Mayor and Council



   For the meeting on:

  February 10, 2014
   Department:   Finance
   Responsible staff:  Stacey Webster, Budget and Finance Manager
  phone: (240) 314 - 8407
  SWebster@rockvillemd.gov


Subject
FY 2015 Budget Preview

Recommendation
Staff recommends that the Mayor and Council receive the FY 2015 Budget Preview and offer input and direction to staff to further guide the preparation of the FY 2015 Proposed Operating and Capital Improvement Program (CIP) budgets.

Discussion
On February 10, 2014, the Mayor and Council will hold a third discussion concerning the FY 2015 Operating and Capital Improvements Program budgets. At the first budget meeting on December 9, 2013, staff presented information on each of the City's operating funds. One week later, the Mayor and Council discussed the completion of a general budget survey for FY 2015 and directed staff to research several areas of interest for possible funding in FY 2015.

This agenda item is divided into four sections: Operating and Capital Improvements Program updates, Mayor and Council survey results, follow-up to Mayor and Council requests for information, and outstanding items.

OPERATING BUDGET UPDATES

Property Tax Revenue
Real property tax revenue is currently estimated to increase from the FY 2014 adopted budget by approximately 2 percent, or $640,000. This estimate is based on the actual property tax valuation report received as of the end of January 2014. The revenue increase is a result of higher assessments from the January 2013 cycle and new properties being added to the tax roll, offset by decreases in assessments due to successful appeals.

FY 2015 marks the first year that the Woodmont Country Club will move to Tax Class 50. Tax Class 50 is the regular tax class for all residential and commercial properties in the City. The tax rate for Tax Class 50 is $0.292 per $100 of assessed valuation. Over 99 percent of all Rockville properties are in Tax Class 50. Woodmont was previously in Tax Class 4 (a special tax class with a reduced rate) due to a 50 year annexation agreement that expires in April 2014. The projected increase in property tax revenues from the Woodmont property equals approximately $35,000. Several properties in the King Farm area remain in Tax Class 4 based on a 20 year annexation agreement; however, they will move to Tax Class 50 starting in FY 2016.

User Fees and Charges Revenue
For the FY 2015 budget, there will be no recommended changes to user fees and charges for the Police Department, Department of Public Works, or the Department of Community Planning and Development Services. The Department of Recreation and Parks will recommend that some fees be updated with the goal of improving cost recovery while maintaining competitiveness with the market. One of the more notable recommended changes is to increase the Senior Fitness Center membership fee from $75 to $85, which will generate an estimated increase in revenue of $6,000. The proposed increase in the membership fee will generate additional revenue to partially offset the increased operating cost of the new facility and to increase overall cost recovery. Staff will discuss this change with the Senior Citizens Commission on February 20, 2014. Staff will also ask Rockville Seniors Incorporated (RSI) to increase its operating contribution of $20,000 to help offset some of the increased expenses related to the new facility.

One-Time Employee Compensation
In the December 9th budget preview agenda item, staff noted that, "In addition to the 2 percent COLA for FY 2015, the City Manager will recommend one-time performance-based compensation for all regular employees who meet certain performance criteria on their annual performance evaluations." The City Manager's current recommendation is to approve one-time performance compensation for high performing employees. This would be administered using the current employee performance evaluation system, which has two categories for high performing employees. The details of the program are still being worked out, but the cost is estimated at $500,000, of which $400,000 would impact the General Fund.

New Consultant Studies
The City Manager will recommend funding for three major consultant studies in FY 2015. These include $75,000 for an Americans with Disabilities Act (ADA) assessment study, $50,000 for a new Cost Allocation Plan (CAP), and $100,000 for the Phase II study of the countywide plan to implement Bus Rapid Transit (BRT). More information on each of these studies is described below.

ADA Assessment Study - The ADA assessment study of all City buildings and parks is being recommended in response to the 2010 ADA law, which expanded the 1990 ADA law to include parks and recreation areas. This assessment will identify deficiencies and the projected cost of addressing those deficiencies; a prioritized list of projects required for the City to comply with the law will be developed. Upon completion and acceptance of the assessment study by the City, staff will include funding in the FY 2016 budget and beyond to address the deficiencies identified in the study.

