Annapolis Finance Commission Sounds Alarm on City’s Financial Future – Capital Gazette

The Financial Advisory Board is expected to deliver a letter this week to Mayor Gavin Buckley and the Annapolis City Council outlining its concerns about the proposed budget for next year and the future health of the city’s finances.

At its last meeting on Thursday, commission members expressed doubts about the city’s ability to pay its bills two years from now, when the federal aid package it received during the COVID-19 pandemic will be exhausted. Council members and the city’s chief financial officer who attended the meeting pushed back on the assessment, arguing that the city is much better off financially than it was four years ago and will find ways to balance the books.

Among the most vocal critics, Vice President Bob Burdon warned that the city has a chance in the current budget deliberations to cut spending and address a growing structural deficit projected for fiscal year 2025. A structural deficit is happening when a government spends more than it collects in taxes in a given period, regardless of the state of the economy.

“Looking down the road, we don’t have a great image developing for this town,” said Burdon, who has served on the commission since 2009. [fiscal 2024 and 2025] we’re going to look around and say, “Oh my God, how did we get into this situation,” and that’s a situation we need to avoid.

Chief Financial Officer Jodee Dickinson called Burdon’s “disastrous picture” of the city’s finances inaccurate.

“I disagree with this assessment. We have a timeline here where in two years we have to look at other sources of revenue and whether that means raising taxes or finding another source of revenue. That’s what it will take. And the board will make that decision,” Dickinson said. “The city is in much better financial shape than it was a few years ago, much better.”

The $170 million budget Buckley submitted to city council last month is balanced as required by city code and recommended no tax increases for fiscal year 2023, which begins July 1. The fundraising plan increases police spending, raises several fees and frees up money for new municipal positions. A shortfall between projected revenues and expenses will be offset by about $1.5 million in American Rescue Plan Act funding, which was distributed during the pandemic to help municipalities meet operating expenses.

Officials have acknowledged that city spending exceeds revenue. About 70% of the city’s spending this fiscal year is on salaries and benefits for its approximately 680 employees. This figure is expected to rise to just under 72% in the coming year. On the other side of the ledger, about 60% of the city’s revenue comes from property taxes. However, triennial property assessments are not increasing as rapidly as municipal staff costs.

The city said a combination of conservative budget projections, cautious spending by department heads and an influx of cash from the federal government during the pandemic has helped ease the city’s financial struggles over the past 25 months. With less than two months to the end of the current fiscal year, the City forecasts a budget surplus of $1.3 million.

Burdon’s criticisms have focused on future budget projections, which show the city using the remainder of the $7.6 million in American Rescue Plan Act funds over the next two fiscal years and ending up with a structural deficit. in fiscal year 2025, which begins July 1, 2024. After Congress passed the emergency relief bill in March 2021, the city used about $1.17 million for spending operations in fiscal year 2021. The city is expected to defer more than $1.5 million to fiscal year 2023 and $4.9 million to fiscal year 2024.

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The goal is to avoid placing an additional tax burden on residents, said Alderman Elly Tierney, a Ward 1 Democrat, who chairs the finance committee. Tierney suggested that other sources of revenue such as raising hotel tax or asking for a portion of Maryland sales tax could help boost revenue down the line.

But for now, the budget is in good shape, she says.

“I cannot stress enough the success we have had with the budget over the past four years. It is balanced and aligned with modern accounting processes,” she said. “We are well positioned with regard to financial controls. Every expense is accounted for. Each source is validated and verified. It’s huge and it took four years.

Other commission members echoed Burdon’s concerns, including James Cardillo, who suggested the city needs to take a hard look at the services it provides to its residents and how it will pay for those services in the future.

The council set aside $50,000 for a community survey to determine which services residents care about most and an additional $5,000 to fund a task force that would look into merging certain public services with Anne Arundel County. Neither initiative took off.

“I believe elected officials just need to engage in some sort of rethinking and strategic planning on what city services the city wants to provide to figure out how best to structure city staff to do that, because we’re far too dependent human capital and it’s unsustainable as we continue to see,” Cardillo said.

The council is due to convene a work session on May 26 to discuss proposed amendments to the budget.