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City's preliminary budget plan includes layoffs, fee hikes

Declining property values suggest city will lose $3.1 million in revenue

December 14, 2010|KATE S. ALEXANDER | kate.alexander@herald-mail.com

HAGERSTOWN — The City of Hagerstown hopes to avoid raising taxes in the coming fiscal year despite projections for an unprecedented decline in property values.

City officials Tuesday presented the city council with a preliminary budget plan, outlining its approach for drafting a proposed fiscal 2012 budget. The plan takes into  account what staff members called the “painful impact” of the economy by eliminating more city employee positions and imposing some fee increases on residents.

Difficult economic times are persisting for the city, which could see a general fund shortfall of more than $4 million for fiscal 2012, according to city documents. Projected revenue for the next fiscal year, which begins on July 1, 2011, is $36.6 million, or about $1.2 million less than city revenue four years ago, the documents said.

“I want to emphasize that this isn’t over,” City Administrator Bruce Zimmerman said of the city’s financial struggles. “I wish I could say it is ... it would be wrong to suggest that. There are still problems ahead, still uncertainties ahead, and, I think, there are still tough decisions ahead of us, not just for (fiscal year) 11-12 but beyond.”

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Declining property values have created the bulk of Hagerstown’s anticipated shortfall, Zimmerman said.

Hagerstown’s triennial reassessment of real estate took place in 2010, he said.

The city will not see final numbers on property values until after the fiscal 2012 budget is passed, City Budget Officer Al Martin said.

However, preliminary numbers suggest that the city will lose $3.1 million in revenue from declining property values, he said.

Residential properties are projected to fall an average of 25 percent in overall assessed value, while commercial and industrial properties are projected to fall between 10 and 15 percent, Martin said.

“We have never had a decrease in our tax base and certainly not of this magnitude,” he said, referring to the past 32 years the city has tracked its assessment base changes. “It is unprecedented.”

State-shared and county-shared revenue is also projected to decline for fiscal 2012, Zimmerman said.

The staff drafted the preliminary budget plan expecting to see about $100,000 less in state highway-user revenue, he said.

To balance the revenue decline, officials suggested the city use a mixture of service fee increases and expenditure cuts while keeping the tax rate static for another year.

As part of the expenditure cuts, Zimmerman said the staff is proposing the elimination of 40 positions for a savings of about $2.1 million.

Approximately 30 of the positions are currently vacant, but about 10 employees could lose their jobs under the preliminary budget plan, he said.

In addition to eliminating positions, the plan suggested extending the freeze on cost-of-living increases, also known as COLAs, and wage step increases for another year.

However, recognizing the responsibility the city has to its employees, the staff suggested not continuing the 10 unpaid furlough and work-stop days each employee was required to take in the current fiscal year.

Zimmerman said the furlough and work-stop days was equivalent to a 3.8 percent pay reduction for employees in the current year.

The plan does not call for raising property taxes, but it would increase refuse fees.

It recommends raising refuse fees from $37.50 per quarter to $50 per quarter to realize an additional $720,000 in annual revenue, Zimmerman said.

Also suggested was a stormwater management fee that would apply to impervious surfaces, Zimmerman said.

Exactly how the fee would be structured has yet to be determined, but the city hopes it would generate enough revenue to cover stormwater-related costs.

Zimmerman said the economy, not poor management, is to blame for the city’s continuing financial struggles.

“This is not a situation we created. I certainly want to make it clear it was not a situation this mayor and council created,” he said. “What we are dealing with here is the impact of the economic recession.”

The five-member city council raised no objections to the plan.

The staff will use the preliminary budget plan to draft the proposed budget it will bring before the council in the spring, Zimmerman said.

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