CAP Study - The City last updated the CAP in 2009/2010, which was implemented starting in FY 2011. The CAP is the basis for the administrative charges that the City's other funds pay to the General Fund for overhead costs. The purpose of the CAP is to establish a rational and consistent methodology for identifying and allocating indirect costs to direct cost programs. It is a common and transparent method of identifying all City overhead costs for appropriate allocation. For example, the Water Fund pays an administrative charge to the General Fund for the overhead costs or general services it receives, such as payroll, accounts payable, information technology support, and human resources support. If the Water Fund did not pay this administrative charge, then all Rockville taxpayers would be supporting the Water Fund, even though the City only provides water services to 70% of the community.

The model developed for the last CAP was static and has become outdated due to the significant changes that the City has undergone. These changes include the outsourcing of the golf course and parking garages, the closing of the Town Center Management District Fund, and the elimination of a significant number of staff positions. Administrative charges are the General Fund's third largest revenue source in FY 2014, bringing in $3.6 million.

BRT Study - The plan to implement Bus Rapid Transit (BRT) routes throughout the County will have a significant impact on the City of Rockville, especially in the Town Center area where three routes are proposed to converge. Major investment in BRT, if not planned, coordinated and implemented properly, could have serious impacts on pedestrian and traffic circulation into and around Town Center and the adjoining neighborhoods. To ensure the City's needs and preferences are included in the BRT design, the City must prepare in advance. A Phase I study will be conducted this fiscal year (FY 2014) during which preliminary issues will be identified, including exploring constraints and limitations in the area around the Metro Station and Town Center.

The recommended Phase II of the study will include the following: development of a preliminary conceptual design that describes ideas the City may want to propose to the agency leading the design (County or State); description of benefits and identifying areas of concern that may need to be addressed in future design work; identifying preliminary right-of-way and utility challenges; and identifying pedestrian and other improvements needed to enhance and implement the overall project. The results of both Phase I and Phase II will help inform the review of the concept for this area that is contained within the adopted Town Center Master Plan, and, in turn, will provide the City's design needs to the County and State.

Security System Replacement
The FY 2015 recommended budget will include approximately $153,000 for the scheduled replacement of existing (10+ years old) major security and surveillance equipment components at municipal facilities. The original purchase of the City's security system was made in the 1990s, with funding provided by a Community Oriented Policing Services (COPS) technology grant. The equipment proposed for replacement is primarily digital video recorders and access lock control panels. Ensuring that City facilities are safe and secure is an essential part of providing high quality municipal services.

Additional Tree Pruning
The FY 2015 recommended budget will include an additional $80,000 for tree pruning. As described under the follow-up section of this agenda item, if the Mayor and Council would like to achieve a tree pruning cycle of 10 years, staff recommends incremental increases in funding over the next six years until the optimal 10 year pruning cycle is achieved. In order to achieve a 10 year pruning cycle, the City Manager will recommend an additional $80,000 for FY 2015, plus an additional $47,000 per year over the next five years (FY 2016 – FY 2020). This includes funding for contract pruning and for a contract inspector to help manage the increased workload.

Civic Center Park Cleanup
The FY 2015 recommended budget will include $85,000 for cleanup of a specific section of Civic Center Park. During the 1970s and 1980s, the area behind the Recreation Services complex at the Rockville Civic Center Park was used as a dump/disposal site for City operations. This location is adjacent to Croydon Creek and within the stream buffer. Debris located within the site includes tires, engine blocks, a steel bridge, golf carts, concrete, plastic, etc. The proposed allocation of $85,000 would fund the removal of debris by a licensed contractor, stabilization of the slope and reforestation of the impacted area. This project is recommended to be funded with $50,000 from the Park Maintenance Fund (special revenue account) and $35,000 from the General Fund.

Beall-Dawson House Re-Pointing
The FY 2015 recommended budget will include $92,000 for the re-pointing/replacement of deteriorated mortar between bricks on the exterior of the Beall-Dawson House. The Beall-Dawson House is a historic property (constructed in 1845) which is leased to the Montgomery County Historical Trust. Deterioration and crumbling of mortar is occurring throughout the exterior of the building. There are two primary purposes of mortar--to hold the brick together and to prevent moisture penetration. Continued deterioration has the potential to lead to water infiltration into the building and minor failure to the stability of bricks. Over the next several months, staff will pursue the possibility of grant funding for all or a portion of these repairs.

