MEMORANDUM. Introduction

Transcription

1 Agenda Item 4 February 13, 2018 Action MEMORANDUM February 9, 2018 TO: County Council FROM: Jacob Sesker, Senior Legislative Analyst ~ SUBJECT: Action: Spending Affordability Guidelines for the FY19 Operating Budget Introduction On January 16, 2018 the Council introduced the Spending Affordability Guidelines for the FYI 9 Operating Budget. A public hearing was held on January 30 at which there was only one speaker, Gordie Brenne of the Montgomery County Taxpayers League, who urged the Council to ensure that existing programs are achieving the desired results and to seek efficiencies in operating overhead. A Government Operations and Fiscal Policy Committee worksession was held on February 1. The deadline for the Council to adopt the guidelines is the second Tuesday in February, which falls this year on February 13. Under the County Charter and Code 1, the Council must set three spending affordability guidelines for the FYl 9 operating budgets: 1. Ceiling on property tax revenues 2. Ceiling on the aggregate operating budget (AOB) 3. Allocation ofthataob In recent years, Council practice has been to concurrently establish a spending target for community grants as part of the spending affordability process. That portion of this memo was prepared by Carolyn Chen, Council Grants Manager. 1 On November 6, 1990, the voters amended the Charter to add to 305 the requirement that "The Council shall annually adopt spending affordability guidelines for the capital and operating budgets, including guidelines for the aggregate capital and aggregate operating budgets. The Council shall by law establish the process and criteria for adopting spending affordability guidelines." The resulting law is in through of the Code.

2 Factors Under of the Code, the Council should consider several factors when adopting its guidelines. Those factors are the condition of the economy; the level of economic activity in the County; trends in personal income; and the impact of economic and population growth on projected revenues. 1. Condition of the economy In the 2 nd quarter of 2007, the unemployment rate for the Washington D.C. metro area was 2.9%. By the 4 th quarter of 2009, the rate had risen to 6.7%. The current metro area unemployment rate (November 2017, not seasonally adjusted) is 3.8%. The unemployment rate in Montgomery County peaked at 6.2% in January 2010, but was down by half to 3.1 % in October Resident employment in Montgomery County was up 3.4% (+18,100) from October 2016 to October Average monthly resident employment is up by 2.0% (+ 10,700) year over year. Payroll (at-place) employment was up 1.3% (+6,000) from March 2016 to March 2017, with most indications pointing to accelerating payroll employment growth in the second and third quarters of Level of economic activity in the County According to the Bureau of Labor Statistics, inflation for urban consumers in the Washington Baltimore area over the 12-month period ending with November 2017 was 1.26%. Montgomery County home sales in October 2017 were 1.7% below October For the year, home sales were up only 0.1% over This is in sharp contrast to 2016 (+5.8%) and 2015 ( % ). Median sales price in 2017 was up 2.2% compared to the previous year, and are up only 5.8% compared to Mark Zandi, of Moody's Analytics, has recently analyzed the impact of the new tax bill on housing. On January 4, his analysis was published in the Washington Post2: "national house prices will take an estimated hit of nearly 4% due to the tax legislation. Specifically, at the peak of the drag from the tax legislation on house prices 18 to 24 months from now, prices will be 4% lower than they would have been if there was no tax legislation... The hit to house prices in the broad D.C. area will range from 2% in Prince William County to almost 4% in the District and 5% in Arlington." 2 "Housing Market Could Shift Under New Tax Law." efcc-l le7-b390-a36dc3fa2842 story.html?utm term=.e09dc79e57d2 2

3 Moody's model 3 estimates that the tax bill will push down housing prices in Montgomery County by 3.20%. CYl 7Q3 Class A office rents average $ The Class A office vacancy rate is 17.1 % YTD net absorption is slightly negative, though it would be "in the black" if Bethesda CBD were excluded. CYl 7Q3 Class B office rents average $ The Class B vacancy rate is 14.9%. Absorption was negative, with a limited number of bright spots ( e.g. Germantown, Park Potomac/Tower Oaks). 3. Trends in personal income Finance estimates that personal income increased by 4.2% in 2017, and projects an increase of 4.8% in Finance estimates that per capita income was up 3.6% and average household income increased by 3.5% in Social Security recipients will receive a 2% COLA in Federal retirees in the CSRS and FERS retirement systems will also receive a 2% COLA in Most federal employees in the Washington area will receive a raise just shy of2.3% in The federal tax reform bill, which targets many deductions commonly taken across the region, will have significant financial consequences, reducing after-tax income for many households. 4. Impact of economic and population growth on projected revenues Population increased by an estimated 0.4% in 2016 and 0.6% in Households increased by an estimated 0.5% in 2016 and 0.7% in Finance estimates that per capita personal income is estimated to have increased by 3.6% in 2016, though population increased by only 0.6%. Population, household, and resident employment affect income tax receipts and transfer/recordation tax receipts. Both revenue streams are affected by other factors ( e.g., stock market fluctuations affect income tax receipts; interest rates affect transfer/recordation tax receipts). 3 "Tax bill: Here's how your county's housing market will change." / l 7 /12/23 /most-federal-employees-in-d-c-baltimore-area-toreceive-2-3-percent-raise-in-january/?utm term=.8a0 l 2e

