For a city in Montgomery, staying debt-free is the norm

The nation’s debt in dollars consists of 14 digits. The District’s, 10. But Gaithersburg has only one: zero.

Yes, $0. Zilch. Just a 45-minute drive from Capitol Hill, the community is debt-free and has been, more or less, for about four decades.

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• Gaithersburg: A city with zero debt
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• Harrisburg, other cities overwhelmed by debt
• Ala. county votes to declare largest ever municipal bankruptcy

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As the country struggles with its $15 trillion debt, Gaithersburg has plugged away with a time-tested budgeting philosophy: Pay as you go and build your financial reserves.

For the city of about 60,000 along Interstate 270, the discipline comes with rewards: There’s $33 million in Gaithersburg’s rainy day fund, which draws effusive praise from local government experts.

“For a community to have a large rainy day fund and no debt is the situation that any local government official would truly die for,” said Donald F. Kettl, dean of the University of Maryland School of Public Policy.

Still, Mayor Sidney A. Katz says it’s never been harder to follow the tenets that put Gaithersburg in such an enviable position. Once the fastest-developing area in the county, Gaithersburg is reaching its limits, and that means its property tax base isn’t growing as fast as it once did. What’s more, the city is receiving less aid from the county, state and federal governments, which have long been vital sources of support.

The city is trying, though. “Debt is a huge issue,” said David B. Humpton, a former city administrator who had a hand in keeping Gaithersburg on track. “Look at places like Harrisburg.”

Last month, Harrisburg, Pa., filed for federal bankruptcy after failing to pay off its debt. And last week, Jefferson County, Ala., became the largest municipal government to file, because it could not handle its debt of more than $3 billion.

On the other side of the spectrum, there’s Edgewood, Fla., a city of 2,500 that became debt-free last month. To celebrate, its mayor and council president held a public ceremony during which the city’s last mortgage was set on fire and residents were served “debt-free cake.”

In Gaithersburg, being debt-free isn’t a cause for fanfare. It’s the norm, as newcomers to government learn. “There’s always a council member that comes in thinking that this city government should go into debt and [they] quickly look at what we’re providing and how we’re providing it, and that pretty much silences it,” Humpton added.

Plenty of cities have debt to pay off. Takoma Park has $6.1 million, Greenbelt has $3.8 million, Bowie has $14 million and Herndon has $21 million.

Then there’s the District, which has many of the responsibilities of a state, with more than 600,000 residents and a debt of $8 billion.

There are plenty of reasons why governments take on debt. Most states and cities are required to balance their budgets, and debt can help pay for employee costs, public facilities and public services. Kettl and other experts say governments find debt particularly useful for building infrastructure, such as water pipes, and buying big-ticket equipment, like firetrucks.

Like other municipal governments in the county, Gaithersburg does not pay for some essential — and expensive — services, including schools, fire and rescue services, mass transit or a jail.