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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Notes from the meeting of March 22, 2017

Topic: “The FY 2018 Montgomery County Budget and what it means for County Residents”

Speaker:   Jennifer Hughes, Director
Office of Management and Budget, Montgomery County

Wed., March 22, 2017  –  7:00 – 9:00 pm
Council Office Bldg. (3rd Fl. Conf. Rm.), 100 Maryland Ave., Rockville, MD 20850

Free and open to the public

Here are the 9 questions sent to the speaker in advance of the meeting and the answers supplied by the speaker at the meeting:

Q1.  Moody Analytics predicts that reductions outlined so far by the Trump administration would reduce employment in our region by 1.8%, personal income by 3.5% and lower home prices by 1.9%.  These reductions might affect Montgomery County even harder given the presence of several federal agencies and tens of thousands of employees in the county.  The budget has been touted as a “cautious” budget.  Is there room in this budget to handle what could be deep cuts later in the year?

A1. The proposed Federal budget suggests major cuts in Federal programs and employment, which will affect the county significantly. The county is home to many Federal agencies (Nuclear Regulatory Commission, National Institutes of Health, etc.). There are approximately 50,000 federal employees in Montgomery County. The county has not made any serious efforts to analyze the effects of the Federal budget so far and will wait until the federal budget picture becomes clearer.

Q2.  Can you discuss the major sources of revenue for the County, and comment on the percentage contribution of each and their volatility (unpredictability) for the last 5 years?  Are the revenue projections that underlie this budget realistic?  How so?

A2. The major source of revenue is property tax which accounts for $1.8 B (28.7%) of total revenue followed by income tax of $1.6 B ( 25.3%) and Intergovernmental which is State and Federal funds of $1.1 B almost all of which goes to the Montgomery County Public Schools (MCPS). The rest of the revenue pie consists of transfer and recordation taxes, charges for services, fines and miscellaneous and other taxes.

As to revenue projections, so far these projections have been valid.

The county’s bond rating has remained at AAA, the highest possible, allowing the county to borrow at a rate less than 1 percent. Much of the bond revenue goes to finance capital projects such as school buildings and police and fire stations.

The County Executive’s highest priorities are education and public safety. For FY 2018, 49.6% of the budget is for MCPS 12.2% for public safety and 8.4% for debt service.

Q3.   What did the property tax increase of last year actually accomplish?  Could you list the programs towards which this increase was applied and did these programs achieve the ends for which they were intended?  Given that the tax increase raised the base for these programs, how are these funds being spent in the FY 2018 budget or are these funds being used elsewhere?  

A3. Most of the tax increase went to MCPS where the Maintenance of Effort funding has remained static for at least 5 years. The increased funding was able to decrease class size by 1, though the results of reducing class size will take some time to show up.

For FY 2018, the County Executive has recommended that the property tax rate be decreased but because property values are going up, there will be a small increase in property tax revenue.

Q4.   When will we see a sunset of the energy tax which we were promised was temporary with a 2-year life ending in 2012? It is now 2017 and the energy tax lives on.  It is true that the County Council has reduced it somewhat by nibbling at the edges but the promise has not been kept.  What gives?

A4. The energy tax increase, enacted in 2010 brings in over $200 million in revenue. One advantage of this tax is that it is very broad and includes entities that pay very little or no tax such as the Federal Government and non-profit groups. There will be a problem if this tax is reduced or eliminated as it currently funds many programs. While the speaker did not address this, it is clear that a tax, once levied never goes away as this “temporary” tax increase now funds permanent programs.

Q5.  What is the rationale for increasing the MCPS budget above the maintenance of effort level, after the huge increase provided last year?  In the absence of a strategic plan to close the achievement gap, how is the Executive assured that continuing the extra spending will make a difference in academic performance?  How much of the increase for MCPS is directly related to employee salaries and benefits?

A5. About half the county budget goes to MCPS which has grown by 2,000 new students annually over the last several years. Of the entire State student population, Montgomery County accounts for 30% of the increase every year; which is the equivalent of one high school per year. This increase in student population is more than that of any of the other 23 school districts in the State. A question was raised that it appears that 25,000 of our total student population are undocumented. The number was said to be highly suspect as there are only 23,000 students in the system who qualify as English for Speakers of Other languages (ESOL)and this includes those who are here legally.

The MCPS budget is supplemented by over $250 million in additional county funds that are used for police officers in schools, nurses, health aides, debt service for school construction, IT modernization, etc. This funding does not appear in the MCPS budget.