4 While the average nominal household tax burden has increased from $8,469 in FY09 to $9,859 in FY18, the average real household tax burden has remained the same across the decade. County taxes as a share of personal income are 4.12% in FY18, below recent highs of 4.37% in FY14 and 4.43% in FY09, but above recent lows of 3.99% in FYll and 4.07% in FY15. See 11. A growing population of residents over the age of 60 slows economic growth through both reduced productivity and reduced wage income. Spending Affordability Guidelines for the FY19 Operating Budget 1. Ceiling on property tax revenue (a) Background Under 305 of the Charter, nine affirmative votes are required to set the property tax rates in May/June if the amount of property tax revenue from existing real property exceeds the previous year's tax by more than the rate of inflation. "Charter limit" is a term that is frequently used in Montgomery County to mean the maximum amount of property tax revenue the Council can approve without requiring nine affirmative votes. However, Montgomery County's "charter limit" is more akin to other supermajority voting requirements than to the harder property tax caps that exist in other jurisdictions. The limit applies only to property tax revenue from existing real property. "This limit does not apply to revenue from: (1) newly constructed property, (2) newly rezoned property, (3) property that, because of a change in state law, is assessed differently than it was assessed in the previous tax year, (4) property that has undergone a change in use, and (5) any development district tax used to fund capital improvement prnjects." Finally, the limit applies to revenue from taxes on real property only and does not apply to revenue from taxes on personal property. It is the amount of real property tax revenue from existing real property, not the property tax rate, which cannot increase by more than the rate of inflation. Interestingly, there is no single "Charter limit" number-the maximum amount of property tax revenue that can be raised without affirmative votes of nine Councilmembers varies, depending upon the specific combination of rate increases and credits that the Council chooses during its deliberations in May. 5 Because the County has little "tax room," budget pressure in Montgomery County is occasionally relieved by Council action to exceed the Charter limit. Most recently this happened in FYI 7, when property tax revenue was set at $140 million above the limit, largely as a way of addressing school overcrowding. Prior to FYI 7, the limit had been exceeded four 5 The Council approves the final calculation of the Charter limit when it sets the tax rates and credit amount in May or June of each year. 4

5 times: in FY03-05 by $4.3 million, $29.2 million, and $37.3 million, and in FY09 by $117.5 million. (b) Recommendation The Government Operations and Fiscal Policy Committee recommends (3-0) setting property tax revenue at the Charter limit, consistent with the approved fiscal plan. The Council adopted the County's Tax Supported Fiscal Plan Summary for the FYI 8-23 Public Services Program on June 27, For FY18, the Council set property tax revenue at the Charter limit with a $692 income tax offset credit. The approved fiscal plan assumes property tax revenue at the Charter limit in FY See Ceiling on the aggregate operating budget (a) Background The aggregate operating budget (AOB) is defined as total appropriation from current operating revenues for the next fiscal year, including current revenue funding for capital projects, but excluding any appropriation made for the following: specific grants, enterprise funds, tuition and tuition-related charges at Montgomery College, and the Washington Suburban Sanitary Commission. The components of the AOB are referred to as "tax supported" budgets, as opposed to the other components, which are not funded by County taxes. The so-called "tax supported" budgets are not funded exclusively by taxes; non-tax sources of funding for "tax supported" budgets include State and Federal aid, interest income, and some user fees. In setting the ceiling on the AOB, the Council is trying to set a maximum on the amount the Council will approve in May based on how much the Council thinks in February the County's residents can afford in the following fiscal year. Whatever AOB the Council sets will result in tax burdens that are more affordable for some residents and less affordable for others. The spirit of the spending affordability guidelines is to ensure that the tax burden on residents generally is affordable. The effect of establishing this guideline is to establish an amount above which a supermajority of Councilmembers must support any aggregate operating budget approved. The affirmative votes of a majority of Councilmembers are all that is required to approve an AOB that exceeds the previous year's AOB by less than the rate of inflation and does not exceed any spending affordability guideline then in place. The affirmative votes of six Councilmembers are required to approve an AOB that exceeds the previous year's AOB by more than the rate of inflation but does not exceed any spending 6 In the December 2017 Fiscal Plan Update, 0MB estimated property tax revenue of $1,769.3 million for FY18, and at $1,811.5 for FY19. If inflation in 2017 exceeded the then estimated rate, then FY19 property tax revenue at the Charter Limit would be revised upward. 5

