Montgomery County Taxpayers League

The Voice of Taxpayers of Montgomery County, Maryland

Budget

“Montgomery County’s expensive private attorneys”

From the Washington Post website of July 15, 2017:

“Montgomery County accumulated excessive legal bills to pursue a lawsuit against the designers and builders of the long-delayed Paul S. Sarbanes Transit Center in Silver Spring.  When all these payments are added together, Montgomery County, in a case that never went to trial, will have paid more than $18 million and will have received a settlement only $6.7 million higher. ….It is absurd to pay $6.5 million for outside counsel for a case that didn’t even go to trial.  “

Questions for the meeting of June 14, 2017

Questions for the meeting of June 14, 2017

Topic:   Affordable Housing in Montgomery County: Vouchers or New Construction?

Speaker:  Clarence Snuggs, Director, Department of Housing and Community Affairs, Montgomery County

June 14, 2017  — Free and open to the public — 7-9 pm. —  Council Office Building

The following questions have been sent to Mr. Snuggs in advance of the meeting:

1. Could you provide us with definitions of the various categories within which you operate?

    • MPDU versus affordable housing versus low-income versus median income housing
    • – what are the income cut-offs and are they pegged to inflation?
    • – what are the other qualification requirements for each category?

2. The Department of Housing and Community Affairs (HCA) has 96 employees and a budget of $52M with an infusion of funds from HUD.  One strategy deployed is affordable housing through payments in lieu of taxes (PILOT).  Another strategy is requiring 12.5-15% of multifamily housing to be moderately priced also known as “mandatory inclusionary zoning”.  How are these strategies working?  What was HCA’s primary performance goal for FY 2017.  Did you accomplish the goal?  Have you revised your plans for FY 2018 and is this reflected in the FY 2018 budget?

3. County Executive Leggett announced a new program to help qualified applicants purchase a home with the support of the Montgomery Homeownership Program. The down payment assistance program is available for buyers with qualified incomes to purchase a Montgomery County home as their primary residence, up to a $429,000 sale price (up to $525,000, in certain neighborhoods.)  Applicants who qualify and are approved may access Down Payment Assistance loans in amounts up to $40,000 – or up to 40 percent of the household income of the prospective homeowner – whichever is less.  Approved buyers also will receive a below-market rate. Montgomery County has committed $1 million to this program.  What are your measures of success for this program and how will you handle defaults on the loans?

4. The Housing Opportunities Commission, is a different organization within the county which also deals with affordable housing, but with a much smaller budget ($6M).  Is there overlap or do each of the two organizations have separate and  distinct missions?

5. How does HCA handle reports of unlicensed rental homes?  Does HCA check to ensure that rental homes and condos using vouchers are licensed?  How does HCA determine that rental income is being declared on state and federal tax forms? How much tax revenue do you estimate we lose from unlicensed rental units? 

6. Given that most mid- and low-income homeowners/renters use the strategy “drive until you qualify”, has the county considered underutilized commercial land or vacant office parks as an avenue to increasing affordable housing?  And as transportation is a major cost concern for low- and some middle-income buyers/renters, would this mitigate the problem?

7. We understand that there are about a thousand homeless people in Montgomery County.  Several studies have shown that providing permanent housing is the solution to improving health and well being for people without homes.  What is the county doing to enable homeless individuals and families to find permanent housing?

Next Meeting: TBA

County, Schools Arrive At Plan For Fully Funding Schools’ Budget

From BethesdaBeat.com May 15, 2017:

“The Montgomery County Council agreed to supply the county’s public schools with $1.663 billion during fiscal 2018, enough when combined with state and federal aid to cover the $2.522 billion spending plan backed by the school board….The $1.663 billion funding level suggested by the county executive is about $19 million above the state-required minimum…The council is expected to finalize the MCPS budget later this month.”

Questions for the meeting of April 19, 2017

Topic:   ” The Montgomery County Police Department and Performance-Based Budgeting”

Speaker:  J. Thomas Manger, Chief of Police, Montgomery County

April 19, 2017  — Free and open to the public — 7-9 pm. —  Council Office Building

The following questions have been sent to Chief Manger in advance of the meeting

1. Almost every police department in the country has performance targets to reduce crime.  We assume that such targets do exist for the Montgomery County Police Department.  However they are not included in the budget or strategic plan (except for strategy 1.3.2- traffic safety).  How do these targets compare, over the last 5 years, with those in Fairfax County where you were the Chief of Police prior to your current appointment?

2. Other than crime reduction, many police departments use performance measures such as clearance rates, response times, and enforcement productivity (#of arrests, citations, “stop and frisk” searches, etc).  Are these useful measures for the Montgomery County Police Department?  How do you measure whether the department is working intelligently, using appropriate methods and having a positive impact? 

3. How much of the $115 million for Patrol Services goes for Community Policing?  The research shows that unreported crimes such as crimes against youth ages 12-17 and crimes committed by someone the victim knows well, for example, are 2-3 times higher than reported crime rates.  Would these and “invisible” crimes such as crimes within the family, white collar crime, crimes involving intimidation, etc. be covered by community policing? 

4. The $43 million budget for Strategic Direction 1, “Reduce and Prevent Crime and Create Safer Communities”, is allocated to Field Services.  What are the performance measures for this category; more specifically, by how much will this $43 million reduce crime?

5. The budget for Investigative Services is $46 million.  What are the performance measures for this category inasmuch as they relate to reduction in crime? 

6. Management Services- How much of this $73 million budget relates to Strategic Direction 1 (e.g. body cameras), and how much relates to the other 4 strategic directions?  How does the cost of overhead functions compare to other police departments such as those in Fairfax and Howard counties?

7. How large is the fleet and what is the budget for operating and maintaining this fleet?  How does this compare to other police departments such as those in Fairfax and Howard counties?  What are some of the metrics used to make these comparisons?

8. Last year, personnel of the Police Department received a 4% pay raise,; at the national level the increase was 2.3% as reported by the Bureau of Labor Statistics.  This year’s budget includes a general wage increase of 2%, service increase of 3.5%, and longevity increase of 3.5%.  Are these pay increases linked to the productivity of the Police Department?  How does the average annual compensation (salary plus overtime) compare to police departments in   Fairfax and Howard counties?

9. The retirement plan for county government workers is a defined contributions plan.  The retirement plan for the Police Department is a much more generous and expensive defined benefits plan.  Can you give us some reasons for the discrepancy between the two?  Also, what percentage of those retiring this year are retiring on a disability?

10. Are there initiatives that longer term would make your department more efficient and save taxpayers money that are not in your budget due to belt tightening?

11. What is your process for identifying cost savings?  What cost savings are included in this budget?  Other police forces have implemented cost saving measures, have you considered or implemented any of these: 

– eliminating land line phones for officers that have department-issued cell phones

redesigning patrol deployment and creating shorter shifts to optimize coverage during periods of high call volumes and reducing coverage during times of low call volumes

– fleet reduction measures

 

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 …..

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.   

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?