitting in the FY07 swimming pool budget might be considered as “appropriated” in FY08, despite there being no FY08 budget. Put together with the authority in section 42 to transfer appropriated funds from one purpose to another, this might allow them to use that money for other purposes in FY08. However, note that Section 42 says that this power to transfer funds from one purpose to another is obtained by the Council after adoption of the budget. And I’m guessing that they don’t mean the adoption of some previous year’s budget. Also note that, in the resolution below, they are proposing to transfer FY07 money, not FY08 money. From what I see in the charter, these CIP funds will automatically become appropriated FY08 funds as long as they leave it right there in the CIP until the end of FY07. But if they transfer it to the operating budget in FY07, this carry-over won’t happen; and they’re not saying here wither they are transferring it. Certainly they can’t transfer it to an FY08 budget, because they don’t have one. I would think that they would want to transfer that money in FY08, once the CIP funds get to the other side of the fiscal year boundary. And anyway, none of this explains what is the legal receptacle in FY08 for the funds that they will transfer out of the CIP, in whatever year. I guess I’m just not understanding something about how this resolution is supposed to work.

Anway, here is the text of the proposed resolution:

RESOLUTION No. ___________

RESOLUTION OF THE MAYOR AND CITY COUNCIL AUTHORIZING THE CITY MANAGER TO TRANSFER FUNDS FROM THE FY 2007 CAPITAL IMPROVEMENTS PLAN FUND BALANCE IN ORDER TO ALLOW FOR THE PROVISION OF CITY SERVICES IN THE ABSENCE OF AN ADOPTED AND RATIFIED FY 2008 BUDGET

WHEREAS, the City of Gaithersburg FY 2008 budget may not be adopted and ratified by July 1, 2007; and,

WHEREAS, the absence of a budget would cause the services provided by the City to cease; and,

WHEREAS, the City Manager has determined that it is necessary and appropriate to transfer funds from the current balance of Capital Improvements Plan (CIP) account number 03-1 (Gaithersburg Aquatic/Recreation Center) to allow for the provision of City services; and,

WHEREAS, such services will be provided using the transferred funds for a maximum of 31 days or until an FY 2008 budget is adopted and ratified, whichever is earlier; and,

WHEREAS, the funds transferred from CIP 03-1 will be restored in due course during FY 2008:

NOW, THEREFORE, BE IT RESOLVED, that the City Manager is immediately authorized to transfer up to $3.75 million from the FY 2007 Capital Improvements Plan fund balance in order to allow for the provision of City services in the absence of an adopted and ratified FY 2008 budget.

NOW, THEREFORE, BE IT FURTHER RESOLVED, that if a City budget is adopted and ratified by July 1, 2007, this Resolution shall be of no force and effect.

ADOPTED by the City Council on this 21st day of June, 2007.

_____________________________

SIDNEY A. KATZ, Mayor and

President of the Council

THIS IS TO CERTIFY that the foregoing
Resolution was adopted by the City Council
in public meeting assembled on the 21st day
of June, 2007.
____________________________
David B. Humpton, City Manager

And following is the meeting agenda:

Agenda - Special Meeting and Joint Work Session, 6/21/2007
Posted 6/18/2007

City of Gaithersburg
AGENDA FOR A SPECIAL CITY COUNCIL MEETING

Thursday, June 21, 2007
7:30 p.m.

I. CALL TO ORDER

II. DISCUSSIONS

• FY 2008 Budget
• Resolution of the Mayor and City Council Authorizing the City Manager to Transfer Funds from the FY 2007 Capital Improvements Plan Fund Balance in Order to Allow for the Provision of City Services in the Absence of an Adopted and Ratified FY 2008 Budget (if necessary)
  Background Material (pdf file)

III. ADJOURNMENT

Immediately following the special meeting, the scheduled joint work session of the Mayor and City Council and Planning Commission will be held to discuss the following topics:

• Introduction of Architect and Overview of the Kentlands Boulevard Commercial District Community Outreach Activities Charrette Schedule
  Background Material (pdf file)

• Concept Plan for the New Youth Center in Olde Towne
  Background Material (pdf file - 3M)

From the City’s website:

At the Mayor and City Council Meeting on June 18, 2007, the City Council, by a three to two vote, approved the FY 2008 budget for the City of Gaithersburg. Mayor Sidney Katz stated that he is considering a veto of the budget. At issue is the amount of funding set aside in a line item for a homeownership assistance program.

