MAYOR AND COUNCIL BUDGET WORKSHOP
MAY 11, 2020
Mayor Cerino called the workshop session to order at 5:10 p.m. In attendance were Councilmembers David Foster, Thomas Herz, Ellsworth Tolliver (by speakerphone) and Meghan Efland, W. S. Ingersoll (Town Manager), Amanda Miller (Treasury Specialist), Jennifer Mulligan (Town Clerk), John Dolgos (Chief of Police), Robert Sipes (Utilities Manager) and guests.
Mayor Cerino stated that Mr. Ingersoll and Ms. Miller will review budget projections for the coming year and then they can go over any additions, cuts, or corrections.
Mr. Ingersoll stated that the budget resembles last year as far as revenue. The Town is in good shape right now because any COVID impacts have not been felt.
Ms. Miller stated that the Utilities budget looked good until the depreciation line because deprecation cannot ever be fully funded. She said that there could be a bad effect if people were not able to pay their water bills due to the pandemic. In this budget there were no increases, rate changes, or capital improvements listed. A total of $222,000 would be funded by depreciation. Mr. Ingersoll stated that the Utilities Department was very healthy overall. Mr. Ingersoll stated that residents in Town pay $.97 per day for water and sewer, which was one of the lowest rates in the State.
Mr. Sipes stated that he has been trying to attract high caliber employees and there was a goal to become level in pay with surrounding jurisdictions. Mr. Sipes stated that there was a compensation study performed in 2012, at which time adjustments were made to catch employees up in pay when the study showed that they were behind other comparable towns by 10%. Mr. Sipes stated that since that time the study has not been followed, leaving the employees just as far behind now as they were then. He said that they have gone 2-years without raises and he would suggest that the Town try to work towards achieving the goals set in the study for parity with other jurisdictions. Mr. Sipes stated that he would like to catch his employees up within the next 3-years.
Ms. Miller stated that minimum wage is also going up annually to ultimately reach $15.25 per hour in 2025 and there are employees in the Street Department and Utilities Department currently below that rate. She said that if the Town does not provide raises, in FY22 there would be employees who must be given raises due to the federal minimum wage increase. Ms. Miller stated that in January 2021, the minimum wage rate will increase to $11.60 and there were no employees under that at this point.
Mr. Sipes stated that the Utilities work is difficult, dirty, and exhausting. He said he was asking people to begin working with him for $12.00 per hour when they could work at a fast food restaurant for the same amount. Mr. Sipes stated that there was career progression, but it took time to get certifications, which made it unattractive. Mr. Sipes stated that he was fully staffed at this time.
Mr. Ingersoll asked about utilities licensing and incentives. Mr. Sipes stated that an entry level employee is started and $12.00 and, aside from cost of living increases, their career projections are based upon obtaining certifications. Once a certification is achieved the employee receives an increase of $2,000.00 to their salary, but the maximum they would receive is $4,000.00. He added that it takes close to 3-years to become certified in water or sewer.
Mr. Sipes stated that this year his department was in good shape, but he was worried about the employee salaries. Mayor Cerino asked how far behind the employees were in salaries in relation to other municipalities. Mr. Sipes stated that when the compensation study was performed, Chestertown paid $9.00 per hour when other towns paid $13.00. He said that there were operators in Cecil County making $45,000.00 but in Chestertown they are making $36,000.00. Mr. Sipes stated that he would get some numbers from other Towns for the Council to review, but when the study was performed it compared Cecil, Queen Anne and Harford Counties, Elkton, Centreville, and Easton. He noted that there has been no adjustment since the initial study was performed and that only brought the employees to half of where they should have been. Their average increase since that time is below what it has been for other areas. Ms. Efland asked about turnover rate. Mr. Sipes stated that he lost three employees this year, two because they failed to show for work and one to retirement.
Mr. Ingersoll stated that Mr. Sipes was firm, but his employees stayed with him for a long time. He said that this was a job where the employees needed to show up and sometimes people just starting out lacked the maturity for the job. It was a job that demanded dependable staff. Mayor Cerino asked if there was an age minimum to work at the Utilities Department. Mr. Sipes stated that they had to have at least a high school education or GED.
