Some Maryland Towns Struggle to Pay Off Pre-Recession Debt

Capital News Service

ANNAPOLIS – Six municipalities across Maryland had budget deficits going into fiscal 2009 that are by and large still being paid off, according to an audit report presented by Robert Garman of the Office of Legislative Audits.

The deficits ranged from more than $961,000 in Cambridge to about $24,000 in Fairmount Heights, Garman said in a report to the Joint Committee on the Management of Public Funds in Annapolis Wednesday.

Other Maryland towns that had deficits entering the recession include Cumberland, Myersville, Princess Anne and Ridgely, though Ridgely now predicts a budget surplus in fiscal 2009 and 2010 after implementing cost cutting measures.

Some of the deficits were created through one-time spending on capital projects, such as in Myersville, which began building a new municipal center in 2003, a project that was completed in July.

“We’ll be assuming a level of debt on it for some time,” said Kristin Aleshire, town manager of Myersville, regarding the city’s new municipal center. Still, he said the city is on track to pay off its deficit.

Other deficits result from ongoing spending amounting to more than ongoing revenues.

“We’re more concerned … when their ongoing expenditures are running more than their ongoing revenues,” Garman said. “That’s when it gets to be a problem, but that can go for years before it comes to a head.”

Several of the local governments responded with corrective actions to reduce general fund deficits.

Garman said Ridgely laid off seven of its 18 town employees, asked current employees to pay an increased amount on their health insurance and voted to reinstate its solid waste disposal fee.

In Cambridge, the city issued furloughs for its employees and put tighter restrictions on the allocation of funds amounting to more than $500.

Others, such as Princess Anne, told state auditors they were scrutinizing spending and taking other measures, such as increasing their local real estate tax, Garman said.

Garman said there’s “no real punishment” for deficits accumulated by local governments and said it’s not really an issue so long as the gap between revenues spent and revenues collected isn’t ongoing.

“It’s typical,” Garman said of the state municipalities with deficits. “There’s always a few. Six is more than normal and I wouldn’t be surprised if there’s more than that next year with the revenue shortfalls and all that comes out of that.”