Montgomery County Taxpayers League

The Voice of Taxpayers of Montgomery County, Maryland
Montgomery County Taxpayers League

The Voice of Taxpayers of Montgomery County, Maryland

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“Here’s why three county unions are receiving generous raises”

From bethesdamagazine.com/bethesda-beat/ by Adam Pagnucco:

“County Executive Marc Elrich has given the county’s largest labor union its most generous contract in recent memory.  And he has paid for it with a one-time diversion from retiree health care money, leaving huge uncertainty on how his labor contracts will be funded in the future….MCGEO, the police union and the career firefighters all endorsed Elrich.  MCGEO additionally contributed $60,000 to the Progressive Maryland Liberation Alliance PAC, a mostly labor-funded super PAC which supported Elrich and opposed David Blair and Nancy Floreen.  Because Elrich was in public campaign financing, he could not accept a direct check from MCGEO….Elrich defeated Blair in the primary election by 77 votes.  MCGEO President Gino Renne told his shop stewards, ‘Marc Elrich won the primary thanks to our shoe leather.'”

 

 

 

 

Questions for meeting of March 20, 2019

Questions for meeting of March 20, 2019

Presentation:    “How we Plan to Govern in Montgomery County”

Speakers:  Council Member At-Large:

Gabe Albornoz, Member, Health and Human Services Committee, and Public Safety Committee

Will Jawando, Member, Planning, Housing and Economic Development Committee, and Education and Culture Committee

Following our meeting in January with new Council Members Evans and Friedson, here is an opportunity to meet with the other two new members. 

5 Questions sent to the speakers in advance of the meeting:

1. Bang Fraud – The investigation clearly showed the lack of internal controls at the Department for Economic Development.  The county government does not need another embezzlement of these proportions.  However, the County’s external audit contract does not provide for either testing of, or an opinion on, internal controls.  This is true for WSSC and MCPS audit contracts too.  Expanding the County’s external audit to include this opinion and additional testing would increase oversight of Department of Finance control activities.  It might uncover control risks in the numerous grants and contracts the County awards annually.  Would you support expanding the audit contract?

2.  Economic Development –  The Fuller Institute just reported that job growth in Montgomery (and Frederick) counties was significantly slower than DC and Northern Virginia.  In fact, over the last 5 years, DC and Northern Virginia have been creating jobs twice as fast as we have.  How do you measure the performance of the Montgomery County Economic Development Corporation and what are some of the ways in which we can compete with the success of the Fairfax County Economic Development Authority?  While we have some of the same assets as Fairfax County (education levels, highly-qualified personnel, good quality of life, good schools), why are we lagging in attracting businesses to the county?

3. Education and Health and Human Services Programs

The HHS committee controls hundreds of millions in spending to supplement the MCPS budget.  How does the committee coordinate the HHS strategic plan with MCPS planning efforts to close the achievement gap?  More spending has been planned for pre-K education which will serve a fraction of the estimated 30,000 economically disadvantaged pre-K kids.  Will the committee require rigorous academic performance measures to determine if the pre-K program has been successful 3-5 years from now?

The Council routinely approves the MCPS budget without linking spending to plans to close the achievement gap.  How would you change this?

The County Government, WSSC and the Maryland National Capital Parks and Planning Commission each have an Inspector General.  MCPS, the single largest component of the Montgomery County budget does not.  Would you support establishing an MCPS Inspector General?

4. Housing and Economic Development–  The PHED committee revised affordable housing policies a year ago to address the weak inventory which has been stagnant at 16,000 units since 2009.  The inventory is still not increasing as older MPDUs are removed as quickly as new ones are added.  In addition, our locally funded voucher program remains underfunded.   The committee also recommended a new economic development unit which is struggling to compete in our region.  How would you increase the inventory of affordable housing?

5. Public Safety– the 911 emergency response system is run by the County, and unlike the successful program in Fairfax, is slowly transitioning to rely on cell phone data for location response.  The aging system is subject to occasional breakdowns and outages, and accountability for performance is limited.  Would you support making this an independent entity to incentivize performance and reliability?   

“Three Ways To Reduce Maryland’s Pension Liabilities”

From the Maryland Public Policy Institute (MPPI) a study by Carol Park: ”On June 30, 2017, the 30-largest public pension funds in the United States, with combined assets of $2.65 trillion, reported a group median funded status of 75.32 percent. At that time, the Maryland State Retirement and Pension System (MSRPS), the 22nd-largest public pension fund in the country, reported a funded status of 69.4 percent. …The [MPPI] study identified three main problems underlying Maryland’s pension crisis: undervalued pension liability, underperforming investment, and inadequate cost sharing.”

The Bang Fraud and Internal Controls

The Bang Fraud and Internal Controls



Will the County Council learn from the $6.7 million fraud perpetrated on the taxpayers of the county?  We will find out when its Audit Committee members meet on March 14th.  Will the Council expand the scope of the current Clifton audit contract to include testing and rendering of an opinion on internal controls – the very vulnerability that caused the Bang fraud to flourish unchecked?

