Subject
title
Introduction and Adoption of an Ordinance to amend Ordinance No. 04-26 to appropriate funds and levy taxes for FY 2027 (Budget Amendment #1)
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 2027 budget. The FY 2027 budget was adopted by the Mayor and Council on May 4, 2026.
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 2027 budget. This amendment recognizes the items that are described in this agenda report and detailed on Attachment 2.
Purchase Orders that Carried Over from FY 2026
Each year the city re-appropriates funds to cover purchase orders that were outstanding at the close of the prior fiscal year. These purchase orders were issued before the end of the fiscal year, but the goods or services were not delivered until after the beginning of the new fiscal year. At year end, these funds are assigned for appropriation and are reflected as an adjustment to the next year's budget. A summary by fund of the FY 2026 purchase order amounts that carried over into FY 2027 is shown under the Fiscal Impact section of this agenda item. The total amount of purchase orders that carried over for all funds equals $4.7 million, but only $4.6 million shows as additional expenses due to the offset with the addition to reserves in the Sewer Fund (see footnote in TABLE 1).
General Fund Operating Adjustments
Linkages to Learning Program Expansion ($100,000 increase in revenues and expenditures): The city’s Linkages to Learning grant has been expanded to add a Linkages to Learning program at Twinbrook Elementary School. This program expansion requires the addition of a 1.0 FTE Linkages to Learning Specialist position, grade AD215.
Replenish Grant Contingency ($20,000 increase in revenues and expenditures): The city receives new grants and changes to budgeted grants throughout the year. When these grants or changes are small, they can be added to the budget through grant contingency rather than having to wait on the next planned budget amendment. This amendment increases grant contingency by $20,000 to allow capacity for additional small grants and grant adjustments during the remainder of the year.
Income Tax ($1,500,000 increase in revenues): This adjustment increases the FY 2027 income tax estimate from the adopted level of $23.2 million to the actual FY 2026 level of $24.7 million. While recent income tax receipts have exceeded budgeted targets, the deployment of a tiered income tax system in calendar year 2027 could result in some reductions to income tax revenues going forward; therefore, staff does not recommend adjusting income tax any higher than the FY 2026 actual amount at this time. Staff will continue to monitor and provide quarterly updates on this revenue source through the quarterly financial reports.
General Fund Transfer to the CIP ($927,600 increase in expenditures): This increase adds sufficient funding to the Building Energy Performance Improvements (GA27) CIP project to enable the city to award a capital purchase of multi-site solar, and funds the required city match for two new grants under the Pedestrian and Bicycle Safety (TD26) CIP project. See additional details under the Capital Improvements Program (CIP) heading below.
City Facilities and Parks Cross-Connection Prevention Improvements ($150,000 increase in expenditures): This funding will implement phased installations and testing of backflow prevention devices at city facilities and parks. These improvements are necessary to ensure compliance with the drinking water Cross-Connection Prevention Program under the Environmental Protection Agency's (EPA) Administrative Order of Consent (AOC).
Network Risk and Vulnerability Assessment ($110,000 increase in expenditures): This amendment reappropriates funding needed to conduct a comprehensive third-party cybersecurity assessment, which is required to comply with mandates and contractual agreements. An IFB was issued for this service in FY 2026, but the city did not receive responses with sufficient experience and was therefore unable to award. IT Security plans to issue an RFP for this work in FY 2027, which will allow a more detailed review of the proposing vendors’ service and experience.
Transfer to the Housing Opportunities Fund ($110,000 increase in expenditures): This increase in the General Fund transfer to the Housing Opportunities Fund will supplement existing Housing Opportunities Fund resources to allow the city to offer a low-interest loan to support housing for low-income households. See additional details under the Special Activities Fund heading below.
Addition to General Fund Contingency ($202,400 increase in expenditures): This adjustment sets aside available funding to increase General Fund contingency in anticipation of higher than budgeted commodities expenditures. Commodities such as electricity, natural gas, and fuel have increased in cost since the FY 2027 budget was prepared.
Special Activities Fund Operating Adjustments
Public Art Contingency ($32,000 increase in expenditures): This adjustment appropriates existing Art in Public Places reserves to provide contingency funding to support unexpected needs or cost increases related to the installation of the David Scull Park and Memory Walk Park public art projects if needed during the year. Going forward, public art contingency funding will be included in the adopted budget each year, funded from Art in Public Places and/or Art in Public Architecture resources.
