Some decisions later turned out to be helpful in maintaining the city’s debt-free status. About 40 years ago, Daily switched the employee retirement plan from a pension, which has a set payout, to the public-employee equivalent of a 401(k), which does not ensure any minimum payout and carries much less risk for the employer. Many private companies have switched to 401(k)s, and some governments are trying to do the same.
Gaithersburg’s employees are not unionized, which also may have driven down costs, experts say. According to the libertarian Cato Institute, unionized state and local employees receive 31 percent higher wages and 68 percent more in benefits than nonunionized employees. Most of the 12 Maryland municipalities with more than 20,000 residents have unionized workforces; Gaithersburg is one of only three without.
Meanwhile, Gaithersburg grew in size and its population and businesses skyrocketed in recent decades because of Interstate 270 and the Shady Grove Metro station. In 1960, the population was 3,000; today, it is more than 20 times that. The city’s budget was $3.7 million in 1979; in 2009, it was $42 million.
The city has taken on debt only once since Daily started his policy. In 1982, it purchased the 57-acre Summit Hall Turf Farm near Route 355, because it wanted a recreation center and private developers would have created a traffic problem if they had purchased and built on the land. Legislators paid off the debt in a few years, ahead of schedule.
But city hall now is struggling to keep debt-free. To pay for its fiscal 2011 operating budget, the city approved its first property tax rate increase in 45 years andslashed the budget by 8 percent.
This year’s budget outlook is not as bleak. The capital budget sharply increased, and city projections show Gaithersburg being debt-free for at least the next five years. But Jones said that moving forward, “being able to sustain the system is going to be consistently challenging.”
Several mixed-use developments — including Crown Farm and the Archstone Gaithersburg Station — will provide much-needed revenue when they are completed, but the pace of new development is decidedly slower.
For now, that suits some residents, such as Jane Tepper. Tepper, 63, has lived in Gaithersburg just over half her life, and she is happy with the pace of the city’s development — and with the level of city’s debt, which was news to her.
“That’s the way the United States should work,” Tepper said.
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