City Council Members Want To Put Forgotten $40 Million In Budget

April 21, 2009|By Annie Linskey | Annie Linskey,

Members of the Baltimore City Council asked the legal department Monday to find ways to use a recently uncovered surplus of nearly $40 million toward closing next year's budget gap, though finance officials belive the extra money must go toward reducing the next city bond purchase.

"There is clearly a consensus that we want to use this money," said Councilman James B. Kraft. "Why can't we be creative?"

The comptroller's office disclosed last week in an audit that $39.7 million worth of partial property tax payments had been piling up in a city account for about a decade. Lower-level city finance employees had forgotten to manually move that money from one account to the general fund.

The mistake was found by the Finance Department, and officials reported it to auditors over the summer, said city Finance Director Edward J. Gallagher, who briefed City Council members at a lunch hosted by Mayor Sheila Dixon on Monday.

Gallagher said the city's charter requires the funds to be used to offset bond purchases. The city was planning to borrow roughly $75 million in May, but instead will issue $35 million in bonds.

He estimated that the city will save $70 million over 20 years by borrowing less.

City Councilman Bernard C. "Jack" Young suggested changing the charter so the city can use the money to stave off cuts to pool hours, recreation centers and child care centers. "Let's let the voters decide," he said.

But there is no scheduled election until 2011, so any charter change would be too late to affect the current budget, Dixon said.

It is unclear why 10 years' worth of internal and external audits had not found the error, and some council members questioned the competence of those charged with inspecting the city's books. "Clearly this tells me they have not been looking deeply enough," said City Councilwoman Helen L. Holton, a certified public accountant.

Gallagher distributed a one-page memo of "frequently asked questions" about the mistake, explaining that the money was "pooled and invested" in a variety of low-risk investments.

The pressure to use the surplus will likely grow this week. Dixon is expected Wednesday to revise down her fiscal year 2010 budget to take into account $26.5 million in cuts from state sources.

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