Low-interest Loan for Twinbrook Place Apartments ($110,000 increase in revenues; $1,500,000 increase in expenditures): This appropriation will allow the city to provide the Twinbrook Place Apartments with a low-interest loan of $1.5 million, due at the end of an agreed upon term, along with annual interest payments directed back to the Housing Opportunities Fund (HOF). The project will provide housing for 125 low-income households. This appropriation is supported in part by a $110,000 increase in the General Fund transfer to the HOF.
Community Development Block Grant (CDBG) Fund Operating Adjustments
CDBG Year 51 Grant Funding ($263,000 increase in revenues; $283,382 increase in expenditures): At the end of FY 2026 the city’s $263,000 CDBG Year 51 grant award was unobligated and requires reappropriation to execute the grant in FY 2027. In addition to the regular grant funding, the city received proceeds from the sale of a home totaling $20,382 that must be appropriated for additional home rehabilitation work.
Water Fund Operating Adjustments
Settlement Payment ($346,140 increase in expenses): On Aug 3, 2026, the Mayor and Council authorized a final payment to a contractor involved with the recently-closed Water Treatment Plant Electrical, Roof, and HVAC (UA17) CIP project. This amount is supported by $326,991 in retainage that was held during the project, with the remainder supported by Water Fund reserves.
Sewer Fund Operating Adjustments
Replenish Sewer Fund Contingency ($65,000 increase in expenses): Several major Sewer Fund vehicle repairs have depleted the Sewer Fund’s contingency account in early FY 2027. This adjustment restores the contingency account to its adopted level of $65,000, ensuring that staff are able to respond to Sewer Fund emergencies during the remainder of the fiscal year, should they arise.
Capital Improvements Program (CIP) Adjustments
David Scull Park Improvement (RA19, $153,000 increase): The city was awarded a Program Open Space grant through Montgomery Parks and the State of Maryland Department of Natural Resources (DNR) to fund a portion of the renovation of David Scull Park.
RedGate Park Master Plan Implementation (RE23, $1,500,000 increase): The city was awarded a $1.5 million Land and Water Conservation Fund grant for RedGate Park from the Maryland Department of Natural Resources to fund paths and pedestrian walkway improvements at RedGate Park. This grant requires an equal city match, which is available in the project’s current budget.
Building Energy Performance Improvements (GA27, $1,485,600 increase): This amendment adds $813,600 in paygo funding to enable the city to award a capital purchase of multi-site solar, and recognizes $672,000 in Maryland Energy Administration (MEA) grant funding. The funding will support the award, design, and construction of three solar installations: rooftop solar at City Hall and solar canopies over the parking lots at 6 Taft Court and the F. Scott Fitzgerald Theatre. The sites were selected based on projected payback and project feasibility, and construction is expected to be completed by December 2028. Based on the projected simple payback period for the multi-site solar project, the system is expected to recover its initial cost through reductions in electricity costs in just under 13 years, which is well below its 25-year life expectancy.
Pedestrian and Bicycle Safety (TD26, $570,000 increase): The city was awarded two grants that support the Pedestrian and Bicycle Safety CIP project:
• Federal Highway Administration Active Transportation Infrastructure Investment Program: This grant provides $216,000 for feasibility and design of a shared use path from Maryvale Park to Redgate Park. The city’s required match of $54,000 is included in this amendment’s increase to the General Fund Transfer to the CIP.
• Maryland Department of Transportation State Highway Administration Carbon Reduction Funding: This grant provides $240,000 for feasibility and design of a shared use path along Research Boulevard. The city’s required match of $60,000 is included in this amendment’s increase to the General Fund Transfer to the CIP.
Water Meter Replacement and AMI Implementation (UB21, $1,843,500 increase): This adjustment advances the funding required to fully fund (including adequate contingency) and strategically accelerate the project schedule for the citywide deployment of advanced smart water meters and Advanced Metering Infrastructure (AMI). By front-loading this funding into FY 2027, the city will accelerate the full deployment timeline from FY 2031 to FY 2029. This acceleration reduces overall project duration, avoids future material inflation, and secures early operational efficiencies. Based upon the planned award this will ultimately yield an estimated $2.25 million in total project cost savings for the city. This amendment represents a strategic investment to capture significant long-term fiscal benefits; there is no increase to the project scope.
