Dear Neighbors:
Here’s a link to the agenda for the May 8, 2019 City Council meeting: https://takomaparkmd.gov/meeting_agendas/city-council-meeting-agenda-wednesday-may-8-2019/. The key agenda items are votes on the 2020 budget, property tax rate, and stormwater fee. In addition, we’ll be voting on a contract for a video security system. Other agenda items include a presentation from the President of Washington Adventist Hospital, proclamations on Bike to Work Day and Public Service Recognition Week, and possible discussion of appointments to resident committees.
Friends of the Takoma Park Library book sale: Saturday, May 11 from 10:00 AM - 3:00 PM at the Library, rain or shine.
Bike to Work Day: https://documents.takomaparkmd.gov/government/city-council/mayoral-proclamations/2019/pr20190501_bike-to-work-day.pdf
Public Service Recognition Week: https://documents.takomaparkmd.gov/government/city-council/mayoral-proclamations/2019/pr20190508_public-service.pdf
Washington Adventist Hospital: https://documents.takomaparkmd.gov/government/city-council/agendas/2019/council-20190508-1.pdf
Video Security System Contract: https://documents.takomaparkmd.gov/government/city-council/agendas/2019/council-20190508-5.pdf. I’ll be voting in favor of the contract.
BUDGET/TAX ISSUES (https://documents.takomaparkmd.gov/government/city-council/agendas/2019/council-20190508-234.pdf)
The Council will take a “first reading” vote this week on the City budget and property tax rate for our 2020 Fiscal Year, which starts on July 1. The final vote will be next week. The tax rate will determine the City component of the property taxes paid by Takoma Park residents later this year. Last week, in our “reconciliation” process, the Council tentatively agreed to a series of spending increases and cuts. Those changes have been incorporated into the budget originally put forward by the City Manager, and their financial impact determines the tax rate. I haven’t decided yet how I’ll be voting.
At this point, I’m not anticipating any significant changes from what the Council agreed to last week. That means the budget continues to move forward on important priorities identified by the Council, including programs that are helpful to low and moderate income residents, and that we’ll likely end up with a local property tax rate of $0.5397 per $100 of assessed property value. That’s roughly three percent lower than the rate originally proposed by the City Manager; about two percent higher than last year’s rate; and approximately 2.5 percent higher than the Constant Yield rate. Constant Yield is the level at which the City’s overall revenue from the local property tax would be the same as in the previous year.
As part of the Council’s reconciliation work last week, I supported a group of spending cuts and a few increases with a combined net impact that would have allowed us to set a tax rate a little below the current rate and slightly above Constant Yield. While most of the budget items that were considered for potential cuts do provide useful benefits to the community, I don’t think the cuts would have substantial negative impacts on City services, programs or initiatives. On several potential spending cuts I was in the minority, meaning we didn’t end up reducing spending and the tax rate by as much as I had hoped. In any case, I thought it would be useful to summarize last week’s reconciliation action and outline the major points that will go into my decision making on this week’s votes.
Reconciliation Summary
In last week’s reconciliation process, I joined with a majority of my colleagues in supporting cuts that cumulatively reduced the budget by $564,500. This included some adjustments to personnel costs which hadn’t been accurately calculated earlier, along with reductions in such areas as the County lobbyist position; a contribution to the Police pension system (above the amount recommended by our actuary); a Commercial District Improvement initiative; the costs of Council and staff conference participation; public art; Independence Day and Celebrate Takoma; and improvements to the Municipal Center.
Again, these initiatives would have been useful, but eliminating or cutting them back won’t in my view be unduly burdensome. I’m also pleased we agreed to restore some Sustainability funding that was slated to be cut, as well as funding for the Old Town Business Association and the Takoma-Langley Crossroads Development Authority. These add-backs totaled $31,500.
Meanwhile, I was in the minority in voting for cuts to sidewalk/street repair funding and Public Land Management Plan implementation, which added up to $225,000. And I was on the losing end in voting against adding funds for the community grant program ($20,000 on top of $60,000); $75,000 for a consultant on the New Hampshire Avenue Recreation Center project (I supported $50,000 for this purpose); $22,500 for an Economic Development Office intern; and $22,500 for a possible tax credit for lower income homeowners (I may support the tax credit idea if we can more clearly identify the income categories we hope to cover). Had all the votes gone my way, we would have had in the neighborhood of $700,000 in spending cuts, which as noted above would have enabled us to get fairly close to Constant Yield.
At the end of this give and take process, the impact of all the spending reductions and increases approved by the Council was a net cut of $395,500. That in turn led to the tax rate of $0.5397.
Key Financial Trends and Factors
As I’ve noted previously, in my tenure on the Council over the last three budget cycles, we’ve cut the tax rate each year. It was .5850 in Fiscal Year 2016, and was lowered to .5675 in FY ‘17, .5348 in FY ‘18, and .5291 in FY ‘19, with the likelihood now that it will go up to .5397 in FY ‘20. This generally downward trend in the property tax rate is complicated when the changes that take place in homeowners’ assessments are factored in. Even when the tax rate goes down or increases by a small amount, residents may still pay more in taxes, depending on what happens with their assessments.
This year’s assessments have seemed less consistent than in some previous years, with a wider than anticipated range of increases and decreases, not to mention -- anecdotally at least -- less consistency in reassessments among similar homes on the same block or depending on when homes were purchased. I’m hopeful we’ll be able to get more information from State tax officials about this year’s reassessment process so we can better understand this year’s data.
Another complicating factor is the new Federal tax law, which restricts the deductibility of State and Local taxes. This means that, for some residents who have seen their assessments decline, the overall impact of taxes from all levels of government may still go up. This doesn’t translate for me into a need to make deep reductions in the kinds of services, programs and initiatives that are important to our way of life in Takoma Park. I think many residents have chosen to live here, among other reasons, because of our tradition of activist government in support of progressive causes. But we have to be conscious of keeping the City affordable, especially given that we’re in a region that’s continuing to see a strong trend of increasing housing prices.
In the past three years, along with the lowering of our local property tax rate, there’s been an increase in the amount of revenue raised from this source (mainly due to increased assessments). According to data in the 2020 budget documents, the cumulative increase in property tax revenues over that period was about 9.2 percent, while the cumulative inflation rate was about 7.9 percent (per the Consumer Price Index). There are other ways to calculate inflation. The City government prefers the Employee Cost Index, a usually higher index which better reflects personnel costs and is also in the collective bargaining agreement with our union workers.
Next Steps
As I mentioned in an earlier blog, Mayor Stewart has suggested the idea of instituting a goal of Constant Yield plus an ECI inflation adjustment as our budget goal each year, which is more or less where we’re likely to end up this year. I agree we should consider various approaches of this sort for our future budgeting, and I’m pleased the Mayor has announced we’ll have a couple of Council sessions to explore broader budget topics of this kind fairly soon. As part of that, I look forward to examining the idea suggested by some residents of enhanced time recording by City employees to help refine our understanding budget impacts.
The bottom line is there’s no perfect answer to our budget and tax questions. We want to continue providing valuable services and programs. We want to keep Takoma Park an affordable place to live. We want to provide fair compensation to our employees. And we want to have reasonably stable budget and tax trend lines that don’t vary widely from year to year. These are among the points I’ll be taking into account in deciding how to vote.
Please feel free to contact me with questions or comments about any of these matters.
Peter Kovar, Takoma Park City Council, Ward One
240-319-6281; www.councilmemberkovar.com