Mayor Cerino stated that Chestertown so far has not seen any of the negative economic issues other areas are facing. Mr. Sipes stated that he wanted to only be heard tonight as this was becoming a major concern and in time he wanted to have parity with other municipalities. Mayor Cerino stated that there was a separate budget figure for the Utilities Department which was not connected with the general fund.
Mr. Sipes stated that since he has been the Manager, he has only had one employee get certified. The other employees were already certified. He said that the effort is not worth the work when the pay is $12.00 per hour because there is at least 3-years of study before certification can be achieved. He said that he would like to be able to phase in adjustments, which is what he thought was going to take place when the initial compensation study was done.
Mayor Cerino asked Mr. Sipes to check into other municipalities’ pay rates. Mr. Ingersoll stated that the compensation study they had was dated and the company that conducted it was no longer in existing to update the study. He said, however, that MML may be able to help with current compensation figures. Mr. Sipes stated that he would also check with Maryland Rural Water.
Mr. Ingersoll asked if there were any cost savings that could be implemented in the Utilities Department. Mr. Sipes stated that he already only spends what is needed and he does cut back by checking pricing as much as he can.
Ms. Miller stated that the General Fund projects a deficit of $37,637.00. The current tax rate is $.43 and the constant rate this year is $.4322 so we need to raise up to that by $.0022 to bring in the same revenue as last year.
Ms. Miller stated that there was an annual post-employment benefit which paid up to $5,000.00 for retirees with Part A and B Medicare. Every employee who retired since July 1, 2006 has received payment for the Medigap, and it is costing the Town $18,000.00 this year with seven retirees receiving the benefit. She said that they were proposing to drop that rate to a $1,000.00 annual stipend to each retired employee to save $9,911.00 in the general fund. Ms. Miller stated that the Town could not afford to continue this benefit as it has become too expensive. She said that the personnel manual would have to be updated to reflect the change. Ms. Miller stated that this change has already been factored into the numbers presented this evening. Mr. Ingersoll stated that a pension plan was converted to the State Retirement Fund (at the cost of $1.2 million) in 2001 to offer employees a better retirement and the Council should look at making this change, as expenses keep rising.
Mr. Ingersoll stated that the State Pension plan was good for the employees and the police LEOPS plan was even better. Employer contributions for regular employees are 10.2% (0.86% increase) and police is 34.93% (2.71% increase). All employees are required to contribute 7% of their pay into the fund. The plan was excellent for supporting Town retirees.
Ms. Miller stated that the Highway User Funds are subject to change in a downward fashion due to the economy.
Mr. Ingersoll stated that a proposal for a large housing project on Talbot Boulevard was almost finished with Planning Commission approvals but would require a text amendment change by the Mayor and Council. Mr. Ingersoll stated that when construction begins it will be a large revenue for Chestertown. This revenue has not been factored into the budget as he did not know when the project would begin. Mr. Ingersoll stated that the fees will probably be in the range to $800.00 to $1000.00 for each apartment unit and there were fees for condominiums. It will make a substantial change to the budget when it gets off the ground.
Ms. Miller stated that there is a grant for part of the salary for economic development, which is ending, so only half of that salary will be available since the grant ends in October. The Town has not been advised if the anonymous donor is intending to continue with their donation. Ms. Miller stated that $37,500 was the normal donation but they have only received half of that so far this year.
Ms. Miller stated that the USDA grant for the Marina will pay off the line of credit at Chesapeake Bank and the interest payment has been removed from the budget. She said that there will be some funding available after that is paid and the Marina has a balance due to the general fund from the principal payment in the amount of $585,000.00. There is a loan payment for $598,000.00. Mayor Cerino stated that there was $275,000.00 with Chesapeake Bank in a line of credit that will be paid down immediately when the USDA grant is received. He said that the grant is to go through before July 1. There will be $130,000.00 left to reimburse the Town for some expenses that were used for the Marina.
Ms. Miller stated that the police budget includes the nine employees (including Chief Dolgos) and three vacancies (even though vacancies are usually not included in the budget). There was a total of $45,000.00 shown in savings by budget cuts. Vacancies were budgeted with all healthcare, insurance, pension, and salary per officer. Ms. Miller stated that the police requested an increase in overtime, academy costs, and some other items, but they were not shown in the figures. Ms. Miller stated that the Mayor and Council also still had to finalize a set salary and contract for the Chief as extra hours for that position are not factored into the budget.