6 affordability guideline then in place. Under the Charter, any AOB that exceeds the previous year's AOB by more than the rate of inflation (to wit, 1.26%) requires the affirmative votes of six Councilmembers. The affirmative votes of seven Councilmembers are required to approve an AOB that exceeds the ceiling on the AOB established by the Council. Neither the Charter nor the Code specifies how to set the ceiling on the AOB. Until FY09, the ceiling was set using revenue projections based on current tax rates. This approach implied an assumption that a budget funded by taxes at current rates was "affordable." In the last eight fiscal years, the Council has not used projected resources as a basis for establishing this spending affordability guideline. During that period, the Council has taken six different approaches: In FYIO, the ceiling on the AOB was set at 5.9% of personal income (4.7% increase above FY09 approved AOB). In FYll, the ceiling on the AOB was set at the FYIO approved AOB (no change from FYIO approved AOB). In FY12, the ceiling on the AOB was set at the FYll approved AOB plus inflation (1.7% increase above FYI I approved AOB). In FY13, the ceiling on the AOB was set at the FY12 approved AOB plus the year-over-year increase in personal income (4.8% increase above FY12 approvedaob). From FY14 through FYI 7, the ceiling on theaob was set at the previous year's approved A OB plus the year-over-year increase in personal income, plus any additional increases in State aid to MCPS and Montgomery College. In FY18, the ceiling on the AOB was set at 2.0%. As the recent history indicates, there are multiple rational approaches to setting the ceiling on the AOB. Council staff presents potential options for FYI 9 on 1: Under Option #1, the AOB ceiling is held at the level of the FY18 approved AOB (no change). Under Option #2, the AOB decreases by 3.28%, reflecting a 4.00% reduction in the budgets of County Government and M-NCPPC. The CE has indicated that FYI 9 non-public safety budgets should target a level of 4.00% below FYI 8. Under Option #3, the AOB increases by 1.26%, the estimated inflation rate used for calculating the property tax revenue at the Charter limit in (CY2017). 6

7 Under Option #4, the AOB increases by 2.00%, equal to the COLA for Social Security recipients. Under Option #5, the AOB increases by 3.50%, the estimated increase in per household income (CY2017). (b) Recommendation The GO Committee recommends (3-0) establishing a ceiling on the AOB at 2.00% above FY18, an amount equal to the COLA for social security recipients and most federal retirees (Option #4). Using this recommendation, the ceiling on the AOB would be set at $4,892.8 million, $96 million (2.00%) above the FY18 AOB. This amount is somewhat below the rate of pay increases for many area federal employees, but equal to the COLA for federal retirees and social security recipients. 3. Allocation of the AOB among the following: debt service; current revenue funding for the capital budget; retiree health insurance pre-funding (OPEB); and operating expenses for MCPS, Montgomery College, County Government, and M-NCPPC. (a) Background The County Code requires the Council to set agency (and non-agency) allocations as part of the SAG process. However, these allocations are not predictions of the actual budgets. It is through the budget process that the Council considers competing demands, establishes priorities, and allocates resources. The SAG allocations that the Council approves are not the final allocations that the Council will approve in May. Several factors could change the allocations by then, including: Factor #1: Revenue estimates (e.g. taxes, state aid, etc.) could be revised up or down from the December 2017 Fiscal Plan Update. Factor #2: Some of the non-agency uses (e.g., pre-funding for OPEB) could be shifted to fund agency uses, or fiscal policies could be modified in light of current budget pressures. Factor #3: Agency allocations could be reduced if fund balances are not re-appropriated. Factor #4: After reviewing each agency's request and considering the Council's priorities for the many and varied services that agencies provide, the Council may decide to allocate resources that is different from the allocation choices that it made for the previous budget. No supermajority requirement is triggered if the Council, in approving the budget, allocates either more or less to any agency or non-agency category than was allocated through the SAG process. The only requirement triggered by this guideline affects the agencies rather than the Council-under County Code 20-63, any agency requesting more than the Council's spending 7