Q6.   Given that 70+% of the county budget funds county salaries and benefits, what is the pay raise this year and how much will this pay raise alone increase pension costs over the next 10 years?  Given the collective bargaining process where the unions are much more successful in bargaining than the Administration and given the tilted playing field of arbitration, is there a likelihood that the County Executive will push to change the arbitration process that failed in the Council last year? 

A6. The pay raise for fire, police and Montgomery County Government staff is 2% for COLA, 3.5% for within-grade increases and 3.5 % for longevity. This was questioned by audience members as excessive compared to the private sector in the county.

As to the collective bargaining process and the need for public participation at least at the stage of “opening offers” and later before the “final” decision, the response was that the public might not find the process too interesting.

Q7.  Would the county consider including civics/citizens groups in the budget formulation process so that ordinary citizens and taxpayers have greater input into how their money is spent?  Also, has the County considered asking for representation in the budget formulation process for MCPS, given that it is close to half of the entire County budget.

A7. The County Executive has been very transparent and has held many meetings open to the public where he has listened to the public’s ideas on the budget. The question was raised as to why there could not be civic representation in the budget formulation process at the agency level before decisions were made by OMB and the County Executive. It was suggested to the speaker that public input could be useful in setting performance measures for the budget year linked to strategies and spending. Most performance measures are “outputs” and not “outcomes”. A discussion ensued as to whether county programs are developed and funded without performance measures established at the outset.

Q8.  The County Executive supported a 4.5% salary increase last year for the WSSC, a $1 billion bi-county enterprise with little oversight and no Inspector General.   In light of a benchmarking study last summer that showed higher than necessary staffing, and weak controls over high fixed cost reliability of service activities, and water rates that are much higher than Fairfax County for residences and businesses, how does the Executive justify a 3.5% spending increase this year.   Why is there not a freeze on spending until new cost controls are implemented?

A8. The WSSC is a bi-county organization which means that both counties have to agree on the budget proposed by the WSSC. If there is no agreement, the budget as proposed by the WSSC goes into effect automatically. Also there is quite a bit of oversight in existence at present by 4 entities – each of the county executives for Montgomery County and Prince George’s County as well as the county councils of both counties.

Q9.   Does every major department in the County Government have a strategic plan in place?  For those that have such plans, why can’t the published budget for the department include a cross-walk of the budget request to the strategic plan so that the public can see how much planned spending is related to strategies, how cost-effective those strategies are, and how much spending is for non-strategic programs and overhead activities?

A9. Will think about it.

“Will the Montgomery County delegation fight for us?”

From “The Seventh State“:

“In 2010, almost all MoCo state legislators promised to oppose a shift in their election campaigns.  But just two years later, Governor Martin O’Malley proposed a partial pension funding shift, backed by both the Speaker and the Senate President, and most MoCo lawmakers voted to support it.  The cost of the shift to the Montgomery County Government increased steadily from $27 million in FY 2013 to $59 million this year, with $6 million offset by the state….. MoCo taxpayers get back just 24 cents for every dollar in taxes they pay to the state.  The state average for all residents is 42 cents.”

A Tax Story…

A Tax Story
starring the County Council and the Council Executive

Last year the County Council raised the recordation tax on home sales with the revenue increase estimated to bring in about $200 million in revenue over the next 6 years.   At the time, the council said about $125 million of the new revenue would go to school construction projects, while the other $75 million would be used to build affordable housing and other infrastructure projects.
 
That was last year.  This year – like right now – it appears that the County Council proposes to approve $4.2 million of these recordation tax revenues to cover the legal fees in the county’s lawsuit against Foulger Pratt et al over the costs associated with the Silver Spring Transit Center.
 
Plus ca change …..

MCTL Supports IG for WSSC

On January 27, 2017, MCTL President Joan Fidler presented testimony in Annapolis to the Montgomery County Delegation.  Her testimony was in support of a proposal (Bill MC/PG 110-17) to create the Office of Inspector General for the Washington Suburban Sanitary Commission (WSSC), the bi-county agency which provides water and sewage service to many Marylanders.  The proposal would also create an Office of Inspector General for the Maryland National Capital Park and Planning Commission.

 

 

 

Questions for the meeting of December 14, 2016

Topic: “The FY 2018 Proposed Budget for the Montgomery County Public Schools

Speaker:   Dr. Jack Smith, Superintendent, Montgomery County Public Schools

Dec. 14, 2016 — Free and open to the public — 6-7:30 pm. —  Rockville Public Library

  The following questions have been sent to Dr. Smith in advance of the meeting

1.  What are the costs related to the top three academic strategies – Achievement Gap, 21st Century Education and Special Education for FY 2018.  What percentage of increased spending is for these 3 strategies? 