The Mayor has called for a special meeting of the Mayor and City Council on Thursday, June 21 at 7:30 p.m. in the City Hall Council Chambers to continue discussions on the FY 08 budget. The posted work session scheduled for June 21 will take place afterwards.

The Gaithersburg Charter provides that the budget must be adopted by ordinance and be approved by the majority of those Council members present and voting. The Mayor then has seven days to sign the ordinance, not sign the ordinance, or veto the ordinance. The Council may override the Mayor’s veto, but must do so with a favorable vote of four Council members, and they must do so within 35 days of the veto.

The Charter requires the adoption of a budget, requires that the City operate on an annual budget, states that the budget shall be prepared and adopted in the form of an ordinance, and states that no public money can be expended without having been appropriated by the Council. There is no provision in the Charter for a continuing resolution to allow the City to operate on an extension of the current budget year. Fiscal year 2008 begins on July 1, 2007.

It is my sincere hope that the Mayor and City Council can reach an agreement during the June 21 meeting to put an FY 08 budget in to place. However, City staff and I are exploring every opportunity and mechanism and are working to develop the necessary documents that might allow the government to continue with minimal disruption to City residents should no agreement be reached.

Still no word, of course, on what is really going on that justifies this sort of risk-taking.

In last night’s meeting, the Mayor and Council continued to spar over the budget. In a continuation of the dispute at last week’s work session, Council members Sesma, Marraffa and Schlichting continued to support the addition of $250,000 to the home ownership assistance program, voting to approve the budget which included this provision. Council members Edens and Alster voted against this version of this budget, insisting, among other things, that the $250,000 funding level is arbitrary and unsupported by a dedicated funding source, and unlikely to be needed in its entirety in FY2008. They also were concerned about the impact of taking these funds out of the contingency budget and that the program they were funding had not yet been fully defined. (*)

While all this might be true, much of it is also true of many other budget line items. The contingency budget, for example, is more or less by definition arbitrary. Projects often need to be funded before they can be fully fleshed out. Many City programs run at a loss, and have no funding sources other than taxes, or are unable to recover all their costs through user fees. They are committing us to an aquatic center which will perpetually run at an operating loss projected to be in the million dollar range. They set aside money in the operating budget to purchase furniture, software and vehicles in future years. In the discussion, it was pointed out — on both sides of the argument — that how much they put (or don’t put) in this line item at this point isn’t all that big a problem, as they can always move it later in the year. This is certainly true; for example, money that was in last year’s CIP for improving West Diamond Avenue was spent on a consultant — the Staubach Company — to help market two City-owned properties in Olde Towne.

Thus, it seems to me that the fiscal standard the dissenters are attempting to apply to the home ownership program just doesn’t make sense in the context of the rest of the budget — which, as I suggested last week, just tells me that the overt argument is little more than a proxy for a covert argument that they don’t want us to know about.

The Mayor, who doesn’t have a vote in these matters, continued to threaten to veto the budget that the Council has now approved on a 3-2 vote. If the Mayor decides to veto this budget, there could easily be a stalemate. The Mayor’s veto will stand unless the Council can muster four votes to override. But with the Council members stubbornly split 3-2, these four votes will be hard to come by. However, if the Mayor vetoes, and the Council doesn’t override, the City will still not have a budget, which has to be in place by July 1 — less than two weeks from now — for the City to continue operations. It is my understanding that the City’s charter does not allow for a continuing resolution. In order to get out of this mess, they will need to have at least three Council members to vote for some new budget. But if the three who have voted for this budget refuse to vote for any budget that does not include the $250,000 for home ownership assistance, and the Mayor continues to insist on vetoing any budget that contains it, then the whole process will just seize up.

