OCEAN CITY – The potential spending of retiree health insurance savings on capital improvement projects was questioned this week in council chambers.
The second reading of Fiscal Year 2015 Budget Amendment #1 was postponed from Monday evening’s Mayor and City Council regular session agenda, due to Councilman Dennis Dare and Councilman Tony DeLuca being absent, and the town wanting a full council present to make the final vote.
A couple of weeks ago, the full council voted unanimously to approve the amendment on first reading. At that time, Ellie Diegelmann, a common speaker at council meetings, approached the council expressing concerns over the amendment.
The budget amendment appropriates an additional $855,680 from fund balance to cover approved expenditures for street paving, the new Ocean City Beach Patrol headquarters, the town’s local match for repaving of runway 14/32 at the airport and the transfer of beautification donations to fund a water feature at the convention center.
An additional $682,076 of appropriated fund balance is included to cover prior year purchase orders and items approved in the FY14 budget but not yet purchased. Items included are advertising and Tourism Advisory Board funds, painting and carpet at City Hall and Northside Park patio resurfacing.
The amendment also includes $350,000 of savings in retiree health insurance to be used to reduce revenue estimates for Emergency Medical Service billing, parking revenue and parking fines. Approximately $90,000 of savings in retiree health insurance would be transferred to the Vehicle Trust Fund to fully fund vehicle purchases for FY 15 per the amendment.
The amount taken from fund balance increases $1,537,756 from $931,828 in the FY15 Adopted Budget to $2,469,584. The fund balance will remain at or above the 15 percent of annual expenditures policy target even with the transfers.
When initially presented, Budget Manager Jennie Knapp made it clear the amendment would not change the current tax rate of 47.04 cents per $100 of assessed value.
City Manager David Recor explained the town has saved about $1.8 million in retiree health insurance, and following the adjustment in revenues that figure comes to about $1.5 million that the Mayor and City Council can put toward capital improvement projects.
Knapp asked $90,415 of the savings be transferred to the Vehicle Trust Fund to complete vehicle purchases for this fiscal year, which the council approved and was included in first reading. The Vehicle Trust Fund was underfunded when the original FY15 Budget was passed.
Other potential uses of the savings is $650,000 be reserved for next fiscal year’s budget for street paving due to the uncertainty if the town will receive additional Highway User Grants. Typically street paving is funded by highway user funds and grants, parking revenue and casino revenue. About $500,000 is reserved to continue canal dredging in the next fiscal year.
“I am wondering why there was such a difference in what it was and what actually turned out,” Diegelmann said of the retiree health savings during first reading last month. “I feel strongly the savings from the retiree health plan should have gone towards the taxpayers.”
Not satisfied with the council or town staff responses, Diegelmann turned to former Councilman Vince Gisriel for support. In turn, Gisriel attended Monday evening’s Mayor and City Council meeting to stand by Diegelmann’s side.
“How did we miss the mark that much?,” Gisriel asked. “That much savings equates to two cents of the tax rate, and another alternative is to lower the tax rate. So, to say it has no bearing on the tax rate I don’t think is fully adequate.”
Gisriel also pointed out a disparity between the originally passed budget and the amendment.
“The work session packet and first reading reflect a grand total of the adopted budget of $124,344,641. They both reflect general fund transfers of $26,101,708. That is not the adopted budget of FY15. The FY15 Budget has a grand total of $129,552,874 and general fund transfer of $20,893,475. There is over $5.2 million error in the ordinance and that gets carried over to the changes. I don’t know how that slips past people but it did.”
With the second reading of FY15 Budget Amendment #1 being postponed due to council members’ absence, Knapp was not present to explain the discrepancy.
Following Gisriel’s comments, Diegelmann returned to the podium.
“Over the years when I have addressed the body of the Mayor and City Council, my two main concerns have always centered on money, whether it the savings or spending of it, and transparency regarding full disclosure,” she said.
Regarding the $5 million discrepancy Gisriel cited, Diegelmann offered several suggestions to better clarify budget processes starting with spending being controlled until a budget amendment is adopted.
Also, she suggested requiring the finance administrator and city manager sign off on the amendment prior to it being presented to the Mayor and City Council for approval, amend the Town Charter to have the fiscal year be the same as a calendar year rather than July 1 to June 30 avoiding the tourist season being divided and adopting a policy to not forward previously approved purchase orders.
She also asked Mayor and City Council be granted additional time to study the amendment prior to first and second reading so they can “formulate relevant questions” and verify and clarify dollar amount ambiguities and discrepancies.
Diegelmann concluded by asking City Solicitor Guy Ayres if a budget amendment can be petitioned to referendum by voters to which he simply answered, “No.”
“Ok, then perhaps the Charter needs to be changed by a charter amendment petition,” Diegelmann said.
Mayor Rick Meehan acknowledged Gisriel’s concern over the $5 million discrepancy and stated answers will be provided at second reading.
“As former councilman, Gisriel knows that budget amendments are an accumulation of a number of meetings and a lot of work that is done subsequent to the passage of the original budget. All of those items are typically discussed throughout the year, and any changes are made on record in the council chambers, and effects on the budget are brought forth when we do our budget amendments,” the mayor said.
Meehan furthered there is always some type of insinuation made by Diegelmann that there is a sleight of hand but that is not the case.
“She [Diegelmann] asks a lot of questions … we certainly do our best to answer those questions at that time and if not that night we get her the answers. She had a number of questions about the budget amendment on two occasions and on both occasions they were answered, or so I thought,” the mayor said. “After those two occasions, she put forth an email that the budget manager spent over two hours of city time that tax payers pay for to supply a resident, not a taxpayer, with the information that she requested. We do go the extra mile to make sure that everybody gets the information.”
In regards to the retiree health savings, the mayor pointed out the town could write the taxpayers a check but the town will still have to fund the approved projects, which the taxpayers have requested, one way or another.
“When we passed the original budget, our intention was to use savings to help supplement the street paving programs. We talked about that from day one and we were fortunate enough to have those savings so we could pass it on to that very important infrastructure project,” the mayor said. “Savings comes back before the Mayor and City Council before it is allocated for any particular purpose, and goes through a hearing. It is not something that is arbitrarily made as a quick decision.”