Subject
title
FY 2027 Budget Worksession #1 - Strategic Initiatives and Revenues
end
Department
Finance
Recommendation
Staff recommends that the Mayor and Council review the FY 2027 Proposed Operating Budget and Capital Improvements Program, and provide direction as needed.
Discussion
This is the Mayor and Council’s first budget worksession related to the FY 2027 Proposed Operating Budget and Capital Improvements Program. During this worksession, staff would like to cover strategic initiatives included in the FY 2027 budget, the operating budget by fund, and proposed fees and revenues. The FY 2027 Proposed Fee Summary (Attachment 1) shows city fees and charges as reflected in the FY 2026 Adopted Budget and fees and charges proposed for FY 2027.
The objective of this worksession is to provide a high-level overview of the FY 2027 budget, along with greater insight into the revenues, taxes, and fees that support the strategic initiatives for FY 2027. The budget worksession presentation (Attachment 2) provides a focused discussion on the alignment of the FY 2027 strategic initiatives with the Mayor and Council’s guiding principles, and shares budget highlights, along with information on proposed fees.
FY 2027 Strategic Initiatives
This budget continues to prioritize the Mayor and Council’s focus areas: public safety, economic development, and housing - while also reinforcing stewardship of the environment and infrastructure and advancing effective and efficient service delivery. The FY 2027 proposed budget places emphasis on key initiatives that will strengthen community safety, enhance long-term infrastructure resilience, expand housing opportunities, and sustain a vibrant local economy.
Public safety remains foundational to a thriving community. A comprehensive approach to safety recognizes that prevention, staffing capacity, infrastructure, and technology investments all work together to ensure a secure environment for residents and businesses. The FY 2027 proposed budget continues implementation of the two-year CCTV modernization initiative and includes the conversion of two police officer overfill positions to permanent positions to stabilize staffing levels and provide added school resources for MCPS public schools located within Rockville city limits. The proposed budget also includes the addition of a 1.0 FTE Sergeant to support patrol operations and implementation of a Street Crimes special unit, along with funding for increased officer on-call overtime pay. Investments are also included for park pavilion and restroom security improvements, a school pathway lighting feasibility study, and continued support for emergency vehicle replacement assistance to the Rockville Volunteer Fire Department. These investments reflect a proactive approach to safety that balances response capability with prevention and visibility.
Within the enterprise funds, infrastructure and operational resilience remain critical priorities. The utility funds continue to support system reliability, equipment replacement, and long-term capital reinvestment to ensure the safety and quality of the city’s water, sewer, refuse, and stormwater services. These funds operate under a cost-of-service model designed to maintain financial sustainability while meeting regulatory and service obligations.
Economic development continues to serve as the engine that drives growth, opportunity, and quality of life in Rockville. Rockville Economic Development, Inc. (REDI) remains a key partner in strengthening and broadening the city’s economic base. The proposed FY 2027 budget maintains operational funding for REDI and includes expanded marketing efforts within the life sciences sector, consistent with the city’s strategic focus on biosciences and innovation industries. The proposed budget also includes funding for the Murals in Private Development Grant Pilot Program and supports completion of the city’s Economic Development Strategic Plan. These initiatives are designed to support business attraction, retention, entrepreneurship, and placemaking efforts that enhance Rockville’s competitive position in the region.
Housing programs and policies continue to promote opportunity, affordability, and neighborhood stability. The FY 2027 proposed budget includes a $500,000 General Fund transfer to the Housing Opportunities Fund. This contribution supports continued downpayment assistance programming, employee homeownership assistance, and provides sufficient fund accumulation to allow participation in gap financing opportunities to preserve and expand affordable housing units within the city. The proposed budget also includes the addition of a 1.0 FTE Community Enhancement Codes Inspector to strengthen rental housing inspections and improve housing quality and compliance. These initiatives reflect the city’s ongoing commitment to responsible growth, equity, and affordability.