Following the public meeting tonight, the Mayor and Council went into executive session to receive legal advice from the City Attorney. It was disclosed that the City Attorney had prepared a “confidential” packet for the Mayor and Council, containing background on what the consequences of a veto might be; I expect that it contained all manner of doom and gloom over what, exactly, they would and wouldn’t be able to do if they had no money to spend. As a simple example, I would expect that they would have to cancel the 4th of July celebration, but at a more basic level it is open to question as to whether they will be able to carry out their public safety obligations, or even turn the lights on in City Hall. Council Member Sesma attempted to begin a conversation about the contents of those confidential packets, suggesting that the public should know what risks we face as a consequence of this standoff. Mr. Sesma asked the question of where facts left off and legal advice began, suggesting that they should at least be able to talk about the facts in open session. However, the City Attorney said that what was in the packets was a legal analysis of the facts, and it was not straightforward to separate the two. She said that during the executive session they could decide what to disclose to the public, and ultimately, I think having made the basic point that the public was not being fully informed here, Mr. Sesma let the matter drop.

The Mayor mentioned that it was his understanding that he had seven days to sign or veto the budget, but that he also understood that time was of the essence. On Thursday night, they had scheduled a joint work session with the Planning Commission to discuss the concept plan for the Olde Towne Youth Center, and to kick off the Kentlands commercial district charrette process. They will be adding to that schedule a special session to have further discussion about the budget, and it is unclear if they will be able to address all three items that evening.

I suggest that all Gaithersburg residents contact the Mayor and City Council in the next day or so to let them know that you expect them to walk away from this brinkmanship and come up with a budget before the deadline, or at least to come clean about what, exactly, they are really arguing about. Personally, I don’t even think it much matters which side of this argument — certainly at least the overt argument — you think is right, and which side you think is wrong. At this point some sort of compromise seems necessary.

(*) Moreover, they were uncertain that the program that has been in place since the approval of the West Deer Park redevelopment project was ideal; the West Deer Park project fell through, eliminating the expected funding source for the program, and only a very few tenants ultimately qualified for the assistance. The Mayor seemed also to be suggesting that he would prefer that this program be available more generally, rather than being tied to multi-family redevelopment projects.

From the City’s website:

Agenda - Mayor and City Council Meeting, 6/18/2007

Posted 6/14/2007

City of Gaithersburg
AGENDA FOR A REGULAR CITY COUNCIL MEETING

MONDAY, JUNE 18, 2007, 7:30 P.M.

I. CALL TO ORDER

II. PLEDGE OF ALLEGIANCE

Jameka Watts, 4th Grade Student, Gaithersburg Elementary School

III. INVOCATION

IV. APPROVAL OF MINUTES

Minutes of a Special Budget Public Hearing Meeting of the Mayor and City Council Held May 14, 2007

TBA - Background Material (pdf format)

Minutes of a Regular Meeting of the Mayor and City Council Held May 21, 2007

TBA - Background Material (pdf format)

V. CONSENT ITEMS

(resolutions for approval by the City Council that do not need discussion)

1. Resolution of the Mayor and City Council Authorizing the City Manager to Enter into a Contract for Stormwater Management Facility Maintenance and Repair ($29,025)

   Background Material (pdf format)

2. Resolution of the Mayor and City Council Authorizing the City Manager to Enter into an Agreement with Home Care Partners, Inc. Using Unexpended Community Development Block Grant Funds ($5,000)

   Background Material (pdf format)

VI. APPOINTMENTS

Resolution of the City Council Confirming Appointments and Reappointments by the Mayor to the Education Committee, Gaithersburg Senior Council, Multicultural Affairs Committee, and Olde Towne Advisory Committee

Background Material (pdf format)

VII. OATH OF OFFICE TO CHIEF OF POLICE JOHN A. KING

• Introduction of New Chief of Police

VIII. PRESENTATIONS

1. Presentation of the City’s Local Winner of the Maryland Municipal League’s “If I Were Mayor, I Would….” Essay Contest (Jameka Watts)
2. Proclamation from the Mayor and City Council Designating June 2007, as "Homeownership Month" in the City of Gaithersburg
3. Presentation by Local Governments Insurance Trusts (LGIT), Awarding a Grant in Support of an Aquatic Risk Seminar
4. Presentation from the City’s Compensation Committee

