MAYOR AND COUNCIL
JUNE 3, 2019
Mayor Cerino called the public hearing to order at 7:00 p.m. In attendance were Councilmembers David Foster, Linda C. Kuiper, Ellsworth Tolliver and Mauritz Stetson, W.S. Ingersoll (Town Manager), Jennifer Mulligan (Town Clerk) and guests.
Mayor Cerino stated that Public Notices ran in the Kent County News on May 23rd and May 30th as follows:
“At 7:00 p.m. on Monday, June 3, 2019, the Mayor and Council will hold a public hearing on the proposed FY2020 Town Budget. The hearing will take place at Town Hall, 118 N. Cross Street. Citizens are encouraged to attend and make written or oral comments on the entire budget. The proposed budget is available for review in the office of the Mayor and Council.
By authority of
Chris Cerino, Mayor”
Mayor Cerino stated that he would give a budget overview before any questions or comments were made from the public. He said that this was his 6th budget hearing and there have never been this many people to comment on the budget. He said that this was a good time to discuss how the budget process works and the numbers they the Town must work with.
Mayor Cerino presented a PowerPoint on the budget and a timeline showing how the Town was in the position of possibly reducing services even after raising taxes last year. He said that the Council was making a concerted effort not to raise taxes this year as there was a 5 cent increase last year, although it was the first increase in several decades. He said that the Town tax rate has been kept artificially low by deferring maintenance and relying on grants for capital projects like the Marina where $7 million was raised in grants. He said that usually a Town has capital in the budget for projects like curbside recycling but that was not the case this year.
Mayor Cerino stated that revenues for FY2020 were projected at $4,038,364.00 with expenses of $3,889,373.00. The Marina was a separate business entity on paper, but it cannot pay its own mortgage which was approximately $145,000.00 per year. There was presently an excess of revenue over expenditures of $57,491.00 in the budget.
Mayor Cerino stated that the Town has been paying the Marina loan principle debt of $91,500.00 while the Marina revenue has been paying the interest since its purchase in 2012. He said that the principle payment never showed in the general fund and has been a slow drain on the Town reserve funds.
Mayor Cerino stated that this budget reflected no raises for staff, no money for street repaving streets and a proposal to cut curbside recycling (a $68,000.00 line item).
Mayor Cerino stated that over the last 10 years there has been a slow but steady rise in expenses while revenues remained flat. The Marina purchase was a drain on the fund but not receiving any type of reimbursement from the County also hurt the budget. Funding was once $110,000.00 each year from Kent County. He said that the grant in aid was started in the early 1990s when the County closed the County landfill to commercial grade trash collection. As a result, the Town takes its trash to Caroline County, which costs $85,000.00 in tipping fees alone this year. He said that the Town purchased a new police station in 2015, which was needed but it also created additional debt. An Enterprise Zone was created in 2016 which deferred tax revenue in the short term but will benefit the Town greatly in 7 to 10 years.
Mayor Cerino stated that apparently many commercial property owners made appeals to the State on their newly assessed property values causing a drop in the assessable base of over $20,000,000. This compelled the Town to raise the taxes by 1 cent just to keep a flat revenue. Mayor Cerino reviewed the rise in expenses versus the flat revenues from 2009 to 2019. He said that during that period costs in public safety have increased by 32% and public works has increased by 18%, while revenues have only risen by 4%.
Mayor Cerino stated that it was standard practice throughout the State of Maryland for counties to compensate incorporated towns that have police, street crews and planning and zoning services. Kent County does not follow that practice.
Mayor Cerino stated that the Marina was a wonderful project (acquired in 2012) and although it was a great idea to use the Town’s non-profit status to obtain grants, in his opinion, it should not have not been purchased outright. He said that the debt service is $145,000.00 each year and the Marina has only made enough money to pay the interest ($55,000.00) each year since that time. He said that since 2012 the total paid out of the general fund was $630,000.00. He said that it was hard to project future revenues as the Marina just opened.
Mayor Cerino stated that the grant in aid to Chestertown from Kent County was zeroed out in 2014 but had been an annual payment of $110,000.00. He said that if those funds had continued, the Town would have $660,000.00 in the general fund. He said that he has gone before the Commissioners to ask to reinstate the grant in aid each year for 5 years but has been ignored every time. He said that a crowd like was in the room tonight would have been helpful when he was talking to them. He said that the Kent County Commissioners hearing on their budget is Tuesday, June 4th at 6:00 p.m.
Mayor Cerino stated that a new Police Station was purchased in 2015, which was much needed. He said that a 15-year loan was taken out at a cost of $41,000.00 per year to the Town.
Mayor Cerino stated that the Enterprise Zone was a cooperative program with the Town, County and State, which was a tax incentive program that deferred new property tax payments for commercial businesses building on raw land. He said that there are many properties participating in the incentive and the Town will not receive the full real estate taxes on those properties for 7 to 10 years.
Mayor Cerino stated that many property owners, especially commercial ones, appealed their property tax assessments and won which shrank the Chestertown’s taxable base by $20,000,000.00 this year. Therefore, the State indicated that for Chestertown to keep a flat revenue the Town had to raise taxes a penny (from .$42 to $.43 per 100.00).
