City Defends Budget Amendment Through Process Review

OCEAN CITY – In response to ongoing public concerns, town officials presented this week a thorough presentation of the budget and its process this week to try and dispel accusations of wrong doing.

Last week Ocean City residents Ellie Diegelmann and Vince Gisriel questioned the passage of Fiscal Year 2015 (FY15) Amendment #1 resulting in City Manager David Recor and Budget Manager Jennie Knapp explaining the budget and amendment process at this week’s Mayor and Council work session.

The budget amendment appropriates an additional $855,680 from fund balance to cover previously approved expenditures for street paving, the new Ocean City Beach Patrol headquarters, the town’s local match for repaving of an airport runway 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 the FY 15 Budget Amendment #1 was first presented, 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 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.

For weeks, Diegelmann questioned the disparity between the originally approved FY15 Budget and Amendment #1.  Not satisfied with council or staff responses, Diegelmann turned to Gisriel, who is a former councilman and also questioned the difference last week.

“As city manager, I can assure you as an administration we share the goal and commitment to complete transparency and full disclosure. It is precisely for those reasons staff provides the mayor and City Council precise, comprehensive, reliable information as background and for the basis for decision on policy,” Recor said. “We strive to make the issues clear to understand … not only for you [Mayor and City Council] to understand but for the general public to understand as well.”

There is a structure to the dissemination of information, Recor said, from the distribution of the briefing book prior to all Mayor and City Council meetings, to the posting of information and all meeting dates and times on the town’s website that is available to the general public, who can develop their thoughts and questions for public comment. Staff is available to answer questions in person, over the phone and by email.

“I know personally staff promptly reaches out, they initiate contact, and timely respond to comments, questions and public inquires. Follow up and responsive in this business affects our credibility and we hold that in a high regard,” Recor said. “We as an organization are not perfect. I believe we can always be better, faster and stronger but in reality our organization is well managed and functions very smoothly.”

Recor furthered there is nothing unique in the Town of Ocean City’s budget process. It occurs twice annually during each fiscal year. The budget manager coordinates budget amendments with various departments and on her own initiative. All the amendments are also approved in advance by the finance administrator and the city manager prior to presentation to the council.

“I welcome the opportunity to answer questions about the budget amendment because I understand how complicated and confusing the process can be for those who don’t work with it on a daily basis. In the past year, I have literally spent hours answering questions from Mr. [Tony] Christ, Ms. Diegelmann and others. Most recently I spent several hours explaining point by point of an email forwarded to the council by Ms. Diegelmann. While I don’t mind answering questions, I do mind the implication of wrong doing,” Knapp said. “Everything that we do in the budget process follows various rules, procedures and protocol. We follow rules and regulations made by the State and Federal Government, rules established by the City Code, and accounting procedures established by the Accounting Standards Board and Generally Accepted Accounting Principles, and because they are so diligent about tracking costs for everything from capital projects to special events there are even procedures dictated by the computer software that we run.”

As far as changing the fiscal year dates, which was suggested Diegelmann, Knapp responded the fiscal year is set by the State of Maryland in Section 16-101 of the Maryland Code that states, “The fiscal year for each county, municipality, or special taxing district begins on July 1 of a calendar year and ends on June 30 of the next calendar year.” This section also states that this fiscal year is required for appropriating money, authorizing expenditures and balancing books and accounts.

“If it were possible to align the fiscal year with the calendar year that timing would also impact our budget process. That would mean we would be holding departmental budget meetings in July instead of in January and the departments would be preparing for the budgets in the spring as they are gearing up for the season instead of in the fall when they are winding down,” Knapp said.

The Town of Ocean City is currently in the process of developing the FY16 Budget. The process began in October when all revenues and expenses up until June 30, 2016 are being estimated.

“Although we are conservative with our estimates, many factors impacting those estimates will occur between now and the close of the next fiscal year,” Knapp said.

Knapp reviewed each change being made to the FY15 Budget through Amendment #1 in detail, including the transfer to the Vehicle Trust Fund.

“It was correctly stated our goal is to answer questions and be accountable, and you have done just that,” Mayor Rick Meehan said following the presentation. “You have also shown there are checks and balances with the final checks and balances being done up here. Transparency is there. You can always find one isolated question and your focus can become fixated on it but maybe it is to just show that somebody made a mistake or somebody didn’t do something right. In the end, we can show every test was met and that we are accountable, and we can account for all the expenditures and revenues in our budgets.”