There are financial challenges ahead for Baltimore County Executive-elect Johnny Olszewski, Jr. He has made surmounting those challenges all the more difficult by his campaign promise not to increase taxes. First, let’s take a look at the situation that he inherits.
The Kamenetz-Homan “legacy”
The announcement that Baltimore County Administrative Officer Fred Homan will retire on December 3rd at the request of Mr. Olszewski was met with a widespread sigh of relief – if not glee – by many county residents. Mr. Homan became the face of an administration that cared little about openness, transparency and accountability and at times was openly hostile toward community groups that dared to disagree with its policies or positions.
I have no desire to dwell in the past, especially not Mr. Homan’s. I believe, however, that there is one aspect of Mr. Homan’s legacy that needs to be discussed because it bears upon the future of the county. That aspect is the myth that Mr. Homan was a good steward of the county’s finances. In my opinion, the myth promotes a misleading view of the county’s financial health and the daunting problems that Mr. Homan will leave behind.
In a letter sent to all county employees, outgoing County Executive Don Mohler, appointed after the death of former County Executive Kevin Kamenetz, wrote:
“Through good times and bad, Fred has been the chief architect of a fiscal policy that has allowed us to invest in education, public safety and our aging infrastructure, while maintaining the county’s triple A bond rating.”
I am not saying that Mr. Homan was dishonest or that he lacked considerable skills in managing a complex county budget but, in my opinion, there is more to stewardship of a county’s finances than that. There is the need for vision and for a fiscal policy sustainable well into the future.
I believe that the county has fallen far short in that area. If he was the “chief architect” of the county’s fiscal policy over the past 12 years or so as described by Mr. Mohler, then Mr. Homan must accept his share of the responsibility for the problems facing the county.
I have written about those problems a number of times in the past. In summary, Mr. Olszewski will take office facing crumbling infrastructure and revenue streams inadequate to repair or replace roads, schools, storm water management facilities, and government buildings. The quality of life for county citizens is at stake, as Mr. Homan himself admitted last week.
Mr. Homan was a master at robbing Peter to pay Paul to avoid tax increases, and too often Peter was the mundane things that the county needs to run properly. The county is short of personnel in key regulatory areas, the county’s IT infrastructure dates to the last century, and that is just the beginning.
Earlier this year it dawned on the county’s Spending Affordability Committee that the day of financial reckoning was close at hand because the county is running up against the limits on how much money it can borrow. Councilman Tom Quirk, a member of the committee, wrote in its report:
“The county’s financial outlook presents immense challenges that the next administration and council will be forced to address.”
Mr. Quirk groused that the Kamenetz administration refused to provide a long-term plan to pay for all the county’s school construction projects and for health care for retirees, among other things. In fact, the desperate need for a long-term financial plan for the county, especially a capital improvement plan, was one issue on which Mr. Olszewski and his Republican opponent, Al Redmer, Jr., agreed.
A word on the county’s AAA bond rating touted by county officials. It is important because it reduces the cost of borrowing money. But it is, in effect, a relatively short-term measure of the county’s creditworthiness, not a judgment on the county’s long-term financial well-being – the fact that the absence of a long-term county financial plan has not affected the rating is an indication of that.
Ironically, an important factor supporting the high rating is the legal availability of additional revenue if needed to pay the county’s debts. Unlike some other counties, Baltimore County has no legal cap on its property tax rate and also has room to increase the local income tax surcharge.
Appearing at his last meeting of the County Council as County Administrative Officer, Mr. Homan spoke briefly to warn council members about the financial difficulties ahead.
“What you face now going forward is going to make a very significant difference in not only the fiscal situation of the county, but the lives of citizens of the county,” Homan said. “I wish you the best.”
Yeah, good luck to us. And thanks a lot.
The challenge ahead
The “immense challenge” referred to by Mr. Quirk can be summed up as follows: Many unmet needs and looming expenses with a revenue stream inadequate to pay for them. Mr. Homan is by no means responsible for the principal limitation on that revenue stream: An aversion to tax increases in Baltimore County that approaches religious fervor. Additional revenue may be legally available, but political availability is another story.
The past refusal to consider increases in the county property tax rate or local income tax surcharge, coupled with the absence of development impact fees, accelerated the decline in the financial health of the county. New development was necessary to provide the property tax revenue to meet the needs of existing development because the property taxes collected from existing development were insufficient to do so.
As I have previously described, the failure by the county to impose development impact fees or excise taxes decades ago, when all other major metropolitan counties in the state were doing so, was a catastrophic mistake. Because of the absence of development impact fees imposed on new development, revenue from existing development had to be used to expand public facilities to accommodate the new development, dramatically reducing the overall financial benefit of the new development to the county.
That meant that the new development needed to proceed at a pace and intensity far greater than many citizens wanted just to keep the Ponzi scheme afloat. It made Baltimore County a developer’s paradise, but it helped create the fiscal mess that the county is in today as the pace of new development necessarily slows down.
In my opinion, the situation suited the outgoing administration. The fast pace and intensity of development kept the developer friends of Mr. Kamenetz happy and they in turn kept his political war chest filled to the brim. And it seems to me that is exactly the situation that most citizens of Baltimore County want changed.
The incoming county executive, Johnny Olszewski, Jr., has pledged not to increase county taxes. So how he is he going to meet the “immense challenges” described by Mr. Quirk and emphasized by Mr. Homan? Thanks in part to Mr. Homan, there is not a lot of fat left to cut in the county budget; some agencies already have been cut into the bone. And if there is not enough money now, when the economy is humming away, what happens when the inevitable downturn occurs?
So what else can Mr. Olszewski do to assure the county’s future financial health if he is unwilling to consider ways of increasing county revenues through fees or taxes? Nothing, except cut back on existing programs and activities. And that will be an exceedingly unpopular task for an ambitious politician.