BUDGET MESSAGE

 

 

 

June 6, 2005

 

 

To the Town of Wilkesboro Mayor, Commissioners and Citizens:

 

        I am pleased to present the recommended budget for the fiscal year 2005-2006 with the same ad valorem tax rate and no increase for water and sewer charges.  The budget was prepared in accordance with NCGS 159.7, The North Carolina Local Government Budget and Fiscal Control Act.   All funds within the proposed budget for the General and Utility Funds are balanced and all revenues and expenditures are identified for fiscal year 2005-2006.

 

          The budget preparation process for this year has proven to be a difficult effort given the following local factors:

 

·         Uncertain State of Local Economy

·         Loss of Ad Valoram Tax Base

·         Rising Fuel and Material Costs

·         Additional Debt Service Costs

 

    These factors coupled with the Boards desire to continue providing service to citizens at current levels and to not raise taxes requires every department to make sure that each and every expenditure is used in the most efficient manner possible.

 

     The recommended budget for fiscal year 2005-2006 totals $7,782,849 for all Town operations, capital improvements and debt service.  This represents a 2% increase over the current year budget.

That increase can be attributed to rising inflation estimated at 3.3% for 2004 by the CPI.  Also, we have experienced an even higher inflation among items such as fuel, chemicals, concrete and utility pipe which account for the majority of our purchasing costs.

 

     In the proposed budget, I recommend with great reservation a tax rate of thirty-four (.34) cents per $100 of valuation.  A property owner who has real property of $125,000 will receive a tax bill of $425.  The ad valorem taxes will yield $1,714,250 based on property tax collection rate of 96.86%.

 

     In the budget worksessions with the Town Board I stressed the importance of a tax rate increase to maintain existing service levels.  As an outcome of the worksessions a tax increase was not chosen.  Instead we have chosen to dip into fund balance quite significantly to balance the General Fund.  Fund balance is a tool to be used for unforeseen circumstances or for a one time fix during low revenue cycles.  However, it needs to be said that to maintain current service levels in the future revenue must be increased.  In the General Fund tax revenue is the only significant locally controlled revenue source.  Based on current funding levels an eight (8) cent tax increase would be needed to fully balance the proposed budget. 

 

     In the Utility fund I have proposed to dip into fund balance in order to have a balanced budget.  This fund balance appropriation is an expected outcome based on a revenue study completed in June of 2004.  A rate increase has been projected for the fund in 3 more years based on proposed capital projects with the most significant of those being a Waste Treatment Plant upgrade to handle increased loading from Tyson Foods.

 

     Water and sewer fees and charges will generate $3,470,000 or 44.6% of the total budget.  The proposed budget will allow the Town to maintain a cash balance of approximately $800,000 for any unforeseen circumstances.  Residential customers using an average of 4300 gallons a month will receive a combined water and sewer bill of $10.11 for one months usage.  Water rates, sewer rates and charges for all out of Town customers excluding the Water Associations will have a multiplier of 2.0 added to the bill.     

 

       

OTHER REVENUES

 

            Local Option Sales Tax: Retail sales in North Carolina have been rebounded this last year.  However, with the continuing uncertainty of the economy a conservative growth estimate of 2.5% should be budgeted for fiscal year 2005-2006.  The Town receives four (4) sales tax allocations:

 

        (1) Article 39 one-cent tax, which is the original local government sales and use tax dating from 1971, (2) Article 40 (1983 one-half cent) tax, and (3) Article 42 (1986 one-half cent) tax.  A 4th one-cent tax was put in place to replace local reimbursements.  The Town’s sales tax revenues are distributed on a per capita basis.  It is estimated that the Town will receive $760,000 in fiscal year 2005-2006.  We will also receive approximately $36,000 in hold harmless revenue.

 

            Other Taxes and Licenses: A business is liable for a privilege license tax as a revenue measure, not as an attempt to regulate activity.  Under N.C.G.S. 160A-211, a town is free to levy privilege license taxes, except as specifically restricted or prohibited by law.  Estimated receipts for issuance of these licenses in fiscal year 2005-2006 are $15,000.

