The need to build new schools and set aside money for retired workers could force Baltimore County, some officials say, to cut spending or do something the county has avoided for more than a quarter-century: Raise taxes.
Bolstered by a new report that expresses concern about key financial indicators, elected officials from both political parties are criticizing outgoing County Executive Kevin Kamenetz for promising school construction programs that future county politicians will need to find a way to pay for.
“We’re clearly running into our credit card limit, so to speak,” said County Councilman Tom Quirk, a Democrat who heads a county committee that advises the county executive on how much to spend and how much to save in the budget. Quirk’s day job is as a financial planner in Catonsville.
The Spending Affordability Committee recently issued its annual report, which indicates the county is in danger of falling short in two areas: how much is spent paying off debt and how much is saved each year.
“The county’s financial outlook presents immense challenges that the next administration and council will be forced to address,” Quirk wrote in the report.
Quirk said the committee has asked Kamenetz for years to provide a long-term plan to pay for all of the county’s school construction projects as well as for health care for retirees, another big ticket item. But he said the committee has never received any plans.
“It’s not responsible to want to have everything and then not come up with a plan to pay for it,” Quirk said.
Kamenetz, a Democrat, is in his final year as county executive and is running for governor. He declined multiple requests for comment, but issued a statement saying that during his first seven years as executive, “my administration has submitted budgets that comply with the council’s spending affordability guidelines, while never raising the tax rates.”
Kamenetz will present his final budget, for the coming fiscal year, in mid-April.
Councilman Todd Crandell, a member of the spending committee, said the county will have to make “tough decisions” about its spending priorities.
“It’s eye-opening how far we’re pushing limits in order to build schools and air-condition schools, and we’ve been really aggressive with that,” said Crandell, a Dundalk Republican. “But as with everything, the bill comes due.”
County Councilman Wade Kach, a Cockeysville Republican, also has raised concerns about the county’s finances, questioning whether the county could afford to grant $43 million in assistance to developers of the stalled Towson Row development in December.
Council concerns intensified this month when Kamenetz promised to build a replacement for aging Dulaney High School — after years of saying the county could only afford a renovation.
All council members except Kach, who represents Dulaney, wrote a letter to Kamenetz stating concern that the cost of a new school would put the county in a “difficult financial position.” The school project “is not warranted by the fiscal realities this county faces,” the letter said.
While Kach expects Kamenetz to submit a balanced budget within spending guidelines, he added that the county needs to take a deeper look at whether taxpayer dollars are being spent efficiently. He said he has had a hard time getting information from the Kamenetz administration.
“The thing I find frustrating is getting answers to questions, like: How much did this cost? Where did the money come from?” Kach said. “You just don’t get them quickly — if at all — sometimes. That makes it very difficult to make decisions.”
The County Council has the ability to cut the budget that the executive presents to them. Kach said he’d rather see smarter spending than any discussion of tax increases.
Council Chairman Julian Jones isn’t as worried about county finances. Jones, a Woodstock Democrat, said council members will take the spending committee’s concerns under consideration when they review Kamenetz’s next budget this spring.
Throughout Kamenetz’s tenure the county has maintained AAA bond ratings — similar to an individual’s credit rating — from the three major bond rating agencies, which means the county pays low interest rates on the money it borrows for construction projects, such as new schools. Such a top bond rating also is generally considered to be a sign of sound financial practices.
Still, the affordability committee peppered its latest report with warnings, cautioning that if spending patterns don’t change, the county might face spending cuts or tax increases in the future.
County law requires it to set aside at least 5 percent of the $2 billion yearly general fund in savings, although the county aims for 10 percent to appease the ratings agencies. Projections show that at the end of the current budget year, on June 31, the county will have 8.2 percent set aside in savings.
Meanwhile, there’s also a limit on how much the county can spend each year to pay off debt for construction projects such as new schools, school renovations, and water and sewer pipe replacements.
The Spending Affordability Committee, which issued the finance report, caps debt payments at 9.5 percent of the general fund but said the county is on pace to exceed that limit by 2022. And it made that projection before Kamenetz promised to build a new Dulaney High, which would add to county debt payments.
Edwin Crawford, a retired banker and a member of the Spending Affordability Committee, said he sees “red flags sitting on the horizon.” More schools need renovation, retiree pension and health funds need money and there’s a chance of a recession in the next few years, he said.
Whether the emphasis is put on schools or retirees, the money has to come from somewhere, Crawford said. That may mean an increase in taxes.
“The next County Council and county executive are going to be walking into a decision where significant and challenging decisions will be made,” Crawford said.
The county has two options for raising taxes: the property tax rate — currently $1.10 per $100 of a property’s assessed value — or the local income tax — currently 2.86 percent.
The county’s property tax rate is much lower than neighboring Baltimore City’s $2.248, but higher than rates in other suburban counties including Anne Arundel, Howard, Carroll and Harford. Anne Arundel’s rate, for example is 90.7 cents, while Howard’s rate is $1.014.
The county’s income tax rate of 2.83 percent is lower than all surrounding jurisdictions except for Anne Arundel’s at 2.5 percent. Baltimore City and Howard County, for example, set their income tax rates at 3.2 percent, the maximum allowed by law.
Baltimore County also could follow the lead of other jurisdictions and create impact fees, typically one-time fees paid by developers when new homes are built. However, past discussions of impact fees in the county have been quickly scuttled.
Members of the County Council, meanwhile, are pushing the county executive to be more transparent about his budget. Five members are sponsoring a bill that would require the county executive to hold two public hearings before he introduces his proposed budget.
Currently the only public hearing on the budget is held by the council, after the budget is introduced by the executive and before the council votes on it. Last year, no citizens testified at that budget hearing.