8 affordability guidelines must submit to the Council by March 31 prioritized expenditure reductions (non-recommended cuts) that would be necessary to comply with the adopted budget allocation and a summary of the effect of those cuts on the agency's program. Because State aid amounts are not known in January, the proposed resolution also includes the following provision: b) Notwithstanding the above, the Council intends that any agency spending a/locations which, as a result of additional increases in State aid, exceed the ceilings specified in (b) do not trigger the requirements of 20-63(b). (b) Recommendations Debt Service Debt service is a fixed charge that must be paid before making the allocation of any resources to the four agencies. Long-term leases are included, since these payments are virtually identical to debt. Debt service is in the County Government's debt service fund and also in the budget for M NCPPC. The GO Committee recommends (3-0) allocating $420.8 million to debt service, consistent with the December 2017 Fiscal Plan Update. This allocation is based on the amount of debt currently outstanding and estimated to be issued. That figure includes $414.7 million for County debt service and $6.2 million for M-NCPPC debt service. Current Revenue Funding for the Capital Budget There are two types of current revenue funding for the capital budget. One type is funding for capital projects that do not meet the criteria for bond funding and must be funded with current revenue, or not funded at all. The GO Committee recommends (3-0) $97.7 million, consistent with the December 2017 Fiscal Plan Update. The other type is referred to as "PAYGO from Current Revenue for Bond Offset" (pay as you go). PAYGO is funding for projects that are eligible for bond funding but for which the Council has decided to use current revenue to decrease the need for bonds. The substitution of current revenue for bonds helps protect Montgomery County's AAA bond rating by reducing indebtedness and decreasing future operating budget expenses for debt service. The GO Committee recommends (3-0) $34.0 million, consistent with the December 2017 Fiscal Plan Update. Retiree Health Insurance Pre-funding (OPEB) The GO Committee recommends (3-0) allocating $127.6 million for OPEB pre-funding, consistent with the December 2017 Fiscal Plan Update.7 That figure includes $79.4 million for MCPS, $2.6 million for Montgomery College, $1.8 million for M-NCPPC, and $43.4 million for County Government. OPEB pre-funding is the practice of setting aside assets at the time that employees earn a benefit in order to pay for those accrued obligations in the future. 7 For purposes of setting the Council's spending affordability guidelines, OPEB contributions (MCPS, Montgomery College, Montgomery County Government, and M-NCPPC) are treated as non-agency allocations, similar to debt service. 8

9 Agency Allocations (County Government, MCPS, Montgomery College, and M-NCPPC) As noted above, any agency requesting more than the Council's spending affordability guidelines must submit to the Council by March 31 prioritized expenditure reductions that would be necessary to comply with the adopted budget allocation and a summary of the effect on the agency's program of the recommended prioritization. However, the GO Committee again recommends that the resolution for FYI 9-as has been the case for each year since FYI 4--should state that a projected increase in State aid should not, by itself, trigger this requirement. The GO Committee recommends (3-0) allocations to MCPS and Montgomery College at maintenance of effort levels, including formula funding for State aid. The allocation of aggregate operating budget to MCPS ($2,395.5 million) includes the local contribution (at MOE), local contribution to MCPS retirement, State aid, and re-appropriation of a $25.0 million fund balance. 8 The allocation of aggregate operating budget to Montgomery College is $183.0 million, which assumes a local contribution (at MOE), level State aid, and re-appropriation of a $3.3 million fund balance. Tuition revenue, not included in that allocation, is assumed to be an additional $76.9 million. The GO Committee recommends (3-0) allocating the remainder to County Government and M-NCPPC in proportion to their FY18 allocations. Under Option #4, the allocation to Montgomery County Government is $1,509.4 million and the allocation to M-NCPPC is $124.7 million. 4. Overall Spending Target for Community Grants (prepared by Council Grants Manager) (a) Background The Council has set an overall spending target for Community Grants as part of its actions establishing spending affordability guidelines for the operating budget for the last eleven years. While the target is nonbinding, it assists the Council in budget planning. For FYI 8, the target set by the Council was $10 million. In May 2017, the Council approved $3.2 million in Council Community Grants 9 and $7.9 million in Executive-recommend Community Grants for a total of $11.1 million. (b) Recommendation The GO Committee recommends (3-0) setting an overall target for Council and Executive Community Grants of $11.1 million. This is the same overall level of funding for Community Grants as the Council approved last spring for the FYI 8 budget. Proposed language for the Council Resolution on spending affordability guidelines would state: 8 Re-appropriation of fund balance is sometimes assumed as part of the spending affordability guideline process, although it is always included in the calculation of the AOB. While the amount of fund balance that will be re-appropriated is unknown, it will be greater than $0. Staff's FYI 8 spending affordability guideline recommendations include $33.1 million for MCPS fund balance and $6 million for Montgomery College fund balance. 9 The County Executive's Recommended FY18 budget included $3.1 million in a Council Grants NDA. 9