   Background Material (pdf format)

IX. PUBLIC APPEARANCES

(public is invited to speak on any subject that is not a public hearing topic on tonight’s agenda – each speaker three minutes)

X. FROM THE MAYOR AND CITY COUNCIL/ANNOUNCEMENTS

• Board/Commission/Committee Vacancy Update
• Upcoming City Events

XI. FROM THE CITY MANAGER

XII. PUBLIC HEARING

JOINT - SDP-07-001, Application Requests Approval of an Amendment to Schematic Development Plan, SDP-05-003, Known as Casey East (Parcels 360, 563 and N455) in Gaithersburg, Maryland. The Approved Plan is a Mix of Uses, Including 382 Residential Units, Office, Restaurant, Retail, Service Station, and Public Uses on Approximately 40.10 Acres of Land. The Current Application (SDP-07-001) Requests Approval to Redistribute the Number and Type of Dwelling Units Among the Three Residential Buildings, Reduce the Height of Building C From Seven to Five Stories, Reduce the Mixed Use Retail by 1,700 Square Feet, Increase the Senior Center From 10,000 to 29,500 Square Feet, and Amend the Phasing Plan. The Subject Property is Located Northwest of the Intersection of Maryland Route 355 (North Frederick Avenue) and Watkins Mills Road, Gaithersburg, Maryland

Background Material (pdf format - 4.9M)

XIII. RECESS MAYOR AND COUNCIL MEETING

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HISTORIC DISTRICT COMMISSION

1. Call to Order

2. Approval of Minutes

Minutes of a Historic District Commission Meeting Held May 21, 2007

TBA - Background Material (pdf format)

3. Certificate of Approval

HAWP-108 Ollie Mumpower, Engineer Services Director for the City of Gaithersburg, Request to Install Entry Markers on Brookes and Walker Avenues

Background Material (pdf format 4.7M)

4. Adjournment

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XIV. RECONVENE MAYOR AND COUNCIL MEETING

XV. ORDINANCES, RESOLUTIONS, AND REGULATIONS

(ordinances, resolutions, and regulations to be introduced or adopted following appropriate procedures required by the City Code, or resolutions that may require discussion by the Mayor and Council prior to approval)

1. Resolution of the Mayor and City Council Authorizing the City Manager to Enter into a Contract for the Kentlands Mansion Roof Replacement and Brick Tuckpointing Project ($384,100)

   Background Material (pdf format)

2. Resolution of the Mayor and City Council Authorizing the City Manager to Enter into a Contract for Construction of Storm Water Management Water Quality Structures at the Public Works Facility ($410,000)

   Background Material (pdf format)

3. Resolution of the Mayor and City Council Approving a Waiver of the Environmental Standards for Development Regulation to Permit, at a Maximum, 1.12 Acres of Disturbance Within the Stream Valley Buffer at the Crown Property

   Background Material (pdf format - 3.8M)

4. Resolution of the Mayor and City Council Authorizing the City Manager to Negotiate and Execute a Contract for the Design, Fabrication and Installation of a Mural in Olde Towne, an Art in Public Places Project ($35,000)

   Background Material (pdf format)

5. Resolution of the Mayor and City Council Authorizing the City Manager to Negotiate and Execute a Memorandum of Understanding for the Installation and Maintenance of a City Owned Mural on the Building at 227 East Diamond Avenue, Gaithersburg, Maryland

   Background Material (pdf format)

6. Resolution of the Mayor and City Council Authorizing the City Manager to Negotiate and Execute an Easement for the Installation and Maintenance of a City Owned Mural on the Building at 227 East Diamond Avenue, Gaithersburg, Maryland

   Background Material (pdf format)