Swim and Fitness Center Repairs
The FY 2015 recommended budget will include an additional $15,000 for ongoing Swim and Fitness Center repairs. In addition to this $15,000, the City Manager approved one-time funding of $43,000 in FY 2014 for certain repairs and purchases. Equipment maintenance, repairs and purchases have been deferred in past years in order to fund emergency repairs at the facility. The FY 2014 and FY 2015 funding will help repair equipment that is out of service (UV system), replace aged equipment that is showing signs of deterioration (Fitness Pool strainer basket and re-caulking) and enhance safety at the facility (chemical automation, water slide/diving board maintenance).

Painting of City Facilities
The FY 2015 recommended budget will include an additional $32,000 to fund contract services to paint entire facilities on an annual schedule, based on condition of the facilities. Increased service calls at other facilities have prevented or delayed systematic facility painting. In-house painting services have been limited to touch-ups and area painting, with larger jobs contracted out if funding is available. The recommended funding would provide for the painting of the Recreation Services building, the Public Works building at Gude, the Social Hall and the F. Scott Fitzgerald Theatre. Funding will be needed on an ongoing basis to maintain additional facilities as conditions dictate.

Maryland Women's Business Center Grant
The FY 2015 recommended budget will include $10,000 for the Maryland Women's Business Center. In 2010, Rockville Economic Development, Inc. (REDI) initiated the Maryland Women's Business Center (MWBC) program to provide direct services to women-owned small and start-up businesses in Rockville and Montgomery County. The Mayor and Council have provided $10,000 in funding support in both 2011 and 2012. In September 2013, the MWBC was awarded a Federal grant for five years. The grant funding requires local matching dollars to demonstrate local support for the program. The MWBC currently receives a total of $95,000 annually from Montgomery County ($70,000 for program support and $25,000 for a child care initiative), and has requested $10,000 from the City of Rockville. City staff will work with MWBC to develop grant criteria to ensure that the MWBC is serving the needs of the Rockville community.

Rockville Rewards Program Grant
The FY 2015 recommended budget will include $20,000 for the Rockville Rewards Program. The City has funded this program for several years, including $20,000 in the current FY 2014 budget. The program is managed by the Rockville Chamber of Commerce and is designed to support local businesses, while helping to raise money for local charities, schools and non-profit organizations. City staff will work with the Chamber of Commerce to develop a reporting mechanism to ensure that the Rewards Program is supporting Rockville's local businesses and Rockville's charities and non-profit organizations.

CAPITAL IMPROVEMENTS PROGRAM UPDATES

The City Manager's recommended budget will reflect several significant changes to the Capital Improvements Program (CIP). These changes include the following: moving one project to the operating budget; increasing the FY 2017 bond issue for the West End Park Noise Barrier; increasing funding for the Bridge Rehabilitation project and adding a FY 2015 and FY 2019 bond issue to fund bridge repair work; and reducing funding for the Water Main Rehabilitation project. Four new CIP projects have been added as well.

CIP Project to Operating Budget
The City Manager will recommend moving one current CIP project, Athletic Courts Repair/Replacement, to the operating budget starting in FY 2015. This project is in the Recreation and Parks program area, and focuses on scheduled preventative maintenance, replacements based on a five-year plan, and as needed repairs. Staff recommends moving this project because it is more consistent with general operating costs of the parks and facilities, and less consistent with major capital repair and replacement. Approximately $170,000 will be removed from the CIP budget and added to the FY 2015 operating budget as a result of this change.

West End Park Noise Barrier
The City Manager will recommend increasing the FY 2017 bond issue amount due to an increase in design and construction costs for the West End Park Noise Barrier. The Mayor and Council previously approved this project with a budget of $884,350. Since that time, the City has been notified by the State Highway Administration that the project will cost $1,097,495. If the Mayor and Council would like to continue to fund the West End Park Noise Barrier project, the City Manager recommends increasing the FY 2017 bond issue amount to compensate for the additional $215,000 in design and construction costs. Staff encourages the Mayor and Council to keep in mind that, until this project is under construction, additional resources beyond the $1.1 million may be required.

Bridge Rehabilitation
The Bridge Rehabilitation project has increased by a total of $3.5 million to address concerns that were identified in the most recent bridge inspection reports. Major bridges scheduled for repair include Edmonston Drive and Hurley Avenue. Staff recommends issuing bonds in FY 2015 for $1.1 million and in FY 2019 for $1.5 million to support these bridge repairs. If the City receives the additional $1.1 million in one-time Highway User Funds (HUR) from the State in FY 2015 as proposed in the Governor's budget, staff will recommend using those additional HUR monies for bridge work and eliminating the FY 2015 bond issue.

