AGENDA ITEM #5A
September 12, 2017
Introduction
MEMORAND UM
September 8, 2017
TO:
FROM:
County Council
Glenn Orlin?6eputy Council Administrator
SUBJECT:
Introduction-Spen ding
Affordability Guidelines for the FYI 9 Capital Budget and FYI 9-
24 Capital Improvements Program
Council staff recommends advertising a range of $330-$360 million/year for General
Obligation bonds, the same range that was advertised two years ago when the guidelines were last
set.
The low end of the range would be $10 million less than the current $340 million annual guideline,
and the high end would be $20 million more. Note that the Council is not ultimately bound to a
guideline within this range; it could plausibly (but not likely) pick an amount lower than $330 million or
higher than $360 million.
Council staff recommends advertising a range of $6.0-7.0 million/year for M-NCPPC bonds.
The low end of the range would be $0.5 million less than the current $6.5 million annual guideline, and
the high end would be $0.5 million more.
***
I.
Establishment of guidelines
Section 305 of the Charter requires the Council to set spending affordability guidelines for the
capital budget each year, and requires the Council to establish by law the process and criteria.
Subsequent law requires the Council to set the guidelines for capital budgets by resolution biennially,
and no later than the first Tuesday in October in odd-numbered years: October 3 in 2017. As the title of
the law indicates, the guidelines are related to how much the Council believes the County can afford, not
how much might be needed.
Until now the guidelines have applied to County General Obligation bonds and bonds issued by
the Maryland-National Capital Park and Planning Commission (M-NCPPC) only; there are no limits on
capital expenditures which are funded by other sources (except for the Washington Suburban Sanitary
Commission, for which there is a separate spending affordability process). Roughly 42.0% of the $4.94
billion Approved FYI 7-22 Capital Improvements Program (CIP) as amended (excluding WSSC) is
financed by County General Obligation bonds and about 0.8% is financed by M-NCPPC bonds.
The guidelines adopted on or before October 3 are to specify:
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1. The total general obligation debt issued by the County that may be planned for expenditure in
FY19.
2. The total general obligation debt issued by the County that may be planned for expenditure in
FY20.
3. The total general obligation debt issued by the County that may be planned for the 6-year period of
FY21-24.
4. The Park and Planning bond debt issued by M-NCPPC to finance local park acquisition and
development (County bonds are used for the regional parks) that may be planned for expenditure
in FY19.
5. The Park and Planning bond debt issued by M-NCPPC that may be planned for expenditure in
FY20.
6. The Park and Planning bond debt issued by M-NCPPC that may be planned for the 6-year period
ofFY21-2 4.
II.
Amending the resolution which set the guidelines
No later than the first Tuesday in February (February 6 in 2018) the law permits the Council to
increase or decrease the guidelines "to reflect a significant change in conditions." A majority of the
Council is needed to approve a change in the guidelines. The change in conditions would relate to an
increase or decrease in the County's ability to afford the debt, not to an increase or decrease in need. The
law places no limit on the amount of decrease permitted to any guideline or to the amount of increase for
the 6-year guidelines. The law limits any increase to the first-year and second-year guidelines to 10% of
the amounts which were set in October. In the second year of a biennial CIP cycle, the second-year
guideline cannot be raised by more than 10% of that established in the prior year.
Therefore, for example, if the Council were now to establish the FY19 guideline at $340 million,
the most it could raise it to in February 2018 is $374 million ($34 million more), and if it did so, the
most it could raise it to in February 2019 is $411.4 million (another $37.4 million more).
In
the second
year the law again places no limit on the amount of decrease permitted to any guideline or to the amount
of increase for the 6-year guidelines.
The capital budget must be approved by June 1, 2018. Note that only a majority is needed to set
the guidelines in October or to change the guidelines in February, but 7 affirmative votes are required to
exceed the guidelines when the budget is approved in May.
III.
Calendar
The law requires the Council to hold a public hearing before adopting guidelines. The schedule
over the next month is shown below:
Council sets
draft
guidelines for the public hearing
• Tuesday, September 12
Council holds the public hearing
• Tuesday, September 19
GO Committee meets to develop recommendations
• Thursday, September 28
Council action
• Tuesday, October 3
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