7. An Emergency Ordinance to Amend Section 15-9, Subsection (f) of the City Code, Entitled “Solicitation in Roadways,” so as to Amend the Effective Date of Ordinance O-4-07 Adopting Section 15-9(f), and Providing for Future Changes to the Effective Date by Resolution (Ready for Final Action)

   Background Material (pdf format)

8. 8. An Ordinance to Adopt the City Budget for the Fiscal Year July 1, 2007, Through June 30, 2008, and Levying an Ad Valorem Tax on all Assessable Property Within the City of Gaithersburg, Maryland (Ready for Final Action)

   Background Material Part I (pdf format)

   Background Material Part II

9. Establishing a Constant Yield Tax Rate for the City of Gaithersburg for the Fiscal Year July 1, 2007 Through June 30, 2008 (Ready for Final Action)

   Background Material (pdf format)

10. Resolution Codifying and Updating a Schedule of Fees, Charges, Fines and Expenses as Provided for in the Ordinances of the City of Gaithersburg

    Background Material (pdf format)

11. Resolution of the Mayor and City Council Authorizing the Use of the Diebold AccuVote Optical Scan System and the AutoMark System as Voting Equipment for the November 6, 2007 City Election and any Run Off Election that may be Required by the City Charter

    Background Material (pdf format)

XVI. POLICY DISCUSSION AND STAFF GUIDANCE

(discussion by the Mayor and Council about previous public hearing topics and other policy matters)

1. An Ordinance to Repeal and Reenact Chapter 11 of the City Code (Fire Safety) to Adopt With Amendments the Montgomery County Fire Safety Code and Various Related National Codes and Standards (Ready for Final Action)

   Background Material (pdf format)

2. Resolution of the Mayor and City Council of Gaithersburg Granting Approval of Schematic Development Plan SDP-04-001, Quince Orchard Park, Parcel A, The Vistas, Winter Walk Drive and Quince Orchard Road, Gaithersburg, Maryland (A Draft Resolution of Approval is Available if the Mayor and City Council Would Like to Take Final Action.)

   Background Material Part I (pdf format - 3.7M)

   Background Material Part II (pdf format - 5.3M)

XVII. FROM THE ASSISTANT CITY MANAGERS, CITY ATTORNEY AND OTHER STAFF

Staff Recommendation to Close the Record on Z-304 as of 5 p.m. on Thursday, June 28, 2007 (Application to Rezone 14.157 Acres of Land, the Broadstone Apartments, Located at the Intersection of MD 355 and West Deer Park Road)

Staff Recommendation to Close the Record on SDP-06-004 as of 5 p.m. on Thursday, June 28, 2007 (Applicant Requests the Redevelopment of 14.157 Acres of Land, , the Broadstone Apartments, Located at the Intersection of MD 355 and West Deer Park Road)

Background Material Part I (pdf format)

Background Material Part II

XVIII. ADJOURNMENT

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ANNOUNCEMENT

Notice to the general public is hereby given that the Mayor and City Council of the City of Gaithersburg:

• will conduct a joint work session with the Planning Commission on Thursday, June 21, 2007, to introduce the HOK Planning Group and Receive an Overview of the Kentlands Boulevard Commercial District Community Outreach Activities Charrette Schedule and to discuss the Concept Plan for the New Youth Center in Olde Towne
• will not conduct a work session on Monday, June 25, 2007
• will not conduct a regular meeting on Monday, July 2, 2007, but will conduct a regular meeting on Monday, July 9, 2007
• will conduct a work session on Monday, July 16, 2007 and a regular meeting on Monday, July 23, 2007

Quoting Council Member John Schlichting:

I’d just like to put this in perspective here, because we’re talking about a $50 million budget. We’ve agreed on everything in that $50 million budget, except for this one $250,000 suggested line item. There are three of us who believe that this $250,000 line item should be in the budget, there are two of us who don’t. And the Mayor is now threatening to veto the budget — the budget — over a $250,000 line item. I just don’t understand the situation.

