Montgomery County Taxpayers League

The Voice of Taxpayers of Montgomery County, Maryland

Maryland

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?

 

 

 

“Is MoCo Becoming a Second-Class County?”

From an article by Adam Pagnucco in BethesdaMagazine.com:

“For years, county leaders have viewed the county’s budgetary, legislative and regulatory policies as separate from economic development. Let’s look at some of what our county has done. We have had nine major tax hikes in 16 fiscal years. We have led the region in passing costly new employment laws while we have been increasing those taxes, the only jurisdiction in the area to do both at the same time. Despite the tax hikes, we have suffered big budget shortfalls and are looking at more. We squeezed county per pupil spending for the public schools for seven straight years in part because our leaders did not like state law on education funding….We have increased county debt by five times the rate of inflation over the last eight years.”

 

Questions for meeting of May 16, 2018

Topic:  “WSSC and its Financial Future”

Speaker:  Joe Beach, Chief Financial Officer, WSSC

                         Free and open to the public

The following questions have been sent to the speaker in advance of the meeting:

1.  What criteria does WSSC use in its decision-making process given the need for new pipes, old pipe repair and replacement, processing facilities, IT investments, etc. especially as WSSC is reaching its debt limit and thus must carefully set priorities for capital spending while maintaining quality and service levels?

2.  We understand the approved capital budget for WSSC includes a $250 million project to build a new anaerobic sewage treatment plant at Piscataway for bio energy.  While WSSC policy does not require that a return on investment justification be provided for projects, do the economics of this project justify this large expenditure of $250 million?  Or could the sewage be more economically transported to Blue Plains for processing.  The documented business case dt. 6/21/12 does not address this option.  Alternatively, are there other projects with a higher return on investment that have not been approved?

3.  Debt service is the largest driver of WSSC’s budget and is projected to hit 40% of its total expenditures in 2023.  We also note that the “new debt” projections for FY 2019, 2020, and 2021 jumped from:
In fall of 2014 (FY 16 budget): $327 million, $278 million, and $219 million for a total of $824million
In fall of 2016 (FY 18 budget): $505 million, $510 million, and $429 million for a total of $1.44 billion
In fall of 2017 (FY 19 budget): $558 million, $562 million, and $545 million for a total of $1.67 billion
New debt projections for the next three years have doubled. Could you address this?
4.  Debt shows big drops in FY 22 and 23 for new water and sewer debt issues.  Is this realistic?  Are the projections based on current known costs with no contingencies for unknowns.  Does this assume that there will be no change to the water loss rate which was 17.9% in 2016 and for sewer line infiltration of 40%?

5.  With the new rate structure, will the highest tier (the rate paid for practically all of the water used by the largest accounts – hotels, NIH, UMd students), meet the Public Service Service Commission’s (PSC) criteria for non-discrimination? Also would let’s say anything over $17.00 per kgal be unjustifiably high and thus not meet the PSC criteria?

6.  We also note a rate increase jump to 6% from 2020 to 2023.  Since presumably this will be determined by the size of the CIP, the operating budget, weather events, interest rate for debt issued and change in the number of customers, it is also obvious that the first two are well within the control of the WSSC.  Will the PSC weigh in as to whether such an increase is reasonable?  How often has the PSC done so in the past?

7.  The negative expenditure adjustments that begin in 2020 appear to be an artifice to make the debt service coverage ratio work. Is there a more rational explanation for this?

8.  The expenditure increases in the fiscal plan assume no new hires (except for attrition).  Are the collective bargaining agreements negotiated by the union affordable?  By how much will these increase the budget?  Also are the health and retirement benefits of WSSC employees similar to those of Montgomery County Government employees?

Next meeting:  TBA

Questions prospective voters could ask candidates for county and state office.

Many voters have asked us to come up with thoughtful questions that they could ask of candidates for local and state offices.  Too often we hear the same promises of greater support for schools, better transportation and lower taxes.  But very little is said about how a candidate intends to achieve these goals.  Our questions below are designed for voters to ask candidates directly so they can get a specific answer as to how the candidates intend to fulfill their promises.

 

County Level:

1.  Now that debt service accounts for 10% percent of the county budget and is for all intents and purposes at its ceiling, how would you address school construction needs?

2.  The Department of Liquor Control is run by the county government and handles the purchase, warehousing and sale of liquor bringing in $28 million in revenue in a $5.5 billion county budget.  Do you believe that the county government should employ 442 county staff and cover their salaries and benefits or does this function belong in the private sector?

3.  The County Executive’s budget proposal for FY 2019 gives the school system $2.59 billion of which $19 million is over and above the mandated Maintenance of Effort level.

–  Do you believe that the school system, while it describes how it will spend the increase, should also show how the increase will produce results?  How would we know that such results have been achieved?

  • 45% of the MCPS budget is overhead (non-instruction), Should MCPS cut overhead costs before it gets an increase in county funding? By how much?
  • Public school budgets are created by non-elected public employees without formal input from the taxpaying public.  What would you do to make the taxpayers feel more confident that the schools are spending their tax dollars wisely? Is it time for an Inspector General for MCPS that would look not only at waste, fraud and abuse but also at program performance?

4.  According to Maryland’s State Department of Assessments and Taxation, there were just 19 new filing for new businesses in Montgomery County in FY16. In the year before there were 57 new business filings in the county. What specifically would you do, at the county level, to encourage business growth in Montgomery County?

5. In addition to reduced income tax forecasts, recordation/transfer and energy taxes are forecast to be lower than expected over the next 5 years.  What are some of the programs or services where you would reduce spending to balance the budget?

