Budget talks start up again
Dominion accounts for revenue increase; preservation discussed
County staff began discussions with the Calvert County commissioners on plans to develop the fiscal 2020 budget, outlining revenue from Dominion Cove Point, land preservation and more, during Tuesday’s regularly scheduled board meeting.
Department of Finance and Budget Director Tim Hayden and Deputy Director Lashon Bethea discussed the budget development process in the first of many work sessions in preparation for the budget build for next year, starting with a look back at the past budget cycle.
“It looks like we’ll end the year with about a $2.5 million fund balance,” Hayden said, reviewing preliminary budget results of fiscal 2018, which ended June 1.
“The income tax revenue line item with a budget of $87.5 million came in short with an $83.8 [million] actual result,” Hayden pointed out, later noting uncertainty of income receipts with the recent federal tax law changes.
Hayden said over the
last few years the county had “unfavorable variances” in the county’s income tax line, meaning the county received less than what was anticipated.
“The feeling is [fiscal 2019] will also come in low,” Hayden said, of the 3 percent tax on Calvert residents’ income. “If I were coming up with a budget number today, I would say $91 million is about right.”
The pair unveiled preliminary financial projections for fiscal 2020 in their staff-recommended budget that forecasts $309,846,746 in total revenue for the county.
Bethea said a little more than 90 percent of the county’s revenue is coming from property and income taxes, with income accounting for a third. Other taxes account for nearly 7.5 percent of county revenue.
“This is an assumption that the rate will remain at $0.937 of each $100 of the tax assessment,” Bethea said, of the property tax rate adopted in fiscal 2019.
Hayden said the property tax assessment trend is about a 1.3 percent annual increase, which the budget director estimates at $225 million and said will allow for some new con-
The total revenue projected for fiscal 2020 is $12,330,613 more than the current adopted fiscal 2019 budget at $297.5 million.
“Most of the increase is related to the Dominion [Payment in Lieu of Taxes agreement]. The Dominion PILOT will be $60,200,000 in fiscal year ‘20,” Hayden said.
Staff documents note that starting in 2020, $7 million of Dominion PILOT revenue should be considered non-recurring, or one-time items. Hayden said the $7 million is a rough number. In 2024, the PILOT agreement changes from a fixed payment to a 42 percent credit.
“Revenues at that time are projected to be $54 million,” Hayden said.
Commissioner Mike Hart (R) said it was essential for the county’s infrastructure to happen quickly while the money is available, referring to the decrease in revenue from Dominion projected down the road.
Hayden said the staff budget is a “starting point” and deferred to the commissioners on what the revenues and expenditures should be for the next year.
“This board will begin the process, but it is whoever is elected and sitting here, the next board, will inherit those initial deci-
sions and then they can make whatever decisions they think are appropriate,” Commissioners’ President Evan Slaughenhoupt (R) said.
Hart said it will be a learning curve for the new commissioners and the budget “is about done” in January when new board members are sworn in.
Slaughenhoupt stressed the budget process is more difficult than some of the current commissioner candidates believe.
“I found out that fast that first year. It was humbling and I ate a lot of crow,” Hart said.
In addition to the preview of the general fund forecast, finance and budget staff discussed the planned approach for county departments to develop expenditures for fiscal 2020.
“We are seeking your approval in recommending that departments be instructed to propose maintenance on flat budgets. The only increases should be related to legally mandated services or expenses that are not discretionary,” Bethea said.
The commissioners green-lighted the request to send out the budget guidance to the departments Oct. 1.
Hayden and Bethea also sought budget guidance from the commissioners on step increases and cost-of-living increas-
es for county employees, land preservation and funding for the retiree health subsidy.
Staff encouraged an annual step, noting it is historically granted when funding is available. Bethea said the step increase will cost the county $1.1 million. Also forecasted is a 1.5 percent cost-ofliving adjustment totaling $845,000.
Staff allocated $5.5 million for land preservation efforts for fiscal 2020, as it did for fiscal 2019.
Commissioners’ Vice President Tom Hejl (R) asked if the county is buying public land or private land, to which Hayden responded the county is buying an easement on the property.
“You are buying transfer development rights. The large property owners — they are encouraged to put their land into preservation and they do that by creating an ag preservation district, an APD, and in order to lock that in, if you will, and preserve it, they have to sell” TDRs, County Administrator Terry Shannon said.
Shannon said the county’s buying those TDRs takes the TDRs out of the market and in order to build a home, homeowners must have five TDRs over and above what their lot density is, but by buying the TDRS, the county is limiting the number of houses that can be built.
She said the county is buying those from private property owners.
Hejl said people are not happy to learn the county is using tax dollars to buy individuals’ land to keep in preservation. He then questioned about the initial intent of the program being for developers.
Shannon said that was at a time when the county was building a new school a year and the commissioners twice reduced how many houses could be built on so many acres.
“It was also an effort to direct the housing — transfer into town centers where we can put the infrastructure — water, sewers and roads,” Shannon said.
Hayden said $781,000 in county funding is earmarked for land preservation. Hart asked what the taxpayer gets for that money.
Nutter said what they get is a promise not to overpopulate, but asked how many times the county is going to buy TDRs.
“I know someone who’s got 26 and can’t sell them,” Nutter said, noting problems with the TDR program.
“What really drives development is the zoning laws — the zoning laws and the tier map system,” Hejl said.
Commissioner Steve Weems (R) said on the macro level the vision for the county has never changed, encouraging development in the town centers and maintaining a rural landscape.
The board agreed to continue at the same funding level on those items.
Staff calculated Board of Education funding using the agreed-upon funding formula. Tentatively based upon the estimated enrollment and consumer price index, funding amounts to $130,183,970 in fiscal 2020, an increase of $3.8 million from fiscal 2019.
For other post-employment benefits, staff proposed $15,633,995 for the school employees trust and $4,165,999 for county employees.
“When it is not earmarked each year, you’re going to get behind,” Nutter said. “I think we’re doing the right way.”
Facing a potential deficit, Slaughenhoupt posed to the board whether to increase the tax rate or make cuts to programs, during a discussion on what-ifs. A decision to make a decision was deferred.
Additional work sessions will be scheduled. A public hearing on the staff-recommended budget will be held March 19, 2019. A hearing on the commissioners’ budget is planned for May 21, 2019.