The City of Hagerstown on Tuesday rolled out preliminary budget figures for next fiscal year, projecting a $1.05 million shortfall that may need to be filled by a property tax increase, according to city officials.
City staff members still have about two months to identify potential cuts or where revenues can be boosted before the proposed fiscal year 2013-14 budget is due before the Hagerstown City Council near the end of March.
“I think that within two months, that problem can be addressed,” Councilman Martin E. Brubaker said. “I think the city is in good fiscal shape. We have a good working fund balance. We have good debt ratio numbers. We’ve managed through this terrible fiscal crisis.”
Initial numbers presented to Mayor David S. Gysberts and the five-member city council during a budget retreat presentation at City Hall show a $37.92 million general fund budget, a 3.4-percent increase from the current year, supported by $36.87 million in revenues, an increase of only about 0.4 percent.
City Administrator Bruce Zimmerman and Michelle Burker, the city’s director of finance, outlined the budget materials, meant to give the elected body a “snapshot” of the city’s current standing as the budget process begins.
“What we’ll do over the next two months is get continued guidance from the mayor and council as far as what they want to do with the tax rate,” Burker said afterward. “And if a tax rate increase is not in the plans then we’ll need to rework operating expenditures as well as capital expenditures to see where additional cuts can be made.”
During the presentation, Burker and Zimmerman suggested that the city needs to at least consider a property tax increase in the upcoming fiscal year as a way to offset upcoming costs of state-mandated Chesapeake Bay clean-up efforts, account for an unexpected decline in corporate personal property tax revenues and prepare for the city’s triennial reassessment coming in December 2013.
Reassessments for towns in eastern Washington County were unveiled in December 2012, resulting in an average decrease of 10.5 percent in residential values in areas such as Smithsburg, Funkstown and Boonsboro, city documents show.
“The big problem is the economy hasn’t turned up and increased property values, and we’re projecting that they’ll stay flat or probably decrease further over the next three or four years,” Brubaker said. “Since about 75 percent of our revenues come from the property tax, it makes it very difficult to operate all the services the city provides.”
The city’s property tax rate has been flat over the past five fiscal years at $0.788 per $100 of assessed value. For comparison, a 1-cent rate increase could boost tax revenue by about $250,000, Burker said.
The preliminary budget snapshot also includes money for a cost-of-living wage increase for city employees, which has not been granted in four consecutive fiscal years.
“To ask employees to go more than four years without a wage adjustment goes beyond what I’m comfortable with,” Zimmerman told the council.
An $800,000 lump sum is included in projected expenditures for fiscal year 2013-14 for cost-of-living increases, but it could also be used to reinstate wage step increases or other needed expenses for upcoming contract negotiations with the city’s four employee labor unions, officials said. Those contracts expire in June.
“This just brings you back to reality,” Brubaker said. “You have to ration, you have to prioritize. You have to decide where to go, and something I’m always interested in is where do you get value for your investment. ... I hope that we can find the way to get the city prosperous again, but without raising that tax rate.”
Other council members also voiced concern over having to raise taxes.
The city council has until May 31 to approve its final spending plan.