2.  Data from prior superintendents and reports by the Council’s Office of Legislative Oversight (OLO) show that MCPS has expended an additional $2,000 per student annually in “targeted” elementary schools to reduce class size and provide supports to low-income learners.  However the achievement gap by student race, ethnicity and income continues to persist and has widened on several measures of college readiness, such as SAT and ACT performance.   How many schools did not meet district-wide performance targets?  Have you set improvement goals for these schools for FY 2018?  As you have highlighted narrowing the achievement gap as a major goal, would you consider sponsoring an independent review by outside specialists of gap closing strategies to determine which approaches are cost-effective – with a report to the public?

3.  Will you consider charter schools as a means of closing the achievement gap?  A review of Baltimore schools in Freddy Gray’s Sandtown neighborhood showed a charter school (Empowerment Academy) not only out-performed his public school (New Song), but out-performed two elementary (Greencastle and Strathmore) and two middle schools with high FARMS rates in Montgomery County – Benjamin Bannecker and Argyle. (see 5/18/15 study posted on MCTL web site).

4.  Will you use Department of Education standards to decide if there is reasonable evidence to deploy a program countywide.  For instance have the Choice Program and the Middle School Magnet Consortium met their performance goals?  If yes, will they be expanded? Will you reprogram funds if goals for these and other programs are are not reached? 

5.  Are performance target improvements planned for special education students in FY 2018 separate from the at risk population at large? How do the marginal costs to achieve these improvements compare to the marginal costs for at risk students in the general student population for the same measures?

6.   Given that the mandated Maintenance of Effort law may not be able to cover both the program needs of our school children and the salaries and benefits of staff which account for 90 percent of the MCPS budget, will you rein in labor contracts so that teacher’s salaries and benefits match more reasonably with their counterparts in Howard and Fairfax counties?

7.  How does your FY 2018 budget manage non-instruction overhead ?  Have you considered benchmarking this against other school systems?  For example, the overhead rate at large school districts in California average 32%.  For MCPS it was 45%  in FY 2017.  Lowering this overhead could result in the hiring of thousands more teachers to lower class size and narrow the achievement gap.  Will you use the expertise of the business community to advise on administrative costs?  Will you consider consolidating administrative functions with those of the Montgomery County government.

8.   Language immersion programs are very popular and wildly over-subscribed.  To open the program to a larger school audience, have you considered innovative solutions such as partnering with universities that provide video classroom learning in a wide range of languages.   

Divestiture by Retirement Funds : Testimony by MCTL President Joan Fidler

Testimony by MCTL President Joan Fidler before the County Council on Bill 44-16

Retirement – Fossil Fuels Investment – Restrictions

December 6, 2016

Good evening, Mr. President and members of the County Council – I am Joan Fidler, president of the Montgomery County Taxpayers League and I am here to testify against Bill 44-16, Retirement – Fossil Fuels Investment – Restrictions.

I would like to state at the outset that I am fully aware of the effects of climate change. I worked for 21 years at the US Environmental Protection Agency, the last 11 as a member of the Senior Executive Service. I was head of the Office of Bilateral Affairs where we worked with the rest of the world on climate-related issues.

So while we are sympathetic to your passion for climate issues, we cannot support confounding that passion with fiduciary responsibilities.

The $4 billion Employees Retirement System and Consolidated Retiree Health Benefits Trust funds are managed prudently and are faring very well – in fact, far better and are run more efficiently than similar funds at the state level.

But this bill allows symbolism to determine investment decisions. We believe that more important than symbolism is a fiduciary responsibility to maximize earnings for the 20,000 current and 30,000 future beneficiaries whose financial security relies on these funds.

The notion to divest from certain fossil fuel companies is a heartfelt impulse but has little bearing on prudent investment principles. Purity of moral principle would dictate that we drastically move away from fossil fuel companies that currently heat and light our buildings, that fuel our transportation, that run our computers. Purity of moral principle would dictate that we never invest in Coca Cola and Pepsi Cola and their sugar-laden drinks, or in Volkswagen that played fast and loose with emissions reporting, or in Wells Fargo that willfully cheated its customers. Where will it end?

