(5/15) While the draft of the FY-25 budget is currently under consideration by the Town Council, two main points of note have been confirmed. There will be no increase of the real estate tax rate, and the enactment of the 2nd of five planned 36% increases in water rates will be implemented.

The town’s budget is broken up into several categories, each having dedicated income sources from which the town’s operating and capital improvement expenses are paid.

Fund 1 is the General Fund where day-to-day town expenses are pulled, such as salaries and operating costs for various departments, including legislative, financial, planning, zoning, parks, streets, buildings, refuse, and public safety.

The proposed FY-25 budget has the General Fund income and expenses balance at an estimated $2,525,468, an increase of 16% from FY-24. The principal sources of revenue for the General Fund include $908,500 in real estate taxes (generated from the .34 cents per $100 of assessed property value) and $636,653 from State and County income tax distributions.

Big ticket expenses in the General fund include salaries for Town Staff ($740,147 for all departments), contractual obligations for mowing, plowing and other similar duties paid to outside companies ($323,460) and the costs for the Frederick County Sheriff’s Office to provide aid to the town ($349,806).

Employee benefits in the General Fund recently saw an increase of $96,702 due to action taken by the Council to reduce the draw on the water and sewer funds by transferring the benefits of office staff that had been charging employee benefits (e.g. health insurance) to the water and sewer funds.

Fund 2 is the Capital Improvement Projects (CIP) Fund. Revenue in the CIP fund comes from the General Fund as well as grants for projects related to parks, equipment, curbs, gutters, sidewalks, paving, and streetlights. In FY-25, the General Fund will transfer $85,995 to the CIP Fund, bringing the available balance to $832,592. These funds can be carried forward each year. At the end of each fiscal year, any remaining money in the General Fund is transferred to the CIP Fund.

Funds 3, 4, and 5 are Business Enterprise Funds. These are dedicated funds and are to be used only to fund their intended activities.

Fund 3 is a Storm Water Management Enterprise Fund used to fund stormwater management, storm drainage, and water resource programs and services. Beginning July 1, customers will be charged a Stormwater Management Utility fee based on the amount of impervious surface area on each property as part of their quarterly water, sewer and trash bill. This fee was approved in FY-23, but a one-year moratorium was approved on enacting the fee due to the water rate increase. The FY-25 revenue is expected to be $34,852.

Fund 4 is the Water Enterprise Fund. Salaries, operating costs, and interest on loans are paid from this account. Water Fund income is expected to be $1,084,795, thanks to the water rate increase enacted last year. This is an increase of $419,745 or 63% over last year’s estimated revenue.

The water rate increase implemented in FY-24 increased 36% for users with a ¾ inch meter, up to 10,000 gallons. Customers with a larger meter size or usage over 10,000 gallons per quarter saw a larger increase. Several commissioners have voiced concerns about continuing the 36% water rate increases but didn’t have enough support from fellow commissioners to enact an immediate change. Any change would require a favorable vote of at least 3 commissioners. Mayor Davis has stated that at least a full year of income is needed to evaluate the amount of revenue being generated from the increase. Discussions on changing the five-year planned increases are expected to continue into FY-25.

The Water Fund, which pays for the operation of the water plant will see expenses increase from $680,801 to $794,183 as a result of the rising cost of salaries, chemicals, repairs and maintenance costs. Big ticket items in the water fund include salaries $235,837 (11.4% increase), repairs and maintenance $141,600 (146% increase), operating supplies and chemicals $152,435 which rose by almost 9%.

Fund 5 is the Sewer Enterprise Fund, which covers operating the town’s sewer system, and is expected to see revenues of $1,333,230, primarily sourced from sewer fees. This is an increase of $271,580 or 26% over the revenue estimated in FY-24. Expenses are projected to rise from $1,018,155 to $1,117,974. Salaries are increasing to $293,879 (20.7%). Operating supplies are increasing from $27,650 to $60,450 (18.6%). The sewer fund is also paying loan interest for the wastewater treatment plant $108,670.

The sewer rate will also increase again by 3% in FY-25. Rate increases in FY-24 were 3% for a ¾ meter. Customers with a larger meter saw higher increases.

The town is also budgeting over $13 million in cash reserves, grants, loans and bonds for the Water and Sewer CIP Fund. The money in this Fund will be used for water meter upgrades, Rainbow Lake dam repairs, the North Seton and Green Street waterline projects and any repairs to lead service lines as mandated by MDE.

The Town has $3,152,022.83 in ARPA funding that must be committed by December of this year and used by December of 2026. The biggest purchase will be $2,057,477 for the water clarifier. Smaller projects include work on the DePaul Street waterline and on the Rainbow Lake Pumphouse.

At the May meeting, Mayor Davis recommended a 2% Cost of Living rase for Town staff which the Council approved. Town staff are also eligible for a 1-3% annual merit increase based on performance reviews by the Town Manager and Mayor.

The mayor is also requesting two positions be added to the budget, one for the General Fund to work on special projects and a second position for the Sewer Fund.

The Council will continue discussing the draft budget at the June meeting.