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Mobtown Beat

Here's That Rainy Day

Recent bad weather piled on the city's budget wrangling

Mel Guapo
Two heavy snowfalls earlier this year added to budget deficits.

By Edward Ericson Jr. | Posted 6/23/2010

Correction: This article misreported lobbyist Bruce Bereano's paymaster in the bottle-tax fight. He is a lobbyist for Safeway Food and Drug, the Maryland Liquor Distributors Association, and the Maryland Tobacco and Candy Distributors Association, not a local Coca-Cola bottler. City Paper regrets the error.

After a frenzied week of negotiations and sometimes back-to-back meetings, the City Council passed its budget on June 21, including a new 2 cent per bottle tax on soft drinks and new provisions for the fire and police pension funds.

In an emergency meeting on the evening of June 17, City Council members lobbied one another and wondered about the fate of a proposed 4-cent-per-bottle tax on soft drinks (Council Bill 10-0474) to fund next year's budget, they quietly agreed to tap the city's "rainy day" fund to cover a $60 million shortfall in the current year's budget opened up, in part, by February's record snow storms.

Council Bill 10-0525, a $60 million transfer into a "Mayoralty-Related" fund for "Miscellaneous General Expenses," and 10-0526, a $24.2 million "Supplementary Motor Vehicle Fund Operating Appropriation" to the Department of Transportation, are necessary "due to the extraordinary cost of the recent snowfall," Councilmember Belinda K. Conaway (D-7th District) said as she reported them favorably out of her Budget and Appropriations Committee. The bills went to Third Reader for final passage without discussion, but a memo behind them explains the city's dire financial state.

The memo, by Bureau of Budget and Management Research Chief Andrew Kleine, outlines "three major budget setbacks" in the past budget year, which began July 1, 2009. In August, facing its own budget crisis, the state cut Baltimore's "shared revenues" by $35.2 million. The city's Motor Vehicle Fund, which handles snow removal, bore the brunt. In December 2009, the city had to decrease its projected tax revenue in part because of $14.6 million in "[s]tate adjustment for overpayments made in fiscal 2009." And then in February, two giant snowstorms forced the city to spend $33 million on cleanup.

The past year's employee furloughs, rotating fire station closings, hiring freeze, and other measures helped get the budget back on track. But the revenue shortfall, combined with the unforeseen snow costs, left the Motor Vehicle Fund deep in the red, and the fix for this involves a three-step process, the memo says, which begins with a transfer of.$10.5 million from an "undesignated reserve" and $49.5 million from the city's "rainy-day fund" to the General Fund. Hence, bill 10-0525.

Step 2 (10-0526) is to send $22.1 million of that, plus 2.1 million from another Motor Vehicle Fund balance, to the Department of Transportation (which is the city department that does the snow plowing). Step 3 (Council Bill 10-0527) transfers $2 million of surpluses from the Department of Public Works and $500,000 from the Department of Recreation and Parks to cover the rest of the Department of Transportation's shortfall.

Whenever the city takes money out of the rainy-day fund, it has to have a plan to put the money back within five years. The last and only time the fund was tapped-to cover a 2004 school budget crisis-it was repaid within months. This time repayment may be more difficult, although the city expects to recoup some of its snow removal expenses from the federal government. This portends tough budget years for the foreseeable future. Next year's projected budget shortfall is $121 million, and has prompted $60 million in new budget cuts.

At its next meeting on June 21, the council kept the city's property tax rate flat at 2.268 cents per $100 of assessed value-by far the state's highest rate. It also passed a slew of other taxes and fees-from a cable TV and electric power tax to parking fines and an increased tax on hotel rooms-to increase revenue in the upcoming year by about $43 million.

The bottle tax was originally proposed at 4 cents, and it lost a narrow vote on Friday when Council members tied 7-7, with Council president Jack Young abstaining. The tax was estimated to raise about $11 million, enough to save about 70 jobs slated for elimination in Public Works and Recreation and Parks, restore funding to the University of Maryland Cooperative Extension program, and eliminate some rotating fire station closures. Council 67 of the American Federation of State, County and Municipal Employees (AFSCME), led by Democratic 6th District Councilmember Sharon Green Middleton's husband, Glenard Middleton, fought hard for the tax, while the local Coca-Cola bottler hired über-lobbyist Bruce Bereano to block it. When the vote came on Friday, audience members wearing AFSCME shirts gasped when Councilmember Conaway voted against the tax, and were surprised again when Warren Branch (D-13th District), a former Public Works employee, voted against it as well, saying his constituents had urged him to vote no.

At Monday's meeting, Councilmember Helen Holton (D-8th District) apologized to her constituents and switched her vote to yes, after amending the tax to 2 cents and adding a three-year sunset provision. It was enough to get Branch to switch his vote as well. Councilmember Nicholas D'Adamo (D-District 2) railed against the changed votes, saying he was "ashamed to be part of a body that would do that."

A few minutes later the council approved controversial changes to the fire and police pension system that replace a variable cost-of-living increase with a fixed 2 percent increase and extend the working years of all new hires and any current employees with less than 15 years' service to 25 years from the current 20. Councilwoman Mary Pat Clarke (D-14th District) offered a package of amendments that would have restored the so-called 20-and-out retirement plan, but the amendments failed on 7-6 vote. "In a perfect world, we would not be voting on this bill tonight," Holton said before voting yes.
Baltimore is not a perfect world.

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