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Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance www.montgomerycountymd.gov/finance

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Page 1: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

Transit Task Force: Budget, Financing, and Debt Capacity

May 6, 2015Department of Finance

www.montgomerycountymd.gov/finance

Page 2: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

Overview

• Charter Limit: Property Tax Revenues

• Charter Spending Affordability Guideline (SAG) Process– Operating– Capital

• Debt Capacity Analysis• Rating Agency Criteria

• Operating Budget– Allocations– Priorities– Pressures

• Capital Budget– Allocations– Process– Priorities

• Appendices

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Page 3: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

Charter Limits: Tax Revenues• Section 305: Total real property revenue must

not exceed the previous year plus CPI except new construction without a nine vote/unanimous override– Override provision Amended from 7 to 9 in 2010– No override since 2010 amendment

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Inflation Charter Limit Added RevenuesEstimate FY15 Rate FY16 FY15 - FY16

Total Current Real Property Levy $1,453,028,337 1.65% $1,477,003,304 $23,974,968New Construction $15,797,285Total Change in Real Property Tax (FY15 to FY16) $39,772,253Total Real Property Revenue $1,492,800,589Personal Property Revenue $89,811,625Total Property Tax $1,582,612,215

Page 4: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

Charter Limits: Operating Budget Spending Affordability Guidelines (SAG)

• Affordability v. Need• Two Tests in Charter• MCC Section 305 Paragraph 2: (AOB * CPI)• Schedule: Adopt Guidelines by second Tuesday in

February each year - MC Code 20(c)1• 1. “Aggregate Operating Budget” (AOB) may not grow

in one year greater than CPI without the vote of at least 6 Councilmembers

• AOB excludes: proprietary funds; WSSC; College tuition; & Grants

• FY16: AOB * 1.65% (CPI)=$4.4254 Billion4

Page 5: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

Charter Limits: Operating Budget Spending Affordability Guidelines (SAG)

• MCC Section 305 Para 3: Council established SAG Guidelines• Requires 7 vote override• Affordability Indicators: “…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.” MC Code 20-61(a)

• Advice of Business Advisory Panel 20-61(b); Convened by Executive and transmitted to Council.

• Specify Budget Allocations for Agencies; debt service; CIP Current Revenue; Retiree Health Insurance Pre-funding

• Council Discretion: No change in year over year; inflationary change; change in personal income; other standard.

• FY16 Operating SAG: AOB * 2.3% (Change in Personal Income)=$4.4539 Billion

• Process: Reviewed and Recommended by Government Operations Committee & Approved by full Council.

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Page 6: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

Charter Limits: CIP SAG• MCC Section 305 Para 3: Council established SAG Guidelines• Requires 7 vote override• Schedule: Adopt by the first Tuesday in October in each odd-numbered

calendar year. By first Tuesday in February of each year, the Council may amend (+/-)to reflect a significant change in conditions (not need).

• Guidelines Set Include: 1. Total general obligation (GO)debt issued by the County that may be planned

for expenditure in the first fiscal year under the capital improvements program;

2. Total general obligation debt issued by the County that may be planned for expenditure in the second fiscal year under the capital improvements program;

3. Total general obligation debt issued by the County that may be approved under the 6-year capital improvements program;

4. Same for MNCPPC; College and MCPS do not have authority to issue long term debt (exception: College Foundation)

5. Also Define expected major revenues for CIP including impact taxes, recordation tax for CIP, etc..

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Page 7: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

Charter Limits: CIP SAGAffordability Indicators. (MC Code 20-57)a) The growth and stability of the local economy and tax base;b) criteria used by major rating agencies related to creditworthiness,

including maintenance of a "AAA" general obligation bond rating;c) County financial history;d) fund balances;e) bonded debt as a percentage of the full value of taxable real property;f) debt service as a percentage of operating expenditures;g) the effects of proposed borrowing on levels of debt per-capita, and the

ability of County residents to support such debt as measured by per-capita debt as a percentage of per-capita income;

h) the rate of repayment of debt principal;i) availability of State funds for County capital projects;j) potential operation and maintenance costs relating to debt financed

projects; andk) the size of the total debt outstanding at the end of each fiscal year

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Page 8: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

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DEBT CAPACITY ANALYSIS

FY15-20 Amended Capital Improvements Program

COUNTY COUNCIL APPROVED

FEBRUARY 3, 2015

Guidelines FY15 FY16 FY17 FY18 FY19 FY20

1 GO Bond Guidelines ($000) 299,500 340,000 340,000 340,000 340,000 340,000

2 GO Debt/Assessed Value 1.50% 1.87% 1.86% 1.84% 1.80% 1.78% 1.76%

3 Debt Service + LTL + Short-Term Leases/Revenues (GF) 10% 11.40% 11.63% 12.07% 11.95% 12.03% 12.21%

4 $ Debt/Capita 3,101 3,167 3,225 3,282 3,327 3,355

5 $ Real Debt/Capita (FY14=100%) 2,200$ 3,039 3,065 3,073 3,069 3,049 3,010

6 Capita Debt/Capita Income 3.50% 3.82% 3.93% 3.87% 3.81% 3.79% 3.76%

7 Payout Ratio 65% - 70% 67.41% 67.71% 68.11% 68.56% 69.41% 70.24%

8 Total Debt Outstanding ($000s) 3,162,750 3,274,680 3,275,440 3,470,145 3,553,575 3,625,915

9 Real Debt Outstanding (FY14=100%) 3,099,824 3,154,016 3,190,132 3,213,755 3,220,177 3,211,230

10 Note: OP/PSP Growth Assumption (2) 3.0% 0.8% 5.2% 3.1% 2.9% 2.7%

Notes:

(1) This analysis is used to determine the capacity of Montgomery County to pay debt service on long-term GO Bond debt, long-term leases, and substantial

short-term financing.