Stewardship of the environment and infrastructure remains central to the city’s long-term strategy. The FY 2027 proposed budget includes funding for a second electric vehicle bus for the Rockville Senior Center, expanded recycling in city parks following a successful pilot program, and support for additional community garden plots. City workplans also include continued implementation efforts aligned with the Climate Action Plan, including community engagement related to the Flood Resiliency Master Plan and Green Space Management Plan, which are in development. These initiatives support sustainability, resilience, and environmental responsibility while enhancing community amenities.
The proposed budget also advances effective and efficient service delivery through targeted staffing and organizational investments. The FY 2027 budget includes the addition of a 1.0 FTE Assistant City Attorney position, expansion of childcare staffing at Montrose Discovery Preschool, temporary personnel to support procurement operations, organizational development initiatives within Human Resources, and expanded community service and enrichment grants. Funding is also included to extend the outdoor swim season following a successful pilot program. These investments strengthen internal capacity, improve service responsiveness, and enhance the resident experience.
FY 2027 Budget Summary
The FY 2027 proposed operating budget totals $187.1 million across all funds, representing a 6.6 percent increase from the FY 2026 adopted budget. The General Fund constitutes approximately 67 percent of total operating appropriations and remains the primary operating fund of the city.
Governmental funds are those through which most governmental functions of the city are financed. The acquisition and use of the city’s expendable financial resources (except for those accounted for in the enterprise funds) are accounted for through governmental funds. The city’s governmental operating funds are the General Fund, the Special Activities Fund, the Community Development Block Grant Fund, the Speed Camera Fund, and the Debt Service Fund. The city has one nonmajor blended component unit, Rockville Economic Development, Inc. (REDI) which is budgeted as a cost center within the General Fund for the city's annual contribution to REDI. The taxpayer-supported General Fund is the largest component, constituting 67.1 percent or $125.5 million of the total budget. The proposed budget maintains the current property tax rate and assumes that the rate will remain flat throughout the forecast period.
Enterprise funds, including Water, Sewer, Refuse, Parking, and Stormwater Management, account for approximately 29 percent of total appropriations or $54.5 million and operate in a manner similar to private business enterprises, with expenses recovered through user fees rather than general taxation.
Table 1 - Proposed FY 2027 and FY 2026 Budget Appropriations
|
|
Budget Appropriations |
|
Governmental Funds |
FY 2026 Adopted |
FY 2027 Proposed |
Change |
|
General |
117,087,900 |
125,461,800 |
7.2% |
|
Special Activities |
1,797,500 |
2,090,820 |
16.3% |
|
CDBG |
263,000 |
263,000 |
0.0% |
|
Speed Camera |
1,380,080 |
1,397,340 |
1.3% |
|
Debt Service |
3,342,000 |
3,340,000 |
-0.1% |
|
|
|
|
|
|
Enterprise Funds |
|
|
|
|
Water |
16,314,940 |
17,341,280 |
6.3% |
|
Sewer |
15,982,230 |
16,475,400 |
3.1% |
|
Refuse |
8,759,240 |
9,417,050 |
7.5% |
|
SWM |
7,625,700 |
8,268,320 |
8.4% |
|
Parking |
2,926,520 |
3,006,400 |
2.7% |
|
|
|
|
|
|
Total |
$ 175,479,110 |
$ 187,061,410 |
6.6% |
The proposed Capital Improvements Program includes $35.2 million in new appropriations and rollover funding across 56 projects and includes a $12.3 million General Fund transfer to support long-term infrastructure investment. This is notably the largest budgeted CIP transfer for the city and reflects the city’s commitment to capital investments and future growth.
The city’s financial management policies require maintaining an unassigned General Fund balance equal to at least 20 percent of adopted General Fund revenues. The FY 2027 forecast assumes a flat property tax rate and projects reserve levels will remain above policy minimums throughout the forecast period. The forecast assumes the planned use of $4 million in FY 2026 reserves to support the FY 2027-FY 2031 Capital Improvements Program while maintaining structural balance.
Citywide Revenues for FY 2027
Revenues across all funds are proposed to total $184.6 million in FY 2027. This is an increase of 6.7 percent from FY 2026 Adopted revenues. Revenues by category are shown in Table 2 and provide a comparison of revenues in the FY 2026 Adopted Budget and FY 2027 Proposed Budget. The largest revenues for the city are charges for service, property taxes, revenue from other governments, and other revenue.
