Subject
title
Introduction and Possible Adoption of an Ordinance to amend Ordinance No. 04-25 to appropriate funds and levy taxes for FY 2025 (Budget Amendment #4)
end
Department
Finance
Recommendation
In accordance with the City Charter, since the budget ordinance is adopted at the fund level, a change in the appropriated amount of any fund requires action by the Mayor and Council. The vehicle for such action is an amendment to the budget ordinance. The proposed ordinance, Attachment 1, would amend the FY 2025 budget. The FY 2025 budget was adopted by the Mayor and Council on May 6, 2024, and has been amended three times since: on August 5, 2024, October 28, 2024, and February 24, 2025.
If the Mayor and Council wish to proceed with adoption of the ordinance at the same meeting, the ordinance should first be introduced and then a motion should be made to waive the layover period. If the motion to waive the layover period is approved by an affirmative vote of six or more members of the Mayor and Council, a motion to adopt the ordinance may then proceed.
Discussion
The proposed ordinance, Attachment 1, would amend the FY 2025 budget. This amendment recognizes the items that are described in this agenda report and detailed on Attachment 2. Attachment 3 is the 3Q FY 2025 Financial Report.
Amendment Detail (Attachment 2)
This amendment includes operating and capital improvements program (CIP) budget adjustments as described below.
Operating Budget
Leases and SBITA adjustments (General Fund, $8 million offsetting revenue and expenditure increase; Special Activities Fund, $70,000 offsetting revenue and expenditure increase): This administrative adjustment allows for the GASB-compliant recording of long-term leases and subscription-based IT arrangements (SBITAs).
Swim and Fitness Center program fees and temp wages (General Fund, $127,000 revenue increase; $47,000 expenditure increase): Swim and Fitness Center program participation and resulting revenue has exceeded estimates for the year. This revenue increase offsets both the need for additional temporary employee staffing at the Center, as well as other General Fund needs.
General Fund transfer to the Special Activities fund for REAP/Bethany House (General Fund, $80,000 expenditure increase; Special Activities Fund $80,000 revenue and expenditure increase): Staff from the Department of Housing and Community Development have been working closely with non-profit senior affordable housing provider Bethany House on its high number of tenants with large rental arrears. Given the vulnerability of seniors on minimal fixed-incomes, preventing evictions at this location is an urgent need. This funding will allow staff, in partnership with Montgomery County, to clear tenants' rental arrears.
Overfill authorization for 2 Police Officer positions (General Fund, no change in appropriations): The city has struggled in recent years to attract and retain qualified applicants for sworn positions. Acknowledging that the training process is long and not all new hires complete the full academy and field training, this amendment provides authorization for up to two Police Officer hires over the authorized level to increase the department’s likelihood of reaching full staffing levels. No additional appropriation is needed for this standing authorization, as the overfill positions will be covered by unspent General Fund personnel funds resulting from vacant positions. This overfill authorization will carry forward into FY 2026 and beyond.
Facility rental fees (Special Activities Fund, $10,000 expenditure increase): The Friends of the Arts program needs to appropriate additional funding, supported by fund balance, to cover rental fees for the city-managed performing arts groups presenting concerts or performances in the auditoriums at Montgomery College, Rockville Campus and Montgomery County Public Schools due to the temporary closure of the theatre during the construction of the F. Scott Fitzgerald Theatre ADA Improvements (RA20) CIP project.
Arbitrage liability payments (Water, Sewer, and Stormwater Management Funds, $548,400 total expense increase): Recent project delays have resulted in a slower spend-down rate than projected for recent bond proceeds. Because the bond proceeds have been earning more in investment income than the yield paid to bondholders, the city is required to repay this excess amount to the IRS as follows: Water Fund $356,100; Sewer Fund $46,600; Stormwater Management Fund $145,700. Staff across multiple departments have collaborated to develop a plan to accelerate contract execution and project spending to help mitigate arbitrage liabilities going forward.
Blue Plains reconciliation payment (Sewer Fund, $163,600 expense increase): Additional funding is needed to cover the final FY 2025 payment for the city’s share of operating costs for the Blue Plains Advanced Wastewater Treatment Plant, which includes a reconciliation adjustment that exceeds the current budget.
