Budget Description
Budget Description
Each year the Mayor is required by the Town Charter to submit a budget to the Town Council for the up-coming fiscal year. The Council must adopt the budget as an ordinance. The adopted budget authorizes the Mayor to spend Town funds up to established amounts in the various accounts described below. This procedure is called appropriation. The Mayor may not authorize expenditures that exceed appropriated amounts in any account nor spend funds for any purpose lacking an appropriation. Current and past budgets
are post on the Garrett Park web site.
There are essentially three parts to the annual budget:
Annual Operating Budget
This part of the budget sets anticipated revenues and establishes the amounts to be spent on operations and routine maintenance for a fiscal year. At the end of that fiscal year this budget “dies” and all spending authority it has granted ceases. On July 1st of each year a new budget takes over, establishing new spending authority. It is the annual operating budget that covers such revenues as local property taxes, income taxes, rents and fees received, etc.; and expenditures such as salaries, equipment operating and maintenance costs, minor repairs to buildings, roads, and sidewalks, and contracted services such as trash and leaf collection.
Debt Service
From time to time, the Town may borrow funds for large capital expenditures. Debt principal and interest are paid on an agreed-to schedule, extending over up to twenty years. While debt service is an annual appropriation, because it represents a multi-year contractual commitment by the Town, it is not considered to be the same as an annual operating expense in that it is not voluntary and, similar to a capital expenditure, it increases the Town’s net asset value
Capital Budget & Capital Program
In each annual budget there is an appropriation for capital expenditures. This spending authority is defined in a Capital Program that is adopted by the Council. Capital appropriations do not “die” at the end of the year, but continue until expended, or until they are changed by Council action. The reason for this is, of course, the multi-year nature of many capital programs. Also, capital expenditures typically increase the net asset value of the Town over an extended period of time.
Town Budget Process
In December current fiscal year revenues and expenditures are reviewed to see if adjustment to the annual budget are required. If changes are needed, they are usually discussed at the January Council meeting. An ordinance making the agreed-to changes is then introduced in the February Council meeting and adopted in the March meeting.
While reviewing the current fiscal year’s budget, estimates as to the next year’s revenues and expenditures are also developed. Town committees, residents, and Councilmembers bring forward proposals for both operating and capital expenditures. A draft budget for the up-coming fiscal year is typically presented at the February Council meeting with detailed discussion taking place at a Council Budget Workshop that usually takes place in late February. An agreed-to budget is introduced as an ordinance in the March Council meeting and adopted in the April meeting.
Tax Rates & Trash Collection Fees
Each annual budget projects income from a number of sources, two of which are the taxes on real and personal property. When the Town adopts a budget it must also set a tax rate – the amount of tax per each $100 of value of a taxpayers real and/or personal property. Typically, most homeowners only pay the real property tax on the assessed value of their house and lot(s). Individuals who have a business located in their home, business operators at Penn Place, and public utilities who own property throughout the Town (Pepco, Verizon, Comcast, WSSC, etc.) will pay personal property tax. For the FY 2006, FY 2007, and the current FY 2008 budget the rate for real property is 19 cents per $100, and for personal property the rate is $1.00 per $100. In FY 2008, the Garrett Park real property tax is approximately 13% of the total tax charged by Montgomery County.
Also on the county tax bill is the fee charged for municipal refuse collection. This fee is calculated by dividing the budgeted amount for refuse, recycling, and yard waste collection by the number of homes receiving the service. In the FY 2008 budget the cost of municipal refuse collection has been set at $134,000, which, divided by 362 (the number of houses in Town), equals $370 per household as this year’s fee.
Annual Revenues
Each budget projects revenues from various sources that are divided into the following accounts:
1000 – TAXES & FEES
1100 – Local Property Taxes
This comprises all taxes on property, real and personal, plus any penalties or interest received as a result of late payments. The rates are explained above. Due to the increase in the Town’s tax base through the rise in value of property in Garrett Park, this amount increases from 7-11% each year without any change to the tax rate.
1200 – Local Income Taxes
This is the Town’s share of taxes paid to the state by Town residents and businesses located in Town. Because this includes capital gains as well as income tax, the amount can vary substantially year-to-year. This amount moves up or down in response to changes in the economy, usually delayed by a year or two.
1400 – Licenses & Permits
This comprises building, variance, and driveway permit fees, as well as liquor license fees.