Table 2 - Citywide Revenues by Category
|
|
Revenues |
|
Category |
FY 2026 Adopted |
FY 2027 Proposed |
Change |
|
Charges for Service |
53,742,340 |
57,590,550 |
7.2% |
|
Property Taxes |
51,720,750 |
53,790,100 |
4.0% |
|
From Other Gov't. |
38,347,360 |
41,971,490 |
9.5% |
|
Other Revenue |
10,471,550 |
11,103,780 |
6.0% |
|
Transfers |
5,448,910 |
5,890,870 |
8.1% |
|
Licenses & Permits |
5,537,070 |
5,733,730 |
3.6% |
|
Use of Money & Property |
4,446,030 |
4,532,820 |
2.0% |
|
Fines & Forfeitures |
3,284,100 |
3,963,000 |
20.7% |
|
|
|
|
|
|
Total |
$ 172,998,110 |
$ 184,576,340 |
6.7% |
Charges for Service
This revenue source comes from charges to users who individually benefit from a particular city service. This revenue category increased from the FY 2026 adopted budget by 7.2 percent, or approximately $3.8 million.
The majority of the charges for services revenue comes from the city's enterprise funds. The largest source of Charges for Services comes from utility customer charges which are assessed for water, sewer, and refuse services. In addition, all residential and commercial properties pay stormwater management fees based on the calculated impervious surface of the property.
Within the General Fund, recreation services make up the majority of this category, including swim team dues, recreation program fees, Swim and Fitness Center memberships, and other facility membership fees.
Proposed increases to utility rates are the primary driver of the FY 2027 increase in this category of revenues. The FY 2027 fee increases reflect the increased costs of providing services and align with the city's cost recovery framework. Recreation program fees revenues are estimated to increase by $414,270 in FY 2027 which reflects a combination of program expansions and fee increases.
The FY 2027 Proposed Fee Summary (Attachment 1) includes detailed information on current and proposed fees that are included in the charges for service category. Changes in revenue projections reflect the combined impact of proposed fee changes and the anticipated volume of activity for the year.
For FY 2027, the Mayor and Council will need to adopt a new set of Refuse and Stormwater Management rates. Water and Sewer rates covering FY 2025 through FY 2027 were adopted on May 6, 2024, following the last cost of service study. A new study will be performed in FY 2027 to inform the next set of water and sewer rates.
• All residential properties in the city are proposed to pay the annual refuse and recycling rate of $585 for FY 2027. The rate represents an increase of 3.5 percent or $20 over the FY 2026 adopted rate.
• All residential and commercial properties in the city are proposed to pay $169 per equivalent residential unit (ERU) per year, which is an increase of 6.3 percent or $10 over the FY 2026 rate.
Property Taxes
The property taxes category includes real property tax, personal property tax, interest on late payments, and includes the city’s homeowners’ tax credit program. These revenues are projected to increase by $2.1 million, or 4 percent. The largest portion of this category is real property tax. The City of Rockville’s real property tax rate is proposed to remain flat at $0.292 for every $100 of assessed value. The State of Maryland Department of Assessments and Taxation (SDAT) reassesses real property every three years and tax bills are based on those assessments. For homeowners, any increase to assessed value is phased in equally over a three-year period, and the resulting increase in the property tax bill is capped at 10 percent. Any decrease is fully factored into the first full levy year after the assessment. The real taxable assessed value from FY 2025 to FY 2026 increased by approximately 3.9 percent to $17.5 billion.
While the General Fund is the primary recipient of property tax revenue, the Parking Fund also receives property tax from the commercial properties within the Town Square boundaries. These properties pay this parking district tax in addition to the regular property tax. The parking district tax rate is proposed to remain flat at $0.33 per $100 of assessed value. The parking district will generate approximately $105,100 in special property tax revenue for FY 2027. The parking district tax revenue has decreased over time due to the reduction in the assessed values of the commercial properties in the Town Square.
