Q&A: Wayne Strausburg on a Wicomico revenues hunt

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For a long, long time in Wicomico County, the County Council’s members served as both the legislative and executive arms of government, but hired a single person to act as their administrative head.

Also for a long, long time, Matt Creamer served in that administrator’s role, acting as the council-appointed leader of the county’s administration.

That all changed when voters approved a County Executive form of government that took effect in 2006, and that change resulted in the election of Rick Pollitt to serve as the county’s executive branch boss.

That 2006 Charter overhaul also allowed the executive to appoint a nonpolitical Director of Administration, someone who the charter said should be “selected on the basis of his qualifications as a professional administrator and shall serve at the pleasure of the County Executive.” In that role the Director of Administration would “exercise general supervision over the departments and agencies of the executive branch” and “cause all county budgets to be prepared and submitted to the County Executive for modification, approval and submission to the County Council.”

Creamer retired in 2001 and his successor, Ted Shea, was the first to hold the post. Shea retired in 2011, and Pollitt hired Salisbury businessman Wayne Strausburg, the well-known president of the owners of the popular English’s restaurants, to oversee the county departments.

Upon Pollitt’s third-term election defeat in 2014, the presumption was that new County Executive Bob Culver would send Strausburg packing, but the incumbent director succeeded in winning Culver’s trust and has worked by Culver’s side now for four-plus years.

Strausburg grew up in eastern Baltimore County and received a bachelor’s in Business Administration & Management from Loyola College, He holds a business master’s in Finance from Morgan State University.

Q. As the county’s Director of Administration, you are the man behind the scenes. You prepare the budget every year and you provide information to County Executive Bob Culver. You also work closely with the County Council, so, it’s a very delicate position you have.

A. Well I think there are some nuances to that. The County Executive and the County Council are elected and they steer the county. My job is to see that our departments operate in conformity with the executives’ wishes and the council’s directives.

Q. We have an interesting budget this year. The spending is actually down a little bit from last year.

A. Yes, the spending is down close to $3 million versus last year’s spending. That’s principally because we’ve done the best we could to minimize the utilization of Fund Balance and we’re doing that because we see some warning signs in the overall economy and the fiscal landscape.

So we have been very cautious in terms of what our outlook is for the finances of the county as we enter the next 12 to 18 months — which I believe are going to be very fluid.

Q. In terms of the big headline from the budget this year, the County Executive has funded the complete school board operating funds for the first time that I can remember.

A. First time in my memory correct.

Q. And that’s a big deal.

A. We think it is and we think it’s quite appropriate.

Q. What triggered what happened to make it appropriate this time as opposed to previous years?

A. The Board of Education, (Superintendent)  Donna Hanlin in particular, and the (County) Executive have striven to communicate on a regular basis to share our ideas with one another to share our concerns with one another. I think anytime you have active communication between people who are operating in good faith — and I believe both the Executive and the Superintendent are acting in good faith — I think you that leads you to better conclusions and much better decisions.

So it’s been the tenor, if you will, between the Board of Education and County Executive’s office, over the time that I’ve been here, has improved dramatically with Donna coming into the position she’s in and it’s a good collaborative process. We can’t satisfy one another’s every wish, but I think we are striving to do the best we can on both sides of the equation.

Q. As a news reporter, you have helped me understand how the Wall Street bond market works in terms of the county’s bond status — how much money the county borrows every year and the whole issue on reserves. A criticism or complaint I hear all the time is “why are we saving so much money?” and “why can’t we invest this Reserve Fund money back into our county?” But how bond markets work how our standing is on Wall Street really does matter in terms of what we pay ultimately for things.

A. When we go to Wall Street, the credit rating agencies are really looking at two things. First of all, credit rating agencies don’t like restrictions on revenue. We have a Revenue Cap. I don’t think it’s any secret that credit rating agencies, like a bank, don’t like your income being restricted.

One one side, that is something that precludes us from having a higher (credit) rating, although we do have a very high rating. On the other side, the (agencies are) very, very comfortable that we have a very adequate fund balance. Wall Street, frankly, doesn’t believe we have too high a fund balance, but that we have very adequate fund balance.

Q. Because they need to be paid back first if something goes wrong.

A. To put it into context, if it were your household, the county need about $10 million dollars a month to operate, so we have in our unassigned fund balance about $30 million right now and we’ve got another $10 million that’s assigned in any rainy day.

But if I said to you would you be comfortable with enough money in your savings account to cover household expenses for the next three months — if something extraordinary happened, you lost your job, anything of that type — would you be comfortable?

I certainly wouldn’t be. What the county has in reserves can carry the county through very difficult times, like we experienced when we dropped off a cliff during the Great Recession.

Q. And you came into the job right at that time. What a great time to show up.

A. I wasn’t drafted, I volunteered. I found it interesting, I found it challenging. I enjoyed it. I enjoy my work, I really do.

Q. Those were tough times though. There were furloughs, the state drastically cut roads funding — that’s never come back.

