By Adam Pagnucco.
Now let’s get to the budget and taxes. Here is more from my panel with Council Members Andrew Friedson and Kate Stewart at the Greater Bethesda Chamber of Commerce’s real estate update on June 27.
Question
This question is for both of you. In this last budget, the county executive proposed a ten percent property tax hike. The council ultimately passed a 4.7 percent property tax hike which both of you voted against actually for different reasons. But in analyzing the budget, the council staff said hey, not only is there a tax hike on the table for this year, there is a structural deficit built into the executive’s recommended budget. They calculated it during the budget process as $145 million, which is roughly equivalent to a 7 percent property tax increase. So you were aware of that during the budget process. I’m not sure that things have substantially changed. So my question is for both of you. What are you doing now to get ready for a possible proposed property tax hike next year?
Council Member Friedson
I’ll start with that great question. We’ve been talking about this very openly, up front, when it comes to the budget challenges that we face… Essentially, we reduced funding for a $6.7 billion budget and we reduced revenues as well. So essentially the tax increase was reduced so… the general structural deficit still exists. It’s not responsible or sustainable to put forward budgets consistently that start next year in the hole. And I’ve been very consistent on that and worked very hard on that.
Just to give you an example, Council Member Stewart is chair of the Government Operations and Fiscal Policy Committee and knows this. We had $160 million in unexpected additional tax revenue at the beginning of the year. I was very up front about the fact that that was money from an economy that no longer existed. That economy was nine months, twelve months, fifteen months in the past. And so as a committee, we joined together and we made a recommendation to the county executive to use all of that $160 million for one-time expenditures since we didn’t expect it to be ongoing revenue, number one. And number two, take $80 million of that and put it towards the capital budget to pay for schools. And that really gave assurance that it would go to one-time expenses because once you build a school, you’re not building that school every single year. You only build it once.
That along with every other recommendation that the Government Operations and Fiscal Policy Committee made, including on the health benefits trust, which has some challenges, also there is OPEB – they were ignored. We have spending affordability guidelines that suggest how much money the county can afford to spend in the budget. The county executive ignored this and blew right through it. So we have to grapple with that fact.
I appreciate the fact that as chair of the GO Committee, Council Member Stewart has really been focused on these issues. You have taken a vote against the property tax increase perhaps for reasons I’ll let Council Member Stewart speak on for herself. My reason was this property tax increase was sold as the way to fund education. But it wasn’t. It was a way to fund education and everything else. And in fact – and Adam did a really good job on the funds coming in… That’s like saying we need to have a lot to fund education. It’s not fully inaccurate but it’s also not completely accurate either… And in fact many county government departments increased larger than the MCPS budget was proposed to increase. So the tax increase – what do you say about the money in my left pocket and my right pocket? It’s still my money? And that’s what we’re talking about here. It’s coming out of one pot.
And so if you’re adding revenue to that pot and we’re spending the way we prioritize… Jurisdictions all over the region were finding ways to support public employees at a time when they are challenged and struggling, public school teachers at a time when they are challenged and struggling, to recruit more of them and retain as many of them as we possibly can and to continue to fund services – and to do it without increasing the property tax. And I think it’s a recognition, to me, of this regional position that we’re in – there is not a recognition in Montgomery County, the decisions that we make will have an impact on decisions that individuals and businesses make. I don’t think that’s true. I don’t think the idea that we can do whatever we want in Montgomery County and not face a consequence where a business is going to choose to invest somewhere else, or a family is going to choose to locate somewhere else – we don’t have that luxury. And so we have to be much more focused and much more intentional about the decisions that we make. I don’t think this budget prioritizes… it’s unfortunate.
Photo credit: Greater Bethesda Chamber of Commerce.
Council Member Stewart
Well, some may be surprised that Council Vice-President Friedson and I actually agree a lot. And one thing that we are reviewing already as he noted on Government Operations and just individually in our offices, is you never finish a budget. You’re always doing budget. And so even though we vote on one budget, you’re already looking forward to the next.
And we’re looking at – Andrew mentioned OPEB, the benefits that we provide to our retirees. [Editor’s note: OPEB stands for other postemployment benefits and refers mostly to retiree health care.] There’s a lot of conversation, again from across the street, on how that should be used and whether or not that is a source of funding that we could actually take money out of. I think it’s safe to say that both of us here feel really strongly that is not something that we should be taking money out of to fund ongoing expenses in our government. Those are really important funds and we’re working right now on updating the policy, the county policy for OPEB to make sure that it is sustainable. Because there are promises that we made to people who worked for our government and to our retirees and we have to keep those promises as we have to be responsible. That is top of line for me as we’re looking forward.
And as we’ll get to in a moment, it’s also really important that we think about economic development in our community and look at how we can expand our revenue base here in Montgomery County. And so our office has been working since day one with Pike District Partnership and others to really think about how do we expand that. How do we attract others like ARPA-H and really build, as Council Vice-President Friedson said, on the strengths that we have now in our community. [Editor’s note: ARPA-H stands for Advanced Research Projects Agency for Health, a federal agency the county is trying to attract to the Pike District.]
We do have a lot of strengths and many times we don’t build on them… We have a great education system from our community colleges up to our four-year institutions. We have a solid base of biotech here. We already have places like NIH and other institutions and we really need to make sure that we are telling the story of Montgomery County loudly and clearly so that we are going to bring businesses here. And we are telling them, if you’re thinking of coming to Montgomery County, our government will be a partner with you to make sure that you can locate here, to make sure that your workers can live here and help them raise their families. So I think those are the things that we’re working on as well as on this budget moving forward.
To the question on the tax rate, I did vote against it… I do not think we should be using one-time funds to fund an ongoing operating budget. That is not fiscally responsible nor sustainable into the future. We do have needs in our county. What we need to look at is how we’re going to fund that in an ongoing way. And this tax increase, whether you think it should be higher or lower, for me it was not really accurate like we need to be in this county. There are things that were, to get to this tax rate, were not included in the budget. Ongoing expenses that we are going to have to fund that they’re going to come back to us at the council, a supplemental, money out of our reserve fund because we have to keep the lights on in the county. And other things like that. And for those reasons I didn’t vote for this tax increase.
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As they said, both Friedson and Stewart voted against the council’s 4.7 percent property tax hike in May. This post transcribed their statements on the day of that vote.
Next, we will ask about rent control.