10 "The Council's intent is that $xxx million of the County Government's allocation will be appropriated for Community Grants (this amount excludes Community Service Grants, and Cost-Sharing CIP Grants). " Schedule: Contents: Introduction Item 30 Public Hearin 1 Council staff's calculations 2 FY19 SAG Resolution 1 GO 5 Fiscal Plan Summary - Dec Council Action 8 FYI 8 Aggregate Operating Budget F:\Sesker\op bud & fiscal planning\sag OB\FY19\Action Memo.docx 11 Average household tax burden, % of personal income 10

11 I FY18 Approved AOB=$4,432,104,67! $4,796.8 ~ CE FY19 Target Reduction A B C D F E FYI 8 Approved A 1l 4,796.8 Option I Option2 Option3 I. No change FY18 to FY19 +o.00% 2. Reduce agency allocations by 4% (MCG, MNCPPC) -3.26% 3. Increase by inflation CY! 7 +l.26% 4. Increase by 2% 5. Increase by change in per household income CY! 7 Ceiline on FY19 AOB $4,796.8 $4,640.4 $4, Table 2: Spending.\ftordab,ht\ Guideline 3 (..\!location of F\'19..\OB, Snullions) A. Non agency allocations 13 Debt service County debt service MNCPPC debt service Current revenue, specific projects Current revenue, PA YGO Retiree health insurance prefunding (OPEB) OPEB for MCPS OPEB for Montgomery College OPEB for MNCPPC OPEB for County Government Subtotal, non-agencies B. Agency allocations 26 MCPS 27 College excl. expen. funded by tuition 26 MNCPPC 28 County Government 29 Subtotal, al[encies 30 Aggregate Operating Budget Total Agency Allocation FY18App $ FY18App % 2, % % % 1, % 4, % 4,796.8 Option l Option2 Option3 $414.7 $414.7 $ $ $ $ $ $ $ $ $ Option l Option2 Option3 2, , , , , , , , , , , , Ta hie 3: Change in..\gene,.\lloc,1tions, F\'18 appro,ed to F\'19 recommended Option l Option2 Option3 34 MCPS +1.13% +1.13% +1.13% 36 College excl. expen. funded by tuition (0.39%) (0.39%) (0.39%) 35 MNCPPC (5.18%) (4.00%) (1.44%) 37 County Government (5.18%) (4.00%) (1.44%) (1.39%) (5.13%) +o.07% G Option4 Option5 4.00% +2.00% +3.50% $4,892.8 $4,964.6 Option4 Option5 $414.7 $ Option4 Option 5 2, , , , , , , ,964.6 Option4 Option % +l.13% (0.39%) (0.39%) +o.74% +5.16% +o.74% +5.16% +o.91% +2.63% Notes: l. FYI9 MNCPPC ddrt service assumes Parle Fund: $6,039,685; ALARF Fund: $151, All other FYI9 non-agcocy allocations are from the Dea:mbec Fiscal Plan Update. 3. All FY18 agcacy allocaticms arc from Resolutioo (Approval of the Aggregate Operating Budget). 4. FY19 Montgomery Coll,se allocatioo assumes total tax support,d budgctof$259.i millioo less $76.9 millioo of tuition and rclatcd charges; local comnoution ofs139.3 millioo (MOE); State Aid set at $35.4 million; tuition assumes increase of$4/$8/$12; fund balance ofs3.3 millioo rc-appropriared. 5. FY19 MCPS allocatiooassumes Sl,687.8 local comnbuticm (MOE); $679.1 million offonnula-bascd state aid; other revoroe of$3.5 million; andre-oppropriaticm ofs25.0 million in fund balance.

12 Resolution No.: Introduced: Adopted: COUNTY COUNCIL FOR MONTGOMERY COUNTY, MARYLAND Lead Sponsor: County Council SUBJECT: Spending Affordability Guidelines for the FYI 9 Operating Budget Background 1. Section 305 of the Charter and Chapter of the County Code require the Council to set spending affordability guidelines for the operating budget for the next fiscal year. 2. The guidelines must specify: a) A ceiling on property tax revenues, which are used to fund the aggregate operating budget. b) A ceiling on the aggregate operating budget. The aggregate operating budget is the total appropriation from current operating revenues, including appropriations for capital projects but excluding appropriations for: enterprise funds, the Washington Suburban Sanitary Commission, specific grants for which the spending is contingent on the grants, and expenditures equal to the estimated tuition and tuition-related charges at Montgomery College. c) The spending allocations for the County Government, the Board of Education, Montgomery College, the Maryland-National Capital Park and Planning Commission, debt service, and current revenue funding of capital projects. As noted above, the College's allocation excludes expenditures equal to the estimated tuition and tuitionrelated charges. 3. Chapter of the County Code lists a number of economic and financial factors to be considered in adopting the guidelines, requires a public hearing before the Council adopts guidelines, and requires that the Council adopt guidelines no later than the second Tuesday in February for 1;he fiscal year starting the following July 1.