A. The state — I use the term “conscripted” — state officials probably don’t like that term but that’s what they did. We were getting to the tune of about $8 million, $8.5 million a year in Highway User (Fund) Revenue, and that funded the entire (county) highway department, so our roads were fully funded by the gasoline tax.

The state cut that by 90 percent, so we went from about $8.5 million down to about $800,000. And we had to find that money someplace.

As you recall that the Board of Education budget took quite a hit in that first year because we lost that Highway User Revenue. We had to have revenue that would cover maintenance of our roads had to come from some place, and we had quite an interesting negotiation with the state in regard to how we would address the reduction of our funding to the Board of Education because Maintenance of Effort was in place and what we did ….

Q. Cutting in quickly, just so people know, the Maintenance of Effort is the number — through a complicated formula — that determines how much each county has to spend, so it’s fulfilling its commitment to education.

A. Each county is required to fund-per-student at the state average, so when you have very poor rural counties, versus very wealthy counties like Montgomery, even the average for a rural county of modest wealth can be a stretch.

But what we did was negotiate and the legislature agreed that if we moved our local income tax to the maximum of 3.2 percent, that they would essentially forgive that backlog of Maintenance of Effort and reset Maintenance of Effort to where it was.

Q. Raising the income tax rate is problematic, since you have Worcester County right next door that charges half of that.

A. You know, it’s very interesting. We are the commerce and professional educational center for a four-county area. You can see that through traffic on Route 50 and Route 13. You can look at traffic in the morning coming on (Route) 13 from the north, coming across (Route) 50 from the east — and there’s much, much lower taxation in both Sussex County and Worcester County, and a much higher wealth base in Worcester County.

The Wealth Index is a complicated formula as well, but Worcester County is currently — per capita — the wealthiest county in the state, and we’re approximately 5 miles away from the Worcester County border. Their income tax rate is marginally about 60 percent of our income tax rate.

Their property tax rates are lower than our property tax rate, so if you’re a high-income earner, it’s very attractive to live in Worcester County or Sussex County — but to earn your living in Wicomico County.

And that’s a dynamic that I don’t know how you change, other than building our wealth here in Wicomico County.

Our marginal income tax rate is as high as allowed in the state. Our property tax rate is a little bit above the average of all rural counties. We’re gonna be 93-and-a-half cents per $100 (of assessed value) and that’s about the average for the rural counties in the state.

The issue is also that about 40 percent of our population lives in jurisdictions that also tax. So we’ve got about 40 percent of our population that is paying really twice.

That is certainly an issue that’s been discussed for decades. So, when you talk about how to raise revenue, I think the last place you can really go is increasing taxation, because I think we’re already a fairly high-taxed area, all things considered.

I think the answer in building revenue is to build our wealth. To do that, there are really several areas that we can focus on.

For one thing, we’re focusing on the airport — that is a critically underutilized asset that can and should be developed.

Q. It’s been called a potential economic jewel — there’s all kinds of things that could be going on there.

A. Absolutely. So we’re running water to the campus now. We have sewer, so in about 12 months we would be positioned to really develop that airport to the type of economic campus that it could be.

The other thing I think we could focus on is development of the Designated Growth Area, and to do that you need water and sewer. There are a couple of ways of going about that. We have water and sewer capacity proximate to the Designated Growth Area.

Q. Something a lot of people don’t know is how the zoning works in the county. We have areas where we want to grow, and we have areas we want to preserve.

A. Correct. We’ve struck that balance in the Comprehensive Plan. We want to, in many aspects, retain the rural character of the county — that is critically important. That’s a legacy here. But at the same time, we are the commerce center for a four-county area. We want to develop that to the extent that we can.

We’ve designated a circle around the jurisdictions that have water and sewer capability, concentrating our development there. The issue we have is we have to extend water and sewer lines to that designated area.

You can do that one of two ways: You can develop your own water and sewer system — and we recently awarded a contract to George, Miles & Buhr to do a study on water and sewer. Not only do we want to see those designated as they should be, but we have areas of the county with failing septic now. We want to maintain those residents, we want to keep those folks in their homes, and the only way to do that is with public water and sewer. You can’t do it with septic any longer.

So, I think the long-term answer is to accommodate development in those areas that we have agreed, as a community, that should be developed — and I think that is critically important.

I don’t think there’s much that is more important than that, than also supporting education.

It’s one of the things we should be doing — certainly it is part of the reason we have underwritten the Board of Education’s request this year and the reason we created the scholarship fund at Wor-Wic Community College. We believe our young people deserve the best education that we can provide them and also we need to have that education focused in areas where they can have gainful employment after graduation from high school, a 2-year college, a 4-year college.

And we have to provide employment here so they can stay here, so we can keep our youthful talent in place in this community, so they don’t have to go to some other part of the state or country to earn a good living. We ought to be able to provide that here.

Q. The county’s operational expenses are constantly going up and the revenues kind of stay the same. I don’t know if we’ve fully recovered from the recession in terms of property values. So what are you doing to look for new sources of revenue — what can be done?

