Filling up local budgets

Gasoline: Officials are negotiating a new long-term fuel deal amid deficits and rising prices.

April 01, 2004|By Molly Knight | Molly Knight,SUN STAFF

For local officials wrestling with budget deficits, the painful pinch in gasoline prices could not have come at a worse time.

Unleaded prices average more than $1.70 per gallon at commercial stations as Baltimore City and the five metro-area counties negotiate a joint, long-term fuel contract to replace the one that expires June 30.

Although the terms of the contract will vary from county to county, this much is clear: Even an extra dime per gallon can strain a stretched local budget.

"At a time when the economy is good, this type of burden is tolerable," said David Bliden, executive director of the Maryland Association of Counties. "But in these tense circumstances, it only exacerbates what is an already intolerable situation for the management of county governments."

Anne Arundel County officials have budgeted an extra quarter-million dollars to cover a projected 10-cent-per-gallon increase in gasoline and diesel prices over the next year.

That's a splash in the tank compared with Arundel's overall operating budget - $950 million in the fiscal year that starts July 1 - but it comes as the county faces what could amount to a $15 million shortfall. The deficit has forced the county to consider layoffs and cuts in department funding.

"It's a small part of our budget, but it lends itself to the overall problem," said Matt Diehl, spokesman for Anne Arundel County Executive Janet S. Owens.

Baltimore City, and Baltimore, Harford, Carroll and Howard counties face similar pressures.

They and Arundel buy fuel at tax-free rates through a purchasing process organized by the Baltimore Metropolitan Council. Each county can choose to lock in prices over a period of time, hoping for a buffer against fuel inflation. Or they can opt for a price pegged to the market on any given day, hoping to save if prices drop.

But over the long haul, no local government is completely insulated from rising fuel costs.

"We're just like Joe Citizen in that we're all feeling the pinch," said Fred Schram, an officer in Anne Arundel's Central Services Department, which oversees a fleet of 2,400 county vehicles. "These incremental increases in commodities certainly affect us."

Baltimore City is budgeting for a 10-cent-per-gallon increase in gasoline and diesel fuel in the fiscal year that starts July 1. For the city, which uses about 4 million gallons of fuel a year in its fleet of 5,400 vehicles, the increase would amount to $382,000.

"If the market price of gas keeps going up, we'll feel an impact, so it's something we monitor very closely," said Matthew Gallagher, director of CitiStat, a high-tech system for tracking departmental efficiency.

Steady rise

Tom Kloza, chief oil analyst for the Oil Price Information Service, a New Jersey-based publisher of industry statistics, said wholesale gasoline prices nationally have been on a steady rise since 2000, when a gallon sold for less than 60 cents. By 2003 that price had jumped to almost $1 and peaked at over $1.05 last week.

Even counties that opt for a fuel contract with a locked-in price are likely to feel the effects.

"It's like saying `I'm going to lock in my airfare the day before Thanksgiving,' " said Kloza. "It's very bad timing because the numbers are off the charts."

Offsetting costs

To offset fuel costs, officials are encouraging employees to carpool, reducing the fleet size and advocating conservation.

Over the past two years, Baltimore City has reduced its fleet of cars for city employees from 223 to 127. In Anne Arundel, officials are getting rid of vehicles that travel less than a few thousand miles a year. And in Harford County, department heads are asked to share rides when possible.

State employees are also being encouraged to conserve, despite fuzzy projections on how rising gas prices will affect Maryland's total budget.

The state, which is under contract to purchase fuel from a private company until 2007, uses two types of gas for environmental reasons: one formulated for the Baltimore region and the other for the Eastern Shore.

As of earlier this week, the gas used in the Baltimore region cost $1.60 a gallon wholesale, compared with $1.44 for the same period last year, said Dave Humphrey a spokesman for the Maryland Department of General Services, which purchases fuel for everything, including snow removal vehicles and police cars. Gas used on the Shore cost $1.57 a gallon, compared with $1.40 last year.

Humphrey said state workers have been asked to drive 55 mph on highways and keep their windows closed when driving at high speeds, both of which increase fuel efficiency.

For some agencies, however, cost-cutting is much more complicated.

"Departments like the police make their living on the road - spending up to 90 percent of their time in their vehicles," said Schram, of Anne Arundel's Central Services Department. "So when we look at the utilization of vehicles, it's hard to reduce in this group."

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