Depreciation adjustment (Sewer Fund, $198,900 expense increase): This adjustment provides the additional budget authority needed to record the updated end-of-year Sewer Fund depreciation estimate for FY 2025.
Capital Improvements Program (CIP) Budget
Water Treatment Plant Safety Improvements (UB19, Water Fund, $210,000 expense increase): Additional funding is needed to accommodate updated construction support requirements and construction contingency. Due to the timing of this adjustment, any unspent funding as of June 30 will need to be reappropriated on the first FY 2026 budget amendment.
3Q FY 2025 Financial Report (Attachment 3)
As shown on page 1 of the attached 3Q FY 2025 Financial Report (Attachment 3) the FY 2025 estimated ending unassigned fund balance equals $25.2 million, which is $3.4 million above the target. This amount factors in the funds committed on the FY 2026 adopted budget ordinance totaling just over $2 million for a subsidy to the Housing Opportunities Fund sub-account ($750,000), a Green Space Management Plan ($280,000), a contribution to the Rockville Volunteer Fire Department for the purchase of a new vehicle ($250,000), and a transfer to the Capital Projects Fund for the construction of the Senior Center Entrance (TA24) CIP project ($800,000).
Impact Statements
Equity
This budget amendment provides funds to support non-profit senior affordable housing provider Bethany House on its high number of tenants with large rental arrears. Given the vulnerability of seniors on minimal fixed-incomes, preventing evictions at this location is an urgent need.
Environment
This amendment provides additional funding for the city’s portion of operating costs for the Blue Plains Advanced Wastewater Treatment Plant, responsible for the safe treatment of the city’s wastewater, as well as additional funding for the Water Treatment Plant Safety Improvements (UB19) CIP project, which funds the transition to safer processing at the city’s Water Treatment Plant.
Economy
There are no significant economic impacts resulting from the adoption of this budget amendment.
Mayor and Council History
This is the fourth budget amendment for FY 2025. The FY 2025 budget was adopted by the Mayor and Council on May 6, 2024, and has been amended three times since: on August 5, 2024, October 28, 2024, and February 24, 2025.
Fiscal Impact
The following operating fund(s) will be adjusted if this budget amendment is adopted.
TABLE 1
|
Operating Fund |
Amended Budget |
6/2/2025 Amendment |
Amended Budget |
|
General Fund |
$121,153,825 |
$8,127,000 |
$129,280,825 |
|
Water Fund |
$16,357,483 |
$356,100 |
$16,713,583 |
|
Sewer Fund |
$16,417,346 |
$409,100 |
$16,826,446 |
|
Refuse Fund |
$9,105,300 |
$ - |
$9,105,300 |
|
Parking Fund |
$2,791,920 |
$ - |
$2,791,920 |
|
Stormwater Mgt Fund* |
$7,319,350 |
$98,144 |
$7,417,494 |
|
Special Act. Fund |
$2,946,210 |
$160,000 |
$3,106,210 |
|
CDBG Fund |
$526,000 |
$ - |
$526,000 |
|
Speed Camera Fund |
$1,420,000 |
$ - |
$1,420,000 |
|
Debt Service Fund |
$4,455,600 |
$ - |
$4,455,600 |
|
Total |
$182,493,034 |
$9,150,344 |
$191,643,378 |
*Changes were made to the Stormwater Management Fund as detailed in Attachment 2, but the amount of the changes was partially offset by a reduction in the budgeted use of reserves, resulting in a smaller net change to the appropriated fund total.
The following Capital Improvements Program (CIP) fund(s) will be adjusted if this budget amendment is adopted:
TABLE 2
|
CIP Fund |
Amended Budget |
6/2/2025 Amendment |
Amended Budget |
|
Capital Projects Fund |
$68,483,200 |
$ - |
$68,483,200 |
|
Water Fund |
$22,094,904 |
$210,000 |
$22,304,904 |
|
Sewer Fund |
$12,132,725 |
$ - |
$12,132,725 |
|
Refuse Fund |
$741,022 |
$ - |
$741,022 |
|
Stormwater Mgt Fund |
$18,567,082 |
$ - |
$18,567,082 |
|
Special Activities Fund |
$1,509,109 |
$ - |
$1,509,109 |
|
Speed Camera Fund |
$104,957 |
$ - |
$104,957 |
|
Total |
$123,632,999 |
$210,000 |
$123,842,999 |