(2) OP/PSP Growth Assumption equals change in revenues from FY15 approved budget to FY16 budget for FY16 and budget to budget for FY17-20.

GO BOND 6 YR TOTAL = 1,995.5 MILLION

GO BOND FY15 TOTAL = 299.5.0 MILLION

GO BOND FY16 TOTAL = 340 MILLION

Page 9: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

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Page 10: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

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Page 11: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

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Page 12: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

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Page 13: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

Rating Agency Assessment of DebtPreliminary Conclusion: The rating agencies would most likely view the Authority’s debt as “overlapping debt” and not direct debt. Before this conclusion is reached they would consider several factors:1. The level of independence of the Authority.

a) Council approval of tax increase and operating budgetb) Control of capital projectsc) Approval for projects requiring a tax increase

2. Rating agencies do consider overlapping debt in their ratiosa) How burdensome is the overall tax levy on the County?b) Tax burden compared to other AAA counties?

3. Does expanding the mission to other Transportation Projects decrease any burden on the County’s current General Fund? If so it would be viewed as “credit positive”.

4. Would additional projects result in expected economic development?a) Does the Authority and the related transportation projects generate additional future

revenues?a) Critical for justifying an increased debt burden.

5. Would the County ever have to step in and pay debt service or operating costs?6. Will creating a Transportation Authority allow the County to transfer current operating costs or

capital costs out of the general fund?7. Who appoints the members and can the County or County Council remove members before their

term expires?8. How involved will the County Executive or County Council be in running or overseeing day to day

operations?13

Page 14: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

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Direct Debt: General Obligation Bonds Outstanding $1,947,490,000 General Obligation Variable Rate Demand Obligations 100,000,000 Short-Term BANs/Commercial Paper Outstanding** 0 2014 General Obligation Bonds 500,000,000 2014 General Obligation Refunding Bonds 297,990,000 Revenue Bonds Outstanding 196,875,000

Total Direct Debt $3,042,355,000

Overlapping Debt as of June 30, 2014 Gross Debt: Washington Suburban Sanitary Commission Applicable to Montgomery County 1,406,111,000 Housing Opportunities Commission 733,830,685 Montgomery County Revenue Authority 90,501,519 Maryland-National Capital Park and Planning Commission Applicable to Montgomery County 44,825,000 Kingsview Village Center Development District 1,570,000

West Germantown Development District 13,505,000 Towns, Cities and Villages within Montgomery County 142,656,981

Total Overlapping Debt $2,433,000,185 Total Direct and Overlapping Debt $5,475,355,185

Less Self-Supporting Debt: County Government Revenue Bonds as of June 30, 2014 196,875,000 Washington Suburban Sanitary Commission Applicable to Montgomery County 1,406,111,000 Housing Opportunities Commission 733,830,685 Montgomery County Revenue Authority 90,501,519

Total Self-Supporting Debt (2,427,318,204)

Net Direct and Overlapping Debt $3,048,036,981

Statement of Direct and Overlapping DebtAs of June 30, 2014

And Including 2014 General Obligation Bonds*

Page 15: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

OPERATING BUDGET: PRIORITIES; ALLOCATION; PRESSURES

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Page 16: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

FY16 ALL AGENCIES / ALL FUNDS

Net Transfers-$1.6-0.1%

Prior Year Reserves $559.19.8%Fines &

Miscellaneous $239.9 4.2%

Intergovernmental $1,030.6 18.1%

Charges for Services $384.06.8%

Other Taxes $283.4 5.0% Transfer &

Recordation Tax $162.2 2.9%

Income Tax $1,443.4 25.4%

Property Tax $1,582.6 27.9%

WHERE THE MONEY COMES FROMTOTAL APPROVED RESOURCES - $5,683.6(million)

Non-Agency Uses $4.7 0.1%

County Government

$2,236.1 39.3%

M-NCPPC $138.0 2.4%

Reserves $497.8 8.8%

Montgomery College $339.3 6.0%

Montgomery County Public Schools

$2,467.7 43.4%

WHERE THE MONEY GOES *TOTAL APPROVED USES OF FUNDS - $5,683.6(million)

*This total covers the full Operating Budget and funds to the CIP, Debt Service, and Reserves. Of this amount $5,067,834,958 is recommended in the Operating Budget.

Page 17: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

FY16 TAX SUPPORTED AGENCIES AND FUNDS

Net Transfers $21.30.4%

Prior Year Reserves $444.39.1%

Fines & Miscellaneous

$121.3 2.5%

Intergovernmental $776.8 15.8%

Charges for Services $84.9 1.7%

Other Taxes $280.2 5.7%

Transfer & Recordation Tax

$153.9 3.1%

Income Tax $1,443.4 29.5%

Property Tax $1,582.6 32.2%

WHERE THE MONEY COMES FROMTOTAL APPROVED RESOURCES - $4,908.7 (million)

Non-Agency Uses $4.7 0.1%

County Government

$1,764.7 36.0%

M-NCPPC $121.3 2.5%

Reserves $408.6 8.3%

Montgomery College $281.6 5.7%

Montgomery County Public Schools

$2,327.8 47.4%

WHERE THE MONEY GOES *TOTAL APPROVED USES OF FUNDS - $4,908.7(million)

*This total covers the full Operating Budget and funds to the CIP, Debt Service, and Reserves. Of this amount $4,407,964,046 is recommended in the Operating Budget.