Mayor Cerino stated that each resident of Chestertown pays Kent County taxes at a rate of $1.02 per $100 which was almost 2½ the rate of Town taxes. He said that the County does not spend any of that money in the Chestertown Town limits. He said that the Chestertown Police answer the calls in Town, but the residents are also paying for the costs for the Sheriff’s Department. He reiterated that the County is not providing any services to the residents of the Chestertown even though the Chestertown taxpayers are paying County taxes as if they do.
Mayor Cerino stated that Chestertown was underwriting services for every unincorporated town in Kent County. He said that there are only 3 counties in the state that do not pay their towns a tax differential. Mayor Cerino reviewed the towns on the eastern shore that receive a tax differential, showing the tax rate that residents of incorporated towns pay to their county versus those that live in unincorporated areas. He also listed the municipalities that receive a check from their County (including the amounts received) to help compensate those towns for the services they delivered.
Mayor Cerino stated that he asked Kent County this year for a 5-cent discount for Chestertown residents and as of today that request had been ignored. He said that he has shown these facts to the Commissioners for 5 years straight noting that the 5-cent discount would still be the lowest figure on the Eastern Shore.
Mayor Cerino stated that the Marina has not been helpful for the budget but the largest expense to the Town was the police department and that is why counties throughout the State compensate their Towns for having a police force. Mayor Cerino stated that the Town has done a great job at balancing the budget but no matter what is cut, it is going to be something that somebody loves and not a popular idea. Mayor Cerino stated that during the recession the County stopped their curbside recycling efforts and the Town picked it up in their budget, which was initially a $40,000 line item. Costs have risen and recycling costs are now a $68,000 line item.
Mayor Cerino stated that he likes the recycling program and nobody on the Council wanted to see it cut, but something had to give. He said that they can look for solutions but if revenue is flat, and expenses keep rising there are going to be problems. He said next year he is advocating for raises for the employees and there may have to be painful cuts, especially if the County does not step up.
Mayor Cerino showed a scale of what other Towns tax rates are with similar services to Chestertown. He said that no other Town in the State offers the services of Chestertown at a rate of $.42 per 100. Using Denton as an example, as it was the approximately the same in the number of residents and police, the Town tax rate is $.77 per 100. He said that if Chestertown had that type of tax rate there would be no issue of cutting services and there would be some extra funding for projects, but the tax rate was now at $.43 and nobody wanted to see taxes raised.
Ms. Trams Hollingsworth asked about a payment in lieu of taxes from Washington College. Mayor Cerino said that the Kent County Commissioners asked him the same question, but the College does not pay taxes to the Town or a payment in lieu of taxes. Mayor Cerino stated that the College is the Town’s largest employer and has invested heavily in Town. The College also hold events that bring revenue into town. The idea of a payment in lieu of taxes has been raised with the College and were basically told that the College does enough. Mayor Cerino stated that it was important to support the College because if it ever went under the the Town would be facing a much larger problem. Mayor Cerino stated that he thought there could be a fee passed along to the students for Town services added to their tuition.
Mr. Charles Lerner suggested looking at departments and justify what is being paid out using a zero-based budget and questioning expenses. He also suggested refinancing the Marina debt to a lower rate. Mr. Ingersoll state that the financing in place for the Marina was at 3.25% and could be renegotiated or sold in 10 years.
Mr. Jan Albert stated that the County has hundreds of miles of roads that need upkeep and animal care and control to run. He said that he did not know the County numbers, but it seemed as though Chestertown has flat revenues and the expenses of the police department are rising. He said that he did not understand why so many police were needed when nothing in Town is changing. He said that he has been here for 7 years and there have been some improvements, but Chestertown seemed to be a place that wants to have it all. He said that recycling has become a basic need of the 21st century and said that cutting it would send a bad message to the younger generation and set the Town back in their efforts to improve the environment.
Ms. Darran Tilghman stated that everyone in the audience was present to discuss curbside recycling this evening. She said that she was grateful for the presentation by Mayor Cerino as it showed exactly where the money was going and a good way everyone could help the Town was to ask the County for an efficiency study on their budget. She said that it was a retrograde step to discontinue recycling and there instead should be consideration given to solid waste reduction and/or yard waste while diverting more to the recycling stream. There has been discussion of a solid waste enterprise system where fees for services are charged. She said that the Environmental Committee would be happy to do some of the footwork in setting up the fund, although it would not the current budgeting deadline.
Ms. Tilghman stated that she thought an efficiency study on the budget should be demanded from the Kent County Commissioners as she believed there was unspent, wasted and misspent money in the budget. Ms. Tilghman stated that the Kent County Commissioners meeting was at 6:00 p.m. on June 4th at 400 High Street.
Mayor Cerino stated that his request to the County Commissioner’s this year was for either a 5-cent differential to the taxpayers or $250,000.00 that would go to the Town. He said that the Commissioners recommendation on both requests was zero.