6.  County employees will get a 2% cost-of-living increase along with a 3.5% “step” increase in FY 2019.  Do you believe this comports with wages in the private sector in Montgomery County?

7. It has been said that collective bargaining gives unions an unfair advantage in arbitration, leading to pay raises way above market and the highest paid employees in the region.  Would you support changing the arbitration rules? Also would you support more transparency in collective bargaining negotiations so that the public is aware of the “going in” positions of labor and management and is allowed to express their opinions at a public hearing before the agreement is finalized?

8. County income taxes have varied significantly from forecast for the last 2 years.  Property taxes are less volatile, but stagnant, and subject to Charter limits.  Would you support increasing property taxes on home improvements by treating them as “new construction” and thus gaining more for the county in property taxes – without Charter limit restrictions? In other words, do you support the inequity of property owners of unimproved properties supporting those who have made major improvements to theirs?

9.  WSSC, the largest monopoly in the state of Maryland, has prepared a six-year fiscal plan that requires 6% rate increases to maintain the debt service it has accrued to meet its net revenues.  WSSC also has ad valorem taxing authority to raise county property taxes. What oversight would you propose to make WSSC an efficient and effective monopoly to avoid these annual rate increases or even an increase in property taxes? 

10. What specific experience do you bring to the office to which you wish to be elected which demonstrates your development or implementation of a program in the public sector.

State Level

1.  The Maryland State Retirement and Pension System has $20 billion in unfunded liabilities.  The last time the State fully funded the system was in 2000.  Further, the State pays $500 million a year to financial management firms to manage pension investments at no higher a return than low-cost index funds.  Should we continue to pay out $500 million a year to these firms?

2.  For every $1 that Montgomery County taxpayers send to Annapolis, we get 20 cents in return in direct aid.  Howard County, a wealthier county than ours gets 24 cents on every dollar.  How would you get us, at least, to Howard County levels?

3.  Our delegates to Annapolis inform us, every year, that they have passed a “balanced” budget.  True, in one sense.  However it excludes long-term liabilities which in pensions alone exceed 10s of billions.  How would you provide transparency in budgeting?

4. According to the State Department of Assessments and Taxation there were just nineteen new business filings in Montgomery County in FY16.  In the year before, there were 57 new business filings in the county.  What specifically would you do, at the state level, to encourage more business growth in the county?

5. Would you support Maryland Public Service Commission oversight of the WSSC, the largest monopoly in Maryland? Would you support privatizing the WSSC?

6. Do you favor the modernization of the state’s laws governing breweries? Breweries—most of which are small businesses—are limited to 2,000 barrels of beer they can sell to visitors in their tasting rooms. They can sell an additional 1000 barrels but only by adhering to a “buy back” provision requiring that they sell the extra beer to a distributor and then buy back their very own beer. This puts our breweries at a competitive disadvantage regarding surrounding states and hinders job growth and the concomitant increased tax revenue.

State Report Blast Dept. of Assessment and Taxation

A just-released 49-page fiscal compliance audit report on the operations of the State Department of Assessments and Taxation (SDAT) has found the state is foregoing millions in property tax revenue because of inefficient assessments.

“According to DAT’s records, only 275,461 of the 676,066 residential real properties (that is, 41 percent) that were to be reassessed during the 2015 assessment year received an inspection of any kind….DAT estimated that the use of oblique aerial imaging for real property assessments across the State should result in increasing the assessable base statewide by as much as $1.4 billion.”

Maryland is one of only two states in which property assessments are done by the state; in all others it is done by the local jurisdiction.

Improved Properties Are Not Being Reassessed Properly

Unimproved property taxpayers are subsidizing more expensive, improved property owners.  How big is the under-assessment problem?  A 2017 report estimates that Montgomery County’s residential property assessment base would be $2.7 to $3.6 billion higher, resulting in an additional $140M in annual property tax revenue.

Read the report by Gordie Brenne and Carol Placek

 

 

Accountability in Education Act: MCTL View

 

Testimony sent to the Senate Education, Health and Environment Affairs Committee

SB 302 – Accountability in Education Act of 2018

February 8, 2018

The Montgomery County Taxpayers League supports SB 302 – but with major reservations. The premise of the bill makes eminent good sense – the establishment of an Investigator General (IG) at the state level. No such investigatory body exists at present and oversight suffers. However, there are some problems with the bill.

  1. We do not see the need – nor the expense – of setting up a whole new commission with all its trappings to select the IG and to whom the IG will report. We have a State Board of Education that could very well fill that role. The Educational Monitoring Unit could be housed either in the Maryland State Department of Education or could be situated within the State Board with the investigative and analytical functions listed in the bill.
  1. Other than sub poena powers, we are not sure as to why many of the other functions are not currently being performed by the MSDE or through the oversight of the State Board.
  1. How will the functions of this new entity comport with those of the various boards of education in the state who currently perform many of the same functions. Will IG decisions over-ride personnel decisions protected by local collective bargaining agreements? Will corrective actions mandated by the IG be funded by the state?
  1. Will it benefit the Investigator General to support the establishment of inspectors general in the larger school districts? Should local jurisdictions elect to do so, will the state fund the establishment of these positions?

It appears to us that the premise of the bill is worthwhile; the creation of yet another free-floating commission is not. The tightening of oversight is worthwhile; the overreach in some of the functions is not. And lastly, though the bill does not intimate it, the establishment of inspectors general in some school systems would strengthen local oversight – and lighten the work load of the proposed Investigator General.

Joan Fidler, President

Montgomery County Taxpayers League

 

“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.”

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”