Water Main Rehabilitation
A reduction in funding for the Water Main Rehabilitation project is being recommended in order to help the Water Fund's financial position. This change will not have a dramatic impact on the repair and replacement cycle and will help the fund obtain a positive cash position over the next ten years. As of June 30, 2013, the Water Fund had a negative cash balance of $5.5 million. In addition to scaling back this CIP project, the City is in the process of hiring a consultant to evaluate the City's water rates and rate structure as authorized by the Mayor and Council in the FY 2014 budget. This evaluation will take place during calendar 2014; any changes resulting from it would be implemented starting with the FY 2016 budget.

New CIP Projects
New projects that will be recommended in the FY 2015 - 2019 CIP include:

Horizon Hill Park Improvements (amount of funding to be determined). This project funds improvements to Horizon Hill Park and is a companion project to the Horizon Hill SWM Pond project (330-850-2C59). Staff will work closely with the community to design park amenities considered to be appropriate for the linear nature of Horizon Hill Park. Possible amenities may include replacement of three playground surfaces with poured in place rubber, interpretive signs, fitness clusters, a pond overlook and additional park paths.

Lotus Notes Migration ($750,000 funded by Capital Projects Fund in FY 2015). This project funds the migration from Lotus Notes to a cost effective email system that better meets the City’s needs. Staff is in the final stages of an assessment of potential systems that will provide email and calendaring tools, as well as replace the custom Notes-based applications currently in use across multiple City departments. The investment in the migration will result in better technology, increased efficiency, and lower operating costs. The system will integrate seamlessly with the City’s network infrastructure and business product suites, and will be consistent with the City’s internal information technology organization and skills. Additional information will be provided in the CIP project sheet as plans for the full migration proceed this winter and spring.

I-Net Infrastructure Upgrade ($543,230 funded by Special Activities Fund in FY 2015). This project funds improvements to Rockville’s core network infrastructure that are identified in the City’s FY 2012 through FY 2016 IT Strategic Plan.

The City’s core network infrastructure needs immediate attention to ensure reliable operations. Cisco Catalyst switches are at the heart of the network infrastructure and provide Ethernet connectivity for the City's local area network and wide area network environments. These switches are at least 14 years old and have never received updates. They have surpassed their useful life and are no longer supported by the manufacturer. Maintaining the switches is extremely expensive, and failure of any one of them will significantly impact the business and operations of the City.

The new switches will provide ten times the City's current network bandwidth (1GbE to 10GbE) and support its high-bandwidth mission, critical virtualized servers’ migration, management, backup and storage connections. This improvement will result in reduced operating and capital expenses. It will also ensure that the City is prepared to implement other important technology initiatives. The long-term goal is to reduce server inventory, reduce maintenance overhead, better utilize servers and manage resources more efficiently.

City Hall Window Replacement (currently unfunded in FY 2016 and FY 2017). This project includes the replacement of all exterior single pane windows (installed in the late 1970s) with double pane tinted thermal windows. The City's current single pane windows are drafty and inefficient. Replacing these windows will reduce the City's carbon footprint.

MAYOR AND COUNCIL SURVEY RESULTS

Each member of the elected body was asked to fill out a general survey on the FY 2015 budget. The survey focused on main policy areas, and the results have been used to help build the City Manager's recommended budget. The survey questions and results are summarized below. Each "x" represents the individual rating of a member of the Mayor and Council.

