County staff outlines tighter FY27 revenue picture amid one‑time pipeline funds

Montgomery County finance staff presented the county’s fiscal year 2027 revenue outlook, telling supervisors the base for FY27 is roughly $1.3 million lower than the approved FY26 budget and that new revenue growth is modest.

Mark McGruder (finance) explained the county’s revenue structure — undesignated (flexible) versus designated (restricted) revenue — and described two components used to build the FY27 revenue estimate: a base revenue true‑up based on current year actuals (new construction, personal property, real estate valuation) and projected new revenue growth. He said FY26 was tracking to an approximate $1.1 million surplus largely driven by timing and a one‑time pipeline valuation payment, but those gains do not fully carry forward into the base.

Key FY27 drivers and assumptions McGruder listed include an ~$800,000 shortfall in business personal property (several large businesses relocated or sold equipment), roughly $400,000 lower interest earnings because of Federal Reserve rate moves, and a projected $500–600K sales‑tax shortfall. Offsetting items include a continuing ongoing Mountain Valley Pipeline payment estimated at about $500,000 and a one‑time pipeline payment realized in FY26 of about $1.3 million that does not recur in FY27. New revenue growth was projected at about $2.3 million for FY27 (real estate $1.2M; personal property $800K; sales tax $300K), producing a modest overall undesignated revenue increase of roughly $1.0M from the adopted FY26 base.

McGruder also summarized other assumptions: a compensation board increase and projected state school funding increases (the governor’s proposed budget estimated additional state funding for schools at about $3.6M based on average daily membership projections), and a caution that a projected two Fed rate reductions could further reduce interest income. He described the county’s cash balance assumptions used to estimate interest earnings (an average cash balance around $107 million was used in the estimate).

Supervisors asked clarifying questions about the composition of one‑time versus ongoing revenues, the calculation of known construction from building permit activity, the share of nontaxable/exempt property in the county assessment, and the sources of business relocations. Staff said some FY26 increases were one‑time in nature and that the FY27 base reflects anticipated reductions.

What happens next: Finance staff recommended the board proceed cautiously on new spending requests in preliminary budgets and to consider gaps between one‑time and ongoing revenues when evaluating budget proposals.