The video of this meeting is now available on the City’s website. I highly recommend that anyone who is truly interested in the future of Gaithersburg, and Olde Towne in particular, watch this video. There were several items of discussion, most of which were largely uncontroversial. Sadly, the $25 million dollar swimming pool/perpetual money sink was not a topic of controversy or discussion beyond the incidental, at least among the Mayor and Council. As far as they appear to be concerned, a certain, perpetual, annual million-dollar operating loss for a swimming pool is a perfectly acceptable burden for the City, but — according to the Mayor and council members Alster and Edens — without an offsetting revenue source or detailed analysis of how much would be needed to cover unknowable future projects, a one-time $250,000 set-aside for homeownership assistance is simply too much for the taxpayers to bear.

The one thing that, to my mind, seemed abundantly clear was that this really had next to nothing to do with a quarter of a million dollars. The City has bits of money stashed away in all manner of budget line items, including for other uncertain expenses without dedicated funding such as assistance for school playgrounds. Putting money in this homeownership assistance program is not the same thing as spending it, and if it turns out they don’t need the money they can zero out the line item in the future, transferring the money back to the undesignated balance if that’s appropriate. No, this argument was a proxy for something else. Things are changing in the City. It’s getting ever more expensive to run this City, and projects like the swimming pool are causing the budget to burst at the seams. At the same time, the housing stock in the older parts of town are in serious decline, and it’s no longer the case that the City can count on the steady diet of greenfield developments to distract everyone from this fact. There are major battles ahead, with developers, homeowners, taxpayers, business owners, renters, affordable housing advocates and the County all taking up sides. I expect that we ain’t seen nothing yet.

Agenda - Work Session: Budget Issues, 6/11/2007
Posted 6/7/2007

City of Gaithersburg
WORK SESSION
Mayor and City Council

Monday, June 11, 2007
7:30 P.M.

• Future Budget Projections
• City’s Undesignated Fund Balance Policy
• Clock Tower Project in Olde Towne
• Homeownership Assistance Program

  Background Material (pdf file)
  FY 2008 Proposed Budget
  

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Closed Executive Session

Notice to the general public is hereby given that the Mayor and City Council of Gaithersburg plan to conduct a closed Executive Session on Monday, June 11, 2007, immediately following the work session of the Mayor and City Council, pursuant to Sections 10-508(a)(7) and 10-508(a)(8), State Government Article, of the Annotated Code of Maryland, to consult with legal counsel to obtain legal advice concerning potential litigation. The topics to be discussed are the legal issues, risks and procedures associated with potential litigation which has been brought to the attention of the City Attorney.   The meeting will be conducted pursuant to a motion properly adopted during the scheduled work session of the Mayor and City Council on June 11, 2007

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Notice to the general public is hereby given that the Mayor and City Council of the City of Gaithersburg will not conduct a work session on Monday, June 25, 2007.

Due to the 4th of July holiday, the Mayor and City Council will not conduct a regular meeting on Monday, July 2, 2007, but will hold a regular meeting on July 9, 2007.

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The background materials posted for this hearing include two memos: One from City Manager Humpton to the Mayor and Council outlining the presentation for the hearing, and another from Assistant City Manager Tomasello to Mr. Humpton, with background on the undesignated fund balance. The third document contained in that PDF is a slide presentation with talking points for the work session. The first two memos are, I think, valuable for everyone to read, so I’ve transcribed them out of the PDF and into HTML for posting here. Please note that, since I did much of this manually, there could be unintended errors, and thus the original PDF document should be consulted prior to commenting to the City on these materials. Also, you’ll need to pull up that PDF to see the slide presentation if you are so inclined.

Memorandum to:	Mayor and City Council
From:	David B. Humpton
Date:	June 7, 2007
Re:	June 11, 2007 Budget Work Session Presentation

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At the work session of June 11, 2007 we will be discussing a number of topics including future budget projections, the undesignated fund balance policy, the clock tower/plaza project, and funding of a homeownership assistance program. The PowerPoint slides that will be used are included with this memo along with the work session cover sheet and a memo relating to the current undesignated fund balance policy. I wanted to summarize the points we intend to make in our presentation.

