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December 17, 2010
A properly advertised Legislative Meeting was held between the Mayor and Board of Aldermen of The City of Frederick and the Frederick County State Delegation. Mayor McClement presided. Present were Alderwomen Karen Young, Shelley Aloi, Carol Krimm, and Kelly Russell, Alderman Michael O’Connor, Senator David Brinkley, Delegate Galen Clagett, Senator-elect Ronald Young, and Delegates-elect Kathy Afzali, Kelly Schulz, Patrick Hogan, and Michael Hough. Delegate Donald Elliott was not present. Also present were City Attorney Saundra Nickols and Kari Melvin, Recording Secretary.
Mayor McClement welcomed the Delegation and offered congratulations on their election/re-election. He stated that the purpose of the meeting was for the City to share some of the initiatives from the Maryland Municipal League (MML) and to obtain feedback from the Delegation. Mayor McClement pointed out that Alderwomen Young and Krimm both serve on the MML Legislative Committee. He then provided a summary of the financial challenges facing the City. He stated that the City had to make tough choices last year, including reductions in force. He continued that the City is being faced with a set of complex scenarios this year that will make the budget even tougher, including the property tax revenue potentially falling below the constant yield rate and an unfunded State mandate to upgrade the wastewater treatment plant. Mayor McClement explained that the City must find $53 million for these upgrades and that the water service users will have to bear the brunt due to lack of growth and impact fees. He continued that the City increased water/sewer rates by 20% last year and warned everyone to expect a 20% increase this year and 10% next year. He said that the City is working with the Maryland Department of the Environment (MDE) and that Delegate Clagett has assisted in an initial meeting to try to get grant funding moved forward. He added that the City is also looking at reorganizing bonds and/or re-bonding and low interest loans from MDE. Mayor McClement said the City appreciates Delegate Clagett’s help and any help the Delegation can provide. He then turned the meeting over to Alderwoman Young.
Alderwoman Young thanked the Mayor and said that it was important he provided an overview of the major challenges facing the City because the proposed legislative requests are financially based and revenue generation focused. She then went over the results of the MML 2011 Legislative Program Straw Poll and pointed out that the item that received the most support is the full restoration of municipal highway user revenues (HUR) and police aid to municipalities. She stated that HUR was a significant portion of the City budget in 2008 at $2,967,000; it reduced to $290,938 in FY10; and the projected State estimate for FY11 is $107,000, which is a 96% decrease in revenues. She continued that this hits the City at a particularly challenging time, when revenues are shrinking from all sources, and added that the City has limited authority in raising revenue.
Alderwoman Young introduced the next two proposals regarding providing municipalities with alternative revenue raising mechanisms in order to reduce overreliance on property taxes as the primary revenue source. She discussed the merits of each and recommended a combination of the two. Alderwoman Young then asked Alderwoman Krimm to discuss additional alternative revenue issues.
Alderwoman Krimm proposed that the City receive a portion of the excise tax collected by Frederick County. She provided handouts that indicated: (1) Frederick County is the only jurisdiction that collects both an impact fee and an excise tax; (2) Frederick County has collected $14,581,830 in excise taxes since its inception, plus accrued interest; (3) the portion of excise tax collected in the City is $4,303,325; (4) of the items the County asserts have been spent to the benefit of the City out of these funds, the West Frederick intersection improvement in the amount of $152,000 is the only item that is actually within City limits; and (5) the County’s current balance of excise tax revenue, located in the Development Road Improvement Fund, is almost $2.4 million. Alderwoman Krimm also commented on the $2 million the County spent on the design of the Monocacy Blvd./US 15 interchange, pointing out that the City also spent $2 million on design. She discussed the population and number of jobs in the City and the need for funding of the Motter Avenue bridge and Thomas Johnson Drive expansion project and the opening of the Fort Detrick Nalin Gate. She stated that the City is not asking for new taxes, only a better distribution of what is already being collected. She added that the City is not impacting the County’s operating budget in asking for this money as it is in an escrow account separate from their general fund.
Alderwoman Krimm also recommended looking at recordation tax. She provided a handout that showed Frederick County’s recordation tax is the highest in the state at 6%. Alderwoman Krimm stated that she would like the City to receive a share and reiterated that the City is not asking for new taxes, only a portion of what is already collected in the City.
Senator Brinkley commented that he believes the excise tax was enacted to encourage development within the City and that there was recognition between the elected officials back then that there would be some partnership between the City and County. He stated that he would like to obtain feedback from the new County Commissioners on this issue.
