The City Budget – Fiscal Responsibility, Council Priorities, Helping those in Need, Sharing the Load and Leveraging Monies from Non-City Sources

From Suzanne Ludlow, City Manager of Takoma Park

Last Wednesday evening, I presented the FY18 Proposed Budget to the City Council for their consideration. The proposed budget is based on the Council Priorities. A good overview of the proposed budget and the Council Priorities is provided in the April Takoma Park Newsletter.

In the proposed budget, I am recommending two separate increases in costs for City property owners to help offset increased costs of services. The first increase is in not reducing the real property tax rate all the way to the “constant yield” rate, and the second is by raising the base Stormwater Management Fee from $55 to $92 per year.

Proposed City Tax Rate

The City’s current tax rate is 56.75 cents per $100 of assessed valuation for tax purposes. The owner of a property that has an assessment value of $400,000 would pay $2,270 in Takoma Park property taxes. I have proposed to lower the rate to 56 cents, but, because property assessments, on average, have increased 6% (last year’s $400,000 property would be valued at about $424,000 this year for tax purposes), the 56 cent rate would result in a tax amount of $2,374 – an increase of $104 over last year.

If the tax rate is lowered to the constant yield amount – 53.58 cents – there would be no increase in property tax revenue for Takoma Park, but $543,000 would need to be cut out of the proposed budget. This amount is almost equal to the small 2.3% increase in operating costs that the City has in providing services.

Sharing the Load and Helping Those Who Need Assistance

A number of budget items help provide financial assistance to those who need it. These items include, but are not limited to, the following:

• Continue rent stabilization program to help keep rental units affordable for our residents.
• Provide a total of $150,000 in assistance to 146 lower-income homeowners who qualify for the Homestead Tax Credit.
• Propose an addition of $300,000 to the City’s new Housing Reserve to be used to further affordable housing initiatives.
• Provide generous scholarships for the Recreation Department’s many programs, and many programs in the Recreation Department and the Library are free.

There are many households in Takoma Park with incomes that can easily afford City taxes. We rely on this property tax revenue to further the community’s values by helping provide assistance to others in need. As was noted last Wednesday night, lowering the tax rate to the constant yield rate will not suddenly make housing affordable in Takoma Park. But, having programs for those who need it will help keep Takoma Park the mixed-income, diverse community we value.

Sharing the Load

Also in the “Sharing the Load” category is the proposal to raise the base Stormwater Management Fee from $55 to $92. This user fee is assessed to all property owners, whether they pay property taxes or not, and is used to finance all of the work done to clean and slow rainwater as it makes its way into Sligo Creek, Long Branch, the Anacostia Watershed, and the Chesapeake Bay. We need to increase the fee because the revenue generated is no longer sufficient to pay for the work that is needed to be done.

A jump from $55 to $92 for owners of single-family properties is large. But, because nonprofit and commercial property owners are assessed based on the amount of impervious surface on their properties, nonprofits and commercial property owners pay about ten times the rate of single-family homeowners on average.

Some have suggested that, instead of raising the stormwater fee, we instead supplement the Stormwater Management Budget with City tax revenue. However, that would mean that our community’s nonprofit property owners would not be contributing their fair share to the stormwater remediation that is needed and the City’s property tax rate would need to be increased, or more expenditure cuts made, to get the necessary funds.

If the Stormwater Management Fee were not increased at all, the City’s property tax rate would need to be raised by 1.23 cents to pay for the work that is needed to be done in FY18. That means the 56 cent rate I’ve proposed would need to be 57.23 cents and the Takoma Park tax on that $424,000 property would be $2,427 rather than $2,374 – an increase of $53 rather than the $37 increase in the Stormwater Management Fee.

The two largest accounts of our Stormwater Management Fee are Washington Adventist Hospital and Washington Adventist University. The amount that they pay equals the base fee for about 470 single family homes because of the large amount of impermeable surface they have on their properties, but they pay no property tax. The reason we have a Stormwater Management Fee is because we believe in Sharing the Load proportionally with those that impact the stormwater system, whether or not they are eligible to pay property taxes.

In the next fiscal year, we plan to evaluate various ways of determining how to more equitably spread costs for stormwater remediation, including conducting a survey to determine the proportion of individual properties that have impermeable surface. In general, the more impermeable surface, the more stormwater remediation is required. Under the current system, all households pay the same fee regardless of the proportion of impermeable surface.

Leveraging Funds from Non-City Sources

While half of the City’s budget is paid for by real property taxes, 26% is paid for by intergovernmental sources, primarily from Montgomery County and the State of Maryland.

Police Department. A case in point is the Takoma Park Police Department. Takoma Park tax revenue only pays for 36% of the Police Department budget. Revenue from the County pays for 39.7% and most of the rest comes from State and speed camera revenue.

Flower Avenue Green Street. Where we can, we use City funds to leverage funds from grants and other sources. For the wonderful Flower Avenue Green Street project, $1.2 million of City funds leverages $5.1 million in other funds. This project is remarkably complex, involving federal transportation funds, utility upgrades, County funds and other grant funds. The resulting “green street” will meet environmental and transit goals as well as provide an attractive gateway into Takoma Park. The mere fact that there will be good sidewalks on both sides of the street will be a major accomplishment for the neighborhood, and the low-impact stormwater facilities will be a major environmental improvement in a location built without any stormwater infrastructure. The project has received statewide attention already and will be a project for which I expect national attention once completed.

Your Opinions Count!

The Takoma Park City Council wants to hear from you about the proposed FY18 City Budget. Please let them know what you think. The first Public Hearing on the budget is this Wednesday, April 12 at 7:30 pm. You can also weigh in by email to Clerk@takomaparkmd.gov. If you have questions, please do not hesitate to email me at SuzanneL@takomaparkmd.gov or call me at 301-891-7229.