AA County Fiscal Impact Analysis (FIA)
Comments by Mike Lofton 4/11/09
Comments are based on a review of the referenced report prepared by TischlerBise dated March 6, 2009.
The FIA attempts to predict revenues & expenses for Anne Arundel County based on a series of “Growth Scenarios” to the year 2025. Ostensibly, these predictions should help guide public policy with a sense of the financial implications of various strategies.
The task is a daunting one. My compliments to the consultant for an impressive effort. Nonetheless, several issues ought to be further explored before the FIA is relied upon for policy making.
As a general concern the FIA takes an optimistic view of prospective revenues while potentially understating potential expenses. Specifically,
* In estimating futures expenses, the FIA assumes that current levels of public services are satisfactory and will remain unchanged thru 2025. It does not incorporate projects in the County Capital Improvement Plan or other approved master plans. It is hard to imagine that county officials and the public will not seek to implement these plans.
*The FIA does not include expenses to address the substantial stormwater management system needed in the county. This was a major issue in the last election with both candidates for County Executive promising solutions.
* The FIA avoids the cost of new school capacity by assuming school population will swell to 120% of capacity. When costs are calculated using 100% of capacity the “Growth Surplus” virtually vanishes!
*It is difficult to tell if all the “Backlog Costs” have been included. Significant new requirements to account for future costs have been imposed by the Government Accounting Standards Board (GASB). A systematic review of those requirements & the assumed costs in the FIA needs to be made.
*The assumption of a zero inflation rate certainly makes the math easier but it could be misleading. Some historical data on recent cost trends in the major costs of county government (specifically “Backlog” components) should be made. Consideration should also be given for the potential of property tax revenues to be constrained below the real inflation rate by the tax cap.
On the revenue assumption side:
*The FIA assumes constant State funding at existing ratios. This is not a safe assumption.
*The FIA assumes recordation & transfer taxes at a constant 15% of total revenues thru 2025. This revenue sources is collapsing now. The FIA projection should be compared to the most recent County budget office projections for at least the next few years. It is likely to significantly under perform the FIA projection in the short term.
General observations:
*The FIA does not differentiate the fiscal impacts of different types of growth. A comparison of the costs/expenses of residential vs. commercial and infill vs. greenfield could be a very valuable policy tool.
*The FIA concludes that Scenario #4, Accelerated Growth, is the most financially advantageous to the County. Caution is advised in considering this scenario. It rests on the questionable assumptions cited above and ignores the creation of an extraordinary “Backlog” as a result of the County’s current revenue tools.
* Scenario #2 has the worst financial performance based on, “the assumption of additional jobs at Ft. Meade, which are assumed to be non-taxable thus generating cost to serve the growth without commensurate revenue. So is BRAC a net cost to the County?
*The discussion of Debt limitation ought to note options cited in the FY 2010 Report of the County Spending Affordability Committee, which could provide additional debt capacity.
*In assessing potential revenue sources to address the “Backlog” the consultants ought to refrain from making political calculations about acceptability to the public. Surely our elected officials can sort these matters out.
*The FIA ought to examine policy options for Tax Increment Financing. Currently, 100% of the increment is devoted to financing infrastructure for development. Approaches using less than 100% may be feasible in some cases creating additional GF revenues.
*One thing is for sure; we can’t grow our way out of this mess. Our elected officials need to craft revenue & expense strategy that truly makes growth at least pay for itself AND responsibly eliminates the large & growing backlog in the maintenance and renovation of essential public infrastructure.
Thanks for all of your insight on this, Mike
Ann
