Government Operations Committee Meeting - September 4, 2025
Government Operations Committee Meeting - September 4, 2025
The Government Operations Committee met on September 4, 2025, at 2:00 PM to discuss the City of Frederick's taxing authority and budget process. The meeting was called to order with the Pledge of Allegiance, followed by approval of minutes and two workshop presentations by Chief Financial Officer Katie Barclay. No public comments were received.
Consent Calendar
- Approval of Minutes (August 21, 2025): Motion carried 3-0.
Discussion Items
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Discussion of the City of Frederick's Taxing Authority: CFO Katie Barclay presented an overview of the city's legal authority to levy taxes and provide tax credits, as authorized under state law. Key points included:
- Real property tax is the city's most significant levy, set annually by special ordinance. The state deadline is June 20th, but city code states July 1st, requiring an update.
- The city can set different tax rates for property classes, but current code applies a single rate except for habitually vacant property.
- Tax set-off: The city receives a reduction in county taxes for city residents for duplicate services (police, planning, parks, road maintenance) based on a 1981 agreement. The formula has not been updated since 1981, and city officials expressed concern that city residents overpay compared to county residents. State law requires annual review but lacks enforcement.
- Income tax: The city receives a share of county income taxes from city residents (greater of 17% of county income tax liability or 0.37% of Maryland taxable income). Rates are set by state and county.
- Admissions and amusement tax: The city collects about $650,000 annually, with a 10% rate on gross receipts and various exemptions.
- Tax credits: The city can only offer credits authorized by state law. The mayor requested consideration of two new credits that the county already offers: one for daycare providers making property improvements (lesser of $3,000 or tax bill) and one for surviving spouses of law enforcement or emergency services personnel killed in the line of duty (100% of county tax for five years). Councilmembers expressed interest but cautioned about equity.
- Councilmembers advocated for revisiting the 1981 tax set-off agreement and potentially seeking state legislation to address inequities, especially for larger municipalities like Frederick.
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Discussion of the City of Frederick's Budget Process and Requirements: CFO Barclay outlined the budget process as defined in the city charter and financial policies. Key points:
- The charter requires the mayor to submit a proposed budget by April 1st, with revisions allowed until May 14th. Council has sole power to revise from May 15th, with adoption by June 20th. If council fails to adopt or override a veto, the mayor's proposed budget becomes final.
- The charter allows council to require additional budget information by ordinance.
- Financial policies (last updated 2013) include: operating costs not funded with debt, one-time revenues for one-time expenditures, enterprise funds self-supporting, department managers accountable, and a rainy day fund of 12% of general fund revenues (about 45 days of operating cash).
- Rainy day fund currently at 12% ($16.3 million). Councilmembers questioned whether 45 days is sufficient for a catastrophe like COVID, and CFO noted that best practices might need review. A proposal was made to build regular review into the policies.
- Council President requested supplemental departmental memos on goals, performance indicators, equity initiatives, etc., which were provided and considered beneficial. CFO noted that such details are not charter-required and could be mandated by ordinance if needed.
- Plans for orientation of new councilmembers in early 2026 were discussed, including workshops on budget and financial policies.
Key Outcomes
- No formal votes or decisions were taken; the discussions were informational and exploratory.
- Councilmembers expressed intent to pursue advocacy at the state level for revising the tax set-off formula and expanding city taxing authority.
- The city will consider adding two new tax credits (daycare providers and surviving spouses of fallen first responders), subject to further research and council discussion.
- The budget process and financial policies will be reviewed, with potential charter amendments or ordinance changes to be considered in time for the FY27 budget cycle.
- An orientation program for incoming councilmembers will be developed to cover budget and financial topics before the next budget process begins.
Meeting Transcript
Call to order the government operations committee meeting for September fourth, two thousand twenty-five. Let us stand for the Pledge of Allegiance. Approval of minutes for August twenty-first, two thousand twenty-five. Second. Motion carries three zero. Two items on our agenda for this afternoon. The first item is discussion of the city of Frederick's taxing taxing authority. Yes. Thank you. Um, my name is Katie Barclay, I'm the chief financial officer for the City of Frederick. Um, I was asked by council leadership to present information today regarding the city's taxing authority, both to levy taxes and to provide tax credits. Um, this is a very broad topic. Um, and we could probably spend a committee session on one of these. So today I'm prepared to go kind of a mile wide and an inch deep, um, knowing full well that we should probably come back and do a deep dive into any one of these areas. Yeah, per committee direction. So, we'll just get started. So just generally um the authority to levy taxes and to provide tax credits. Um, or authorized under state law. Right. So the city can't levy taxes on anything that it chooses. Right. It has to be provided for in state law, and the same with tax credits. Um, the city is able to pass local ordinances, as you are familiar, to provide structure for implementation, and that's mostly around tax credits, right? Most of the tax credits provided for under state law, not all, but most are very general. She says, you know, you can provide a tax credit under this circumstance. And the a county or municipality can create whatever rules they want around that, as far as you know, income levels or assessment of values and things like that. But again, that authority is provided for under state law. So I was just gonna step through what we can and can't do, or I guess mostly what we can do today. And again, if we wanted to come back with with more information, we certainly can do that. So tax on real property is the city's most significant levy. Um again, that you're all familiar with. Um we set the tax rate annually uh via special ordinance. Um setting this tax rate is required under state law. However, the deadline to which to do that is very, very strange. Um state law were just changed and is now required to be done by June 20th. Our code says July 1st. Um we need to update that to be, I guess, more in line with the state. Um, but Frederick County provides our treasury services for us um regarding real property tax. Oh, okay. And this far? Yeah, it's too close, which is we're so used to having to have it. So close that you can barely that's how it used to be. Okay. So is this better, everyone? It's it's much more comfortable for me, so I like it. Um, as I was saying, Frederick County provides the treasury services for us and all the municipalities in Frederick, which they are not obligated to do. We are very appreciative of their efforts. They include our tax, our real estate tax, or a real property tax on the tax bills that they send, they collect the money and transfer to us. Um they are required per STAT to have that tax information to STAT by the end of May, um, maybe the first day in June. So that's the date that we go by as far as when the tax rate needs to be adopted.
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