AGENDA #3a
Questions from Julie Brenman
Q: Property tax growth assumptions – given historical growth in the 3% range, 1.5% seems awfully conservative. While Chapel Hill may be nearing build out, there still seems to be a lot of new development.
Do the number of building permit or planning site plan reviews support the lower growth rate?
A: The number of commercial building permits has decreased significantly and the number of residential building permits remains stable. We based our estimates for property tax growth on this indicator as well as available information regarding property tax revenue trends. While there continues to be a slight increase in property tax revenues, our review of property tax revenues pointed to declining increases (an increase of 2% from fiscal year 2002-03 to fiscal year 2003-04, as opposed to a 14% increase from fiscal year 2001-02 to fiscal year 2002-03). In addition, our estimate of 1.5% growth was determined in December, at which time we had limited knowledge of what our collection rate would be in the current year. Therefore, we chose a conservative estimate for our preliminary projections. The Manager will make his final estimate as a part of his budget proposal to the Council.
Q: Sales tax growth assumptions – while there is volatility in sales tax, given the historical 3-4% growth rate, the 1% assumption seems too conservative.
A: Sales tax is difficult to estimate for the Town, in part because the University pays sales tax on its construction projects and later gets a refund of those taxes. The refunds do not come in at the same time or in the same amount each year. The sales tax estimates were prepared in December, and because UNC is currently engaged in a number of building projects, we anticipated that the refund might be large. In addition to the unknown amount of the sales tax refund to the University, there have also been divergent trends among the components of the total sales tax, which led us to be conservative. We will revise our estimates in the Manager’s recommended budget based on information available at that time.
Q: I was not aware that Chapel Hill had a housing program (bringing me back to the usefulness of a budget
overview) … What are general fund matching costs for housing programs? What is the level of subsidy for the public housing funds?
A: Chapel Hill operates a federally subsidized public housing program that provides 337 units of housing. Revenues are mainly federal grants and rents paid by residents. The Public Works Department provides about $125,000 of landscaping services to public housing neighborhoods.
Q: Can you provide some history on the transit tax? When was it established, what restrictions are on it, why is it accounted for separately?
A: The establishment of a separate property tax to support transit services began in the mid 1970's. This tax revenue is set aside specifically to provide public transit services to the citizens of Chapel Hill; therefore, it is accounted for as a non-operating revenue
in the Transportation Fund. The Transportation Fund is an enterprise fund and, as such, is accounted for separately.
Q: You note a projected increase in operating revenues for the Tar Heel Express. Who pays for the service?
Do the revenues cover the full cost of service for special events, etc. or is it subsidized by the Town?
A: With the exception of UNC graduation, the service is paid for by the users (riders). In the case of graduation, the University pays for Tar Heel Express services. This service is self supporting and revenues cover the full cost of the service.
Q: Parking Fund: is there any town subsidy or are the parking operations self sufficient?
A: Parking operations are self supporting and are not subsidized by the General Fund.
Q: On Exhibit 1 (page 23) from the 1/26 memo regarding the budget:
• The budget has $2.47 million appropriated from fund balance, but you are not showing any in the 04-05 estimated. Why not?
• Can you explain the projected reduction in 05-06 in ”other revenues” and “interfund transfers?”
• You note you are assuming you will get the current level of Powell bill funds next year… where does that show up? I assume that would be in “state-shared revenue”, which is projected to decrease.
A: Fund balance is not a "revenue" to be used for estimating. It is determined at year-end, at which time actual revenues are compared to actual expenditures and the net is the resulting use of fund balance.
There is a projected reduction in fiscal year 2005-06 in "other revenues" and "interfund transfers".
"Other Revenues": In prior years we have received a contribution in the amount of $125,000 from Carol Woods, which may not take place in FY 2005-06. Therefore, this amount was not included in the preliminary budget estimates.
"Interfund transfers": In 2004-05 we received $402,000 from the Stormwater Fund as a reimbursement for general funds used in the prior fiscal year to start up the Stormwater program. This transfer was a one-time event that will not recur.
Powell Bill is accounted for within the state-shared revenues and is estimated to be fairly stable. Total preliminary state-shared revenues are estimated at about $12 million, and will be revised in the Manager’s recommended budget based on information available at that time.
Q: Have you compared costs of leasing computers versus lease-purchasing with debt?
A: We looked into this option several years ago and it was not an attractive option at the time. We have not reviewed this option since that time as we have been satisfied with the arrangement that we have with Dell through State contract.
Q: I noticed in the budget book the “trends” section in most departments that identify performance measures. Can you address how performance measures are incorporated into the budget process?
A: While the Town has used performance measures for years, performance measures were first included in our budget documents two years ago. During budget discussions between department heads and management, we review performance measures to determine if the measures are serving the citizens as a means to help examine the quality of work done by a department.
We have also done more in-depth performance reviews for certain departments, including police, transportation, housing and the library, and will distribute these reports. A wider array of performance measures are provided to the Council for each quarter and annually. The annual report for 2003-04 has been distributed to the committee in electronic form.
Q: Is there funding set aside for unanticipated consulting studies that come up after the budget?
(For instance to hire Maximus or the MLK facilitator.) The operating budgets of the Council and Manager do not appear to have that money, so I am wondering if it is set aside somewhere else or if an appropriation from fund balance occurs mid-year.
A: We do not routinely build into the budget contingency funds for unexpected consulting studies.