BY ROSANNA LANDIS WEAVER — At the last minute, on June 28, the City Council passed a budget ordinance that both the mayor and councilmembers were dissatisfied with. But they knew it was their only option to avoid starting the new fiscal year on July 1 without an operating budget.
“I would rather pass a bad budget than have the city shut down,” said Councilmember Patrick Paschall (Ward 3) at the time.
The council narrowly voted in May to maintain the current tax rate for the eighth straight year. But lower assessments mean most residents will pay less in taxes and the major source of revenue for the city will be reduced. Expected revenue from property taxes is down over $1 million this year, from $11.32 million to $10.07 million.
With revenue estimated at $14.4 million, and expenses at $15.5 million, Hyattsville will have to – for the first time in many years – l need to rely on $1 million from the $8.4 million existing fund balance to cover the shortfall in the budget. The fund balance has built up over several years when revenues exceeded expenses.
The general fund budget for 2014 is $13.8 million, lower than it has been for three years. The total budget of $21.7 million includes $1.7 million for debt service and $5.4 million for capital improvements.
The Capital Improvement Plan is a five-year plan created in 2012, and funded from bond issues, general fund transfers, leases and state grants. This year, the projects include $2 million to improve parking on Route 1, and several ongoing public works projects.
While there are small cuts throughout the budget, the overall picture remains generally consistent and few services will be cut. Proposed savings under the police budget are expected to be found by not filling open positions.
The entire budget process has been particularly rocky this year, with many councilmembers expressing frustration at getting less information later in the process than in past years.
The budget ordinance last year passed on May 7, after hefty “budget books” had been distributed to each councilmembers. This year, said Paschall, they first received a one-and-a-half page summary of budget changes on May 20 – the same night he and five other newly elected councilmembers were sworn in.
While Paschall characterizes the budget as bad, he characterizes the process as “horrendous.”
A number of changes to the budget were approved at a June 19 council meeting that the mayor did not attend. However, the one representing the greatest expense was a budgeted amount of $92,470 toward reducing OPEB (Other Post-Employment Benefits) liabilities.
Since taking office, Mayor Marc Tartaro has encouraged each council to address this issue. The current council, which took office on May 20, seems close adopting changes. The city currently pays retirees an amount per month toward their health insurance equal to what they received before retiring.
All replacement plans under discussion are based on one proposed by the city earlier this spring. At retirement, the plan would pay $12.50 per month per number of years in service until age 65, when the worker is eligible for Medicare. At that time, the payment would be cut in half to help defray the cost of gap insurance.
The details under negotiation among the council are around how to phase changes in for long-time city employees who have served the city believing they would receive similar benefits. Under the scenario that seems most likely to be adopted retires age 60 and above will stay on the current plan, and their dependents will have a one year notice period before changing to a $6.25 plan. Retirees under age 60 will stay on current benefits for five years (or until age 65 if that is sooner), and then move to the reduced payments. Among the issues that still remain to be resolved is the treatment of those who retire on disability.
Even small variations to the plan have long-term impacts that are difficult to calculate, so council members put forward a budget item of $10,000 “for the purposes of obtaining updated actuarial studies run for OPEB.”
At the same meeting, the council also approved an additional $200,000 designed for “authorization to negotiate with the Farrell McGlynn Associates to develop permit-ready construction drawings and a comprehensive, turnkey estimate” for the long-stalled Arcade Building project. Paschall explained that the current contract with the engineer could have elapsed in July, meaning that “we were in a situation where we were going to lose work that we’ve done” because the design rights would have reverted to the engineer at that point.
The Arcade building, located next to City Hall, was acquired by the city in October 2000, and Paschall points out the building costs the city in maintenance now to avoid having a “more dilapidated building that will either cost more to repair or be worth less” if the city sold it. One significant obstacle to completing the project – besides the price tag – is that the council has yet to decide how to use the space. Among the options are public meeting rooms, additional city offices, performance space, office space for local nonprofits and retail businesses.
Tartaro objects to this expenditure in the paid advertisement he took out in the current issue of the paper. He told the HLT, “If we’re not going to build it right now, what’s the point of spending money on design? Can we afford to build and staff it?”
A number of the potential cost-saving measures identified by council members were related to bond issues. Since the bonds themselves will not be issued until late in the year and no payments need be made on them until 2015, they do not show up as saving for the 2014 funding year but in the four following years.
Another June 19 resolution was designed to require the city administrator and staff to inform the council when significant changes or interruptions occur in ongoing projects, and require contractors to communicate more quickly with council members.
Communication will clearly remain an issue in the coming year, between the council and with the citizens. Tartaro, the sole vote against the budget, said, “I have a responsibility to let the residents know that when the entire council approved the budget and I voted no, I felt that I had to explain that decision.”