The last page of the auditor’s CAFR opinion letter for the FY’18 audit, makes it clear that their current testing is “not to provide an opinion on internal control over financial reporting…”  So no one is testing the controls set by the Department of Finance (the overseer of all things financial in the county government) because the County’s external auditors do not test these same internal controls to render an opinion.

In the wake of the Enron fiasco – and yes, we are not there yet – every publicly traded commercial organization now engages their outside auditors to provide an opinion on internal controls.  This in turn stimulates more robust internal assessments of controls by managers who own the controls called self-assessments.

MCPS and WSSC audits have the same deficiency.  The County needs to lead on this issue.  If not, the Bang fraud could lead to a bigger bang in the future.

There are other questions for which there are no answers:  Why did the background check of Bang, run by the County, not reveal his 2006 bankruptcy?  While Bang worked at the Department of Finance, what were his duties and fiscal responsibilities?  Has the county investigated any possible kickbacks on grants and contracts as a result of lax controls exhibited in the Bang case?  Why did the County and the Inspector General withhold vital public information until after the election and the Amazon decision?

Let not history repeat itself.

Joan Fidler and Gordie Brenne, President and Treasurer, Montgomery County Taxpayers league

Questions for meeting of February 20, 2019

Questions for meeting of February 20, 2019

Presentation:   “County Executive’s Transition Plan”

Speaker:  Andrew Kleine, Chief Administrative Officer, Montgomery County Government

7 Questions sent to Mr. Kleine in advance of the meeting:

1. Thriving Youths –   Will the Executive recommend an MCPS FY 2020 budget based on a review of MCPS strategies to close the achievement gap?  How?  By how much will the $400 million provided by the County to MCPS (in addition to its appropriated budget of $2.6 billion) succeed in closing the achievement gap? Will the infusion of funding for Pre-K programs be accompanied by rigorous student academic performance measures to ensure that strategies are producing results that do not disappear by 3rd grade? 

2.  Growing Economy and Tax Equity – How will transition strategies address the 2018 slump in residential and commercial development and foster balanced growth in the residential and commercial property assessment tax base?  Residential assessment base growth remains low, in part because the State Department of Assessments and Taxation (SDAT) reassessments have not kept pace with improvements to existing single family homes (“McMansions”),and also because policy treats these improvements as subject to Charter Limits.  Consequently, homeowners without improvements are subsidizing the property taxes of those homeowners with improvements who see delayed and in some cases no market-based reassessments by SDAT.  How would the Executive change this and encourage better coordination between the Department of Permitting Services, SDAT, and the Department of Finance?

3. Non-Governmental Grants – If arts organizations are an integral part of the quality of life in Montgomery County, what are some of the results from such organizations that would qualify for funding under “outcome budgeting”?

4. Affordable County – Demand for rental housing has increased significantly in recent years, from 25% to 32% since 2008, but supply has remained limited, driving up rents.  The average cost to build an MPDU (Moderately Priced Dwelling Unit) is now $190,000, placing further pressure on supply.  A consultant studied the county’s affordable housing policies in 2017 for the Council and recommended that funding for the small but promising locally funded voucher program be increased. The Council declined.  How would the transition plan expand access? 

5. Effective, Sustainable Government – One performance measure calls for awarding more work to minority-, female- and disabled-owned and local businesses presumably to improve the cost-effectiveness of County services?  Shouldn’t a performance measure include periodically evaluating every non-core activity to determine if out-sourcing would make the service more cost-effective?  Could the County’s bond rating be improved by subjecting capital spending to rigorous return on investment analysis and ranking?  

6. WSSC-  A billion dollar operation, WSSC has water rates double those of Fairfax Water and spends on projects that have either no rate of return or one that’s lower than the cost of capital. We, as rate payers, subsidize the resulting debt service.  Consequently, we have endured a never ending spiral of above market rate increases (132% since 2003).  But WSSC continues to argue in its proposed budget (1/15/19) that it cannot calculate ROI or rank projects based on their returns.  In a 2/7 hearing about the CIP plan that involved no substantive discussion of major projects, the T&E chair remarked that he would stay in his “swim lane”, and would look to the state delegation’s Metro committee for oversight.  Does the Executive plan to also defer to the state?  Would the Executive support shifting rate-making away from local politicians to the state’s Public Service Commission?

7. Safe Neighborhoods – The Police Dept has 1/3 more officers in its Investigation Division than does Fairfax County, but does not have comparable closure rates.  Unlike Fairfax county, our 911 call system is not run by an independent agency with strong cost controls and has been slow to innovate and add features to locate cell phone callers.  How does the transition plan address performance in these areas?

OPEN TO THE PUBLIC

Notes from the meeting of Jan. 31, 2019 – Good Governance

Meeting of January 31, 2019

Topic: “Approaches to Good Governance in Montgomery County

Speakers: Evan Glass, Council Member At-Large, Member Health & Human Services Comm., Transportation & Environment Comm.

