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Baltimore budget boosted by pandemic recovery, but staffing shortages have meant more overtime costs

Baltimore’s pandemic-rattled budget has shown small signs of recovery in the first months of the 2022 fiscal year, including higher-than-expected hotel occupancy rates, city finance officials report, but coronavirus-related staffing shortages continue to hurt the city’s financial picture.

Baltimore finished the first quarter of the 2022 fiscal year with a nearly $60 million surplus compared with budgeted figures for the period, Budget Director Bob Cenname told Baltimore City Council’s Ways and Means Committee.

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That $4.3 billion budget for 2022 was based on conservative projections as the city continues to recover from the coronavirus pandemic. Parking and hotel tax revenue have been hit particularly hard during the pandemic as former commuters have worked from home and tourists have shied away from travel.

City officials saw better than expected income tax revenue from July through September and strong collections of recordation and transfer taxes — a reflection of the continued strength of the real estate market. A $13 million surplus was seen in the collection of other local taxes, which officials believe is from businesses that are paying down on taxes due the prior year.

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Speed and red light camera revenue was also stronger than expected with a $6.9 million surplus. The cameras have proved to be a strong revenue source throughout the pandemic as drivers have grown more reckless with fewer cars on the road, city officials said.

Officials anticipated a small improvement in driver behavior as children headed back to city schools, Cenname said last Tuesday, but that didn’t happen.

Hotel tax revenue, one of the areas hardest hit during the pandemic, also slightly beat expectations, Cenname said. A 51% occupancy rate was anticipated for the entire 2022 fiscal year — rates fell into the teens during the height of the pandemic — but city hotels reached 52% occupancy during the first quarter, which reaped a $3 million surplus.

“The fact that we’re already at 52% in the first quarter lends some hope we’ll continue to see improvement in the year,” Cenname said.

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Higher-than-anticipated revenue for the first quarter helped offset a $3.5 million overage in expenditures for the same period. Some of the city’s front-line departments, including police, health and public works, have faced significant staff vacancies as the pandemic wears on, Cenname said. That has caused unanticipated overtime costs.

In the Office of the State’s Attorney, city officials agreed to increase salaries in exchange for eliminating positions. And the city’s newly signed contract with the Fraternal Order of Police calls for increased salaries for new hires to be offset by cost savings elsewhere in the Baltimore Police Department, Cenname said.

Democratic Council Vice President Sharon Green Middleton noted that nearly 100 positions in the Department of Public Works are vacant, calling it an “emergency.”

“These are, I’m sure, positions that have benefits and are careers and are probably mostly in sanitation, which is a dire need for our city,” she said.

Cenname said it has been a “struggle” to hire during the pandemic. The city has relied in some cases on contracts with private groups to help with trash and recycling collection during the staffing shortage.

“I still think it’s a cheaper way to train and try to get people in these jobs than to contract out,” Middleton said.

Democratic Councilwoman Odette Ramos asked whether across-the-board salary increases for city employees have been considered. The announcement of the finalized police contract depressed morale among other city employees, she said.

“We’re not really considering our $13-an-hour garbage persons. We’re not considering some of the people who have been working ridiculous hours and not getting that compensation,” Ramos said. “Sure, they’re allowed overtime. That doesn’t actually solve the problem in terms of being able to recruit people and being able to retain people.”

Cenname said the police were a “good model” for other agencies because they suggested cuts to operations that could be made in exchange for the pay increases for certain officers.

“What we try to stress with agencies is that you can’t just ask for pay increases because we can’t afford it,” he said “We have a budget, and we can’t just bump up salaries unless we choose something else that goes away.”

Cenname cautioned that there are several financial uncertainties for the rest of the 2022 fiscal year. Two police helicopters will need to be decommissioned by the end of the 2022 calendar year and replaced. Depending on the cost, that could wipe out a $2 million first-quarter surplus.

City finance officials are also closely monitoring the city’s mandatory COVID testing program for employees who refuse to submit their vaccination status to the city. Currently, more than 20 testing sites are open across the city to test employees and Cenname expects to use federal funding to help pay for the testing.

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