PRINTED WITH PERMISSION
From: MacDonald, Meg [MD]
Sent: Monday, October 27, 2008 3:54 PM
To: 'Wayne Cooper'
Cc: 'Deborah Hudson'; 'rjpellicoro'; Fisher, Bill [MD]
Subject: Budget questions
Dear Wayne,
I talked to Deborah Hudson after the budget presentation Tuesday, and she suggested we route our questions through you. That presentation by county’s fiscal services department raised a lot of questions for me, and I would appreciate your explaining the derivation of some of the numbers that were cited.
First, I want to make sure I am correctly identifying the source of the “$9 million shortfall,” which is not specifically identified. The report shows no loss in property taxes and no loss in income taxes, so can we assume that the loss is only the recordation tax loss ($8.4 Million) plus the loss in interest income ($600,000)?
The report says there’s “not enough data” about income tax receipts. What is the budgeted (projected) income tax revenue for the next quarter? We’d like to be able to compare that against the actual you receive in November when you get the first major distribution.
Similarly, the report says that property tax is “performing as expected” but it doesn’t say how much you’ve received to date is, nor what the expected amount is. Can we have the exact figures?
In the report, the current amount of the county’s fund balance is never expressly given. Page 8 of the presentation implies that the Unreserved Fund balance is $22.3 million; however, as I was able to clarify by talking to Deborah after the meeting, the $12.1 Million “estimated loss” had not been deducted yet. That $12.1 million would reduce the fund balance only if all projected shortfalls were deducted from it. In fact, Deborah said the current fund balance is $50-$51 million, and that the county had used about $3.5 million out of it for this year’s budget.
This leads to another question -- why is the “estimated loss” $12.1 million on page 8, when the anticipated loss from recordation tax and interest income described on page 3 is only $9 million? Where does the other $3.1 million in losses come from? Page 8 also shows $20.3 million in “Reserves and Designations,” but none of them are listed. Can you tell me what expenditures make up that $20.3 million dollars in Reserves? Aren’t some of those items discretionary? Deborah said they will be listed in the audit, but that the audit will not be available until next month, between November 15th and 30th.
On page 4 of the report, under “additional Revenue concerns,” it states that there will be “greater cash demands for capital projects.” What projects are these, and how much are they expected to cost? Should the county be increasing capital projects when adequate funds for necessary operations are under pressure?
With regard to the bond rating, it was stated several times that it was the county’s “policy” to keep 8% of funds as a fund balance. Was there ever a formal vote or public discussion about that figure? If so, when was it?. Can you show me the data that the commissioners used to determine that keeping 8%(or any other percent, for that matter) of the budget as fund balance positively impacts the bond rating? Because as you know, Bill and I gave you some information from our fiscal consultant, RJ Pellicoro Associates last March that specifically addressed the bond rating/fund balance relationship, and there was virtually no correlation. The information was written by the actual Bond rating agencies (Moody’s and Standards & Poore); I will be glad to send that information to you again if you want. I did see that your own report cited jurisdictions that had a higher bond rating and yet a lower percent of their budgets in surplus.
You asked the Human Resources department to determine the cost of paying county employees for each day, but you stated at the meeting that furloughs were not being considered, Then what is the purpose of having that data?
With regard to Board funding -- on page 11 of the report, it says the Board of Education has 50% of the budget (at $154.4 million). I guess that figure must include funding for the community college, since the Board got only $144 million this year. Still, the Board is supposed to get 52.4% of revenue, yet page 11 shows them receiving less than 50% (if 50% is $154, then $144 is less than 50%) of the funds distributed as expenditures. Why is that?
It does seem odd to me that this “shortfall” came up, when just two weeks ago, the newspaper (Maryland Independent October 10, 2008 “Officials Calm in Face of Economic Jitters”) quoted the commissioners as saying that Charles county’s economy was “steady.” Did something happen to change that? Was there a distribution or a projection that came in between then and now, and if so, can you tell me what it was? Absent that, you know, one could conclude that the commission is using the very recent, federal- level economic situation -- and our citizens’ fretfulness about it -- to cut county expenses when there is really no need to do so.
Considering that 82% of county revenue sources are stable (according to the report, property taxes and income taxes are 54% and 28% of revenue respectively) , and considering there is a $51 million dollar fund balance, it certainly seems that any cuts to the county, let alone to the board of education, would be premature. There are numerous factors that could compensate for a loss of less than 3% of the budget, even if that loss does materialize. For example, the Maryland Association of Realtors just announced that the sales of existing homes are up last month, to the highest rate since 2003. Here is a link to their web site, showing Charles county having an 11.8% increase in units sold over this same period last year: http://www.mdrealtor.org/LinkClick.aspx?fileticket=ebhqG8B%2fZxE%3d&tabid=161&mid=543
Certainly, the increase in units sold could help revive the recordation tax receipts, right?
You know that we had a lot of debate last year about the county’s long history of underestimating revenue, through which they acquired a $73 million fund balance and shorted the Board about $40 million in revenue in the course of five years (based on 52.4% of actual receipts). The Pellicoro report we presented to you last year showed that the county underestimated general fund revenues for 5 of the last 6 years, by an average of about $17 Million per year. Students and teachers are hurt when funding cuts are made based on overly grim speculation about budget revenues. Maybe this year truly is different -- but if the county commissioners want the citizens to believe that this time there really, really is a wolf, I think they should present a better explanation of the situation than the one we were given on Tuesday.
I hope the county is not asking the Board of Ed to impact students and teachers unnecessarily. There are ways of getting money back – the federal government just banked $700 billion of tax payer money on that premise – but it’s much harder for a child who gets behind in school to recover that year of quality instruction. Class sizes are already bigger this year, thanks to last year’s budget cuts, and clearly any further overcrowding will negatively impact students. I’m sure you’ll agree that our ability to grow commercial business (suggestion number 10 on page 14 of the report) depends on having an educated work force.
We would like a copy of your FY 2008 audit as soon as it is available, but in the meantime, I’d appreciate your explaining what the $17 Million in “Transfers Out” of the general fund comprises in the FY 08 Estimate (page 38 in the FY 2009 Budget Book). I can see that $6.8 million of it was the PayGo for capital projects (page 177), but what was the other $11 million used for?
Finally, can you tell me the amount of county dollars expended to date on the following items (operating costs and capital budget costs):
- Blue Crab Stadium
- Capital Clubhouse
- Expansion of the County Government Building ($12 million set aside last spring)
- The value engineering study for the Rosewick Road construction
- Land acquisition and purchase, if any, and feasibility study for the new Waldorf Library
Thanks. Please feel free to contact me if you need any clarification on these questions. I’d appreciate any information you can provide.
Meg MacDonald
UniServ Director
EACC/MSTA
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