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State’s municipalities hoping they can limp into better times

Richard W. Carlson, Mayor of Accident, MD. keeps the fire burning in their Town Hall on Monday.

Richard W. Carlson, Mayor of Accident, MD. keeps the fire burning in their Town Hall on Monday.

ACCIDENT — Smoke drifts lazily above the town hall in this tiny Western Maryland municipality while inside, city leaders warmed by a squat, wood-burning stove ponder how to squeeze a few more bucks out of the $124,000 budget.

Sometimes fueled by trees that fall in the town park, the stove is part of Accident’s scrimping and saving. It lowers the monthly heating bill for propane gas by about $300, a dollar for every resident.

“There’s a lot of little things, but they add up,” said Mayor Richard Carlson, who has stopped taking his $450 annual salary.

Cities throughout Maryland are feeling the same pressure as those brought by the recession to Accident, and they are responding with their own combination of budget cuts and one-time fixes in hopes they can limp into better times.

The economic downturn has decimated both of the main revenue sources towns use to keep roads paved, garbage picked up and police cars patrolling:

Slumping state revenues forced Gov. Martin O’Malley to cut $5.6 billion in planned spending during his first term, which trickled down to counties and cities in the form of bare-bones aid for highways and public safety.

And sagging real estate values in the moribund housing market threaten the property tax revenues that pay for more than half the annual budgets in many towns.

“We’re at the bottom of the food chain there,” said David E. Carey, chairman of the Board of Commissioners of Bel Air. “The ability that the state has to raise revenues, the ability that the counties have — the same rules don’t apply to us.

“We’re the ones who have town halls full of people saying they’re not going to make it if we raise the property tax by a penny.”

‘Shared sacrifice’

Scott A. Hancock, executive director of the Maryland Municipal League, said leaders in the 157 cities in Maryland understand the pressure the state is under to keep its budget balanced, but he called the situation “dire.”

Maryland cities, however, are not faring as poorly as some others in the nation. A handful of towns in other states have declared bankruptcy to escape ballooning pension obligations.

Highway funds for Maryland’s cities have been cut by the state to just $1.6 million this year, from a peak of $46.6 million in fiscal 2007. Police funds are down from $12.4 million in fiscal 2009 to $8.9 million this year.

“We need to have that money restored,” Hancock said.

That’s unlikely.

House Speaker Michael E. Busch, D-Anne Arundel, said last week that he expects the low levels of local funding to continue. And O’Malley, grappling with a deficit estimated at between $1.3 billion and $1.6 billion, hinted at more cuts to come in an address to the Maryland Association of Counties this month.

“The reality is that while our national economy is improving, times are tough in every state,” he said. “And although we in Maryland are in better shape than our counterparts, a $1.3 billion hole requires shared sacrifice.”

Pay-as-you-go coffee

The sacrifice for Annapolis Mayor Joshua J. Cohen was $15 million in cuts in spending and services.

In his first year as mayor, he chopped the budget from $86.5 million to $71.5 million. He laid off 33 employees and eliminated 100 total positions from a work force that had numbered 700. He imposed a hiring freeze and furloughs that disrupted trash pick-up and operations at the city’s rec center.

“The city of Annapolis has never furloughed employees, much less laid off employees,” Cohen said. “It was just a completely foreign thing for Annapolis to go through. It was a real culture shift.”

Like many other cities’, Cohen’s government has found ways to nibble away at spending in some areas while making large cuts elsewhere.

Light fixtures in City Hall now sport energy-efficient bulbs and Cohen has declined to use the mayoral credit card. The city no longer picks up the tab for coffee brewed in the mayor’s office.

“We each pitch in 10 bucks every few months to pay for coffee,” he said. “We’re trying to limit spending wherever we can.”

In Bel Air, Carey and his fellow commissioners have scrapped road projects and put off construction of a police station, a move that will keep their force of 33 officers in a building designed for 16, unloading prisoners in a parking lot next to a park that hosts concerts during the summer.

In their operating budget of about $10 million, they saw state highway funds cut in fiscal 2010 and 2011 from about $490,000 to $48,000.

The funds, which come from the gas tax, vehicle titling fees and other transportation-related sources, are paid to municipalities to maintain roads for which the counties or state would otherwise be responsible. They have been a frequent target of raids by governors over the last three decades.

“We can cut and move money around for a few years before we have to start turning off lights and laying off police,” Carey said. “We’re at the point with another year of this we’re going to have to cut something significant.”

Like many local leaders, Carey said residents may have to start paying for garbage pickup and that road projects will continue to languish.

“It’s never been this bad,” said Carey, who was first elected commissioner in 1997. “You go through times when the property tax doesn’t bring as much as you think. But to lose 90 percent of your state aid — nobody ever thought that was a possibility.”

Plummeting property values

Gaithersburg, which cut its budget by about 10 percent to $40 million this year, eliminated contract positions in the permitting and inspections office, where the workload lessened as building slowed. The city is waiting longer to replace its police cars and other vehicles, scaled back its winter lights show and cut recreation programs while eliminating its entire capital budget.

“The last couple years have been the absolute worst we’ve ever encountered,” said Mayor Sidney Katz, who was first elected to the City Council in 1978.

Gaithersburg still must cope with a property tax reassessment this year — all property is reassessed by the state every three years on a rolling basis — which could cut into tax revenues because property values have declined.

Cheye Calvo, mayor of Berwyn Heights, said his city’s proximity to large employers like the University of Maryland, College Park and Goddard Space Flight Center has protected it from the foreclosure tidal wave that has slammed Prince George’s County. Even so, Berwyn Heights saw its property tax base drop from $415 million in the 2007 assessment to $300 million in 2010.

“We’ve never seem property value decrease like this in the state of Maryland,” Calvo said. “This really is an unprecedented challenge.”

While property values were plummeting, the state was cutting its aid. Calvo said property taxes were 47 percent of his budget when he was first elected mayor in 2004, but now account for 64 percent.

The town had been socking money away to spend in chunks of $600,000 or $700,000 on infrastructure projects, but had to discontinue that as the budget shrank. Berwyn Heights trimmed hours for part-timers, froze pay and raised parking fines, and Calvo recently proposed a property tax hike of 2.5 cents, or 5 percent, to put toward transportation projects.

“We’re not funding infrastructure,” Calvo explained. “I think it’s akin to not making pension payments. If you allow enough time to go by and you don’t do the work, when you get there it’s no longer a simple fix, it’s a remove-and-replace.”

They mayor is already looking ahead to the next reassessment, but a recovery for the property taxes that his city and every other rely on could be even further off.

“Our best hope is that in 2013 to 2014, the real estate market has improved somewhat and we see some increase in our tax base,” Calvo said. “But there are a lot of foreclosures in the pipeline that have to work their way through. The foreclosures here are selling, but they’re selling at bargain prices.”