Page 18: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

Tax Supported Expenditures Only Appropriation% of Total Cum %

1. MCPS 2,168,760,952$ 49.2% 49.2%2. Public Safety 589,917,331$ 13.4% 62.6%3. Debt Service 357,342,505$ 8.1% 70.7%5. College 248,500,000$ 5.6% 76.3%6. Health and Human Services 205,808,067$ 4.7% 81.0%7. Transportation 167,259,058$ 3.8% 84.8%8. Retiree Health Insurance 106,681,060$ 2.4% 87.2%4. General Govt. & Other Functions 350,122,598$ 7.9% 95.2%9. M-NCPPC (Park and Planning) 120,919,605$ 2.7% 97.9%10. Libraries, Culture, & Recreation 72,277,463$ 1.6% 99.5%11. Community Dev. and Housing 18,319,709$ 0.4% 100.0%12. Environment 2,055,698$ 0.0% 100.0%

4,407,964,046$

FY16 CE Recommended Tax Supported Expenditures by Function

Page 19: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

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($ in Millions)

App. Est % Chg. Rec. % Chg. Projected % Chg. Projected % Chg. Projected % Chg. Projected % Chg. ProjectedFY15 FY15 FY15-16 FY16 FY16-17 FY17 FY17-18 FY18 FY18-19 FY19 FY19-20 FY20 FY20-21 FY21

5-22-14 App/Rec 3-16-15Total Revenues

Property Tax 1,538.9 1,534.6 2.8% 1,582.6 2.6% 1,624.2 2.8% 1,670.2 3.0% 1,720.1 3.3% 1,777.2 3.0% 1,831.0Income Tax 1,340.6 1,333.1 7.7% 1,443.4 5.6% 1,524.7 5.8% 1,613.7 4.9% 1,692.6 3.8% 1,757.6 3.5% 1,819.1Transfer/Recordation Tax 160.7 141.6 -4.3% 153.8 14.2% 175.6 6.1% 186.4 6.4% 198.3 3.2% 204.6 4.9% 214.6Other Taxes 277.7 275.8 0.9% 280.2 1.3% 283.7 1.3% 287.3 1.0% 290.3 0.9% 293.0 1.2% 296.5Other Revenues 955.8 970.8 2.6% 981.0 -0.8% 973.0 0.4% 976.9 0.4% 981.0 0.5% 985.7 0.5% 990.9Total Revenues 4,274.3 4,256.4 3.9% 4,443.1 3.2% 4,585.2 3.4% 4,739.9 3.1% 4,889.2 2.8% 5,026.4 2.7% 5,162.6

Net Transfers In (Out) 43.3 43.6 -50.9% 21.3 2.2% 21.7 2.3% 22.2 2.5% 22.8 2.8% 23.4 3.1% 24.2

Total Revenues and Transfers Available 4,317.6 4,300.0 3.4% 4,464.4 3.2% 4,606.9 3.4% 4,762.1 3.1% 4,911.9 2.8% 5,049.8 2.7% 5,186.8

Non-Operating Budget Use of RevenuesDebt Service 344.1 339.0 5.4% 362.6 10.0% 399.0 2.3% 408.1 3.8% 423.6 3.9% 440.0 3.5% 455.3PAYGO 30.0 30.0 8.3% 32.5 0.8% 32.7 1.5% 33.2 0.0% 33.2 0.0% 33.2 0.0% 33.2CIP Current Revenue 49.4 54.9 20.9% 59.7 21.0% 72.2 -1.4% 71.2 11.2% 79.3 -1.5% 78.1 0.0% 78.1Retiree Health Insurance Pre-Funding 127.8 127.8 -15.2% 108.5 1.3% 109.9 -2.9% 106.7 -3.8% 102.7 -3.1% 99.5 -3.2% 96.3Set Aside for other uses (supplemental appropriations) 0.1 0.1 -100.0% 0.0 n/a 20.0 0.0% 20.0 0.0% 20.0 0.0% 20.0 0.0% 20.0 Total Other Uses of Resources 433.1 429.1 21.8% 527.4 26.6% 667.9 0.8% 673.3 3.1% 694.1 -0.2% 692.5 0.8% 697.9

Available to Allocate to Agencies (Total Revenues+Net Transfers-Total Other Uses)

3,884.5 3,870.9 1.3% 3,936.9 0.1% 3,939.1 3.8% 4,088.8 3.2% 4,217.8 3.3% 4,357.3 3.0% 4,488.8

Agency Uses

Montgomery County Public Schools (MCPS) 2,138.1 2,106.1 1.4% 2,168.8 -0.6% 2,156.6 1.1% 2,180.0 1.0% 2,200.8 0.7% 2,215.8 0.8% 2,232.7Montgomery College (MC) 244.5 236.3 1.6% 248.5 -3.2% 240.6 0.7% 242.2 0.7% 244.0 0.8% 246.0 0.9% 248.3MNCPPC (w/o Debt Service) 111.9 111.9 1.7% 113.9 0.9% 114.9 8.1% 124.2 6.4% 132.2 6.9% 141.3 5.9% 149.7MCG 1,390.0 1,416.5 1.1% 1,405.7 1.5% 1,427.0 8.1% 1,542.4 6.4% 1,640.8 6.9% 1,754.2 5.9% 1,858.1

Agency Uses 3,884.5 3,870.9 1.3% 3,936.9 0.1% 3,939.1 3.8% 4,088.8 3.2% 4,217.8 3.3% 4,357.3 3.0% 4,488.8

Total Uses 4,317.6 4,300.0 3.4% 4,464.4 3.2% 4,606.9 3.4% 4,762.1 3.1% 4,911.9 2.8% 5,049.8 2.7% 5,186.8

(Gap)/Available 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

County Executive's Recommended FY16-21 Public Services Program

Tax Supported Fiscal Plan Summary

Page 20: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

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App. Est % Chg. Rec. % Chg. Projected % Chg. Projected % Chg. Projected % Chg. Projected % Chg. ProjectedFY15 FY15 FY15-16 FY16 FY16-17 FY17 FY17-18 FY18 FY18-19 FY19 FY19-20 FY20 FY20-21 FY21