13 Page2 Resolution No.: 4. At the public hearing on January 30, 2018, the public had the opportunity to comment on the following guidelines. a) The amount of property tax revenue will not exceed the amount calculated in accordance with 305 of the Charter that would require nine affirmative votes. b) The proposed ceiling on the aggregate operating budget and the agency allocations in millions of dollars are: Debt Service $ Current revenue, specific projects $ 97.7 Current revenue, PAYGO $ 34.0 Retiree health insurance prefunding $ MCPS $2,395.5 Montgomery College $ County Government $1,509.4 M-NCPPC $ Total= Aggregate Operating Budget $4,892.8 Action The County Council for Montgomery County approves the following resolution: 1. The spending affordability guidelines for the FYI 9 Operating Budget are: a) The amount of property tax revenue will not exceed the amount calculated in accordance with 305 of the Charter that would require nine affirmative votes. b) The ceiling on the aggregate operating budget and the agency spending allocations in millions of dollars are: Debt Service $ Current revenue, specific projects $ 97.7 Current revenue, PA YGO $ 34.0 Retiree health insurance prefunding $ MCPS $2,395.5 Montgomery College $ County Government $1,509.4 M-NCPPC $ Total= Aggregate Operating Budget $4,892.8

14 Page 3 Resolution No.: c) Notwithstanding the above, the Council intends that any agency spending allocations which, as a result of additional increases in State aid, exceed the ceilings specified in (b) do not trigger the requirements of 20-63(b). 2. The Council's intent is that $11.1 million of the County Government's allocation will be appropriated for Community Grants (this amount excludes Community Service Grants, Montgomery Cares Grants, and Cost-Sharing CIP Grants). This is a correct copy of Council action. Megan Davey Limarzi, Esq., Clerk of the Council

15 Total Revenues FY18 FY App/Proj EsVProj 4 Other Taxes % 0.8% % % % % % Other Revenues 1, , % 0.1% 1, % 1, % 1, % 1, % 1, % 1, Total Revenues 4, , % 2.9% 4, % 5, % 5, % 5, % 5, % 5, Net Transfers In (Out) % -48.8% % % % % % PAYGO % 0.0% % % % % % GIP Current Revenue % 47.7% % % % % % Change in Other Reserves % 100.8% % % % % % Contribution to General Fund Undesignated Reserves % 222.6% % % % % % Contribution to Revenue Stabilization Reserves % 5.7% % % % % % Set Aside for other uses ( supplemental appropriations) n/a 33.3% % % % % % Total Other Uses of Resources % 83.3% % % % % % Available to Allocate to Agencies (Total Revenues+Net Transfers-Total Other Uses) 28 Agency Uses 4, , % -4.8% 4, % 4, % 4, % 4, % 4, % 5, Total Uses 4, , % 2.6% 4, % 5, % 5, % 5, % 5, % 5, (Gap)IAvailable ,0 ~ Assumptions: App. Est 1 Property Tax 1, , % 2.4% 1, % 1, % 1, % 1, % 2, % 2, Income Tax 1, , % 6.1% 1, % 1, % 1, % 1, % 1, % 1, Transfer/Recordation Tax % 1.8% % % % % % Total Revenues and Transfers Available 4, , % 2.6% 4, % 5, % 5, % 5, % 5, % 5, Non-Operating Budget Use of Revenues 12 Debt Service % 5.2% % % % % % Agency Uses 24 Montgomery County Public Schools (MCPS) 2, , % -0.1% 2, Montgomery College (MC) % -1.1% MNCPPC (w/o Debt Service) % -11.7% MCG % -11.7% , , % -4.8% 4, % 4, % 4, % 4, % 4, % 5, Property taxes are at the Charter Limit with a $692 credit. Other taxes are at current rates. 2. Reserve contributions are consistent with legal requirements and the minimum policy target. 3. PAYGO, debt service, and current revenue reflect the Amended FY17-22 Capital Improvements Program. 4. State Aid, including MCPS and Montgomery College, is not projected to increase from FY Projected FY19 allocations for MCPS and Montgomery College assume funding at maintenance of effort. The allocations do not include potential increases to State Aid or other possible agency resources, such as use of additional fund balance. Additional State Aid or use of fund balance would increase the rate of growth for MCPS and Montgomery College.

