Fiscal 2020 Preliminary Budget Havre de GraceFiscal 2020 Preliminary Budget View Fiscal 2020 Preliminary Budget Proposed Budget Legislative Calendar For Fy 2020 INTER – CITY MEMORANDUM To: Havre de Grace City Council and Citizens From: Mayor William T. Martin Date: March 18, 2019 RE: Fiscal 2020 Preliminary Budget Citizens of Havre de Grace and Honorable Members of the Council, Enclosed is my preliminary budget for fiscal 2020 for your consideration. I have decreased spending on City infrastructure significantly in the General Fund compared to prior years. I remain committed to improving our parks, museums and public social venues and I will continue searching for visionary partners to keep making progress in these areas. For fiscal 2020 I am concentrating our resources on core service infrastructure within our Water/Sewer Fund 9. I have said repeatedly that I would not “kick the can down the road” for future Administrations to deal with. The fiscal 2020 budget includes requested funding to develop a long-term plan to make meaningful and timely replacements and improvements in our water distribution and wastewater collection systems. The 2020 budget is a fiscally responsible budget and, with your approval, I am keeping real property tax rates and water/sewer metered usage fees at the 2019 levels. My 2020 budget will result in real progress in our efforts to make the Water & Sewer Fund 9 more reliable long-term. I am in continued negotiations to sell our excess water capacity to neighboring communities and I am optimistic that, once completed, the additional usage will allow us to be even better situated to deal with the realities of an aging infrastructure. General Fund 1 The General Fund 1 is expected to begin the year with a $417,200 surplus. Expenditures and fund transfers are projected to exceed revenues by this same $417,200 million leaving the General Fund 1 balanced at year end as required by our charter. Budgeted revenues are expected to be $13.8 million in fiscal 2020; a $573,100 decrease from the current year projected revenues, primarily due a reduction in anticipated State and County grant funds. The Maryland Department of Assessments and Taxation estimates that net assessable real property tax base for Havre de Grace will decrease $4.2 million for fiscal 2020. They are suggesting the tax rate be increased from $0.565 to $0.5666 to keep real property tax revenues constant (i.e., the Constant Yield Tax Rate). I am, however, proposing to maintain the real property tax rate its current $0.565 per $100 of assessed value. I am not increasing the tax rate, effectively reducing taxes, because I am seeking to increase water connection fees in 2020. Overall spending is budgeted to be $15.4 million, a decrease of $1 million from projected spending for fiscal 2019. The capital program is budgeted to be almost $1.6 million in fiscal 2020, a $1 million decrease compared to the current year. The City intends to continue its focus on storm water remediation in fiscal 2020. Previously, remediation efforts were heavily subsidized with grant funds from the Department of Natural Resources. While that is no longer the case for 2020, the City will continue to protect its most vital natural resource, the Chesapeake Bay. Rest assured that the City will continue to seek Federal, State and County funding but development of future projects will take time to plan and design. Personnel costs will increase $230,000, or 2.3% in fiscal 2020. This increase can be attributed mainly to a modest anticipated increase in healthcare premiums and to very modest increases in salaries consistent with the recommendations of the Benefits and Compensation Commission. Debt Service is anticipated to be unchanged. Water and Sewer Fund 9 The Water and Sewer Fund 9 is expected to begin the year with a $500,000 fund deficit. Budgeted revenues are projected to exceed expenditures by this same $500,000 and bring the fund back into balance by the end of the year. Anticipated residential development for fiscal 2020 is expected to return to a more traditional level in fiscal 2020. New connections have been set at 80 units, a level that has been met or exceeded in each of the last 3 years. This approach reduces estimated revenues by $208,000. I am proposing that the City increase its new service connection fees by $1,300 to $18,500 per new residence. Increasing connection fees was recommended by the Water & Sewer Commission and I am endorsing their recommendation. I also want to thank this group of citizens for their tireless efforts to find funding alternative recommendations as we reinvest in our infrastructure. Increasing the rate will recover half of the lost revenue resulting from reducing projected new development activity. The City’s infrastructure is rapidly aging and I believe that we must continue to address this issue head on. The fiscal 2020 budget includes $2.7 million in needed rehabilitation to the water treatment plant along with planned engineering and design costs to develop a well thought out plan to replace the water and wastewater piping throughout the City. The City borrowed $2.4 million in fiscal 2016 to rehabilitate and upgrade the water treatment plant. That work is already under way and the fiscal 2020 budget anticipates completing that work. Now we must turn our attention to the infrastructure that distributes the water throughout the City and collects the wastewater for treatment. Preliminary estimates are a sizable multi-year effort will be required and financing this effort solely through bonds will place a sizable burden on our users for many years. For fiscal 2020, together with the Water and Sewer Commission, the City intends to develop a plan to address this issue including a long-term financing plan. It is apparent that revenues will have to increase to fund this effort. To that end, I am increasing the base fee charged per quarter from $18.75 to $20.00. I am also requesting Council approve an Infrastructure Replacement Program (IRP) fee that will be based on meter size. I have structured the fee so that the great majority of users will incur a fee of $10 per month. As a result, projected revenues for fiscal 2020 are $850,000 higher for the upcoming fiscal year. I am not requesting a change to the metered usage rates for fiscal 2020. As proposed, I believe that the above new fee structure will generate adequate funds to develop a long-term plan to replace and upgrade our water/wastewater distribution systems. Further, when added to the projected revenue from our current operations, funding should be adequate for our operating needs, our debt service, and the most critical improvements to our infrastructure. Marine Facilities Fund 8 The Marine Facilities Fund 8 is budgeted to begin fiscal 2020 with a surplus of $545,000. The Marine Facilities Fund 8 is budgeted to end fiscal 2020 with a surplus of $510,000. Operating revenues are budgeted to exceed expenses by $25,000, while $60,000 will be spent on capital improvements to the facility. ***** I trust you will find this preliminary budget provides a solid foundation for our joint efforts to continue revitalizing the City while also protecting our valued water resources.