Annapolis under Mayor Mike Pantelides projected turnover among city employees that unrealistically lowered expenses by millions of dollars over his four years in office.
Ending that accounting technique is one reason Mayor Gavin Buckley proposed a 13 cent property tax increase in his first budget, a $120 million blueprint for the upcoming fiscal year, marking a 20 percent increase in the rate.
Instead of cutting jobs, the Pantelides administration proposed and the City Council approved projected turnover among city employees in fiscal years 2015, 2016 and 2017 that never fully materialized.
Savings in payroll and benefits that did take place when employees left were wiped out by overtime expenses for unfilled shifts, City Manager Teresa Sutherland said. About $1.2 million of turnover, called attrition, was budgeted for the current year.
The Buckley administration pointed to these unrealistic attrition figures as The Capital has worked to explain expenses covered by the $10.6 million in additional revenue sought by the mayor, poring over line item expenses and revenues, scrutinizing department requests and listening to weeks of City Council analysis during Finance Committee meetings.
“To balance the budget every year for the last several years, the city would get to its budget and say, ‘I’ve got to cut $1.2 million. What am I going to do? OK, I’m just going to put attrition,’ ” Sutherland said. “It’s not even a guess. It’s a budget plug.”
Pantelides, who has criticized the proposed tax increase, refuted the idea that attrition projections were used as a “plug.”
“We didn’t just pull the number out of thin air,” he said. “We figured out what the actual attrition was and did it that way.”
Initially, the city had an idea of which positions would become vacant due to retirement, and most departments budgeted to their attrition figures. But as time went on, the attrition number was not at the forefront of budget discussions, Pantelides said.
“In a total budget of $107 million, it was never a huge number."
And the $1.2 million is just part of the rationale behind Buckley’s property tax increase. The increased revenue isn’t just from taxes, either. The city has also budgeted for about $3 million more from other sources, such as increased property valuations.
The Finance Committee and Financial Advisory Commission will continue to discuss the budget in the coming weeks, and the Finance Committee will report their findings to the full council by May 14. The commission does not have a deadline but usually reports its findings before the first public hearing on the budget, set this year during the City Council meeting on May 14.
Finance Committee Chairman Ross Arnett has said he does not support the budget as it is currently proposed. Members Sheila Finlayson and Marc Rodriguez said they are still scrutinizing proposals for additional employee positions and individual department asks.
“No one feels comfortable about such a high tax increase, especially without talking about cuts,” Rodriguez said. “There are tough conversations we still have to go into. Next week we’ll start into more detail what we feel we can justify within this budget in terms of enhancements.”
Sutherland said this budget more accurately reflects the money Annapolis is taking in for its services. For example, the city has budgeted increased revenues in charges for service. This does not reflect increased rates, but rather a more accurate accounting of the money the city actually makes from things like zoning and permitting fees and ambulance rides.
And the proposed budget won’t include large attrition figures in the same way the budget did under Pantelides.
In both the current fiscal year and the year that ended in June 2017, the city budgeted $570,000 for attrition among police officers and civilian personnel, $650,000 in the Annapolis Fire Department and $99,846 in the Department of Public Works.
This projection first appeared in FY15, when Department of Parks and Recreation Director Brian Woodward served as acting city manager for most of the budget process. The final spending plan included about $1.3 million of attrition, which has fluctuated in the following years. The reasoning included in the Finance Committee’s revised FY15 budget? “Increase attrition rather than reduction in current staffing.”
Former alderman Ian Pfeiffer, Finance Committee chairman between 2014 and 2017, said the political will did not exist in 2014 to cut services and positions. Woodward, a longtime government employee, drew on his experience in government and suggested budgeted attrition as a way to account for the turnover that occurs naturally within departments, Pfeiffer said.
Most city departments do have some yearly attrition when employees retire and new hires start at a lower salary. Buckley’s budget maintains some for fire as well as other departments.
But any attrition occurring in police and fire has been mostly offset by growing overtime expenses. In FY17, all three departments — police, fire and public works — exceeded their total authorized budgets of $354,065, $554,800 and $63,790 respectively, even after taking into account budgetary transfers.
Past overspending by police and fire departments also is dealt with by Buckley’s proposed budget, as are pensions, retirement benefits, debt service and other obligations.
Police and fire overspent their allotted overtime budget in FY17 by about $719,000. When people leave the departments, or positions remain unfilled, both police and fire have to cover those shifts with overtime work, officials said.