Mayor Cerino stated that if all positions filled the Town was at a $37,500 deficit but if the positions were not filled there could be a potential savings.
Mayor Cerino asked about salaries in general. Chief Dolgos stated that the starting salary for an untrained officer was $42,000 which was comparable with other Towns. A trained officer with no experience was $43,000 and many towns are higher. He said that he lost three officers this year (two to Queen Anne and one to Prince George County). He said that he cannot seem to recruit officers because of the pay. Mayor Cerino stated that the Town would not be able to ever match Queen Anne’s County police officer’s pay scale, but Chestertown is comparable with other towns. He said that there had to be a way to lock in new officers with a contract that they could not break so easily.
Mayor Cerino asked if when the officers are leaving for other agencies if they are paying the balance of their contract with Chestertown. Chief Dolgos stated that they were paying back prorated costs, but he wanted to raise the salaries of the certified officers to try to avoid turnover. Mr. Herz stated that some people put themselves through the academy and then are reimbursed over a certain timeframe by the agency they are working for and asked if that was something the Town could consider. Chief Dolgos stated that he has done that before, but the academies are on the Western Shore where graduates are recruited at higher rates of pay. Chief Dolgos stated that in addition to funding the academy, an officer receives a salary for the 6-months he is there.
Mr. Foster asked how much would be needed in the way of salary to keep the officers. Chief Dolgos stated that he would be willing to lose the 12th officer position to fund a $5,000.00 raise for each officer across the board, not including himself. He said that he thought that would help recruit and retain officers. Mayor Cerino stated that they could make the same case for Town Hall by firing some people and raising other salaries. Chief Dolgos stated that he thought this was the only way to stop the bleeding in the department.
Ms. Efland asked for comparables from other municipalities, including whether they offered LEOPS. Mayor Cerino stated that he would like comparables with Denton, Centreville, Berlin and the Kent and Queen Anne’s Sheriff’s offices. Mayor Cerino stated that he thought the Town was comparable with towns of the same size on the Shore. He said that once officers leave the academy they are being poached by larger agencies and there was not much that the Town could do about. Mayor Cerino stated that the officers are being paid a salary while they were in the academy and only a small pro-rated amount was being paid back to the Town, which did not include any portion of the salary they drew while at the academy. Chief Dolgos stated that he was trying to have the contract changed to reflect reimbursement of four month’s salary.
Ms. Efland asked how less staff would impact overtime costs. Chief Dolgos stated that he asked for an additional $5,000.00 in overtime benefits to account for the loss of one vacant position.
Mr. Ingersoll asked what revenue could be yielded by civil citations and parking tickets. Chief Dolgos stated that additional speed cameras would help with revenue, noting that the 300 block of Washington Avenue and 800 High Street locations would be good locations, noting that they could yield $1,000,000.00 the first year (which would drop by 40% in future years). Mayor Cerino stated that he would support the Washington Avenue speed camera and one at High Street and Morgnec Road bypass as it was close to the Radcliffe Creek School.
Mayor Cerino asked how many staff were in the Town Hall building. Ms. Miller stated that there were six employees, seven if Ms. Macintosh was counted. Ms. Miller stated that Town Staff was pushed about as far as possible with their workload. Mayor Cerino stated that they did not know enough about what income tax revenues were going to be this year due to the COVID virus. He said that he did not want to let anyone go but said that they may want to think about furloughs as at least benefits would remain in place.
Mr. Ingersoll stated that the internet from Kent County would be a help to the budget amount if they could get group use as they spend $19,770.00 each year with Atlantic Broadband. The police department was going to get fiber into their building, which would save about $10,000.00. He said that Music in the Park could be cut at a savings of $5,000.00 (noting that they likely would not be permitted to have gatherings of that kind due to the virus) and revenues have not supported the program over the last couple years. Revenues from construction are something to look forward to and real estate assessments may go up as well. Mayor Cerino stated that recycling was a large cost to the Town and something that was discussed to cut last year which was highly debated but something to again consider.
Mayor Cerino stated that when the State reopened for business it was going to be different and he did not know that people would attend festivals, nor would they be able to crowd restaurants, noting that this was going to bring revenue down. He feared that people would default on property tax bills and the hotel tax income would be affected.