Strongly Disagree
Disagree
No
Opinion
Agree
Strongly
Agree
1
Maintain the Real Property Tax Rate
x
xxxx
2
Maintain the Personal Property Tax Rate
of $0.805 and maintain current exemptions
x
xx
xx
3
Offer the current Homeowners' Tax Credit Program
xxxxx
4
Assume Fees and Charges on discretionary
programs will be adjusted in accordance with
achieving cost recovery goals
x
xx
xx
5
Increase annual Employee Compensation
by a 2.0% cost of living adjustment
xxx
xx
6
Provide one-time performance pay to regular employees
who meet certain criteria on their annual reviews
xx
xxx
7
Maintain current Employee Benefits
xx
xxx
8
Transfer sufficient funding to the City's Capital
Projects Fund to support the current 5-year CIP
x
xxxx
9*
Issue new general debt
x
x
xx
10 Maintain the following program and service areas
10a
Arts and Special Events
x
xxxx
10b
City Communication and Outreach
xxx
xx
10c
City Forest and Tree Services
xxx
xx
10d
Mayor and Council Support Services
xx
xxx
10e
City Parks and Open Space
xxx
xx
10f
Employee Relations, Benefit Administration
and Development
xxx
xx
10g
Engineering, Design and Construction Services
xxxx
x
10h
Financial Management and Budgeting Services
xxxx
x
10i
Information Technology Systems and
Telephone Services
xx
xxx
10j
Inspection Service
xxxxx
10k
Public and Community Recreation Facilities
xxx
xx
10l
Outside Agency Grants
xxxx
x
10m
Planning and Zoning Services
xxxx
x
10n
Police Services
x
xxxx
10o
Recreation Programs
xxxx
x
10p
Roads, Sidewalks and Traffic Services
xxx
xx
10q
Senior Citizen Services
xx
xxx
10r
Social Services
xxxx
x
10s
Neighborhood Services
xxx
xx
10t
Environmental Management
xxxxx
* One person did not answer, but noted "would consider issuing debt in advance of projects to capture low interest rates."

FOLLOW-UP TO MAYOR AND COUNCIL REQUESTS FOR INFORMATION

There were additional items mentioned on the surveys and during the December 16 Mayor and Council discussion of the FY 2015 budget . The next section of this agenda item provides more detail on those requests that a majority of the Mayor and Council expressed interest in.

What is the cost and viability of a pilot compost program?
Food composting is the next major opportunity that the City will have to reduce the amount of material discarded as refuse and to increase the amount of material reused or recycled. In the next few weeks, the Maryland Department of the Environment (MDE) intends to publish draft rules on composting, including food composting, for public comment. The agency hopes to issue final rules on this subject by the end of calendar year 2014.

At the present time, staff does not believe that food waste composting is viable or cost effective. While several food composting facilities exist in the region, none are currently located within a reasonable distance to Rockville. Howard County has a large pilot program underway that collects and commingles food waste with yard waste and composts them together at a County owned facility. The City of Takoma Park has a pilot food waste collection for 1,000 homes that generates 4 tons per week. This material is taken to a Waste Management transfer facility in Jessup, Maryland from which it is taken to a composting facility in Delaware. Waste Management charges Takoma Park $72 per ton for this service (approximately $288 per week). In addition to a similar tipping fee, Rockville's costs for a similar pilot will include the cost of purchasing and distributing food waste containers, additional staff time to collect this material and the additional fuel needed to transport the food waste. Another option may be a new composting facility being built in Prince George's County, but that facility is not scheduled to open until sometime in 2015. Staff expects more facilities to become available once the MDE rules are in place.

Staff recommends continuing to monitor opportunities to engage in food waste composting, and will closely review the draft rules on composting published by MDE. Staff will also periodically check in with Montgomery County as it debates whether to construct its own food waste transfer or compost facility. Staff will also monitor the pilot programs in Howard County and Takoma Park for updates on their lessons learned.

What is the need and cost of additional Police Officers?
The Rockville City Police Department (RCPD) currently has 59 sworn officer positions, 2 of which were added in FY 2014. The City's full-time officer to resident ratio is lower than the national average, coming in at less than one officer per 1,000 residents. For the City of Rockville, there are a number of variables that drive police staffing, one of which is the City's somewhat unique hybrid service arrangement with the County. Factoring in some level of County Police presence in the City, staff recommends, as a long-term goal, adding officers until the City achieves approximately 1.1 officers per 1,000 residents or 69 officers.

Due to the limited number of certified field training officers, new officers must be brought on gradually, or no more than four per year. It takes approximately 13 to 14 months to put a fully functional officer on the street. As new officers are hired, they will be assigned to uniform patrol, which is the core mission of the RCPD. Currently, the RCPD handles approximately 73 percent of patrol calls for service. At a staffing level of 69 officers, the RCPD would expect to handle 85 to 95 percent of these calls.

The cost of each new officer is approximately $120,000. This figure includes salary and benefits, equipment, and a vehicle. Staff does not recommend adding any additional officers at this time due to other service needs, limited funding, and the lack of a municipal tax duplication payment from the County for the police services currently provided by the City.

What is the need and cost of additional tree trimming?
Total FY 2014 funding for tree care services, which includes pruning and removals, is $438,920. Assuming that $236,000 is spent on pruning each year, the City's estimated pruning cycle is 19 years. If fewer removals are required, then more funding is available for pruning and, consequently, the pruning cycle would be reduced.