Future Budget Projections The presentation clearly outlines the fact that growth of the expenditure budget will need to be reigned in unless new revenue sources are identified. The current forecasts utilize too many undesignated funds to balance future budgets; indeed these funds would be totally depleted within the next few years. Historically, we have realized an annual “savings” by coming in under budget on expenses and over budget on revenue. Beginning with FY 2007, this is no longer the case.

Future budget numbers presented are conceptual but are based upon recent trends, an extremely robust Strategic Plan, and the need to maintain an ever-growing infrastructure inventory. For example, in developing the proposed FY 2008 plan I received requests from the various department heads for fifteen new employees and combined expenditure/capital requests of approximately $60 million. All of the requests were reasonably related to Strategic Plan initiatives and/or the need to maintain the high level of service to residents that has been our tradition for decades. The budget team eventually trimmed almost $10 million from the budget and proposed five new employees, but this illustrates that tough choices will need to be made in the years ahead – the budget will not be able to grow as it has in years past.

Undesignated Fund Balance As you know, this is a relatively new policy that has been in effect for about two years. I recommend that we reduce the current formula to 25% of the average of the previous three years’ budget. This is a reduction from the current 40%. Now that we have some experience with the policy, we feel comfortable with reducing it to a more reasonable level. The most likely expenditure scenario would be a severe weather emergency such as a tornado or hurricane.

Realistically, in a catastrophic event, the major responsibilities for restoration and recovery would fall to the State of Maryland, Montgomery County, FEMA, and/or the insurance companies. Additionally, the need to fund retiree healthcare was shifted to a trust fund (established under GASB 45) that will be funded out of contributions from the base expenditure budget.

In summary, even with this reduction in the policy, we would need to reduce future budgets from current expenditure forecasts to remain in compliance with the policy. In preparation for the FY 2009 proposed budget, staff will work to comprehensively review and re-prioritize the Strategic Plan. The results of this effort will be available prior to the Mayor and Council’s next strategic planning process.

Clock Tower/Plaza Project Several options for funding this CIP are presented. I recommend that we utilize the third option, which involves transferring $600,000 from the current Aquatic/Recreation Center CIP balance, and subsequently restoring that amount in FY 2009. Over the two fiscal years, there would be no net effect on the budget.

Homeownership Assistance Program The presentation identifies $147,000 available in a current open Purchase Order that was created for the West Deer Park relocation effort. I recommend that the purchase order be cancelled and the funds be applied to a new line item in the FY 2008 Economic Development budget. We will be holding a work session on this topic in summer or fall of this year. If new homeownership initiatives are identified by the Mayor and Council, they will need to be funded out of Operating Contingency funds.

Cc:	Tony Tomasello
	Harold Belton

Memorandum to:	Dave Humpton
From:	Tony Tomasello
Date:	June 7, 2007
Re:	Undesignated Fund Balance

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Pursuant to guidance staff received at the 2004 Mayor and Council retreat, we have been studying the possibility of implementing a policy regarding an appropriate level for our undesignated fund balance. This memo provides some background on the policies of other area jurisdictions, discusses factors considered in determining an appropriate level of reserves, and provides a recommendation you may wish to present to the Mayor and Council for further discussion.

Harold Belton collected data relating to the fund balance levels and policies of numerous jurisdictions throughout the region and these have been a very useful starting point for our analysis. The policies varied in both levels and methodologies, but all used either a percentage of revenues (for the current or previous year), or a percentage of the expenditure budget as the “benchmark”. Some examples of other local governments include –

»	College Park, MD	25% of previous year’s expenditures
»	Rockville, MD	15% of general fund revenue
»	Bowie, MD	25% of current expenditures
»	Leesburg, VA	10% of current expenditures

The City of Gaithersburg ended FY 2004 with an undesignated fund balance of approximately $18 million. This represents about 52% of FY 2005 expenditures and 56% of FY 2005 general fund revenues (reappropriation is not included in general fund revenue). Clearly, we do carry a substantial undesignated fund balance relative to other local municipalities.

We have long-standing financial policies that affect our consideration of this issue. Obvious examples of these are our unchanging (and relatively low) tax rate and the absence of debt on our balance sheet. While these polic