Beginning ReservesUnrestricted General Fund 241.5 281.8 -36.2% 154.1 -4.5% 147.2 5.7% 155.5 4.5% 162.4 4.2% 169.3 3.8% 175.8Revenue Stabilization Fund 207.2 208.0 11.3% 230.7 10.5% 254.9 10.0% 280.5 9.6% 307.4 9.2% 335.6 4.5% 350.6Total Reserves 448.7 489.8 -14.2% 384.8 4.5% 402.0 8.4% 435.9 7.8% 469.8 7.5% 504.9 4.2% 526.4

Additions to ReservesUnrestricted General Fund -92.2 -127.6 92.4% -7.0 219.1% 8.3 -16.3% 7.0 -1.6% 6.9 -4.9% 6.5 -11.4% 5.8Revenue Stabilization Fund 22.6 22.7 6.9% 24.2 5.6% 25.6 5.3% 26.9 5.0% 28.3 -47.1% 14.9 -39.4% 9.0Total Change in Reserves -69.6 -104.9 124.8% 17.2 96.8% 33.9 0.0% 33.9 3.7% 35.1 -38.9% 21.5 -30.9% 14.8

Ending ReservesUnrestricted General Fund 149.3 154.1 -1.4% 147.2 5.7% 155.5 4.5% 162.4 4.2% 169.3 3.8% 175.8 3.3% 181.6Revenue Stabilization Fund 229.8 230.7 10.9% 254.9 10.0% 280.5 9.6% 307.4 9.2% 335.6 4.5% 350.6 2.6% 359.6Total Reserves 379.1 384.8 6.0% 402.0 8.4% 435.9 7.8% 469.8 7.5% 504.9 4.2% 526.4 2.8% 541.2

Reserves as a % of Adjusted Governmental Revenues

8.4% 8.6% 8.6% 9.1% 9.5% 9.9% 10.0% 10.0%

Other ReservesMontgomery College 4.6 10.6 -75.5% 1.1 0.0% 1.1 0.0% 1.1 0.0% 1.1 0.0% 1.1 0.0% 1.1M-NCPPC 4.1 7.3 5.3% 4.3 2.1% 4.4 2.8% 4.5 3.0% 4.7 3.3% 4.8 3.1% 5.0MCPS 0.1 33.2 -100.0% 0.0 n/a 0.0 n/a 0.0 n/a 0.0 n/a 0.0 n/a 0.0MCG Special Funds 0.6 8.4 77.3% 1.1 5.7% 1.1 4.5% 1.2 4.2% 1.3 3.8% 1.3 3.3% 1.3

MCG + Agency Reserves as a % of Adjusted Govt Revenues

8.6% 9.9% 8.7% 9.2% 9.6% 10.0% 10.1% 10.2%

Retiree Health Insurance Pre-Funding

Montgomery County Public Schools (MCPS) 85.5 85.5 61.7 63.1 61.3 59.0 56.7 54.4

Montgomery College (MC) 2.0 2.0 1.4 1.5 1.6 1.6 1.5 1.6

MNCPPC 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8

MCG 38.6 38.6 43.5 43.5 42.0 40.4 39.5 38.6

Subtotal Retiree Health Insurance Pre-Funding 127.8 127.8 108.5 109.9 106.7 102.7 99.5 96.3

Adjusted Governmental Revenues

Total Tax Supported Revenues 4,274.3 4,256.4 3.9% 4,443.1 3.2% 4,585.2 3.4% 4,739.9 3.1% 4,889.2 2.8% 5,026.4 2.7% 5,162.6

Capital Projects Fund 123.4 123.4 0.2% 123.6 -12.4% 108.2 -7.7% 99.9 -2.2% 97.7 7.7% 105.2 0.0% 105.2

Grants 116.6 116.6 2.9% 120.1 2.2% 122.7 2.3% 125.6 2.5% 128.7 2.8% 132.3 3.1% 136.5

Total Adjusted Governmental Revenues 4,514.3 4,496.4 3.8% 4,686.8 2.8% 4,816.2 3.1% 4,965.3 3.0% 5,115.6 2.9% 5,264.0 2.7% 5,404.3

Page 21: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

Federal budget uncertainty – sequestration

High structural cost increases – debt service, retiree health, reserves, compensation and benefits

School Enrollment increases and State-mandated Maintenance-of-Effort spending requirements (MOE) for MCPS

Deferred infrastructure maintenance

Operating impact of new facilities – libraries, schools, college, recreation centers, and fire stations

Unavoidable cost increases related to energy costs, snow removal, and inflation

State budget uncertainty – budget reductions, cuts to State Aid

Operating/Capital Spending Pressures

Page 22: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

CAPITAL BUDGET:PRIORITIES; PROCESS; ALLOCATION

Page 23: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

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FY16-21 Fiscal OutlookOperating Budget & Capital Budget

– Three ways the budgets intersect• Cash payments for capital projects• Operating costs for new facilities• Debt service Every $1 million used for debt service could also be used for:

13 public school teachers9 police officers

9 fire fightersOperating 1 library

Operating 5 recreation centersRental assistance for 427 families

31,250 bednights in family shelters11,111 bednights at overflow motels

Respite care for 339 clientsChild care subsidies for 197 children for a year

Services for 4,124 Montgomery Cares clients1,274 county-funded Maternity Partnership program

1,919 Housing Stabilization grantsPruning 2,150 trees Purchasing 2 buses

Renovations for 50 bus stops

Page 24: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

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CIP Process: Planning, Review, and Approval

• Identification of Needs– Community– Departments and

Agencies– Land Use Plans – Growth Policy

• Readiness for Programming– Facility Planning– Cost Estimating– Collaboration

• Affordability– Fiscal Planning– Fiscal Policy– Operating Impacts

• Executive Branch Considerations– Readiness

• Planning• Scope Definition• Basis for Estimates:

Confidence Level– Master/Sector Plans– Department Strategic

Plans– Return on

Investment/Results– Affordability– Evaluate Changes: Costs,

Scope, and Schedule– Method of Financing– Scheduling– Partners: Mixed Use

Project– Priorities

• Community Priorities• M-NCPPC Priorities

Page 25: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

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Six Year CIP: Major Funding CategoriesFY15-20 APPROVED

EXCLUDES WSSC ($000S)

PERCENT OF TOTAL

APPROVED FUNDING SOURCEGeneral Obligation Bonds 2,028,509 45.6%General Paygo 194,700 4.4%Agency Bonds 42,248 0.9%Revenue Bonds 305,977 6.9%School Financing Bonds - 0.0%Current Revenue - General Fund 307,064 6.9%Current Revenue - Other Tax-Supported 103,470 2.3%Current Revenue - Non-Tax Supported 62,890 1.4%Recordation Tax 209,969 4.7%Recordation Tax - Premium 62,158 1.4%Intergovernmental Revenues 565,238 12.7%Impact Taxes - Transportation 40,501 0.9%Impact Taxes - Schools 170,966 3.8%Short & Long Term Financing 180,668 4.1%Interim Financing 10,013 0.2%Land Sale - 0.0%HIF Revolving Program 7,280 0.2%Contributions 16,754 0.4%Other 143,571 3.2%

TOTAL SIX-YEAR CIP 4,451,976 100.0%

Page 26: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

Financing Sources: Bonds• General Obligation: $2.2 B Programmed in CIP; 50% of total 6 year CIP

– 20 year maturity; Charter authority for up to 30 years; AAA Rated– Backed by full faith and credit, unlimited tax pledge of County– Outstanding: $2.845 B. as of June 30, 2014

• Revenue Bonds: $305.9 MM; 7% of six year CIP– Secured by dedicated stream of revenue required e.g. Parking fees,

WQPF fees, Solid Waste fees, liquor revenues– 20 year maturity; Charter authority for up to 30 years– Rating: 1 to 3 notches from AAA depending on reliability of

revenue stream, market familiarity, reserves, covenants– Outstanding: $196.9 MM as of June 30, 2014

• Other Appropriation Backed Debt: $180.7 MM; 4.1% of six year CIP – Maturity depends on average useful life of asset being acquired;– facilities generally 20; equipment 7 years or less

• Master Lease for smaller equipment• BANS: Bond Anticipation Notes/Commercial Paper

– Short term debt (<1 year maturities) that is used to initially finance capital projects but is not a permanent source of funding

Page 27: Transit Task Force: Budget, Financing, and Debt Capacity May 6, 2015 Department of Finance

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FY13-18 AMENDED

EXCLUDES WSSC ($000s)

FY15-20 APPROVED EXCLUDES

WSSC ($000s)PERCENT CHANGE

PERCENT OF TOTAL

APPROVED

TAX SUPPORTED COUNTY GOVERNMENT

General Government 417,715 436,739 4.6% 9.8%Public Safety 374,989 235,492 -37.2% 5.3%Transportation 1,086,531 1,085,204 -0.1% 24.4% Bridges, Roads, Traffic Improvements 358,625 406,236 Mass Transit - County Programs 284,590 222,720 Parking 71,176 26,148 Other Transportation 372,140 430,100 Health and Human Services 60,003 36,996 -38.3% 0.8%Libraries and Recreation 170,868 154,433 -9.6% 3.5%Conservation of Natural Resources 24,512 22,465 -8.4% 0.5%Housing and Community Development 35,656 30,711 -13.9% 0.7%

County Government without Stormwater 2,170,274 2,002,040 -7.8% 45.0%

Stormwater Management 304,861 363,655 19.3% 8.2%

Subtotal: County Government 2,475,135 2,365,695 -4.4% 53.1%

OTHER AGENCIES

MCPS 1,365,497 1,527,967 11.9% 34.3%Montgomery College 354,296 348,857 -1.5% 7.8%M-NCPPC 154,575 178,231 15.3% 4.0%Housing Opportunities Commission 12,337 7,500 -39.2% 0.2%Revenue Authority 26,661 23,726 -11.0% 0.5%

Subtotal: Other Agencies 1,913,366 2,086,281 9.0% 46.9%

Grand Total: All Agencies (Excludes WSSC) 4,388,501 4,451,976 1.4% 100.0%

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Appendices

1. MC Charter - Section 305 paragraph 4: Property Tax Revenues

2. MC Charter – Section 305: Operating and Capital Spending

3. FY16-21 Debt Service Budget Detail4. GO Bond Adjustment Chart: How the amount of GO

Bonds available for programming are estimated5. CIP Schedule6. Chapter 20: Article X & XI :Spending Affordability

Guidelines for Capital and Operating Budget

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Charter Limits: Tax RevenuesMCC Section 305 Paragraph 4By June 30 each year, the Council shall make tax levies deemed necessary to finance the budgets. Unless approved by an affirmative vote of nine, not seven, Councilmembers, the Council shall not levy an ad valorem tax on real property to finance the budgets that will produce total revenue that exceeds the total revenue produced by the tax on real property in the preceding fiscal year plus a percentage of the previous year's real property tax revenues that equals any increase in the Consumer Price Index as computed under this section. 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 projects. (Election of 11-7-78; election of 11- 6-84; election of 11-6-90; election of 11-3-92; election of 11-8-94; election of 11-3-98; election of 11-4-08.)