Ms. Tilghman stated that she wanted to thank Mayor Cerino for working every day to make Chestertown the great Town that it is. She said that this level of detail would not be received at a County Commissioners budget meeting. Ms. Tilghman urged residents to attend tomorrow nights Kent County Commissioners meeting and make their voices heard. The County has a $40 million-dollar budget in comparison to Chestertown’s $4 million-dollar budget.
Mr. Ingersoll stated that he has worked with Mr. Schumann in recycling efforts back to 1982 when the Town of Chestertown first started curbside recycling in Kent County. He said that he would like to continue recycling in Town as much as anyone else. He said that recycling was given over to the County when they decided to go bigger and better and then they totally gave up the entire effort during the great recession.
Mr. Ford Schuman stated that he met with his management team at Infinity Recycling and tried to figure out a way to save money. He said that it has been a difficult this year for recycling and Chestertown was a quarter of their business’ revenue. He said that staff decided that instead of charging per household they would charge a lump sum per month which would save the town $6,000.00 each year with no change to service or setup fees.
Mr. Stetson stated that the Town pays Infinity per household but there have never been any changes made to the list. He asked if they were paying for services that are not being provided. Mr. Schumann stated that there were snowbirds and summer residents, making it difficult to figure out if the list was 100% correct at all time.
Mr. Schumann stated that he though the proposal was as fair as Infinity could be and thought that the Town should be able to find $6,000.00 to fund the shortfall.
Mr. John Vogel stated that there was a lot of trash in town and that residents should take the opportunity to refill items rather than throw them away. He suggested a composting area for residents as he thought compostable waste could be a large factor in weight at the landfill.
Mr. Bob Ortiz stated that Mr. Sobers had an article in the Kent County News with information on how to cure the recycling issues which seemed to explain a way out, but he did not know how to judge the information and asked if anyone else had read it. He said that the solution had real numbers attached to it. Mayor Cerino stated that the easiest solution seemed to be to pick up the trash once a week but studies show and their hauler told him that it is not really a savings as the trucks would be picking up the same volume at each house per week and they would have to run the trucks just as much. He said that the explanation seemed legitimate, but the Town looked at the figures and it just did not work out that way. Mayor Cerino stated that he could not balance a budget on people’s behaviors and betting that if trash was picked up once a week more people would recycle.
Mayor Cerino stated that when he told the County Commissioners he was under heat to continue the recycling program; he was told that all residents can take recycling to Worton or individuals could contract with Infinity on their own.
Mr. Ortiz suggested hosting a series of concerts to raise money for recycling noting that he made $18,000.00 last year for another cause. Mr. Brad Holloman stated that some residents were willing to pay additional fees or taxes in order to keep the recycling program.
Rev. Tolliver stated that he attended an Environmental Commission meeting and one of the things that was presented was a solid waste management fund and Mr. Sobers sent the information to the Mayor and Council. He said that he thought that this was something that should be reviewed more carefully.
There was a question as to where the yard waste went. Mr. Ingersoll stated that the one benefit the County provides is that once a year they triple tub grind the brush the Town collects which produces mulch that was available for residents at no charge. He said that there was no longer a demand for it but it has been available since the mid-1980s.
Mr. Ingersoll stated that the Mayor and Council should be proud of what they do and have done. He said that the Town has done an incredible job of getting grants for parks, public housing, the marina and many other things, and he said that he was proud of the recycling program as well.
Mayor Cerino stated that he was losing hope in the Kent County Commissioners and said that he needed bodies and educated people at the Kent County Commissioners Meetings. He reiterated that Town residents are paying for services in Kent County that they are not receiving in Chestertown. Mayor Cerino stated that the Town also funds and pays the salaries for the Kent County Visitors Center. There were shouts from the audience to stop paying those fees or close the center. Mayor Cerino stated that if that had to happen there would be a room full of different people upset.
There was a question about filing suit against Kent County and Mayor Cerino said that Ocean City took Worcester County to court but lost for additional money, noting that Ocean City receives 3.5 million in grants each year. He said that the judge did agree with the fact that there should be some differential or abatement by each county. He said that the he and Jake Day, the Mayor of Salisbury, have been in contact and Wicomico County was considering a tax differential to Salisbury this year because they are having the exact same problem. Mayor Cerino stated that if Wicomico gives the differential or abatement, Kent County will stand alone as the only County that has not figured this out.
Mr. Ingersoll stated that with Mr. Schumann’s offer tonight the Council could make the adjustments to the budget this evening when the Ordinance is enacted.
Mr. Mark Mumford stated that Mr. Schuman stepped up to the plate decades ago when none of the residents wanted an incinerator at Still Pond. He said that he employs 7 full-time employees and deals with needy organizations by employing people at Infinity and has been in place for over 30 years.
A resident asked what it would cost for a single household to contract with Infinity on their own. Mr. Schumann stated that it will cost between $8.00 and $10.00 per month per household if the Town does not continue to pay for recycling.
Mayor Cerino stated that until the revenue curves up this may be an ongoing subject each year.
There being no further comments or questions, Mr. Stetson moved to close the public hearing at 8:02 p.m., was seconded by Rev. Tolliver and carried unanimously.
Submitted by: Approved by:
Jennifer Mulligan Chris Cerino
Town Clerk Mayor