Revenues from Other Governments
This category of revenue consists of revenues from the federal government, State of Maryland, and Montgomery County. Nearly all of the revenue in this category supports the General Fund and comes from income tax, tax duplication, admission and amusement tax, highway user revenue, and police protection grant. Within the CDBG Fund, there is a federal grant that is passed through Montgomery County and within the Parking Fund there is an annual contribution from Montgomery County that supports the parking garages near the library in Town Square.
The income tax estimate for FY 2027 is $23.2 million, 3 percent higher than the actual amounts received of $22.5 million in FY 2025. In FY 2022 the city realized significant growth in income tax revenues, but this growth slowed in FY 2023 and FY 2024, and spiked again in FY 2025. This revenue source is challenging to predict because it is based on individual income tax returns each year. Factors such as employment rates, capital gains, retirement rates, and wage growth all contribute to the amount of annual revenue.
Tax duplication payments are received from Montgomery County as a partial reimbursement for services the County does not provide, but for which the County receives taxes from Rockville properties. Montgomery County passed legislation in March 2022 that more accurately acknowledges taxpayer-supported spending by Rockville and other municipalities in Montgomery County. The FY 2027 funding level reflects updates made to the calculations as part of the quadrennial assessment. The FY 2027 revenue equals $10.5 million, a 16.9 percent increase over the FY 2026 adopted budget.
Admissions and amusement tax is a local tax collected by the State of Maryland Comptroller's Office for jurisdictions in Maryland. The tax is imposed on the gross receipts from admissions, the use or rental of recreational or sports equipment, and the sale of merchandise, refreshments, or services at a place where entertainment is provided. Rockville receives the largest amount of this revenue from movie theaters, indoor athletic facilities, and ice skating rinks. The FY 2027 budget assumes revenues of $1.3 million which is consistent with recent trends. This revenue is paid to the city on a quarterly basis.
Highway User Revenue is distributed by the State of Maryland based on a methodology that uses lane miles and vehicle registrations. This revenue source supports the construction, reconstruction, and maintenance of the city's roads and streets. For FY 2027, the city is projected to receive $4.5 million in highway user revenue, which is less than the FY 2026 adopted budget. This is the latest estimate from the Maryland State Highway Administration. The legislation which increased this transportation funding for local jurisdictions is set to sunset in FY 2028. The city anticipates reductions beginning in FY 2028 for this revenue based on the current legislation.
The city receives an annual police protection grant from the State of Maryland to assist with policing services. The FY 2027 budget estimates revenues of $1.1 million for this grant, consistent with the amount budgeted for FY 2026.
Other Revenue
The other revenue category is made up of revenue sources that are not consistent with the other categories. This revenue source is primarily made up of hotel tax, community contributions, miscellaneous revenues, administrative charges and revenues that reflect the latest requirements set by the Governmental Accounting Standards Board (GASB).
Administrative charges represent centrally budgeted administrative or "overhead" costs. Six of the city's operating funds pay for their share of overhead costs through an annual transfer to the General Fund. The FY 2027 administrative charge revenue equals $6.1 million based on the city's internal cost allocation model; this is $471,500 more than what was adopted in FY 2026. A calculation is performed each year to determine the administrative charges.
Hotel Tax consists of the city's share of tax levied on a person who pays for a room or space at a hotel in Rockville. For FY 2027, the budget is $900,000 which is consistent with recent trends.
Lease and SBITA Inception revenue is triggered when the city enters into a new lease or SBITA (subscription-based IT agreement). Governmental accounting standards require that entities report inception revenue to show that the city received a long-term asset upfront. At the same time, an equal and offsetting expense is reported to show that the asset will be paid for over time through future lease or subscription payments. The amounts that are recorded annually will adjust based on newly executed contracts. For FY 2027 this is estimated at $2.1 million.
Transfers
General Fund transfers are made annually to the Refuse Fund to support refuse services for Rockville Housing Enterprises (RHE) properties, to the Parking Fund to support ongoing debt service associated with the construction of the parking garages, to the Special Activities Fund to support various arts and need-based programs, and to the Debt Service Fund for taxpayer-supported debt payments. While these transfers are expenses to the General Fund, they are revenues to the funds receiving these subsidies. This category also includes the annual administrative fee received by the Water Fund for utility billing functions that include Sewer Fund charges for services. In FY 2027 these transfer revenues cumulatively total $5.9 million.
