AGENDA #5a

BUDGET WORKING PAPER

TO:              W. Calvin Horton, Town Manager

FROM:        Kay Johnson, Interim Finance Director

SUBJECT:    How $800,000 Rollover was Identified for the Current Year; Where it has been Identified for the Coming Year

DATE:         March 30, 2004

For many years, the Town of Chapel Hill has budgeted $800,000 in appropriated fund balance as a part of its revenue budget projection.  The $800,000 is an estimate of the difference between revenues and expenditures from the prior year.

BACKGROUND AND DISCUSSION

Rollover from Fiscal Year 2002-03

In fiscal year 2002-03, revenues exceeded budget by approximately $95,000.  The balance of the $800,000 that was carried forward was available because of actual expenditures that were lower than budgeted. 

Because the State withheld Utility Franchise fees in fiscal year 2001-02, we conservatively budgeted Utility Franchise fees in fiscal year 2002-03.  When the full amount of the Utility Franchise fees were received in fiscal year 2002-03, the Council planned for the use a portion of the difference to help defray potential tax increases in each of the fiscal years 2003-04 and 2004-05 (approximately $490,000 for each year.)

Rollover from Fiscal Year 2003-04

The expected $800,000 rollover from fiscal year 2003-04 to 2004-05 has been identified. 

Revenues in the current year are expected to be about $533,700 higher than budgeted.  Property tax revenues continue to be projected higher than budgeted by about $436,000.  We also expect approximately $330,000 in revenues from the Federal Emergency Management Agency (FEMA) off-setting current year expenditures for last fall’s Hurricane Isabel.  In addition, the Town will receive approximately $600,000 in sales tax revenues that have historically been received after the end of the fiscal year, because the State has changed from a quarterly to a
monthly sales tax distribution schedule.  Projected revenues that remain lower than the adopted budget include sales tax, utility franchise tax, motor fuels tax (known as Powell Bill funds), and interest.   Differences between budget and estimated revenues for 2003-04 are shown below:

Expenditures are anticipated to be lower than budgeted by approximately $392,300.  Differences from the current revised budget are shown below.  Where a negative difference is shown, expenditures exceed the current budget.

Unfilled positions are the major source of underexpenditures.  In order to reflect the Public Works contribution to fund balance, we have shown the Public Works’ portion of FEMA reimbursement for the cost of last fall’s Hurricane Isabel.  We have not yet amended the budget for the FEMA revenues.  We expect to have a final reconciliation with FEMA soon and will bring a budget amendment to Council at that time. 

The underexpenditures of $392,300, when added to the revenue-generated addition to undesignated fund balance, would allow the Council to rollover an estimated total of $926,000 for use in next year’s budget.