Andrew Friedson, Council Member – Dist. 1, Member Govt. Operations & Fiscal Policy Comm. ; Planning, Housing & Economic Development Committee

Because of the limited time of Council Members Glass and Friedson, they were able to respond to just 4 questions ( see highlighted areas) that had been sent to them in advance of the meeting.

1. There was a lot of discussion about the fraud at the County’s Department of Economic Development (DED). Although the fraud by Peter Bang, DED’s Chief Operating Officer, had been discovered in April 2017, the public never heard about it until November 2018, a year and a half later. A casino operator became suspicious because Bang was using large sums of money for gambling, and the casino then alerted the IRS. When asked why it took so long for the County to hear about this case, the response from the County was that it took the IRS a long time to trace the money trail, which led to South Korea. Both Messrs Glass and Friedson found this curious. There could be more fraud in that area but no one knows yet. (The 161-page report of the County’s Inspector General is available online at  www.montgomerycountymd.gov/OIG/Resources/Files/PDF/IGActivity/FY2019/mcded_mismanagement_final_report_19_nov_2018.pdf)

The County Executive is searching for a new head of Human Resources who may pursue the issue as to the status of county employees during criminal investigations. It should be noted that Mr. Bang was transferred to the payroll of the County’s Department of Finance where he remained until he was terminated in 2018.

We were told by Council Member Friedson that he formerly worked on Comptroller Franchot’s staff and thus also staffed Board of Public Finance issues. He has extensive experience in looking at contracts in general and in no-bid contracts in particular. He was involved in questioning contracts awarded to support the state’s implementation of the Affordable Care Act. Some contracts were let without competition and lacked transparency.

Council Member Glass, as a former CNN journalist who covered issues on Capitol Hill, has extensive investigative experience. As a supporter of transparency, accountability and better governance, he supports an Inspector General for Montgomery County Public Schools, supported both by the Taxpayers League as well as by the Montgomery County Civic Federation.

The Office of Procurement, formerly within the Department of General Services, is now an independent office. It works with the Department of Finance’s accounts payable function to validate payment requests and to match them to existing contracts. The Department of Finance manages grants and tax credits of the Department of Economic Development. The Taxpayers League questioned the oversight exercised by the Department of Finance noting that while they operate critical internal controls, those controls are not independently tested by external auditors and thus these auditors do not render an opinion on internal controls.

2. Council Member Friedson stated that the lack of affordable housing affects the educational achievement gap. Council Member Glass said that more funding should be provided to narrow the achievement gap with the provision of more wrap-around services to the public schools. There is a $28 million carryover in the MCPS budget, which is not subject to the requirements of the Maintenance of Effort (MOE), There has been more collaboration between MCPS and the Montgomery County Education Association (teachers’ union) with the advent of the new union president. The new focus is on a more holistic approach. Everyone including educators, parents and social service providers needs to be involved. 33% of MCPS students are in the FARMS program (Free and Reduced Meals).

Council Member Friedson talked about impact fees on developers . The Taxpayers League noted that impact fee collections have dropped over the last year not only due to tax credits to developers but also due to declining development which appears to be a trend in the county. This has an adverse effect on schools as impact fees fuel tax revenue on which the public schools are dependent.

3. Council Member Friedson opined that the recent decision by Amazon not to choose Montgomery County as its second headquarters was not due to our taxes, as Long Island City in New York is a high tax district too. Businesses are hesitant to relocate to the county because the very high cost of housing makes it too expensive for the average employee. He said that the county’s economic development strategy should focus on our high quality of life to distinguish it from our competitors.

4. All agreed that affordable housing is critical and the need for it is growing. Council Member Glass noted that the percent of those residents who are renters has increased since 2008 from 24% to 32%. Council Member Friedson stated that the Bethesda Master Plan will add another 1,300 housing units and that the county has added over 37,000 affordable housing units in the last 5 years but more is needed. This number is at variance with Taxpayer League data that shows a net balance of 16,000 MPDUs in inventory. The difference may be attributable to the units that have been retired either by sale or conversion.

Fortune 500 companies choose VA, not MD

We recently did a little research into the number of Fortune 500 companies headquartered in Maryland and Virginia.  Of the total of 24 in the two states, three are headquartered in Maryland – all three in Bethesda (Lockheed Martin, Marriott International, and Host Hotels and Resorts). The other 21 are in Virginia – of which 10 are across the river from Montgomery County.

Who says Maryland is business friendly?

 

 

 

Popular Annual Fiscal Report – FY18

Montgomery County recently released its Popular Annual Fiscal Report (PAFR) for FY18.  Its 16 pages are full of facts about the county’s fiscal resources and expenditures. Miscellaneous data include–

—  Population: 1.057 million

—  Median Household income:   $103,178

—  Top employer:  U.S. Department of Health and Human Services  (Of the top ten employers, 4 are Federal agencies, 2 are local government, 2 are not-for-profit health services providers and two are publicly listed private businesses)

—  Average Housing Value: $460,100

—  Home ownership: 65.6%

—  Bachelor’s Degree or Higher: 58.3%, (U.S. rate: 32%)