16 31 Beginning Reserves Unrestricted General Fund % % % % % I 34 Total Reserves % -17.9% % % % % % Addjtions to Reserves 37 Unrestricted General Fund I % 222.6% % % % % 6.1, 13.3% Revenue Stabilization Fund % 5.7% % % % % % Total Change In Reserves % 304.5% % % % % % Ending Reserves 42 Unrestricted General Fund % 317.7% % % % % % Revenue Stabilization Fund % 9.4% % % % % % Total Reserves % 44.6% % % % % % Reserves as a % of Adjusted Governmental Revenues 8.9% 6.9% 9.7% 10.0% 10.0% 10.0%1 10.0%1 10.0% 46 Other Reserves 4.6 Montgomery College 0.0% % 0.0% 0.0% 0.0% I MCPS n/a n/a 0.0 nla 0.0 n/a 0.0 n/a 0.0 n/a 0.0 n/a MCG Special Funds % 11.3% % % % % % MCG + Agency Reserves as a % of Adjusted Govt - Revenues I 9.1%\ 7.1%\ 9.9%\ 10.2%\ 10.2%\ ,I 10.2%1 10.2% 52 Retiree Health Insurance Pre-Funding Montgomery County Public Schools (MCPS) Montgomery College (MC) MNCPPC MCG Subtotal Retiree Health Insurance Pre-Funding Adjusted Governmental Revenues 59 Total Tax Supported Revenues 4, , % 2.9% 4, % 5, % 5, % 5, % 5, % 5, Capital Projects Fund % 0.5% % % % % % Grants % 2.3% % % % % % Total Adjusted Governmental Revenues 5, , % 2.8% 5, % 5, % 5, % 5, % 5, % 5,940.0 ~

17 - KEY REVENUE App. Estimate %Chg. %Chg. - Profected o/-;-chg. Projected o/, Chg. Projected %Chg. Projected %Chg. Projected %Chg. Projected CATEGORIES FY18 FY18 FY18-19 FY18-19 FY19 FY19-20 FY20 FY20-21 FY21 FY21-22 FY22 FY22-23 FY23 FY22-23 FY24 TAXES App/Proj Est/Proj Property Tax 1, , % 2.4% 1, % 1, % 1, % 1, % 2, % 2, Income Tax 1, , % 6.1% 1, % 1, % 1, % 1, % 1, % 1, Transfer Tax % 1.8% % % % % % Recordation Tax % 1.8% % % % % % Energy Tax % -0.1% % % % % % Telephone Tax % 3.3% % % % % % Hotel/Motel Tax % 1.9% % % % % % Admissions Tax % 3.2% % % % % % E-Clgarette Tax % 3.8% % % % % % Total Local Taxes 3, , % 3.7% 3, % 3, % 4, % 4, % 4, % 4,579.4 INTERGOVERNMENTAL AID 11 Highway User ' % 1.5% % % % % % Police Protection % 0.0% % % % % % Libraries % 0.0% % % % % 6,3 0.0% Health Services Case Formula % 0.0% % % % % % Mass Trans it % 0.0% % % % % % Public Schools % 0.0% % % % % % Community College % 0.0% % % % % % other % -6.3% % % % % % Total Intergovernmental Aid % -0.4% % % % % % FEES AND FINES 20 Licenses & Permits % 1.5% % % % % % Charges for Services % 1.8% % % % % % Fines & Forfeitures % 1.6% % % % % % Montgomery College Tuition % 1.8% % % % % % Total Fees and Fines % 1.8% % % % % % MISCELLANEOUS 25 Investment Income % 34.9% % % % % % Other Miscellaneous % 2.3% % % % % % Total Miscellaneous % 9.7% % % % % % TOTAL REVENUES 4, , % 2.9% 4, % 5, % 5, % 5, % 5, % 5,643.7 Calculation for Adjusted Governmental Revenues 29 Total Tax Supported Revenues 4, , % 2.9% 4, % 5, % 5, % 5, % 5, % 5, Capital Projects Fund % 0.5% % % % % % Grants % 2.3% % % % % % MCG Adjusted Revenues 5_,1_26.9 5,032.fl_ 0.9% 2.8% 5, % 5, % 5, % ~ % 5, _.1L ~940.o

