Gaithersburg's "Pay as You Go" Policy

The City has passed its Fiscal Year 2009 budget which will go into effect on July 1, 2008. Building the Gaithersburg Aquatic center has been put on hold because it could cost around a million dollars a year to run, and that would cause the city budget to be in danger of running into a deficit.

There are those who urge the city to sell bonds—that is to go into debt—in order to fund the Aquatic Center and other projects of interest.

We feel that doing so would be tantamount to a family taking out a second mortgage on their home in order to fund a trip to Disney World. Oh, wait. People have been doing that kind of thing.

The nation is in the middle of an epidemic of foreclosures. Countless people have lost their homes, and no area has been disease free. On this site, we have posted notices of “Foreclosure Workshops,” but these cannot help every family, and it is a terrible thing for families to lose their homes. Naturally, we all want the various governments to help out those who are in danger—but where does that money come from? —From those who have been careful not to go into debt that they cannot handle. The money comes from various taxes. There is no other place governments can get most of their funds. As a result, citizens who have remained afloat see tax rates rising and home value deflating.

We are not asking that governments neglect to do whatever they can to help citizens keep their homes. It’s very important for families to have homes.

What we do ask is, regardless of how liberal or conservative governments are in other areas, that they maintain a practice of fiscal responsibility and of  fiscal conservativeness—that is conserve the public funds of which they are the stewards. Gaithersburg’s “Pay as You Go” practice of not going into debt is a policy that benefits its citizens in ways that we cannot imagine without thinking carefully about it. In recent decades, we have seen cities go bankrupt as a result of careless spending.

In his report on the City budget James D. Arnoult, Acting City Manager, states:

For the 45th consecutive year, the City’s budget can be funded without a tax rate increase.  This remarkable record has been achieved through careful oversight of the budget process and our adherence to a “pay as you go” philosophy.  We propose to maintain the real property tax rate at $.212 per $100 of assessed value.  Additionally, the ad valorem tax on tangible personal property would remain at the rate of $.53 per $100 of assessed value.  We feel that this budget allows us to keep an acceptable level of reserves, maintain a consistent tax rate, and avoid debt, while still providing a high level of core services and adding major Capital Improvement Projects….

It is important to note that our real property tax rate is already the lowest of any major jurisdiction in Maryland.  Our personal property tax rate, which applies to property owned by businesses (such as furniture, fixtures and equipment) is also lower than the rate charged by many other local municipalities. (Gaithersburg FY2009 Budget)

We endorse and reinforce the city government’s care with our money. It’s fortunate to have a Mayor and Council who monitor our expenditures with such circumspection.

Mayor Sidney Katz: Click to hear Mayor Katz speak about Pay as You Go Budget

Councilmember Cathy Drzyzgula:

I did support the “pay as you go” financing method in my campaign, and I still do. Barring a major disaster which could require immediate reconstruction dollars, I would rather fund projects and services, not make interest payments.

Councilmember Jud Ashman:

In tough economic times, with revenues declining for everyone, and surrounding jurisdictions plagued by huge structural deficits, Gaithersburg stands as a model of fiscal responsibility.  Our Pay As You Go tradition has helped keep us in a position of financial strength all these years because it forces our City leaders to continually find ways to get the best possible value from our taxpayer's dollars.  Gaithersburg has been remarkably successful in providing excellent facilities and services without borrowing a dime!  I'd like to see that continue for as long as possible.

Councilmember Ryan Spiegel:

I am proud to have been a part of a City Council that unanimously approved a FY2009 budget that maintains the tradition of a balanced, fiscally responsible, "pay as you go" philosophy. As other governments in the region run up deficits, debts, and tax increases in response to the current economic downturn, Gaithersburg citizens can take great comfort in the fact that even when times are tough, their leaders have found a way to balance the books and keep taxes down. While I remain willing to at least consider all available options for realizing the city's goals -- as any conscientious public official should—I believe that we should consider pursuing financing instruments only if absolutely necessary to advance critical capital projects. To date, I have not been convinced that any unfunded projects are so critical as to justify such an approach.

Councilmember Mike Sesma:

Essentially I believe the Pay as You Go policy has served the city well and we see how well during this economic period when other cities have having budget problems. I would add that the mayor and council need to be prepared to carefully reconsider this position in the future if we are faced with a special opportunity that can only be pursued by a creative approach to financing an acquisition or project. Such circumstances must be very well defined and crucial to the economic vitality of the city and a significant enhancement to the quality of life for our residents.

VIII.XI.MMVIII

Click here to respond to this editorial.