A. Well, let me back up on that. About 90 percent of the county’s total revenue comes from property taxes and local income taxes. We have seen a very nice increase over the years as we have rebounded from the recession in our income taxes

You have to bear in mind that income tax distributions from the state lag by about 16 to 18 months, so you’re looking in the rearview mirror. We hit an employment highpoint back in July or August of 2017. We got up to some 50,000 jobs. We have settled back in at a run-rate of about 48,000 jobs.

So when you’re looking forward and anticipating what your revenue is going to be in the future years, we are anticipating a leveling out of that growth — and you’re going to see that in this year’s budget.

We are budgeted at $52.5 million (in income tax revenues) in 2019. I think we’ll probably hit that, looking at the distributions we’ve got. And we budgeted $52.2 million for this coming year because of that trailing average, and the fact that we’ve seen employment leveling out.

The latest triennial saw about a 6 percent increase in the property base, but you have to remember that 6 percent increase in the property base is going to be limited in terms of the revenue that can be derived because we have a 2 percent Revenue Cap.

You get the benefit of the new construction in the first year, so to the extent of which you have new construction, property revenues will be increasing. But when that levels out — which we anticipate that it is going to level out, we see it leveling out — you’re going to be in stasis, if you will, at 2 percent.

The historic rate of inflation in this country — until this last decade, which is really an anomaly — had been about 4.5 percent. It went crazy, as you know, in the 1970s, but about 4.5 percent is a normal rate of inflation.

So when a significant part of your revenue is coming from property taxes that are limited at 2 percent increment, looking at a stabilized work force at the highest marginal rate that you can charge, I circle back again to, “OK, the way for us to produce increased revenue is to grow our base.”

And to grow our base, I come back to “we need water and sewer capability.”

Water and sewer is not inexpensive. The infrastructure is expensive, so to the extent that we have in place already, to the extent we can make the best utilization of that capacity, we’re smart because you’re covering your fixed costs. I think it’s a win-win.

We need to sit and have discussions about that with the municipalities, but I think it can be structured as a win-win for the community.

I try not to use the terms city vs. county. I try to talk in terms of community, because one hand washes the other.

The city, obviously, is critically important from a commercial employment standpoint, but the rural character of this county is also what attracts a lot of people to live here and to enjoy living here.

So I look at it and say we have the best of both worlds. You can live in what I call out in the country, but still have access to all of the amenities that you need here in Delmar, Salisbury and Fruitland.

Q. I’ve always been amazed that you stepped up when you did to take on the role of county administrative leader. I don’t see play city-against-county politics — you say we’re all a big group. You seem to truly understand the economic development angles. I feel like we’ve been very fortunate to have you at the time we did.

A. Again, I’ll come back to the fact that I really enjoy what I do. I’ve been very fortunate, majored in Finance. Have an MBA, so …

Q. Right! So I want to talk about your background, because I only knew you from leading the English’s restaurants. You wouldn’t think the guy running English’s is going to run the county.

A. Well, the inside story there is that the English Co. — and English’s restaurants — was purchased by a Baltimore-based firm that at one point in time was a Fortune 500 firm, Fairlane Inc.. and I was employed by Fairlane Inc.

I started in the Finance area, progressed to being the Director of Real Estate & Development and eventually became that company’s President. We owned the English’s Co.

When Fairlane’s founder died, the company was broken up into its component parts. We had a significant real estate development company, which later became one of the largest in the country, so we spun that out. We had the English C., we had bowling centers, we owned the Anne Arundel Ice Cream Co. We were a very diverse company, with our fingers in a lot of different pies.

Being inside that company and being involved in various operations over the years, you learn a lot. You really are exposed to a lot of different businesses and spend a lot of time on Wall Street. So I was fortunate to be hired by that company in the right place at the right time.

I was mentored by excellent people, so the combination of that experience and my education in Finance has put me in good stead. And I feel very, very fortunate.

My father worked at the Bethlehem Steel Co. I grew up in eastern Balitimore County and my father worked at Bethlehem Steel for 36 years — a very very dangerous place to work. They had an open house there one time, so I went and my father took me into the steel mill that he worked in, and I watched that process and we came back out and did a tour of the whole facility which was huge.

We got back in the car — I will never forget this — so my father looked over at me and said, “Well, what did you think?” and I looked at him and said, “What I think is — I don’t know how you did that for 36 years, I wouldn’t have lasted 36 minutes.”

And he says, “Son, had to make a living.”

I grew up in a very modest household in a very modest community, but with very supportive people around. I got an excellent public education in Baltimore County. Went on to Loyola College, got an excellent education there.

I just really feel very fortunate and I like challenges. I like problem solving. I like numbers. But I also like people. I really enjoy the relationships you develop with people.

And you know, again, I look back at it — I look at my career now and I’m certainly at the age that some people, particularly my wife, think I should retire.

And you look back at it, and I have no regrets. I feel very fortunate being able to feel that way.

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