In FY 2014, an allocation of $33,000 was included as a one-time budget increase. Staff recommends that this amount be carried forward on an ongoing basis. In addition to the $33,000 in increased funding, the City Manager will recommend that an additional $47,000 be provided in the FY 2105 budget for pruning; of this amount, $7,000 would be earmarked for contract inspections to assist in managing the increased workload. This additional funding would bring the City's pruning cycle to approximately 17 years.

Ideally, trees should be pruned every 7 to 10 years to improve public safety and to minimize tree and branch failure by removing dead, dying and damaged branches or trees before they fall and potentially cause property damage. In addition, lighting and clearance above streets and sidewalks is greatly improved through regular tree maintenance.

To achieve the optimal 10-year pruning cycle, staff recommends incremental increases in funding over the next six years. In addition to the new ongoing allocation of $80,000 described above, the City Manager will recommend the appropriation of an additional $47,000 per year over the next five years (FY 2016 - FY 2020). This amount reflects funding for contract pruning and for a contract inspector to help manage the increased workload.

Are there opportunities to expand the City's child care services?
The Recreation and Parks staff is continually assessing the needs of the community and looking for opportunities to expand affordable child care services when the needs arise. After school childcare is currently offered at Twinbrook Elementary School, Twinbrook Community Recreation Center, Thomas Farm Community Center and Lincoln Park Community Center. Before school childcare is offered at Twinbrook Community Recreation Center. Over the past year the City has increased the number and capacity of after school enrichment programs at schools with the highest percentage of children on Free and Reduced Price Meal Service (FARMS). Currently there are 12 to 14 children per after school enrichment program at Meadow Hall, College Gardens, Twinbrook, and Beall elementary schools. Staff is continually evaluating these programs, and, if expansion is warranted, will expand these programs within the current budget.

Staff recommends expanding is the Lincoln Park Community Center after school program, called Clubhouse. Clubhouse currently serves 30 participants with an additional ten families interested in participating. Staff recommends increasing this program to serve 40 children, which equates to an additional estimated expense of $7,880, which is partially offset by approximately $6,650 in revenue.

Another after school program that has recently expanded is the Linkages to Learning enrichment and tutoring program at Maryvale elementary school. This program serves an average of 20 to 25 children at no cost to the participants involved in the supportive services provided by the Linkages to Learning staff members. The City operated Linkages to Learning program is grant funded. There is no need to expand the program at the present time.

Are there sufficient funds programmed for the Swim and Fitness Center project?
The Rockville Swim and Fitness Center project included in the CIP is currently funded at $5 million, which includes approximately $2.6 million in FY 2014 and an additional $2.4 million to be appropriated in FY 2017. Projects slated for FY 2014 include design and construction of the South Pool deck, HVAC system improvements, and the design, renovation and expansion of the indoor locker rooms.

As staff began working on the South Pool projects, it became apparent that a comprehensive facility assessment was needed. A facility assessment will help to quantify current conditions, develop a concept plan for renovations and provide an estimate of project costs. The comprehensive assessment will be completed in phases. Phase 1 will include South Pool Deck/HVAC improvements and indoor locker room renovation and expansion. Phase 2 would include creation of a seasonal structure for the outdoor fitness pool and modifications to the North Pool and outdoor complex. Staff is in the process of evaluating the qualifications of firms to conduct the comprehensive facility assessment and hopes to select a firm to perform the work in the near future. Staff is also working on specifications for an Owner’s Representative to act as the City’s project manager.

At this time, staff recommends that the Swim and Fitness Center Improvements CIP project budget amount remain the same until the facility assessment report mentioned above is completed. Staff will continue to move forward on the projects which are currently funded. Should the comprehensive facility assessment indicate that additional funding is needed, staff will request the same during the FY 2016 budget process.

What is the cost of reinstating merits/steps?
If a 3.5 percent step increase for regular benefitted Police scale employees and 3.25 percent step/merit increase for all other regular benefitted employees is assumed, the FY 2015 budget impact would be approximately $515,000 ($415,000 is General Fund), while the total annual impact would be approximately $1,030,000 ($830,000 attributable to the General Fund). The FY 2015 impact and the total annual impact differ because, if steps/merits were reinstated, they would be effective on the employee's anniversary date. It is important to remember that employees at the top of the scale would not be eligible for an increase and are not included in the figures above.

