Havre de Grace leaders do not, at present, plan to make any significant changes to Mayor William T. Martin’s proposed $34.96 million budget for fiscal 2021 before voting on its adoption next month, despite concerns about how the ongoing novel coronavirus pandemic could affect the local economy and city revenues.
City Council President David Glenn anticipates introducing the annual budget ordinance at the next council meeting on Monday, June 1 and finalizing it at the next meeting on June 15, he said. The budget must be adopted before the next fiscal year begins July 1.
A review of the budget, based on available revenues, could happen in the fall, according to Glenn.
“Once we get additional information, we’ll take another look at it,” Glenn said
Martin introduced his proposed budget to the council March 16, the eve of when many businesses across Maryland and the nation shut down and the majority of people began “social distancing,” or remaining at home to slow the spread of the virus.
Martin said he did not plan to increase property taxes or water and sewer rates when he introduced the budget in March. The council affirmed that commitment during its meeting May 18 when members voted 5-0 in favor of Ordinance 1033 — keeping the real property tax rate at 56.5 cents per $100 of valuation and the personal property tax rate at $1.70-and-a-half cents — as well as Ordinance 1034, which keeps the base water rate at $6.20 per 1,000 gallons and the base sewer rate at $9.30 per 1,000 gallons.
Councilman David Martin was out sick for the May 18 meeting in a continued battle with pneumonia, which also kept him from the May 4 meeting.
Councilman Jason Robertson had brought up concerns during the previous council meeting, when the rate ordinances were introduced, about how the coronavirus and the economic fallout could affect city revenues and whether tax rates should be adjusted “at a future date.”
City officials did not change tax or utility rates between the two meetings, and Robertson praised keeping them the same during discussion ahead of the council’s vote May 18. But he did warn of potential adjustments in the future.
“There may be some need to change [tax rates] and conduct a special assessment later on in the fiscal year,” he said. “I don’t see that happening at this time.”
Property tax rates have not increased at all during Robertson’s three years on the council, he noted.
“Our constant yield has actually grown within the same period of time,” Robertson said. “Part of that’s because of a very robust economy — a lot of that has to do with the real estate market here in Havre de Grace and how it’s grown.”
A number of new houses have been built in Havre de Grace over the past few years, primarily in neighborhoods on the northwest side of the city such as Scenic Manor, and several new developments are in the planning stages. Planning Director Shane Grimm talked later in the meeting about reviews by city staff and the Planning Commission of projects slated for the Blenheim Run property off of Route 40, the Green, Ianniello and Patrone tract off of Route 155 and within the Greenway Farm community near Route 40.
Home prices in Havre de Grace increased by 3.6 percent from March of 2019 to the same period this year, although they are expected to decrease by 1.9 percent over the next year, according to the Zillow real estate website.
Water and sewer capital projects
Robertson praised keeping water and sewer rates the same; Ordinance 1034 includes a quarterly service charge, starting at $30, meant to raise money for a citywide Infrastructure Reinvestment Program proposed by the mayor to repair aging water and sewer infrastructure.
The mayor has said revenue from the quarterly fee will go toward debt service, following voters’ approval of a $15 million bond referendum during a special election in February. Martin has proposed nearly $5.2 million worth of capital projects in the water and sewer fund budget, also known as Fund 9, for next year — they are more than one third of projects planned over five years, according to the mayor’s budget memorandum.
Some of the largest capital projects in Fund 9 include $850,000 to upgrade the solids handling facility behind the municipal water treatment plant, $781,900 for water line upgrades and more than $1.3 million to replace the sewer line along Commerce Street, according to the budget.
City officials agreed that, with voters’ support in the special election, “we would not need to raise rates in FY2021, due to the ability to use debt service to pay for capital projects moving forward,” Robertson said.
City leaders expect to go to the bond market in mid-July, city Finance Director George DeHority said during a budget work session preceding the council meeting. Councilwoman Casi Boyer asked about the timeline, noting “extremely favorable” interest rates.
DeHority acknowledged the “terrifically favorable” rates Harford County received during its annual bond sale in late April, although he noted that rates are “in a very volatile position,” as of the council meeting. The city plans to sell its bonds through the state, taking advantage of Maryland’s AAA bond rating, which DeHority expects to help Havre de Grace get a better rate compared to the city selling bonds on its own.
State officials believe, by the end of July, that rates “will have calmed down and be more normal,” DeHority said.
“Virtually the entire Fund 9 capital project list is to be covered by the upcoming bond,” he said.
Possible budget adjustments
Robertson brought up, during the work session, his concerns about the pandemic’s impact on local revenues and whether the city should adjust its budget ahead of the next fiscal year.
DeHority said adjustments could be made by taking the final stages of capital projects slated to be completed in fiscal 2020 and moving that portion of funding into next year, as work on such projects has slowed down due to the pandemic.
DeHority noted that it would be better to make such adjustments around the start of the next fiscal year so officials can have a more accurate picture of where capital projects stand as of the end of the current fiscal year on June 30. Robertson had suggested making adjustments sooner since “we have a good understanding now — this is the end of May — of what projects are likely to not be done within the next month, right?”
“If we do it now we can get close, provided nothing strange happens, but you’ll likely still have to do another [adjustment] anyway, simply because maybe you guessed it off by $50,000 [from] where you were at the end of the year,” DeHority said.
City leaders acknowledged potential financial challenges coming next year because of the coronavirus, with DeHority suggesting that fiscal 2021 “will probably be a very busy budget amendment year.”
“Once we get through COVID-19, and we start getting back to some type of normalcy, it’s going to be very important for us to pull together supporting documentation that really helps us identify the path forward,” Glenn said.