Alderman O’Connor commented that the State Constitution looks at county and municipal government as equals, but that funding and support flows to the counties into the municipalities, not to the county and municipality simultaneously. He asked that the City be involved in discussions about how the State looks at funding of local governments at the same level the State would have with a county.
Alderwoman Young stated that municipalities statewide lost 82% of HUR, while counties lost 7%. She added that counties have other sources such as transfer taxes and recordation fees to backfill those losses, whereas municipalities do not. Delegate Clagett expressed his dissatisfaction with the current system and said that a program was put together during the last budget cycle to try to increase HUR numbers. He added that only 9.2% of HUR will go to local governments in 2013: 7.5% to Baltimore City, 1.4% to counties, and 0.3% for municipalities.
Alderwoman Young moved on to the next legislative request regarding publication of legal notices which would allow municipalities to advertise on their websites in lieu of the newspaper. She stated that the City is required to advertise certain items in the newspaper and that the cost is close to $60,000 per year. Alderwoman Young said that she would like to see legislation that provides municipalities with discretionary authority to either advertise in the paper or online. She stated that the merits of this proposal are two-fold: it provides another avenue to reduce costs and manage the budget effectively; and, it allows the City to focus its communications in a media that is becoming the primary source of information for the majority of citizens. Alderwoman Krimm agreed that it should be enabling legislation, except that notices regarding property tax and constant yield should still be required to be published in the newspaper. Alderman O’Connor mentioned that the majority of City bid respondents get their information directly from the City’s website. Senator-elect Young stated that he has agreed to sponsor this in the Senate, but that there should be a small notice in the newspaper when the information is put online. He added that this would help people to find the information and still drastically reduce costs. Alderwoman Young commented that the cost of advertising should not impede action on viable initiatives.
Alderwoman Young presented the last legislative request concerning unauthorized signs on highway rights-of-way which would allow municipalities to remove signs from highway medians and collect modest fines from sign owners. She stated that this request is not included with the priority requests, but is being brought forward for potential consideration. She continued that this administration has discussed this issue extensively and that signs in the right-of-way are not only an aesthetic issue, but can be a distraction and block vision. She discussed the history of this request over the past three years and stated that the City would like to urge the Delegation to consider it if they see it gaining additional support. There was discussion about the treatment of the different types of signage, including political, real estate, and business. The method of determining the fine amount and whether there should be a fine or just authorization to remove signs was also discussed.
During general comments, Delegate Clagett talked about his concerns regarding impact fees, excise taxes, and adequate facilities ordinances as they relate to businesses and being business friendly. He stated that for Frederick County to have both an impact fee and excise tax and not share with the City is unconscionable. He added that most of the economic development activity happens in the City and that this is in line with the comprehensive plan. He also said that he would be willing to look at providing the City with a share of the recordation taxes because 25% of development happens within City limits. Alderwoman Aloi stated that cities have been funding counties in large part for many years and it has not been looked at again and again. There was discussion regarding the land use policy at the State level being in conflict with the property tax policy and the taxes municipal residents pay.
Alderwoman Krimm commented on the water/sewer issue the Mayor mentioned earlier. She said that impact fees are down about $3.5 million and that is why the City is struggling and has to raise rates. Delegate Clagett said that municipalities should receive credit for what they put into the flush tax program for system improvements. Alderwoman Aloi provided a recent example of a business that was asked to pay $169,000 in impact fees to submit their plan for a restaurant downtown because of the current state of the water and sewer fund. She added that this makes it impossible for anyone to come here to do business and that whatever is required to obtain equity is very important or the City will have no growth.
Senator-elect Young stated that he is already considering amendments to several upcoming issues that could have negative impacts on municipalities. There was discussion regarding the stormwater management and total maximum daily load (TMDL) regulations and the possibility of a regional approach to these regulations.
Alderwoman Krimm mentioned North Frederick Elementary School and advocated for public school construction or renovation money because it is in such poor condition. She stated the importance of having good schools in place to entice companies to come here. She added that she also supports funding for Frederick High School.
Alderwoman Russell said that the City would also like to see reinstatement of State aid for police protection. She stated that the police department is critical to public safety and quality of life. She continued that the City is facing a dire situation and any assistance to help our police department would be greatly appreciated.
Public comment was received from Tamar Osterman regarding signage in the State right of way, impact fees, and excise taxes.
Mayor McClement provided closing comments and made a commitment to be more active and make more appearances in Annapolis this year. He added that the new Board of County Commissioners’ President, Blaine Young, has made the same commitment and that they will be coming to the State as a joint effort. Mayor McClement then thanked the Delegation for coming.
There being no further official business, the meeting was adjourned at 4:27 p.m.