Council approves plans to procure lines of credit for up to $300 million
$72M cut from budget as part of savings plan
On Tuesday, the Montgomery County Council approved the procurement of up to $300 million in lines of credit.
Montgomery County is preparing to procure lines of credit for the first time in its history to help cover operating costs in the wake of unfavorable tax revenue estimates.
The lines of credit are bank loans for incremental borrowing over a period of time. They’re used as “insurance” to address any cash flow issues.
They will be for up to $300 million and used for operations if taxes aren’t received in time for operational expenses.
The County Council approved them on Tuesday.
The approved resolution sunsets on Dec. 31, 2022.
County officials have estimated that tax revenue could decrease by roughly $522 million total for last year, this year, and next year.
Council Member Andrew Friedson said at the council’s meeting Tuesday that the lines of credit are an unprecedented action for the county.
“We’re trying to balance the fiscal and economic realities within the regular budget and invest the federal dollars that we’re getting for the immediate emergency [COVID-19] response. … This line of credit is a sobering reminder of the fiscal economic realities that we face,” he said. “It’s effectively an insurance policy against a major economic downturn.”
The county’s Office of Legislative Oversight told the council that borrowing through credit is not recommended for normal swings in the economic cycle, but is useful for extreme economic distress, Council Member Nancy Navarro said.
“We don’t really know when things are going to get better,” she said. “We don’t really know what our fiscal situation will look like.”
On Tuesday, the council also unanimously approved a savings plan for fiscal year 2021 that cut $72 million from the county’s $5.8 billion operating budget.
Of the cuts, $43.7 million was reduced from the operating budget and $28.3 million was reduced from the Capital Improvements Program.
County Executive Marc Elrich had proposed cutting $66 million. The council’s reduction was greater because it included cuts to the Maryland-National Capital Park and Planning Commission, which were not yet approved by the Planning Board at the time of Elrich’s recommendation.
A vote on $628,000 of cuts to the M-NCPPC CIP is delayed until the fall to meet public hearing advertising requirements.
The council approved most of the cuts proposed by Elrich, except for $2.4 million of the $34.3 million from the county government.
Briana Adhikusuma can be reached at firstname.lastname@example.org.