Havre de Grace Mayor Bill Martin and the City Council agreed to institute a hiring freeze Monday and will require city employees to pay a higher percentage of their health care insurance in Fiscal Year 2016.
Bill Martin said he would issue an executive order Tuesday morning creating the hiring freeze.
Faced with an additional and unexpected $300,000 shortfall in the city's water and sewer fund, the council approved former Mayor Wayne Dougherty's proposed $14.5 million operating budget for FY 2016 with the amendment that affects city employees.
The city's real property tax rate under the new budget would stay the same, at 56 cents per $100 of assessed value, and basic water and sewer rates would likewise be unchanged; however, water and sewer customers will be required to pay a new surcharge that will be at least $100 a year for homeowners.
Besides asking employees to contribute 20 percent toward the their health care insurance premiums instead of 15 percent, the council's decision Monday also calls for the creation of the commission to study employee wages and benefits.
The council voted 5 to 1 in favor of the final budget. Councilman David Glenn, who cast the lone vote against it, also voted against the amendment, proposed by Council President Steve Gamatoria, on the hiring freeze and high health care contribution increase.
Glenn said he would prefer to keep employee health care contributions at 15 percent, as proposed by Dougherty, until the wage commission reaches a conclusion.
"Let's establish a commission and get back feedback and not put the cart before the horse," he said.
The final budget approval comes on the heels of a new quarterly surcharge the council previously agreed to impose to reduce the water and sewer debt and a recurring deficit, which is reaching more than $1 million.
The staggered surcharge would have residential and commercial water and sewer customers pay at least $25 each quarter, more depending on their water use, and is projected to generate an additional $500,000 in revenue annually.
Martin, who was elected May 5 and succeeded Dougherty on May 18, announced his plans for the surcharge the night he took office, and the council approved it on June 1.
"In my opinion, this is a year of recalibration for the city," Gamatoria said after explaining his vision for the wage commission, which he said would study the city's wage and benefit program "on a macro level" in order to help "maintain a sense of competitiveness but also one of affordability."
Cutting into employee salaries as well as making residents pay more, at least for two years until the water and sewer surcharge is re-evaluated, means "it's across-the-board pain and suffering," Gamatoria said. "I hate to be the bearer of bad news but I feel this is the direction the city needs to go."
Martin tried to reassure employees better times are ahead.
"Hang tight," he said in a message to city staff. "Everything is going to work out. We are trying to recalibrate, we are trying to get back on the right path, so work with us here."
Martin said he already promised residents the city administration and council will do their part to fix financial shortfalls.
"Just bear with us. We have got a plan," the mayor promised, saying he feels good about the wage commission because it is often hard to know how the city's wages and benefits compare to those of other municipalities.
"It's difficult sometimes to get a grasp on that, especially when you are on the legislative side," said Martin, who was a city councilman for five years before becoming mayor. "We do want to come up with the best way forward for employees."
Councilman Randy Craig said the budget and amendment are "a great attempt" to fund the city's needs, despite the pain it brings employees.
"This is going to be a challenging budget year," he said, agreeing with Gamatoria that he hopes the city can re-evaluate its financial position "and allow for a better budget year next year."
Councilman Michael Hitchings said he comes from a perspective of austerity and understands Glenn's concerns, but he believes the approach taken was "to look really hard and really deep" at the way the city spends its money.
Resident Joe Fiocchi said during the citizen comments period that "the latest buzz" suggests the council is planning improvements in the city and he hopes there would not be "pet projects" moving forward now.
"I did not realize tonight that the employees of the city would take a pay cut," Fiocchi said, adding he never saw such a cut improve morale. "I never saw any effect other than make people disgruntled."