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Charter Limit: Operating & Capital Spending

MCC Section 305 Paragraph 2-3An aggregate operating budget which exceeds the aggregate operating budget for the preceding fiscal year by a percentage increase greater than the annual average increase of the Consumer Price Index for all urban consumers for the Washington-Baltimore metropolitan area, or any successor index, for the twelve months preceding December first of each year requires the affirmative vote of six Councilmembers. For the purposes of this section, the aggregate operating budget does not include: (1) the operating budget for any enterprise fund; (2) the operating budget for the Washington Suburban Sanitary Commission; (3) expenditures equal to tuition and tuition-related charges estimated to be received by Montgomery College; and (4) any grant which can only be spent for a specific purpose and which cannot be spent until receipt of the entire amount of revenue is assured from a source other than County government.

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. Any aggregate capital budget or aggregate operating budget that exceeds the guidelines then in effect requires the affirmative vote of seven Councilmembers for approval.

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DEBT SERVICE - GENERAL OBLIGATION BONDS, LONG & SHORT TERM LEASES AND OTHER DEBTRecommended Projected Projected Projected Projected Projected

GO BOND DEBT SERVICE EXPENDITURES FY16 FY17 FY18 FY19 FY20 FY21

General County 51,742,730 59,602,490 60,639,090 63,186,840 64,182,450 64,708,820

Roads & Storm Drains 62,163,950 69,785,800 73,665,980 77,393,970 85,398,030 94,268,560

Public Housing 258,810 761,430 741,130 720,830 700,530 680,240

Parks 8,339,930 9,293,610 10,423,180 11,149,850 11,793,320 12,295,430

Public Schools 135,717,510 154,146,710 159,814,420 166,721,400 171,372,110 174,398,990

Montgomery College 21,904,420 23,803,460 25,974,370 26,972,470 27,731,820 29,365,680

Bond Anticipation Notes/Commercial Paper 1,200,000 2,550,000 3,400,000 4,350,000 5,300,000 6,200,000

Bond Anticipation Notes/Liquidity & Remarketing 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000

Cost of Issuance 1,183,000 1,053,100 1,080,200 1,111,300 1,146,400 1,184,500

Total General Fund 285,010,350 323,496,600 338,238,370 354,106,660 370,124,660 385,602,220

Total Tax Supported Other Funds 31,808,950 34,708,270 37,644,720 41,019,120 43,411,050 45,093,040

TOTAL GO BOND DEBT SERVICE EXPENDITURES 316,819,300 358,204,870 375,883,090 395,125,780 413,535,710 430,695,260

TOTAL LONG-TERM LEASE EXPENDITURES 6,627,680 6,624,640 6,230,900 2,515,140 991,850 987,710

TOTAL SHORT-TERM LEASE EXPENDITURES 24,316,140 27,307,890 18,596,390 18,214,790 17,711,190 15,410,690

TOTAL OTHER LONG-TERM DEBT 11,299,445 15,709,990 15,714,430 20,922,460 21,112,150 21,112,410

DEBT SERVICE EXPENDITURES

Tax Supported 348,782,725 393,153,400 401,727,680 416,873,710 433,251,250 448,109,560

Non-Tax Supported - Other Long-term Debt 10,279,840 14,693,990 14,697,130 19,904,460 20,099,650 20,096,510

TOTAL DEBT SERVICE EXPENDITURES 359,062,565 407,847,390 416,424,810 436,778,170 453,350,900 468,206,070

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Recommended Projected Projected Projected Projected Projected

FY16 FY17 FY18 FY19 FY20 FY21

GO BOND DEBT SERVICE FUNDING SOURCES

General Funds 267,814,910 318,046,600 332,888,370 349,036,660 365,254,660 380,932,220

Federal Subsidy on General Obligation Bonds 5,707,000 5,450,000 5,350,000 5,070,000 4,870,000 4,670,000

Premium on General Obligation Bonds 11,488,440 - - - - -

Total General Fund Sources 285,010,350 323,496,600 338,238,370 354,106,660 370,124,660 385,602,220

Fire Tax District Fund 7,238,360 8,255,520 9,282,370 10,845,120 13,153,570 14,410,670

Mass Transit Fund 17,248,520 18,906,470 20,614,280 22,537,670 22,916,790 23,385,630

Recreation Fund 7,322,070 7,546,280 7,748,070 7,636,330 7,340,690 7,296,740

Total Other Funding Sources 31,808,950 34,708,270 37,644,720 41,019,120 43,411,050 45,093,040

TOTAL GO BOND FUNDING SOURCES 316,819,300 358,204,870 375,883,090 395,125,780 413,535,710 430,695,260

NON GO BOND FUNDING SOURCES

General Funds 16,682,345 17,800,840 11,805,440 10,798,840 9,787,350 7,544,610

MHI Fund - HUD Loan 63,480 61,280 59,020 56,750 54,400 52,050

Water Quality Protection Fund 3,020,250 7,432,400 7,430,100 12,646,200 12,839,650 12,844,000

MHI - Property Acquisition Fund 7,196,110 7,200,310 7,208,010 7,201,510 7,205,600 7,200,460

Federal Subsidy - Qualified Energy Conservation Bond 146,000 141,000 136,000 131,600 125,500 122,000

Mass Transit Fund 8,396,640 9,138,890 5,337,690 5,337,690 5,337,690 5,337,690

Recreation Fund 1,525,040 1,524,500 1,526,360 1,525,700 - -

Fire Tax District Fund 5,213,400 6,343,300 7,039,100 3,954,100 4,465,000 4,410,000

TOTAL NON GO BOND FUNDING SOURCES 42,243,265 49,642,520 40,541,720 41,652,390 39,815,190 37,510,810

TOTAL FUNDING SOURCES 359,062,565 407,847,390 416,424,810 436,778,170 453,350,900 468,206,070

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GENERAL OBLIGATION BOND ADJ USTMENT CHARTFY15-20 Amended Capital Improvements Program