In lieu of steps/merits, staff recommends including one-time performance based compensation for all regular benefitted employees who fall into the top two categories on their annual performance evaluations. This one-time compensation recognizes employees for their hard work, while still maintaining a fiscally responsible compensation structure. During calendar 2014, the City will initiate a compensation and classification study; until the results of that study are known, staff does not recommend permanent compensation increases such as steps or merits.

Is it possible to link caregiver grant funding to property tax revenue or the total General Fund?
It is possible to link the total amount of caregiver grant funding to actual property tax revenues or actual General Fund revenues; however, staff does not recommend this approach. Linking the funding amount to property tax revenue would limit the Mayor and Council’s discretionary spending in the General Fund and would create a constituency for general taxpayer dollars that could become problematic for future elected officials.

Another reason that staff does not recommend this approach is because there is no nexus between the revenues generated from property tax, which make up over 60 percent of the General Fund, and the needs of caregiver agencies, which fluctuate from year to year. Staff believes that total funding should be based on caregiver needs and not predicated on an arbitrarily set formula.

If the Mayor and Council choose to link the funding amount to property tax revenues or total General Fund revenues, staff recommends including language in the Financial Management Policies. The Policies would provide direction on how to calculate the transfer amount each year based on the prior year actual revenues.

Staff encourages the Mayor and Council to keep in mind that social services are primarily the responsibility of the County. The City receives no tax duplication payment from the County for the significant amount that the City currently invests in caregiver grants and social service activities.

Are there sufficient staffing resources in historic preservation?
The FY 2014 adopted budget includes one 0.8 FTE Historic Preservation Planner. In December 2013, the 0.8 FTE Planner retired, and at that time, the entire historic preservation function was evaluated. As a result of the evaluation, the Planner FTE was increased by 25 percent to a full 1.0 FTE due to the demands of the position. This Planner position is primarily responsible for the daily operational tasks of historic preservation, such as design review, historic designations and staffing the Historic District Commission (HDC). In addition to caseload management, this Planner position collaborates with others on some major policy issues such as the historic preservation element of the Comprehensive Master Plan and discussions of future Conservation Districts.

In FY 2014, staff initiated a review of the City's various historic planning documents. This project, which is still in progress, cost approximately $20,000. The result of this project will be a recommended work program to clean up and make all of the City's historic planning documents consistent. Depending on the consultant's recommendations, there may be a need for additional resources beyond FY 2015.

For the FY 2015 budget, staff will recommend an additional $6,000 for consultant services related to historic preservation. This enhancement will allow for a consultant to provide review and analysis, including a recommendation for Certificate of Approval applications on an as-needed basis. A Certificate of Approval from the HDC is needed for exterior alterations to properties within a designated Historic District. State Code requires a processing time no longer than 45 days, or an application is deemed approved. The additional $6,000 is necessary to provide on-call services when caseload is heavy or when the Planner is needed for major preservation projects.

Staff believes that, with the above mentioned changes, additional resources for historic preservation are not needed at this time.

Describe an economic development grant program for small businesses
During the December 16, 2013 budget preview, Mayor Newton requested that the Mayor and Council consider implementing a small business grant program for $250,000. Mayor Newton also suggested that staff examine the City of Gaithersburg’s program as a model. The memo provided in Attachment A provides information about the grants available through Gaithersburg’s Economic Development Toolbox.

Gaithersburg’s goal is to provide diversified economic development incentives to existing businesses and eligible commercial spaces in the city. Six types of grants are offered: Tenant Fit Up Assistance, Job Training, Commercial Signage Assistance, Demolition Assistance, Americans with Disabilities Act (ADA) Upgrades, and Utility Upgrades. Gaithersburg has awarded 31 grants totaling $620,000 since the inception of the program. Economic Development staff estimate that the grants have brought 600 jobs to Gaithersburg. A primary program goal is to fill commercial space that has been vacant at least two years. The majority of the grants awarded to date have funded the fit out of vacant commercial space to be occupied by a business with high growth potential and well-paying jobs. The grants are not targeted to small businesses specifically; any size business may apply.

Each element of the Gaithersburg Toolbox was established to provide a specific type of assistance that benefits the city’s economic development efforts in a targeted manner. To be most effective, staff recommends that the Mayor and Council consider the specific goal(s) of any Rockville grant program and design the program accordingly. Another item to consider in the possible establishment of a business grant program is that Gaithersburg has its own internal economic development function, while the City utilizes REDI for its economic development activities.

