June 5, 2006
To the Town of Wilkesboro Mayor, Commissioners and Citizens:
I am pleased to present the recommended budget for the fiscal year 2006-2007. 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 2006-2007.
The budget preparation process for this year has proven to be a difficult effort given the following local factors:
· Uncertain State of Local Economy
· Minimal Gain in 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 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 2006-2007 totals $8,218,293 for all Town operations, capital improvements and debt service. This represents a 5% increase over the current year budget.
That increase can be attributed to rising inflation estimated at 4.2% for 2005 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 a tax rate of forty-two (.42) cents per $100 of valuation. A property owner who has real property of $125,000 will receive a tax bill of $525. The ad valorem taxes will yield $2,258,500 based on property tax collection rate of 97.2%. This represents an eight (8) cent increase over the current thirty-four (.34) cent rate. Even with this increase a fund balance appropriation of $141,458 is needed to balance the proposed budget.
In the budget worksessions with the Town Board I stressed the importance of a tax rate increase to maintain existing service levels. With the fund balance available for appropriation estimated at $890,000 or 21% of the proposed budget it is imperative that the Town remains fiscally prudent. Next year the Town will face revaluation and it will be important to maintain the forty-two (.42) cent tax rate and capture additional tax revenue to provide for a truly balanced budget. A balanced budget (without fund balance appropriated) will allow for growth in the fund balance as a percentage of the budget. In the General Fund tax revenue is the only significant locally controlled revenue source. Based on current funding levels a 10.6-cent tax increase would be needed to fully balance the proposed budget.
In the utility fund I have proposed a 7.5% rate increase to all rate classes as well as a $135,000 fund balance appropriation to balance the proposed budget. I shall note that the town should raise rates between 5 and 7% each year for the foreseeable future to raise cash to allow for much needed infrastructure purchases.
Water and sewer fees and charges will generate $3,626,100 or 44.2% of the total budget. The proposed budget will allow the Town to maintain a cash balance of approximately $600,000 for any unforeseen circumstances. Residential customers using an average of 6000 gallons a month will receive a combined water and sewer bill of $15.93 for one months usage which is a $1.12 increase. 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.
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 2006-2007. 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 $765,000 in fiscal year 2006-2007. We will also receive approximately $25,000 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 2006-2007 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 2006-2007. 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 2006-2007 are $125,000.
Fund Balance: The proposed budget includes a general fund balance appropriation of $141,458 in order to get a balanced budget as required by statute. If spent this will leave the Town approximately $750,000 or 17% 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 $3,629,761 or 44.2% 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 $715,000 for group health and dental insurance for 68 employees, 4 elected officials, and 4 retirees. As Health Insurance costs continues to rise faster than general inflation the Town will have to look at charging for dependent coverage as well as reducing benefit levels
The budget contains provisions to allow for a 2-step cost of living raise of 2% in July and 2% in January. There is also a provision of up to a 2% merit increase based on performance evaluations.
Approximately $20,000 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 48.2 percent or $3,964,032 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 7.6 percent or $624,500 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 and a utility building.
The fiscal year 2006-2007 budget summary of revenues and expenditures for all funds is:
FUND REVENUES EXPENDITURES
General $3,876,135 $3,876,135
Water & Sewer 4,342,158 4,342,158
TOTAL $ 8,218,293 $ 8,218,293
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.
Kenneth D. Noland