Growing up with a single mother struggling to raise three children, Talisha knows firsthand how hard it can be to make ends meet. The pandemic exacerbated economic disparities in the nation and residents in Takoma Park were not immune. With rising inflation and property values in the City, Talisha understands that many families are struggling. Moreover, increasing inflation can cause uncertainty in the outlook of the City's operational expenses including staff salaries. Talisha is committed to protecting the City's fiscal outlook. This means establishing long term as well as short term approaches to managing the budget.
In the short-term we will need to effectively manage American Rescue Plan Act (ARPA) funds and projects as well as reduce expenditures where feasible. The City received $17.5 million in ARPA funds. ARPA funds must be obligated by December 31, 2024 and spent by December 31, 2026. Therefore, it is important that we manage these funds appropriately.
The City has not grown. The City’s population has only grown by approximately 2,235 people between 1980 to 2020. We have had no new housing creation or mixed-use development during that time. In the long-term, we must increase economic development in the city which will increase the city’s tax base. This is critical to ensuring that the City is not overly reliant on property taxes to fund important services and programs.
There is a lot of information that is floating around regarding the budget. Let’s start with defining a few terms.
Property tax rate: The amount you pay in property taxes is determined by four factors: (1) the assessed value of your property; (2) state property tax rate; (3) county property tax rate which includes special taxes such as transit tax and recreation tax; and (4) city tax. For the tax period July 2022 through June 2023, the tax rates are as follows:
State tax rate: 0.1120
County property tax rate: 0.9915
Takoma Park property tax rate: 0.5397
Constant yield: This constant yield concept is that as assessments rise, the tax rate should drop to the point that the revenue derived from the property tax stays at a constant level from one year to the next, thus assuring a "constant yield" from this tax source. However, it is important to note that the constant yield rate is based on maintaining property tax revenue constant. Constant yield does not reflect potential external factors, like the pandemic or inflation, which might impact expenditures such as staff salaries.
The chart below shows Takoma Park’s tax rate, constant yield, and the difference between these rates since 2012. As you will see, years in which the City’s tax rate fell below constant yield were often met with increases above constant years in subsequent years. On average, both the City’s tax rate and the constant yield rate has decreased over time.
Revenues: The City has 5 revenue categories (1) charges for services, (2) intergovernmental reimbursements, (3) grants and contributions, (4) property taxes, and (5) miscellaneous and investment earnings. In 2021, property taxes made up 50 percent of the City’s total revenues. Ten principal property taxpayers make up 7.7 percent of these tax revenues. Certain revenues were lower due to the pandemic. For example, the charges for services category decreased primarily due to the decrease in recreation programs revenues. The graph below shows the revenue allocation by category in 2021.
Expenses: The City’s expenses primarily consist of people and the services they provide to the community as well as the management of our capital infrastructure like the community center and library. The number of city staff have increased by 21.7 percent (147.73 in 2012 to 179.76 in 2022). However, these costs do not impact the budget in the same way.
Some of our revenue streams are reimbursements for services or programs. For example, Montgomery County reimburses the City for services such as policing, public works, and recreation services that the county would otherwise have to provide Takoma Park residents. This concept is called “tax duplication”. In 2021, nearly 66 percent of expenses for the police department were covered by the program specific revenues such as reimbursement from the county and speed camera revenues (see graphic below).
Is the city running at a deficit?
Well, yes and no. Net position is useful indicator of a government’s financial position. In 2021, the City’s assets and deferred outflows of resources exceeded its liabilities and deferred inflows of resources by $43,954,497 as of June 30, 2021. By far the largest portion of our net position reflects our net investment in capital assets (e.g., land, buildings, infrastructure, machinery). This investment was $33,599,748 or 76.4 percent of the City’s net position as of June 30, 2021.
The unrestricted portion of the net position was a deficit of $1,643,080. This category represents the amounts that the City may use to meet ongoing obligations to its residents and creditors. The unrestricted net position deficit resulted from the reporting of the net pension liability of $10,760,724 related to the City’s two pension plans. Before 2015, the liabilities were disclosed in the footnotes to the financial statements and were not reported as liabilities within the financial statements. The remaining balance of net position $11,997,829 or 27.3 percent reflects the City’s restricted net position, primarily comprised of monies related to the Infra-Structure bond fund, Safe Speed Program, and franchise cable equipment grants, that can only be used for specifically designated purposes.
During the fiscal year 2021, the City of Takoma Park’s total net position increased by $1,706,263. Factors contributing to this growth include the reduction of expenses.
What will Talisha do?
Manage the cost to you- the taxpayer
The last 3 years have been difficult not only for families in need but also as it relates to managing the City budget necessary to address those needs. There were a lot of unknowns. Now, we have a better understanding of our resources and community needs.
Talisha will work to look at our budget with an eye for what is realistically feasible for staff to accomplish during the year. This will result in a reduction in expenses.
Manage ARPA funds
The City received $17.5 million in ARPA funds. These funds are being used to address many of the community’s needs from providing direct cash assistance to residents to covering costs associated with launch of a participatory budget tool. It is critically important that these funds are managed in accordance with U.S. Department of Treasury requirements. If not, the City runs the risk of having to return ARPA funds to the government.
Talisha will work to ensure that the Council receives regular updates regarding the status of ARPA fund spending. This will allow for the Council to adjust the budget as needed.
Advocate for additional resources from the State and County
The City Council, working with other county municipalities, had a small win this year with tax duplication. However, the City must continue to lobby for a greater share of county property taxes paid by Takoma Park residents for services that the City, not the county provides.
Talisha will also work to advocate for State resources to support the City’s goals.