By Adam Pagnucco.
County Executive Marc Elrich’s recommended capital budget amendments are out and here are the four main points.
He wants to increase spending on school construction.
He wants to increase funding for a handful of county building projects.
To pay for the above, he wants to whack transportation projects and borrow more money.
And he wants “other local funding options” although he won’t say what.
The county’s capital budget is called the Capital Improvements Program (CIP). It is a six-year spending plan containing individual projects and streams of expenditures (like road resurfacing). Its largest funding sources are general obligation (G.O.) bonds, which are backed by the full faith and credit of the county; state and federal aid; impact taxes on new construction projects; recordation taxes on home sales; cash and many other smaller line items. Full CIPs are approved in even years (like 2020 and 2022) while amended CIPs are approved in odd years (like 2023). The current CIP applies to FY23-28 and Elrich submitted his recommended amendments last week.
Project adjustments are routine. Revenue sources can come in high or low. Some projects might have cost increases. Others might slip on schedules. The CIP is essentially a jigsaw puzzle – when one piece changes shape or moves around (especially if it’s a big piece), other pieces must be moved to accommodate it. And these pieces get moved all the time. While county executives recommend where the pieces go, the county council has final say on what the puzzle will ultimately look like.
This year, Elrich had to deal with a few revenue constraints. First, recordation taxes on home sales came in $138 million below estimate. Second, state aid for school construction has fallen by $21 million due to higher interest rates affecting the state’s funding formulas. Third, Elrich wrote in his letter to the council, “High inflation due to supply chain issues, labor shortages, and a tight construction market has had a major impact on the biennial CIP.”
Sometimes these jigsaw puzzles come in shrinking boxes, which it makes it harder to put them together!
So what does Elrich want to do? First, he would like to add $104 million to school construction funding, a large amount but one he acknowledges falls short of MCPS’s request by $63 million. Second, he would like to fund a number of non-MCPS projects including a $2 million new transit maintenance depot, a $38 million acceleration of the Wheaton Arts and Cultural Center, an extra $30 million to buy and preserve naturally occurring affordable housing and millions of dollars for HVAC projects in county buildings. There are also substantial cost increases in some existing projects, notably a $28 million bump for the Capital Crescent Trail.
That’s a lot of money to find in a tight budget, so how does Elrich pay for all this? First, he wants to issue an extra $20 million in G.O. bonds in both FY24 and FY25 ($40 million total). Bonds are not free money; they have to be paid back in debt service, which is a large item in the county’s operating budget. And second, he wants to delay a large number of projects, most them in transportation (which is cut by $89 million). They include:
Delayed by One Year
Rockville Fire Station 3 Renovation (380 Hungerford Drive) – Planning delayed by one year.
White Flint Fire Station 23 (New Station)
North Bethesda Metro Station Northern Entrance
Forest Glen Passageway, Silver Spring. This would build a new metro entrance east of Georgia Avenue at the Forest Glen station.
Observation Drive Extended, Clarksburg/Germantown. Combination road/bike path/shared use path project.
Summit Avenue Extension, Kensington. This one is scheduled so far out that it may as well be in limbo.
Delayed by Two Years
Outdoor Firearms Training Center, Poolesville.
Bradley Boulevard Improvements, Bethesda, includes traffic lanes, bike lanes, path and sidewalks.
Falls Road Bikeway and Pedestrian Facility, Potomac. Another project scheduled so far out that it is effectively in limbo.
Goldsboro Road Sidewalk and Bikeway, Bethesda. Another limbo project.
Tuckerman Lane Sidewalk, Potomac (partial delay).
Chevy Chase Library and Redevelopment. Another limbo project. Last year, Elrich said he was interested in building affordable housing at this site.
Other Delays
White Oak Science Gateway Redevelopment, Silver Spring – Completion delayed until FY29 or later.
Capital Crescent Trail, Chevy Chase/Bethesda – Completion delayed at least three years.
Note the prevalence of transit and pedestrian projects among the recommended delays. This is not the first time Elrich has wanted to delay many of them. The Capital Crescent Trail is one he has gone after multiple times only for Council Member Andrew Friedson to restore its funding. We shall see if Friedson prevails again.
Projects in Bethesda, Chevy Chase and Potomac dominate the list of those delayed by two or more years. These are areas Elrich lost in the last primary. Also, Elrich wrote that “racial equity was considered in assessing possible CIP additions and deferrals.”
Some of you may be unhappy with one or more of the above delays. Let’s acknowledge that they are the product of a tight capital budget and Elrich’s emphasis on school construction. Elrich himself seems to be unhappy with the box he is in, and so he wrote this plea to the county council:
Need for Additional Resources
In the not so distant past, the County had more resources to support the capital budget. As recently as FY18, the County was issuing $340 million a year in General Obligation debt. And, over my objections, the prior Council approved changes to the Growth and Infrastructure Policy (formerly known as the Subdivision Staging Policy) which, at the time, were expected to, respectively, reduce schools and transportation impact taxes by $9.5 million and $3 million a year. As noted above, our constrained resources are limiting our ability to achieve our educational, environmental, transportation, housing, economic development, and community enhancement goals. While my staff and I are aggressively pursuing State and federal funding opportunities, partnerships that leverage the resources of others, and creative financing mechanisms, I hope that we can collectively explore other local funding options.
Believe this: “other local funding options” means a tax hike of one kind or another. Combined with declining federal funding and the creation of hundreds of new positions during Elrich’s first term, taxes will be on the council’s table at some point – perhaps sooner rather than later.