CC APPROVED SAG

($ millions) 6 YEARS FY15 FY16 FY17 FY18 FY19 FY20BONDS PLANNED FOR ISSUE 1,999.500 299.500 340.000 340.000 340.000 340.000 340.000

Plus PAYGO Funded 199.950 29.950 34.000 34.000 34.000 34.000 34.000 Adjust for Implementation ** 138.948 46.903 19.370 18.911 18.437 17.934 17.393 Adjust for Future Inflation ** (84.350) - - (8.051) (16.383) (25.208) (34.708) SUBTOTAL FUNDS AVAILABLE FOR DEBT ELIGIBLE PROJECTS (after adjustments) 2,254.048 376.353 393.370 384.861 376.053 366.726 356.685

Less Set Aside: Future Projects 167.776 0.929 31.581 33.040 27.947 27.919 46.360

7.44%

TOTAL FUNDS AVAILABLE FOR PROGRAMMING 2,086.272 375.424 361.789 351.821 348.106 338.807 310.325

MCPS (772.762) (119.158) (138.761) (136.484) (153.119) (124.107) (101.133) MONTGOMERY COLLEGE (153.700) (37.570) (20.427) (30.663) (25.817) (12.452) (26.771) M-NCPPC PARKS (67.788) (9.789) (11.103) (13.135) (12.677) (11.222) (9.862) TRANSPORTATION (608.312) (105.073) (78.496) (78.212) (96.334) (122.492) (127.705) MCG - OTHER (559.151) (161.048) (123.849) (98.256) (62.476) (68.668) (44.854)

Programming Adjustment - Unspent Prior Years* 75.441 57.214 10.847 4.929 2.317 0.134 -

SUBTOTAL PROGRAMMED EXPENDITURES (2,086.272) (375.424) (361.789) (351.821) (348.106) (338.807) (310.325)

AVAILABLE OR (GAP) - - - - - - - NOTES:* See additional information on the GO Bond Programming Adjustment for Unspent Prior Year Detail Chart** Adjustments Include: Inflation = 2.03% 1.98% 2.20% 2.33% 2.53% 2.80%

Implementation Rate = 86.46% 94.61% 94.61% 94.61% 94.61% 94.61%

April 15, 2015

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CIP Schedule• September: MCG Departments Submit CIP to OMB

Council Approves CIP Spending Affordability Guidelines (SAG)

• September – December: OMB Reviews

• October – December: Schools, Water/Sewer, Parks, College Submissions

• January 15th: County Executive Transmits to the Council

• February: County Council Public Hearings

• February: County Council revisits Spending Affordability Guidelines (SAG)

• February – May: County Council Committee Reviews

• May: Full Council Reviews (Approval before Memorial Day)

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Article X. Spending Affordability-Capital Budgets. [Note]

Sec. 20-55. Definitions.

In this Article, the following terms have the meanings indicated:

(a) "Aggregate capital budget" means all capital budgets approved by the County Council.

(b) "Capital improvements program" means the comprehensive 6-year program for capital improvements submitted by the County Executive to the County Council under Section 302 of the Charter.

(c) "Council" means the County Council sitting as a spending affordability committee under Section 305 of the Charter. (CY 1991 L.M.C., ch. 29, § 2; 1997 L.M.C., ch. 33, § 1.)

Sec. 20-56. Establishment of Guidelines.

(a) General. The Council must adopt spending affordability guidelines for the aggregate capital budget under this Article.

(b) Content. The guidelines for the aggregate capital budget must specify the:

(1) total general obligation debt issued by the County that may be planned for expenditure in the first fiscal year under the capital improvements program;

(2) total general obligation debt issued by the County that may be planned for expenditure in the second fiscal year under the capital improvements program;

(3) total general obligation debt issued by the County that may be approved under the 6-year capital improvements program;

(4) total amount of debt, except refunding bonds, issued by the Maryland-National Capital Park and Planning Commission that may be planned for expenditure in the first fiscal year under the capital improvements program for projects in the County;

(5) total amount of debt, except refunding bonds, issued by the Maryland-National Capital Park and Planning Commission that may be planned for expenditure in

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the second fiscal year under the capital improvements program for projects in the County; and

(6) total amount of debt, except refunding bonds, issued by the Maryland-National Capital Park and Planning Commission for projects in the County that may be approved under the 6-year capital improvements program.

(c) Procedures.

(1) The Council must adopt spending affordability guidelines for the aggregate capital budget, by resolution, not later than the first Tuesday in October in each odd-numbered calendar year.

(2) The council must hold a public hearing before it adopts guidelines under paragraph (1).

(3) The Council may delegate responsibility for monitoring relevant affordability indicators to its standing committee with jurisdiction over spending affordability matters.

(4) Not later than the first Tuesday in February of each year, the Council may, subject to paragraph (5), amend the resolution establishing the guidelines to reflect a significant change in conditions. An amendment may alter a guideline by either an upward or downward adjustment in dollar amount.

(5) Any upward adjustment of a dollar amount under paragraph (4) for a guideline required by subsection (b)(1), (b)(2), (b)(4), or (b)(5) must not exceed 10%. (CY 1991 L.M.C., ch. 29, § 2; 1997 L.M.C., ch. 33, § 1.)

Sec. 20-57. Affordability Indicators.

In adopting its guidelines, the Council should consider, among other relevant factors:

(a) the growth and stability of the local economy and tax base;

(b) criteria used by major rating agencies related to creditworthiness, including maintenance of a "AAA" general obligation bond rating;

(c) County financial history;

(d) fund balances;

(e) bonded debt as a percentage of the full value of taxable real property;

(f) debt service as a percentage of operating expenditures;

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(g) the effects of proposed borrowing on levels of debt per-capita, and the ability of County residents to support such debt as measured by per-capita debt as a percentage of per-capita income;

(h) the rate of repayment of debt principal;

(i) availability of State funds for County capital projects;

(j) potential operation and maintenance costs relating to debt financed projects; and

(k) the size of the total debt outstanding at the end of each fiscal year. (CY 1991 L.M.C., ch. 29, § 2; 1997 L.M.C., ch. 33, § 1.)