If the Mayor and Council would like to pursue the establishment of a grant program, staff recommends that FY 2015 be a period of policy definition, with program establishment starting in FY 2016.

What are the planned IT projects for the current year and next year?
It is the goal of the Department of Information and Technology (IT) to gradually bring down costs through standardization, consolidation, virtualization and implementation of highly secure and scalable cloud technology initiatives. These initiatives will significantly reduce management and maintenance costs, and will demonstrate how IT spending contributes to value creation for the organization.

Below is a list of planned IT initiatives for FY 2014 and FY 2015.

  • Install a new fiber circuit to improve internet service and provide redundancy
  • Implement cloud-based data protection to replace costly and inefficient backup to tapes
  • Replace Help Desk application to improve Help Desk operations and customer service
  • Upgrade aged telephone system components and desk phones
  • Purchase nimble Storage Area Network (SAN) modules to provide additional 12 terabytes of space
  • Implement cloud managed enterprise Wi-Fi for employees and visitors to city facilities
  • Complete the mandatory PCI compliance re-validation to ensure the security of citizen’s information to prevent data theft, credit card fraud, lawsuits and fines
  • Begin security vulnerability and penetration testing
  • Implement a single-sign-on system to avoid multiple passwords
  • Upgrade City’s Internet Bandwidth
  • Implement a VPN Solution
  • Standardize all City hardware and software suites
  • Consolidate physical and virtual servers using Cisco Unified Computer System Blade Servers
  • Enhance data protection using encryption for hard drives and flash drive
  • Enterprise Resource Planning System CIP Project
  • I-NET Infrastructure Upgrade CIP Project (NEW for FY 2015)
  • Lotus Notes Migration CIP Project (NEW for FY 2015)

These strategic initiatives are designed to help the City obtain a better balance between spending on maintenance and focusing on innovation over time. Some of the initiatives are currently funded, while others will be included in the FY 2015 budget.

OUTSTANDING ITEMS

There are two significant items that will require direction from the Mayor and Council before the FY 2015 budget is finalized. They are the possible acquisition of 175 Watts Branch Parkway, which is owned by the County, and the future of the King Farm Farmstead.

The City has submitted a proposal to the County for the re-use of the property located at 175 Watts Branch Parkway as park land. The final disposition of the City's proposal is unknown at this time, and no funding is currently allocated for acquisition of the property.

Over the years, there has been periodic discussion of the future of the King Farm Farmstead. Currently, there is no funding planned for the significant improvements that will be required to make the property viable for re-use. The Mayor and Council will receive a briefing from staff on the King Farm Farmstead on February 10, 2014.

Mayor and Council History

Meeting Date
Agenda Item
December 9, 2013 FY 2015 Budget Preview - All Funds Overview
December 16, 2013 FY 2015 Budget Mayor and Council Discussion

Public Notification and Engagement
All information related to this budget preview is available on the City's website.

Four general budget public hearings are scheduled for March 31, April 7, April 21, and April 28, 2014. In addition to the public hearings, residents can submit written comments to the Mayor and Council through the City Clerk's Office.

Fiscal Impact
This presentation contains information that will impact the revenues and expenditures of the FY 2015 Operating and CIP budgets. Staff will incorporate any additional policy direction and/or guidance of the Mayor and Council into the City Manager's recommended budget.

Next Steps

Meeting Date
Agenda Item
March 17, 2014 Presentation of Proposed Budget, Introduction of Ordinances and Resolutions
March 31, 2014 Public Hearing #1, Mayor and Council Worksession #1,
Constant Yield Tax Rate Public Hearing
April 7, 2014 Public Hearing #2, Mayor and Council Worksession #2
April 21, 2014 Public Hearing #3, Mayor and Council Worksession #3
April 28, 2014 Public Hearing #4, Mayor and Council Worksession #4
April 29, 2014 Close of Budget Public Record
May 12, 2014 Budget Adoption

Attachments
Attachment A - Memo Describing Gaithersburg’s Economic Development Toolbox
AttachA_BusinessGrantMemo.pdfAttachA_BusinessGrantMemo.pdf


Department Head:



Gavin Cohen, Chief Financial Officer
Approved on: 02/05/2014

City Manager:

Barbara B. Matthews, City Manager
Approved on: 02/05/2014