2000 – INTERGOVERNMENTAL REVENUES
2200 – From State of Maryland
This reflects Highway User payments from gasoline taxes the state receives. Depending on the state’s budgetary situation, this amount fluctuates, but trends upward as gas tax receipts increase. These funds are to be spent on the maintenance and repair of our streets and the Town is required to report annually on street work done.
2300 – From Montgomery County
Each year the county calculates the value of county services that the Town provides directly to its residents and reimburses the Town. This is somewhat dependant on the county’s budgetary situation and has been level funded in FY 2008 after annual increases in past years.
3000 – SERVICE CHARGES
3100- General Government Charges
Photocopying charges are the primary source with a few minor receipts for other services provided. Budgeted at $400 for FY 2008.
3200 – Municipal Refuse Collection Fees
See above for the explanation of these fees.
4000 – FINES & FORFIETURES
Any fines the Town collects go to this account. Typically, there is no amount budgeted as the Town rarely levies fines.
5000 – MISCELLANEOUS REVENUES
5100 – Investment Earnings
The Town places its funds into two accounts: an interest-bearing checking account at Wachovia Bank; and the Montgomery County Pooled Investment Fund. Typically, the Town keeps $25,000 to $50,000 in the checking account, depending on anticipated payments at any given moment, and maintains all other cash in the county account, which earns interest at approximately 25 basis points (.0025%) below the Federal Funds rate, similar to rates offered by ING Bank and others on their savings accounts. Funds are transferred between these accounts as needed. Current balances can be found in the most recent monthly financial report [LINK]. Obviously, amounts invested and interest rates affect this source of revenue and it is estimated very conservatively.
5200 – Rents & Concessions
Penn Place & Town Hall rents, as well as cable TV franchise fees are placed here.
5300 – Contributions & Donations
The Town currently receives funds to support the preservation, management, and accessibility of its extensive archival collection. [LINK TO ARCHIVES] Any other contributions or grants would go here.
5500 – Sale of Property
At the moment, the Town sells very little – mostly publications and posters.
[LINK TO ITEMS AVAILABLE FOR PURCHASE]
9000 – CARRYOVER FROM PRIOR YEAR
This is an amount estimated to be a surplus, if any, from the prior year. As this estimate is made 4 – 5 months before the prior year closes on June 30th, it is difficult to predict.
Annual Expenditures
Each budget projects expenditures that are divided into the following accounts:
10000 – PERSONNEL
10100 – Salaries
Salaries paid, including casual labor and reimbursement for compensatory time not taken as leave.
10200 – Overtime
Generally, hourly workers called back to work outside of normal hours, or who work more than 40 hours per week, are given time and one-half for the extra hours worked.
10300 – Benefits
For an explanation of the benefits offered to Town employees go to [LINK]. The cost of these benefits is budgeted in this account.
10400 – Payroll Taxes
11000 – TOWN ADMINISTRATION
11100 – Elected & Appointed Officials
This account covers any Council or committee meeting costs and any expenses incurred by elected and appointed officials while on Town business.
11200 – Elections
This comprises the election judges’ salaries ($100 each per election) and expenses, as well as postage for mailings and other expenses related to Town elections.
11300 – Archives & Public Records
This account includes all expenses related to the management, storage, and preservation of the Town’s collection of historic documents, as well as vital public records. The salary for the Town Archivist is included.
11400 – General Administrative Expenses
This account comprises all expenses related to the day-to-day administration of the Town. Office supplies, office equipment expenses, computer expenses, postage, telephone, cleaning, furniture, and similar expenses are included here.
11700 – Professional Services
Audit, legal, and accounting fees.
11800 – Insurance
The Town uses the Local Government Insurance Trust (LGIT) as the carrier for all its property and liability insurance. The Clerk-Treasurer’s Bond is also included in this account.
11900 – Town Administration, Other
From time to time there are expenses that do not fall readily into other administrative accounts.
12000 – SPONSORSHIPS, SUBSCRIPTIONS & DUES
12100 – Membership dues
This account covers the Town’s membership in the Maryland Municipal League (MML) and the MML’s Montgomery County chapter.
12200 – Sponsorships
The Town supports the Garrett Park Citizens Association and the Montgomery County Martin Luther King Day Committee.
12300 – Subscriptions
The Town pays for Bugle subscriptions for its public records, as well as for its Annapolis Delegation, Congressman, and U. S. Senators. The Town also subscribes to the Montgomery County zoning ordinance update service provided by the county attorney’s office.