The Standard of Care requires the Board to act “only in the best interest of the participants and their beneficiaries”. To which I would like to add the best interests of the taxpayers of the county – who funded both the ERS and the Retiree Health Benefits Trust to the tune of $200 million just this year alone. Are we now going to let each new idea of social condemnation narrow the investment portfolio? Will you increase the taxpayer burden if divestment decisions result in lower returns?

Though sympathetic to your impulse, the Taxpayers League cannot support this bill which puts us on a slippery and dangerous slope that would allow investment decisions to be driven by political considerations. I don’t need to remind you that Gardez bien is the motto of the county. Enough said.

Thank you.

Department of Permitting Services: Our Observations and Recommendations

On October 26, 2016, the Montgomery County Taxpayers League hosted a meeting with the Director of the Department of Permitting Services and with a representative from the Department of Finance focusing on the IG-17-001 report dated August 25, 2016, on revenue from reassessments.  More specifically, the interest of the Taxpayers League was in how the DPS was addressing corrective actions for improving building permit information to SDAT.  DPS made it clear to us that it is not in agreement with the appropriateness and cost-effectiveness of several of the IG’s recommendations.

After asking for a response from the DPS – and receiving none – the following observations and recommendations were sent to members of the the County Council on November 10, 2016, making a business case for an independent review of the Department of Permitting Services focusing on streamlined reassessments:

The DPS is responsible for a wide range of permitting services, and has to consider how best to allocate resources between competing public safety and economic development objectives as it processes its workload.

We believe that equitable and efficient tax collection depends on compliance by permit applicants and DPS and SDAT workflows. We think the DPS is at a critical juncture with SDAT, and that the County needs to improve property tax collections or face even higher tax burdens.

We were unaware of the complexity of the tasks performed by the 85 inspectors and 30 permit technicians, comprising 115 of the total 236 total employees at DPS. In addition to SDAT, DPS also interfaces with the Department of Finance, with MCPPC (for address data base to get tax IDs), and with the public. It appears that, over time, DPS has expanded its core mission to include the collection of impact taxes and funding and possibly even performing SDATs job. While we compliment the DPS on performing next day inspections, we wonder whether it is at the cost of weak follow-up for existing permits as we have heard of instances of occupancy permits in arrears when homes are sold.

In short, permitting is a complex business process. We believe that DPS must be managed to optimize property reassessment tax revenues while continuing to achieve public safety and economic development objectives. This may be a tall order for DPS with aging workflows and systems and a growing workload.

We estimate that inefficient DPS and SDAT processes cost Montgomery County $10M a year in reassessment revenues with the caveat that this number may be subject to estimating errors based on a small sample and based on assumptions about data to which we have no access. A new Finance Department internal control could detect and correct errors by comparing expired permits to assessments and measure and monitor the size of the problem. This is an important new internal control which should be added to the management plan of DPS. 

Based on the DPS and Finance presentation at our meeting, here are three preliminary observations and recommendations to make revenue collection more efficient:   

1.  Relationship with SDAT Needs More Controls  – SDAT may not be able to implement the changes needed to get timely and accurate reassessments without more help from DPS. DPS has reached out to SDAT with technology and technical assistance. However, SDAT only gets 10% of collections, which amounts to a poor incentive for the State. We learned that the Montgomery County pays ½ of SDAT costs and deserves more control over reassessments. The recent history of new DPS reports (those for occupancy permits, demolitions, residential and commercial use, and tax IDs) all took place in the last year under duress of audit and Council scrutiny and not as a result of continuous improvement by on-going control systems.

2.  Data Collection and Integrity Weaknesses   There are issues that need to be resolved related to responsibility for missing or incorrect tax IDs, erroneous or lowball cost estimates submitted by home owners on permit applications, alternatives SDAT has for information needed to trigger reassessments outside the 3-year cycle, and how cost validation could slow down processing by DPS permit technicians. We questioned DPS responsibility for verifying construction completion independent of builder notifications and were told that a recent procedure to compare sales to outstanding permits was now in place. In short, improved data could involve more work by DPS with higher costs but could also lead to higher compliance rates. We have learned that some expired permits were corrected with occupancy permits at the time of sale with no retroactive change to assessments. We are concerned that if key data does not get validated, it creates lots of rework, and sends a negative message to applicants.