Mr. Herz stated that in his hometown, the residents had to pay for trash pick-up per bag, but recycling was picked up at no-cost by the municipality, which forced people to recycle to save money. He said that people initially hated this idea, but it is a good service and the residents now like it. He said that he would see if he could get the schedule to see how it was implemented. Mr. Ingersoll stated that the Town has not picked up bulk trash since the businesses were closed due to the virus and it turned out to be time-consuming work that was not worth the money even though fees are paid. He said that he would like to investigate bi-weekly curbside recycling.
Mayor Cerino stated that he thought that recycling was a large cost for the Town when residents could pay for recycling service individually. The annual cost for curbside recycling was $62,400.00 and was initially done by Kent County. When Kent County zeroed out the program the Town picked up the cost and he said that he thought it was a mistake to undertake a cost being cut from a much larger budget to begin with. Mayor Cerino stated that he was all about being recycling but it just cost too much money for the Town.
Ms. Efland asked how much a one cent tax increase would yield. Ms. Miller stated that one-cent added about $57,878.00 to the budget. Ms. Miller stated that if raising taxes was going to be an option the advertisement had to be to the paper by Monday, May 18th at 5:00 p.m. to meet the deadline. Mr. Ingersoll stated that he did not see a point in going down this road. Mayor Cerino agreed, stating that this was not the climate to raise taxes.
Mr. Foster asked what would happen if the Town was significantly overestimating revenues. Mr. Ingersoll stated that he could not budget based upon the unknown and if there was a time where there was a “worse case” scenario the Town would have to borrow on a line of credit. He said that for almost 30 years former Council members refused to raise taxes which left them in the position they find themselves today. Mr. Ingersoll stated that solid waste costs have been crippling and the Town was paying the price from Kent County who stopped providing solid waste services and then stopped a tax differential.
Ms. Miller stated that if raises were again not given this year she would suggest that they meet in December to discuss the possibility. She said that one year without a raise was bad but going 2-years without a raise was going to be difficult for many employees. Mayor Cerino state that 20% of the country was unemployed right now which was devastating. Ms. Miller stated that the Town was self-pay when it came to unemployment and if the Council decided to furlough staff, the Town would be paying sizeable bills for unemployment. She said that unemployment has an 18-month lookback and said that that two employees who left have now been laid off from other agencies and the Town received the bill for it today. Ms. Miller stated that if one department was going to receive increases they all should as it was not fair to single one department out. She said that the street crew was paid significantly lower than other departments (where minimum wage increases were going to take effect in FY21-22).
Mr. Foster asked if the festivals being cancelled was hurting the Town’s budget. Mr. Ingersoll stated that it was not right now, it was actually saving on street and police overtime, but the virus is affecting the overall vitality of the Town.
Ms. Miller stated that the Marina budget was separate, and the Town was going to have to pay the deficit. She said that the dockhand positions could be dropped if slips could not be rented, noting that was a $16,000.00 line item.
Mayor Cerino summarized the meeting by saying that the Town budget was $35,000.00 in the hole and if the grant funder for Main Street comes through they will be negative $18,887.00. He said that with the Marina there was a $74,000.00 deficit overall. There was discussion of redistribution of funds by reducing one position from the police department. He said that he would like to revisit recycling with Mr. Ingersoll speaking to Infinity. Mayor Cerino stated that two speed cameras should be installed, asking Chief Dolgos to check with the SHA to make sure they will allow them to be installed on Washington Avenue. Mr. Ingersoll asked for the Council to stay in contact with him throughout the week with any thoughts or changes. Chief Dolgos stated that there was a proposal for 24-hour speed monitoring which could also help improve revenue. The Council would meet for a second budget workshop on Monday, May 18th at 6:00 p.m.
Mr. Herz asked if there was any development on the Federal Government providing some funding to help smaller local municipalities. Ms. Efland stated that there would not be a planning session for that for another couple of weeks. Ms. Miller stated that the Town did submit some costs to the County for the CARES Act but if anything was already planned for in the budget it did not factor into funding.
Mr. Herz moved to adjourn the meeting at 6:49 p.m., was seconded by Ms. Efland and carried unanimously.
Submitted by: Approved by:
Jennifer Mulligan Chris Cerino
Town Clerk Mayor