 

            Unrestricted Intergovernmental: Utility Franchise Tax - each town’s share of the utility franchise tax is based on the actual receipts from electric, telephone, and natural gas service within the municipal boundaries during fiscal year 2005-2006.  The utility franchise tax is estimated to yield $400,000. 

 

            Restricted Intergovernmental: Powell Bill Allocation - These funds, unlike other State-shared taxes, are limited in their use.  N.C.G.S. 136-413 directs that the money be spent “only for the purpose of maintaining, repairing, constructing, reconstructing, or widening of any street or public thoroughfare including bridges, drainage, curb and gutter, and other necessary appurtenances within the corporate limits of a municipality or for meeting the municipality’s proportionate share of assessment levied for such purposes.”  Three-quarters of the proceeds are distributed on a per capita basis, while the remaining quarter is distributed on the basis of the number of miles of non-state streets in the town.  Estimated receipts from the Powell Bill Allocation in fiscal year 2005-2006 are $120,000.

           

             Fund Balance: The proposed budget includes a general fund balance appropriation of $330,741 in order to get a balanced budget as required by statute.  This will leave the Town approximately $1,100,000 or 28% of the proposed General Fund budget in unappropriated fund balance.  The Local Government Commission recommends that municipalities maintain at least 8% in fund balance reserves.

 

EXPENDITURES BY CATEGORY

 

            Personnel:  This category of expenditures accounts for $3,481,868 or 44.7 percent of the total budget.  These expenditures include salaries and wages, FICA, retirement, group insurance, merit pay, and other miscellaneous benefits for 68 full-time employees, 8 part-time employees, and 5 elected officials.    

 

            The budget contains $630,000 for group health and dental insurance for 68 employees, 4 elected officials, and 4 retirees.  We have entered the self-insurance market and have realized savings of potential premiums in excess of $100,000 for the current year.  These savings should allow the Town to continue providing full coverage health insurance for its employees and dependents for a least 2 more years before additional costs catch up to the realized savings.

 

            The budget contains revenue for a 3 percent salary and wage increase for funding a 3% cost of living increase effective July 1.  There will be no merit increases offered in this budget cycle.   I have also included 46,900 for a 5% match on 401k contributions for general town employees.

 

            A total of $19,830 has been budgeted for training this year.  This funding will be used to improve job skills, gain knowledge of the latest equipment and technology, and to remain up to date on a variety of issues that impact the Town.  Internal training will focus on safety and the use of technology.

 

            Operating Expenditures: This category of expenditures accounts for 47.5 percent or $3,690,481 of the total budget.  These expenditures include costs other than personnel and capital outlay that are required for the operations of the Town.  Debt service requirements, inflationary trends, increased service demands, and enforcement of government regulations directly affect operational expenditures.

 

            Capital Outlay: This category of expenditures accounts for 7.8 percent or $610,500 of the total budget.  These expenditures are for the purchase of machinery, equipment, and other items that are too permanent in nature to be considered expendable at the time of purchase and have a value greater than $5000.  Some of the items include a dump truck, police car, mower, chipper and a utility building.

 

BALANCED BUDGET

 

            The fiscal year 2005-2006 budget summary of revenues and expenditures for all funds is:

 

                                    FUND                           REVENUES                   EXPENDITURES

 

                                    General                          $3,975,981                     $3,975,981

                                    Water & Sewer               3,806,868                    3,806,868

 

                                    TOTAL                         $ 7,782,849                   $ 7,782,849

           

 

CONCLUSION

           

             As the economy recovers this is an exciting time for Wilkesboro.  We continue to be financially strong, we are an affordable community to live in, and we provide a high quality of life to our citizenry.  As we look to the future, our desire is to provide a safe, healthy, and prosperous community in which to live.

 

            This budget is proposed by the Town Manager.  At this time, it is neither final nor is it necessarily a reflection of what will be approved by the Town Board.  The Town Board will undertake a thorough study of this proposal to arrive at what it considers the proper program of revenues and expenditures for the Town government for the coming year.

 

                                                                                                Respectfully submitted,

              

                                                                                                Kenneth D. Noland

                                                                                                Town Manager