Sewer Rehab & Improvement (UC26, $2,592,000 increase): This change recognizes outside funding that the city has been awarded for this project including:
• $1,092,000 federal earmark for sewer lateral replacement work: This earmark requires a city match of $273,000, which is available within the project
• $1,500,000 Clean Water State Revolving Fund (CWSRF) Supplemental Assistance Program grant for sewer lateral replacement work, no city match required
This grant funding will allow the city to address a backlog of sewer lateral replacements and absorb cost increases without impacting other planned work within this project.
4Q FY 2026 Financial Report
The 4Q FY 2026 Financial Report <https://www.rockvillemd.gov/wp-content/uploads/2026/10/4Q-FY26-Financial-Report-1.pdf> is available on the city’s website. The FY 2026 estimated ending unassigned fund balance equals $31.3 million, which is $6.3 million above the FY 2027 target of $25 million. This amount factors in the $3 million assigned for purchase orders that rolled from FY 2026 to FY 2027. This unassigned fund balance above the reserve target can be used for one-time needs. Staff recommends the Mayor and Council consider this reserve balance in the context of needs presented in the FY 2028 through FY 2032 CIP budget.
Impact Statements
Equity
This amendment includes funding for several programs that provide assistance to low-income households: Linkages to Learning, the Housing Opportunities Fund, and CDBG.
Environment
This amendment includes funding to provide rooftop solar and other energy improvements at several city facilities, and provides funding to design shared use paths in two locations that provide non-vehicular transportation alternatives.
Economy
This amendment provides a low-interest loan to enable the provision of 125 housing units for low-income households within the city.
Mayor and Council History
This is the first budget amendment for FY 2027. The FY 2027 budget was adopted by the Mayor and Council on May 4, 2026.
Fiscal Impact
The following operating fund(s) will be adjusted if this budget amendment is adopted.
TABLE 1
|
Operating Fund |
Adopted Budget |
FY26 Purchase Orders |
11/9/2026 Amendment |
Amended Budget |
|
General Fund |
$125,138,300 |
$2,957,662 |
$1,620,000 |
$129,715,962 |
|
Water Fund |
$17,454,700 |
$817,099 |
$346,140 |
$18,617,939 |
|
Sewer Fund* |
$16,475,400 |
$ - |
$ - |
$16,475,400 |
|
Refuse Fund |
$9,434,820 |
$293,676 |
$ - |
$9,728,496 |
|
Parking Fund |
$3,006,400 |
$ - |
$ - |
$3,006,400 |
|
Stormwater Mgt. Fund |
$8,231,060 |
$384,912 |
$ - |
$8,615,972 |
|
Special Act. Fund |
$2,090,820 |
$172,284 |
$1,532,000 |
$3,795,104 |
|
CDBG Fund |
$263,000 |
$ - |
$283,382 |
$546,382 |
|
Speed Camera Fund |
$1,397,340 |
$ - |
$ - |
$1,397,340 |
|
Debt Service Fund |
$3,340,000 |
$ - |
$ - |
$3,340,000 |
|
Total |
$186,831,840 |
$4,625,633 |
$3,781,522 |
$195,238,995 |
* FY 2026 purchase orders were added to the FY 2027 budget totaling $105,530 for the Sewer Fund, but this full amount was offset by a reduction in the fund’s “add. to reserves” line.
The following Capital Improvements Program (CIP) fund(s) will be adjusted if this budget amendment is adopted:
TABLE 2
|
CIP Fund |
Adopted Budget |
11/9/2026 Amendment |
Amended Budget |
|
Capital Projects Fund |
$55,667,076 |
$3,708,600 |
$59,375,676 |
|
Water Fund |
$30,481,438 |
$1,843,500 |
$32,324,938 |
|
Sewer Fund |
$18,120,294 |
$2,592,000 |
$20,712,294 |
|
Refuse Fund |
$694,350 |
$ - |
$694,350 |
|
Stormwater Mgt Fund |
$19,240,516 |
$ - |
$19,240,516 |
|
Special Activities Fund |
$1,385,925 |
$ - |
$1,385,925 |
|
Speed Camera Fund |
$ - |
$ - |
$ - |
|
Total |
$125,589,599 |
$8,144,100 |
$133,733,699 |