The city has not been contributing the full amount it should be to the police and fire pension funds — in FY17 the city contributed about 18 percent of the fund and had a $23 million liability.
In Buckley's budget, Annapolis would increase its contribution by $490,000 to bring the city contribution to 20.3 percent, the full amount set by calculations on how much money is needed to keep the funds healthy.
Similarly, the city will contribute $300,000 more toward post-employment benefits for other city employees and chip away at a liability that stands at about $49 million.
The city also has unfunded personnel costs in the form of “use or lose” annual leave.
Certain retiring employees can claim their unused annual leave as a payout to a special expense account when they leave service with the city, but so far the government has not actually budgeted this expense. The city will contribute $275,000 toward this leave.
The city will contribute about $2 million more toward debt payments and about $1 million more toward increasing health insurance costs for employees. There is also $938,339 budgeted for increased costs associated with contract negotiations with police and fire unions, which are ongoing.
Then there are street and sidewalk repairs.
Previously, the city took out bonds to buy vehicles and make repairs to facilities, roads and sidewalks, spreading out the costs over several years and accruing interest. No more under Buckley’s proposal.
The proposed FY19 budget includes about $3.3 million toward regular repair and maintenance for the facilities, roads and sidewalks and to replace failing vehicles. The mayor and council members have argued the city ended up paying twice as much after interest for projects that occur routinely.
The tax increase isn’t all about past imbalances in expenses and revenues. There’s also money to cover requests from 10 city departments.
Every budget cycle, each department director within Annapolis government makes individual requests called “enhancements” for various additional expenses they want funded.
The mayor can choose to approve or deny an enhancement, but as with anything in the mayor’s proposed budget, the City Council Finance Committee can make adjustments.
Buckley initially approved $481,608 toward new positions in his office, the Department of Information Technology, the Department of Human Resources, and the Department of Planning and Zoning. He approved $1,147,881 in nonpersonnel enhancements, which cover everything from copier expenses to emergency medical services supplies to cardio and weight room maintenance in the Roger W. “Pip” Moyer Community Recreation Center.
The Finance Committee has been discussing these enhancements over three weeks of meetings and will decide on each request before submitting its report on May 14.
So far, Alderwoman Sheila Finlayson, D-Ward 4, has been making the case for personnel enhancements in departments that had previously seen cuts but are now overwhelmed with work. Alderman Ross Arnett, D-Ward 7, has been a harder sell on new positions.
Alderman Marc Rodriguez, the Ward 5 Democrat who is new to the budget process, has been quiet during most of the meetings but has advocated for enhancements in the parks and rec department. He believes extended hours at the Moyer center should be a priority, as they align with the mayor’s goal to engage young people.
Where are the cuts?
The city has budgeted for $650,993 of reductions in general fund expenses, but Sutherland and the Finance Committee are still searching for efficiencies within departmental budgets.
Arnett, Finlayson and Rodriguez have so far singled out expenses surrounding special events as a way to rein in some money that previously went uncounted. The police and fire departments often have to staff special events, ranging from protests to sports and entertainment events to elections, which can cost upward of $25,000 depending on the level of security needed.
Often, the city either waives associated fees or the department does not receive full compensation for the cost of the event. The Military Bowl played between the Naval Academy and the University of Virginia in December cost the fire department about $30,000, though the city received about $4,000 in reimbursement.
“These are for-profit events that are ticketed,” Rodriguez said. “I would understand if they were nonprofit, or some sort of cultural event, but this is reaching a small target of the community and costing literally tens of thousands of dollars.”
Finlayson said as she mulls over what cuts need to be made, she has concerns about the level of staffing in certain departments.
“Our residents expect a certain level of service,” Finlayson said. “You can’t eliminate an employee without eliminating a service. When people tell me we should be reducing staff, I say what services do we eliminate?”
Arnett, the committee chairman, said as of now he is a “no” on the mayor’s budget. He has repeated during the committee meetings he will not agree to the full tax increase without budget cuts elsewhere. He also advocated for creating a lockbox to ensure funds allocated for road and sidewalk repair are used for their intended purpose.
He is working with former political rival Julie Mussog, chief executive of the Anne Arundel Economic Development Corporation, to analyze the budget. During the November City Council election, Mussog campaigned partially on finding creative efficiencies in the city budget.
The Finance Committee will meet four times next week, hoping to finalize its findings starting at 10 a.m. Friday.