Licenses and Permits
The licenses and permits category includes building permits, rental licenses, animal licenses,
stormwater permits, and other types of licenses. This revenue category increased from the FY 2026 adopted budget by 3.6 percent, or approximately $196,660. Approximately 88 percent of the revenue in this category comes from building permits and rental licenses which provide resources to the General Fund.
The proposed changes to permitting/licensing, zoning, forestry, and public works fees are the result of a fee analysis intended to promote cost recovery for fee-funded services. Fees administered by CPDS and Public Works had not undergone a comprehensive fee analysis since 2011. Since its initial adoption, the Master Fee Resolution has been revised several times in order to make inflationary adjustments, but never based upon determining the actual city costs to provide the underlying services. In an effort to bring the fees more in line with the city’s cost recovery framework, staff worked with NewGen Strategies to evaluate the cost to provide most services covered by these fees. Staff labor time was calculated along with additional expenses such as overhead and vehicle miles. The consultant also benchmarked comparable fees for other local jurisdictions. Proposed fee increases take the benchmarking data into consideration to ensure that city fees are not unreasonable relative to neighboring jurisdictions, when comparable fees exist. More details can also be seen in the FY 2027 Proposed Fee Summary (Attachment 1).
Use of Money and Property
The use of money and property category includes land and building rentals, cable franchise fees, and interest earnings. The FY 2027 proposed budget includes $2.5 million in interest earnings revenue, an increase of $157,000. Cable Franchise Fees support the General Fund and the Special Activities Fund (Cable TV Equipment) and represent franchise fees and grants paid to the city by Comcast and Verizon. The FY 2027 estimate for this category equals $1.4 million, a $174,730 increase from FY 2026 following a formal review of subscriber allocations.
Fines and Forfeitures
This revenue category increased from the FY 2026 adopted budget by 20.7 percent, or $678,900 up to approximately $4 million for FY 2027. This category of revenue includes redlight camera citations, speed camera citations, parking violation citations and other fines and charges.
Mayor and Council Considerations
The revenues proposed in the FY 2027 budget support the planned spending for the upcoming fiscal year. The Mayor and Council are responsible for approving property tax rates, utility rates, and the master fee resolution. Any direction to modify the proposed tax rates, fees, or charges will require that the following worksessions include focused discussions around adjustments to planned spending.
The proposed changes to utility rates, coupled with estimated increases in assessed property values result in an increase of $170 per year (or approximately $14 per month) for a single-family homeowner who pays Rockville water and sewer rates.
Mayor and Council History
|
Date |
Action Item |
|
November 10, 2025 |
Budget Public Hearing #1 Budget Timeline Presentation |
|
January 5, 2026 |
Mayor and Council Priorities Discussion |
Public Notification and Engagement
There are two more public hearings related to the FY 2027 budget (March 9 and March 23). In addition to these public hearings, the public can submit written comments directly to the Mayor and Council via the City Clerk/Director of Council Operations.
The Rockville community is also encouraged to submit an online budget survey to communicate their budget priorities for FY 2027. This form is available in three languages (English, Spanish, and Simplified (Mandarin) Chinese) and will be posted until April 13, 2026. The survey can be found at www.rockvillemd.gov/budget <http://www.rockvillemd.gov/budget>.
The FY 2027 budget public record closes on April 13, 2026.
Fiscal Impact
The FY 2027 proposed operating budget by category and fund can be found in the Fund Summaries section of the budget document. The FY 2027 proposed CIP budget appropriation by fund, program area, and department can be found in the CIP Overview section of the budget document.
Next Steps
|
Date |
Action Item |
|
March 9, 2026 |
Public Hearing #2 FY 2027 Budget Introduction M&C Worksession #1 - Strategic Initiatives and Revenues |
|
March 23, 2026 |
Budget Public Hearing #3 M&C Worksession #2 - Operating Expenditures and Grants |
|
April 13, 2026 |
Close of the community budget priorities survey and public record M&C Worksession #3 - CIP, Changes, Final Balancing |
|
May 4, 2026 |
Adoption of FY 2027 Budget and Capital Improvements Program |