Sec. 20-58. Approval of Capital Budgets.

Any aggregate capital budget that exceeds the spending affordability guidelines in effect after the first Tuesday in February requires the affirmative vote of 7 councilmembers for approval. (CY 1991 L.M.C., ch. 29, § 2.)

Article XI. Spending Affordability-Operating Budgets.

Sec. 20-59. Definitions.

In this Article, the following terms have the meanings indicated:

(a) "Operating budget" means the total amount appropriated from current operating revenues for the ensuing fiscal year, including any current revenue funding for capital projects.

(b) "Aggregate operating budget" means the operating budget, minus any amounts appropriated for:

(1) enterprise funds;

(2) the Washington Suburban Sanitary Commission;

(3) expenditures equal to tuition and tuition-related charges estimated to be received by Montgomery College; and

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(4) any grant which can only be spent for a specific purpose and which cannot be spent until receipt of the entire amount of revenue is assured from a source other than County government.

(c) "Council" means the County Council. (CY 1991 L.M.C., ch. 30, § 1; 1997 L.M.C., ch. 35, § 1; 1999 L.M.C., ch. 21, § 1; 2008 L.M.C., ch. 32, § 1.)

Sec. 20-60. Adoption of Guidelines.

(a) General. The Council must adopt spending affordability guidelines for the operating budget in accordance with this Article.

(b) Content. The spending affordability guidelines for the operating budget must specify:

(1) a ceiling on funding from ad valorem real property tax revenues; and

(2) a ceiling on the aggregate operating budget.

(c) Procedures.

(1) The Council must adopt spending affordability guidelines for the operating budget by resolution not later than the second Tuesday in February of each year.

(2) The Council must hold a public hearing before it adopts the guidelines under paragraph (1).

(3) The Council may delegate responsibility for monitoring relevant affordability indicators to the Council’s standing committee with jurisdiction over spending affordability matters. (CY 1991 L.M.C., ch. 30, § 1; 1992 L.M.C., ch. 30, § 1; 1997 L.M.C., ch. 35, § 1; 1999 L.M.C., ch. 21, § 1; 2008 L.M.C., ch. 32, § 1.)

Editor’s note—1999 L.M.C., ch. 5, § 1, states: "Notwithstanding any provision of Chapter 20 of the County Code to the contrary, including Section 20-60(c)(4) and Section 20-62, the County Council may increase the spending affordability guideline for the aggregate operating budget for fiscal year 2000 by more than 1% over any guideline previously adopted.

Sec. 20-61. Affordability Indicators.

(a) Factors. In adopting guidelines, the Council should consider, among other relevant factors, 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.

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(b) Advice. To assist the Council in adopting guidelines, the Finance Director must each January, and at other times as necessary, consult with independent experts, who need not be County residents, from major sectors of the County economy. The experts should advise on trends in economic activity in the County and how activity in each sector of the economy may affect County revenues. The Director must report the experts’ views, if any are received, to the Executive and Council. (CY 1991 L.M.C., ch. 30, § 1; 1997 L.M.C., ch. 35, § 1; 1999 L.M.C., ch. 21, § 1; 2008 L.M.C., ch. 32, § 1.)

Sec. 20-62. Approval of Aggregate Operating Budget.

Any aggregate operating budget that exceeds the ceiling on the aggregate operating budget adopted under Section 20-60(c) requires the affirmative vote of 7 Councilmembers for approval. (CY 1991 L.M.C., ch. 30, § 1; 1992 L.M.C., ch. 30, § 1; 1997 L.M.C., ch. 35, § 1; 2008 L.M.C., ch. 32, § 1.)

Editor’s note—See County Attorney Opinion dated 10/30/91-A describing the additions to Charter § 305 by Question F as not conflicting with the TRIM amendment.

1999 L.M.C., ch. 5, § 1, states: "Notwithstanding any provision of Chapter 20 of the County Code to the contrary, including Section 20-60(c)(4) and Section 20-62, the County Council may increase the spending affordability guideline for the aggregate operating budget for fiscal year 2000 by more than 1% over any guideline previously adopted.

Sec. 20-63. Recommended Budget Allocations.

(a) Applicability. For each fund or budget included in the aggregate operating budget, in the resolution adopted under Section 20-60(c)(1) the Council must adopt separate budget allocations for County government, the Board of Education, Montgomery College, and the Maryland-National Capital Park and Planning Commission, and for debt service and current revenue funding of capital projects.

(b) Expenditure Reductions. If a budget submitted to the County Council exceeds a budget allocation adopted under subsection (a), the County Executive (for the County government budget) and the governing board of the agency that prepared the budget must recommend by March 31:

(1) prioritized expenditure reductions that would be necessary to comply with the adopted budget allocation; and

(2) a summary of the effect on the agency’s program of the recommended prioritization.

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(c) Added Information. If the Executive or an agency submits a proposed amendment to the operating budget to the Council after the Executive has submitted the annual budget, and the proposed amendment would cause the budget for County government or the agency to exceed the budget allocation adopted under subsection (a), the Executive or the respective agency must include with the amendment the information required in subsection (b). (CY 1991 L.M.C., ch. 30, § 1; 1992 L.M.C., ch. 30, § 1; 1997 L.M.C., ch. 35, § 1; 1999 L.M.C., ch. 21, § 1; 2008 L.M.C., ch. 32, § 1.)