3.  Accountability Gaps – Trade-offs between public safety and economic development objectives need to be resolved to improve DPS workflows. The limited controls over data or processing errors noted above lead to reduced property tax collections, in part because responsibilities and property tax revenue targets for reassessments are not set for DPS or for the Department of Finance. Inspectors are key to moving the process along and reaching milestones for reassessments, but it was noted that inspector productivity has not been benchmarked against Howard or Fairfax counties. It appears to us whatever standards exist may be the product of negotiations with the union and not by the establishment of objective, outside benchmarks. For instance, are there productivity standards for permit technicians? There are also legal questions about how far back the county can go to tax a major improvement that it did not reassess after the improvement was built, and also how far back the county can go to collect tax if a reassessment after improvement had errors such as not enough square feet, property quality or condition not accurate.

Given these observations, we recommend an independent review be performed of DPS workflows and Finance Department controls, as well as productivity and organizational accountabilities to determine what’s best for the county. The study would need to look at alternate workflows and automation and to replace legacy systems that would improve productivity, timeliness and quality. It would also need to look at strategic issues like improved accountability and controls for new and issued permit follow-up, and even new legislation to increase revenues by shifting responsibilities from SDAT to DPS to streamline reassessments.  

Questions for the of meeting of November 16, 2016

Free and open to the public

Topic: “What Factors will Shape the FY 2018 County Budget?”

Speaker: Steve Farber, Council Administrator, Montgomery County Council

Questions sent to the speakers in advance of the MCTL meeting of November 16, 2016

1.  Will the results of the national elections affect the projections for FY 2018 revenue and spending for Montgomery County?

2.  What do you project to be the revenue source mix for FY 2018 among property taxes, income taxes, grants and contract, fees and other?  Are there policy options in place for increasing the less volatile property tax share?  Is it likely that there will be another Charter busting property tax increase?   How could other revenue sources be boosted to match Fairfax County’s approach?

3.  Given that the Wayne case decision has been incorporated into the projections for FY 2018, will ITOC credit refunds, faster reassessments for property improvements, and collections of overpayments made to municipalities affect the revenue picture positively?  By how much?

4.  Other than spending increases that are likely to exceed the CPI such as negotiated salaries and benefits for MCPS and county employees, and debt service, what other spending increases are likely?

5.  With the FY 2017 funding of MCPS of $90 million over the Maintenance of Effort requirement, by how much will this increase the baseline of per pupil costs for FY 2018?  Given MCPS cost projections for FY 2018, is it likely that funding for MCPS will exceed the MoE limit once again?

6.  What are some of the bills passed at the last legislative session in Annapolis that will affect the Montgomery County budget in FY 2018 –  both positively and adversely?

 

Notes from the meeting of Oct. 26, 2016

Notes from the MCTL meeting of Oct. 26, 2016

opic: Are Slow Reassessments Hurting Property Tax Revenues?

Speakers: Mike Coveyou (substituting for Alexandre Espinosa)

Department of Finance, Montgomery County

Diane Schwartz-Jones

Director, Department of Permitting Services, Montgomery County

Questions sent to speaker in advance (below) are followed by an overview of the discussions at the meeting:

1. What were some of the causes leading to this loss of property tax revenue?  Were there gaps in accountability?

2. What is the annual budget for the Department of Permitting Services (DPS)?  How many inspectors are authorized in the DPS budget?  Have they increased or declined over the past 5 years? How are workloads projected for DPS inspectors?  Are there trade-offs between new vs improvements to properties?

3. How are inspector backlogs managed to ensure timely and accurate assessments?  What incentives do inspectors have to reduce backlogs? 

4. How are expired permits tracked and follow-up inspections performed?

5. Why are the processes for controlling inspections and the interface with the State Department of Assessments and Taxation (SDAT) not automated?

6. How do inspection backlog standards compare with those in Fairfax and Howard counties?

7. How does the Department of Finance project revenues for new and improved properties?  How much revenue was not collected in FY 2016 and 2017 due to procedural weaknesses at DPS? at SDAT? 

8. As a result of the Inspector General’s report, when will corrective actions be implemented and how much will they cost?  How much in additional property taxes will the county regain in FY 2018, 2019 and 2020 as a result of corrective actions? What role will SDAT need to play to make DPS changes implementable?

9. It is estimated that the county has lost $52 million a year in revenue through granting of Income Tax Offset Credits (ITOC) for non-owner occupied homes.  The county claims that it lacks the requisite State authority to remove these credits on failure to submit the form. But the county uses exactly the same qualifications to grant Homestead Credits. State law that authorizes ITOC directly references State law that authorizes homestead credits.  Why has the county not sought authority from the state to remove the ITOC from every property whose owner has not submitted a homestead credit verification form?  Can you justify this loss of revenue? 

The meeting was called to order at 7:03 pm by President Joan Fidler. Attendance was 16 including the two speakers.