18 # 15 - Aggregate Operating Budget - Requires 7 affirmative votes Resolution No.: Introduced: Adopted: May 25, 2017 May 25, 2017 COUNTY COUNCIL FOR MONTGOMERY COUNTY, MARYLAND By: County Council SUBJECT: Approval of the FY 2018 Aggregate Operating Budget Background 1. Section 305 of the County Charter requires the affirmative vote of 7 Councilmembers to approve the aggregate operating budget if that budget exceeds the adopted spending affordability guidelines then in effect. Section 305 excludes from the aggregate operating budget: Specific grants; Enterprise Funds; Tuition and tuition-related charges at Montgomery College; Washington Suburban Sanitary Commission. 2. Section of the County Code requires the Council to set spending affordability guidelines by resolution no later than the second Tuesday in February. The guidelines must specify a ceiling on the aggregate operating budget for FY Section 305 of the Charter requires that at least 6 Councilmembers must approve the aggregate operating budget if that budget exceeds the budget for the preceding year by more than the rate of inflation, as measured by the annual average increase in the Consumer Price Index for all urban consumers in the Washington-Baltimore Metropolitan area for the 12-month period preceding December 1, which was 1.14% percent for the 12-month period preceding December I, On May 26, 2016, in Resolution 18~511, the Council approved the FY 2017 aggregate operating budget in the amount of $4,641,025,741. If that aggregate operating budget increased at the 1.14% percent rate of inflation for the 12-month period preceding December I, 2016, it would be $4,693,933,434.

19 Page 2 Resolution No.: In Resolution No adopted February 14, 2017, the Council adopted the following spending affordability guideline for the FY 2017 aggregate operating budget. FY 2018 ceiling on the aggregate operating budget $4,733,846,255 Action The County Council for Montgomery County, Maryland approves the following resolution: The Council approves the FY 2018 aggregate operating budget in the amount of $4,796,849,791, as calculated on the attached page. Because the FY 2018 aggregate operating budget exceeds the adopted spending affordability guidelines, 7 affirmative votes are required to adopt this resolution. This is a correct copy of Council action. ~7h-~ Linda M. Lauer, Clerk of the Council

20 Page 3 Resolution No.: The FY 2018 aggregate operating budget excludes enterprise funds, specific grants, and tuition and tuition-related charges at the College and it is calculated as follows. Fund or District General Fund Fire District Economic Developrrent Fund Mass Transit. Recreation District Urban District Montgorrery County Public Schools Montgorrery College Maryland-National Park and Planning Connnission: Administration Fmld Park Ftmd Debt Service on Cotmty Bonds and Leases Debt Service on Park Bonds CtnTent Revenue for the Capital Budget CtnTent Revenue for PAYGO Total Appropriations Less College Tuition and Tuition-Related Charges FY2018 AGGREGATE OPERATING BUDGET SUMMARY: Montgorrery County Public Schools Montgorrery College Total Cotmty Governrrent Maryland-National Park and Planning Connnission Retiree Health Insurance Pre-Ftmding Debt Service on County Bonds and Park Bonds CtnTent Revenue and PA YOO for Capital Budget TOTAL APPROPRIATIONS Less College Tuition and Tuition-Related Charges FY 2018 AGGREGATE OPERATING BUDGET. '.. Aggregate Operating Blrlget for FY $ increase % change Appropriation 1,220,938, ,862,420 4,110, ,226,957 37,687,311 8,690,049 2,368,655, ,759,376 30,778,741 95,101, ,279,660 5,666,760 66,165,000 34,000,000 4,875,922,961 (79,073,170) 4,796,849,791 2,368,655, ,759,376 1,498,373, ,829, ,192, ,946, ,165,000 4,875,922,961 (79,073,170) 4,796,849,791 4,641,025, ,824, % '

21 $11JXlO $9,000 S,46[} 7,~51 AVERA:~ti'<i'cr:~J~RDEN CciJ.556 ~,703 $7, ,248 $ ,617 5,668 BY FISCAL YEAR 8, ,763 9,157 * * * ,989,082 6,034,5,929 5,824 6, ,859 6,248 $3,000 $1,000 -$1Jl est 2018est. -NOMlNAL TAX BlRDEN --REALTAX Ei.JRDB-~ 1999=100 Prepcired by Montgtinel)' County Departr{ierit of Rnance COUNTY TAXES AS A SHARE OF PERSONAL INCOME MONTGOMERY COUNTY 4]5% 4.50% 4.00% 3.75% 3,50% j est 2018 est Prepared by Montgomery County Department of Finance Fiscal Year 5-18 Revenues FY18 Operating Budget and Public Services Program FY18-23