13000 – BUILDINGS & GROUNDS
13100 – Penn Place
13200 – Town Hall
13300 – Maintenance Department Building
The buildings & grounds accounts cover all the regular operating and maintenance costs for the Town’s three buildings. Substantial repairs or improvements are usually carried as capital expenses.
14000 – TOWN SERVICES
14100 – Roads & Sidewalks
This comprises minor repairs and improvements, leaf and snow removal, signage, painted markings, and street light operation and maintenance.
14200 – Stormwater Drainage Maintenance
This account includes the inspection, cleaning, and maintenance of the Town’s Stormwater drainage system.
14300 – Municipal Refuse Removal
This is the cost for the contract with Montgomery County Sanitation and Recycling, Inc., the Town’s trash and recycling collection contractor. It includes large item pickups and an estimated inflation and fuel adjustment charge.
14400 – Arboretum
The Arboretum Committee annually proposes to the Council a work program for maintaining and enhancing the arboretum – tree and shrub planting, care, and removal costs, as well as database development, planning and research, and committee expenses are included. Funding provided by the Council for this work is in this account.
14500 – Fees
The Town must pay tipping fees at the Montgomery County Transfer Station for trash, debris, and other materials that are collected by the Maintenance Department from time-to-time. Also, there are MVA fees for the Town’s vehicles, and WSSC hydrant water meter fees, among others.
14600 – Parks
This comprises the various expenses incurred in operating and maintaining the parks throughout Town. Also, the Town has agreed to maintain the landscaping in the County’s portion of Garrett-Waverly Park.
16000 – EQUIPMENT REPAIR & MAINTENANCE
This account includes all operating, maintenance, and repair of Town equipment, including vehicles, mobile equipment, fuel and oil, tools, etc.
17000 – PUBLICATION EXPENSE
This account has covered the cost of designing and printing a number of Town publications over the decades. Now, it will also include the Town’s website’s annual operating and maintenance expenses.
18000 – CONFERENCES CONVENTIONS MEETINGS
The largest part of this account is for MML Annual and Fall conference attendance by the Mayor and Councilmembers. From time-to-time there may be other events included.
19000 – CONTINGENCY
This is included to provide a source of funds within the budget should unanticipated expenses cause any given account to need increased funding. The Council must vote to transfer funds between accounts.
20000 – DEBT SERVICE
When the Town borrows money, all principal, fee, and interest payments are made from this account. The Town currently has one bond issue outstanding, issued in 2002 in order to pay for roadwork, the new Town street lights, and the Penn Place renovation project. [LINK TO BOND P&I].
21000 – TAXES & BAD DEBT
While the Town is a tax-exempt organization under both state and federal law, from time-to-time we get charged sales tax on out-of-state purchases and property taxes on leased equipment. These are small amounts, but need a dedicated account for audit purposes. We rarely have write-offs.
TOTAL OPERATING EXPENDITURES
The total of all the above accounts produces the annual operating budget. The spending authority granted by these appropriations expires at the end of each fiscal year, to be replaced by the next year’s budget.
23000 – TRANSFER TO CAPITAL
Each year the Council reviews the existing Capital Program [LINK] and makes changes and additions to it. The total of all new Capital Program appropriations provided for in an annual budget is transferred out as an operating expense at the beginning of the fiscal year for accounting purposes. Unexpended capital appropriations survive the end of a fiscal year and spending authority remains until all the appropriation is expended or the Council makes changes to it. Actual expenditures throughout the year are charged to the appropriate account in the Capital Program. It is not necessary to hold funds in a capital reserve unless specifically required by an act of the Council, so from time-to-time the Town will not have all the funds on hand needed to fund all capital appropriations in their entirety. This usually occurs in the beginning of a fiscal year as the Town receives revenue throughout the year that can be used for capital appropriations made at the year’s beginning.
25000 – TRANSFER TO OPERATING RESERVE
With the FY 2008 appropriation of $63,796, the Town’s operating reserve has risen to $125,000. The total amount of cash that the Town has at any time may fall below the level of the appropriated reserve. However, this reserve must be available, in cash, at the beginning of any fiscal year, so expenditures throughout the year must be managed to preserve this reserve. Transfers from the reserve can only be made by ordinance. Reserve funds are kept in the Town’s account.
TOTAL EXPENDITURES
This is the total amount of expenditures and transfers appropriated for the fiscal year and must be in balance with the Total Revenues appropriated to create a balanced budget.
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