Is the Growth Debate Over?

A recent Washington Post article points out that the economic downturn has slowed growth to a point where it has affected local government revenue sources. While some folks had argued that we must slow growth in order to catch up on infrastructure, we now are in a position of scaling back our capital projects because decreased transfer, impact, recordation and income taxes have left us with a big budget shortfall, an estimated revenue loss of $78 million in FY08, in fact.

According to the County’s Department of Finance, there are three economic indicators of particular note. First, the County continues to have one of the lowest unemployment rates in the state, but job growth in payroll employment remains anemic with businesses adding fewer jobs in the past twelve months. Second, while home prices are still increasing at a low rate, home sales have declined nearly 34% during the fiscal year to date. Finally, because of the decline in home sales and the increase in the inventory to sales ratio for existing homes, the outlook for any improvement in residential construction is not encouraging.

I also find it interesting to note that the County's Department of Economic Development reports: from the second quarter of 06 to the second quarter of 07 (the most recent data available) private payroll jobs in Montgomery County dropped by 4,653 bringing the total number of private sector jobs to the lowest level in two years.

In a December column in the Gazette about our recently adopted growth policy, I worried that bringing growth to its knees would have an adverse effect on the county’s fiscal bottom line. As we now face school and transportation impact taxes about 1/3 lower than anticipated, we’re looking at delaying high school modernizations, deferring construction funding on five fire stations, delaying land acquisition for the Montrose Parkway East and cutting the Ride On bus fleet expansion. We’re falling behind, not catching up, on infrastructure and necessary programs and services.

In my April 4 post, I encouraged more discussion on the base budget issues. Here I solicit your views on the bigger picture. Do you agree with the Post that the “growth” debate is over? Do you have any thoughts on whether we should think about revisiting any current policies?

To read the Post article, my Gazette piece, the Department of Finance’s economic indicators, or the Department of Economic Development's Montgomery's Pulse, click on the links to the right.