Annapolis Mayor Joshua J. Cohen plans to raise $2 million through a property tax increase, paired with a $2.8 million package of spending cuts — including a hiring freeze and cuts to nearly all city departments — to balance his proposed $86.2 million budget for next fiscal year.
The plans announced Wednesday were the result of an agreement between Cohen and a majority of the city council, many of whose members criticized his budget proposal when it was introduced in March. Initially, the plan included a 7.6 percent spending increase over the previous year and would not have changed the property tax rate.
The proposed increase in the property tax rate is expected to offset the effect of a projected annual loss of $2.5 million to $3.7 million in property tax revenue from fiscal 2013 through 2015 because of an expected decline in property assessments. The city's property tax rate would increase 3 cents, to 56 cents per $100 of assessed property value. If approved, the average tax bill on an Annapolis property would rise by about $112.
Last week, the city's Financial Advisory Commission recommended a similar approach to the city's budget. Six of the council's eight members support the mayor's plan.
"This plan responds to the fiscal reality of our times, making significant cuts while at the same time enabling us to continue to provide essential services," Cohen said in a statement. "This agreement represents a significant step forward in restructuring our finances and restoring confidence in how we invest taxpayer dollars."
The spending reductions include $45,000 in cuts to community grants and $50,000 less to the Annapolis Economic Development Corp. The county would save $265,000 through a nine-month delay in changing the status of 21 workers from contractual to city employees.
Under the spending plan, the city's fund balance would increase to $13 million, which city officials hope will reduce the need for short-term borrowing. The city has experienced cash-flow problems, causing it to seek authority to borrow up to $10 million in order to pay its bills, including payroll. The city secured a $10 million line of credit earlier this spring; about $7 million of that line has been spent.
"The City Council and I want to put a stop to the practice of heavy short-term borrowing to pay our expenses. It is our responsibility to rebuild our fund balances," Cohen's statement said, "and I applaud the alderpersons for making the tough compromises to see this agreement through."