It was an informative discussion. Here is an overview:

Ms Schwartz-Jones stated that the IG report on slow reassessments was misleading and that her office did not agree with the appropriateness and cost-effectiveness of some of the IG’s recommendations.

The annual budget of the DPS is $37.7 million with a total staffing of 236 positions. Of these, 85 are inspectors. However, the DPS is an “enterprise fund” and is self-funded through the fees it collects. It receives no direct taxpayer funding.

Most important, the DPS performs next day inspections, i.e., inspections are performed no later than the day after the request is received. Hence there are no inspection backlogs. In FY16, DPS received applications for over 60,000 permits and licenses (commercial, residential, trades, signs, zoning, etc.). Over 110,000 people were served at the DPS walk-in counters. In FY15 DPS performed over 157,000 inspections and reviewed over 92,000 plans.

DPS has a far-reaching mission and not only includes permitting services but allocates its revenues between competing public safety and economic development objectives. Thus it has inspectors for commercial building, fire prevention and code compliance, residential construction, land development and zoning and site plan enforcement.

Property assessments are performed by the Maryland State Department of Assessments and Taxation, but the local jurisdictions in Maryland pay half the cost of MSDAT’s expenses. In addition, DPS has supplemented MSDAT resources with the provision of technology and technical assistance. , There are differences in the terms”cost estimate”, “fair market value” and “assessed value”, mostly due to timing

A trigger for reassessment would be a substantially completed improvement that adds at least $100,000 in value to the property. This generally translates to an increase in 694 – 887 square footage for an addition. The DPS issued 762 permits between January 2014 and April 2016 for additions over 800 sf and 1,868 permits for additions under 800 sf..

Every property is reassessed every three years, so those properties which have large changes in assessed value between assessments are eventually assessed appropriately. However, if substantially completed improvements to a property add at least $300,000 in value, an assessment can be done between scheduled assessment cycles. While there is a loss of tax revenue due to the lag in reassessing improved properties, that loss is relatively minor, per DPS. Furthermore, to devote more DPS resources to faster reassessment would mean that resources would need to be diverted from other DPS areas.

Washington Suburban Sanitary Commission (WSSC) Needs More Oversight

Washington Suburban Sanitary Commission (WSSC) Needs More Oversight   –  October 29, 2016

The WSSC is the second largest monopoly in the state of Maryland. It is a bi-county agency providing an essential function but with little oversight. The Montgomery County Taxpayers League has chosen to shed some light on this $1 billion agency and has testified before both county councils. We offer some insight on the issue below:

Both the Montgomery and Prince George’s County Councils voted this week to “guide” WSSC to a 3.5% rate increase for its proposed FY’18 budget.  This is a spending control limit, and will serve as a guideline as WSSC formulates it’s budget for approval next spring. 

WSSC wanted a 4.5% rate increase. Montgomery County Executive Ike Leggett endorsed that proposal while PG county Executive Rushern Baker elected to make no recommendation.  But a higher rate increase could still occur since this vote only provides guidance to the WSSC when it prepares its justification for its recommended budget next Spring. The good news is that both county councils were persuaded that a lower rate increase would motivate WSSC to find cost savings recommended in a benchmarking study completed last summer. 

That June 2016 study found that WSSC had weak, inefficient practices for fleet management, utility services, and asset management/capital improvements and too many IT staff and engineers.. All these, of course, continue to impact reliability of service unless corrected.  It is important to note that these problems also contribute to high costs and will need new cost controls.  Of particular concern is the 4.5% pay raise given to WSSC employees in last year’s budget – higher than the pay raise for our county employees.  Also, both Councils noted that the new fee to replace aging pipes are now in place thus eliminating the need for WSSC to cover these costs in volumetric rate.

One major issue both county councils will confront again next spring is the state law which compels both councils to agree on any changes to the WSSC’s operating and capital budgets. In the absence of such agreement, the requested WSSC budgets must be adopted (Section 17-202(c)(2), Public Utilities Article, Annotated Code of Maryland).  This so-called default budget law gives WSSC extra leverage in budget negotiations and does not allow the regulators of this, the second largest monopoly in the state, to adequately press for changes in the budget. We would support an amendment that, in the absence of an agreement, would default to the prior year’s budget.

The Montgomery County Taxpayers League continues to urge both Councils to amend or get rid of this default budget law which essentially treats the WSSC budget as a cost plus contract: WSSC spends more and rate payers pay more, never less, regardless of performance.  And let us not forget Montgomery County’s motto? “Gardez bien”