Year End Finances Look Good But Confusion Over Reserve Persists, Mayor and Council Meeting 10/18/10

As usual, the Mayor and Council meeting on Monday provided information on a wide range of topics and issues. Here’s a quick review to keep you informed.

Restaurant Week. As you know, Rockville Central was supportive of Rockville Restaurant Week and it appears many others were too! Andrea Jolly, Director of the Rockville Chamber of Commerce, reported 17,578 hits on the website with over 8,000 unique visitors. Although only 7 of the 30 participating restaurants had returned their surveys, they all said they had very successful weeks and will do it again.

Rockville Rewards. If you want to help local nonprofits, keep a look out for the new Rockville rewards program from the Chamber of Commerce. Nonprofit organizations will be selling these cards and keep the profit. Meanwhile businesses will participate by offering everyday or one-time deals. The big kickoff will be held in November to sell cards for the holidays. Also businesses can partner with nonprofits and sell the cards for them.

HHS in King Farm. The U.S. Department of Health and Human Services plans on consolidating four leased locations in Suburban Maryland into one location to improve functional efficiency and the City would like it to be at the Irvington Centre site in King Farm. The Mayor and Council approved the City’s Draft Environmental Assessment letter to the General Service Administration which has received multiple offers for potential locations, so we’re in the competition.

Let’s Move City. Rockville will also be applying to participate in the “Let’s Move Cities and Towns” Initiative and join First Lady Michelle Obama’s fight against childhood obesity. We’ll apply and specify actions for the next year, then the Department of Health and Human Services will review our reports, and if approved, designate the City as an official “Let’s Move City.”

Transportation Demand Management (TDM) Plan

Did you know that funds are collected from new commercial, retail and multi-family developments for ten years and that the City has $1.8 million in the TDM Funds from these contributions? In next five years Rockville can expect an average of $204,000 per year in additional revenue. The City doesn’t have a plan on how to spend it and wants to identify the types of projects for the funds such as maintaining bus shelters, providing transportation info and services, physical improvements, and unfunded CIP projects. Staff sought comments from the Mayor and Council and wanted direction on conducting a public hearing.

As for bus shelter maintenance, the City will need to maintain them in the future because the County does not. If the City is willing to do advertising on bus shelters, it could save some money. The current plan is to pay a contractor $160,000 to repair shelters. The City could enter into an agreement for the shelters to be installed for free if there was advertising, then the City would continue to receive some revenue but it would not completely pay for maintenance. What do you think about advertising on bus shelters?

Finances

At Monday’s meeting, the Unaudited Fourth Quarter FY 2010 Financial Report was reviewed. Each fund has a positive year-end balance except for the Sewer Fund with a negative balance of approximately $86,000 (which will be addressed by a rate hike) and the Redgate Golf Course Fund with an estimated negative $1.7 million balance (which will be addressed by a transfer from the General Fund).

The City of Rockville has a policy to maintain the general fund balance at or above 15%. The balance in the General Fund is often referred to as the reserve. The good news is that the estimated FY10 fund balance of $15,224,325 is $5,911,937 higher than the target minimum balance. Having $5,911,937 above the minimum requirement, the City used $1,019,625 to balance the budget, $2,390,645 for RedGate, and $450,389 for Purchase Orders that carried over from FY10. Even with these adjustments, the FY11 estimated reserve of $11,363,666 is 18.3%, which is $2,048,266 above the required 15% reserve level.

Councilmember Bridget Newton wanted a clarification as to what reserve means. Councilmember Mark Pierzchala explained. The fund balance at the end of the year is what we call reserve. Any money left at the end of the year could have been used for other things, such as reducing the City’s borrowing costs.

Later during Old Business, the discussion of the reserve issue continued. Councilmember Newton wanted to talk about the Rockville Report article concerning the spending on Redgate. She wants another article to explain. She also stated that going forward with the Golf Foundation study she wants people to think that there are no preconceived notions as to what the answers will be.

Councilmember Pierzchala wanted to know what changes she is asking for in the article. The only change he thought could be added was that we managed to stay above the 15% reserve after having spent the money to pay down the Redgate debt. The rest of it was accurate. Surplus can be defined differently. One way is that it is just sitting around and there is no use for it, but the fact is that anytime there is “extra monies” (and there often is) it has a use and that use is to pay down CIP and reduce borrowing costs.

Councilmember Newton said she was specifically asking for clarification that the motion made by the Mayor and Council was to use surplus funds for Redgate and that the funds used were new money/found money. She thought the Rockville Report article was very one-sided and the use of the word reserves means the City took it out of reserves. Then she added that the use of term got a lot of comments. She didn’t know who wrote the article or who has oversight but the article raised an awful lot of questions that didn’t need to be raised because of the use of the term reserves.

Councilmember Pierzchala stated you could just as easily characterize the article in a totally different direction. There are trade offs inherent in every spending decision. There are trade offs not mentioned in the article and they could debate it forever. But what he really didn’t want to see is City Staff caught in the middle of this. Councilmember Newton responded that she would have put in his explanation.

Councilmember Piotr Gajewski agreed that way the article was written was fine and it represents his approach to what they did. He believes the reaction from the public was not about the term reserves, it was about spending $2.4 million on the golf course.

Mayor Phyllis Marcuccio hoped they could concentrate on tomorrow. The first meeting with the National Golf Foundation will be held and the City should go forward in a fair way. Councilmember Pierzchala asked about the purpose of the kickoff meeting. He wanted to know why elected people and Redgate advisory group would be involved. Mayor Marcuccio stated that she wants to give them her point of view. Councilmember Gajewski asked if he could go and give them his view as well. Councilmember Pierzchala stated that direction was given to City Staff and when a contractor is involved, the City Staff should be the ones involved. He was concerned that people with one position might be overrepresented when the City wants an unbiased report. Mayor Marcuccio asked how that can be. Councilmember Newton thought the Redgate Advisory might have a couple of people. The Mayor thought the Golf Foundation’s job would be to pick out what’s objective and what’s unbiased. Councilmember Newton said all stakeholders should be involved at this meeting then back off. Councilmember Pierzchala wanted to know who a stakeholder was, and Councilmember Newton responded that anyone in the community is a stakeholder. Councilmember Gajewski said tax payers weren’t coming.

The Mayor then asked if they should end the Mayor and Council Meeting. Councilmember Newton made the motion, Councilmember Britton seconded it, and the Mayor adjourned the meeting without a vote.

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