AGENDA #1a

MEMORANDUM

TO:                  Mayor and Town Council

FROM:            W. Calvin Horton, Town Manager

SUBJECT:       Preliminary Report on Development of the 2005-06 Proposed Budget

DATE:             March 23, 2005

The purpose of this memorandum is to report the status of work on development of the 2005-06 budget.

This is not the Manager’s recommended budget.  The Manager’s recommended budget will be presented to the Council on May 9, 2005.

INTRODUCTION

Overall Budget Issues for 2005-06

Key issues for the upcoming budget for 2005-06 include the following:

 

In addressing these key budget issues, the Council requested that budget information for next year be presented in a format that separates the base budget for continuing current operations from optional additions to the base budget that could be considered by the Council on a case by case basis. 

Based on this guidance from the Council, this status report provides our preliminary revenue and cost estimates for General Fund and Transportation Fund base budgets, and presents additions to the bases as options for the Council’s consideration.  We also present preliminary budget proposals for the Stormwater Management, Housing and Parking Funds.


SUMMARY

General Fund

·        Base expenditures for next year’s budget, including debt payments for the Town Operations Center, are estimated to total approximately $44.2 million for the General Fund.  Base revenues total approximately $42.4 million.  The difference of about $1.8 million is offset in part by the expected availability of $1.5 million from cost reductions and additional revenues from this fiscal year, leaving a balance of about $283,000 that would have to be covered.

·        We believe that additions to the base budget should include costs and revenues for planned annexations, employee compensation adjustments to be competitive in the Triangle labor market, funding for essential operations, human service contracts and several other special program considerations. 

·        We could cover costs of options by a combination of fee increases (as we expect to be recommended by the Council’s management consultant) and/or a tax rate adjustment in the General Fund.

·        Additional options to enhance and supplement current services would require additional revenue.  Preliminary options are presented in Attachment I in two priority groupings.  Preliminary options in the first priority group would cost about $3 million.  Other preliminary options would cost about $796,000.

·        We believe that the Council’s budget considerations should take into account the importance of retaining an unreserved, undesignated fund balance level sufficient to respond to emergencies, to take advantage of unexpected opportunities, and to preserve our current bond ratings of AAA and AA+.

·        We estimate that the value of one cent on the property tax rate will be approximately $549,000 in 2005-06.

Transportation Fund

Preliminary estimates of revenues and expenditures for the Transportation Fund base budget for next year show revenues equal to costs based on a $12.1 million budget.  We have provided a preliminary list of possible additions to the base budget.

Stormwater Management Fund

Preliminary estimates of revenues and expenditures for the Stormwater Management Fund base budget for next year show revenues equal to costs based on a $1,583,000 budget with a transfer of $532,000 to the General Fund as in this year.

Parking Funds

On-Street Parking Fund:  On-street parking revenues are expected to be about $551,000, about $89,000 less than estimated for 2004-05.  For 2005-06, we estimate revenues to be sufficient to allow a transfer of about $104,000 to the General Fund. 

Off-Street Parking Facilities Fund:  Preliminary estimates of revenues and expenditures for the Off-Street Parking Fund base budget for next year show revenues equal to costs based on a $1,277,000 budget.

Public Housing Fund

Preliminary estimates of revenues and expenditures for the Housing Fund base budget for next year show revenues equal to costs based on a $1,550,000 budget, a decrease of about $103,000 from the original 2004-05 budget.

Other Funds

We also present preliminary budget proposals for the Debt Service Fund, the Capital Improvements Fund, the Housing Loan Trust Fund, the Library Gift Fund and the Downtown Service District Fund.

Budget Process to Date

In anticipation of a challenging budget year, the Council has engaged a management consultant and has established a citizens’ committee to assist in examining the Town’s budget.  The consultant began work in January.  The Budget Review Advisory Committee also has been meeting since that time.  Both the Budget Review Advisory Committee and the management consultant are scheduled to report to the Council on April 11.

The Council began the budget development process on January 13, 2005 with discussion at the annual planning retreat, followed by a community forum held on January 26, 2005.

Remaining Budget Schedule

The Council will conduct a community forum on the 2005-2006 budget this evening. 

Budget work sessions are currently scheduled for April 6 and April 27 and additional sessions may be scheduled.

Both the Budget Review Advisory Committee and the management consultant are scheduled to report to the Council on April 11. 

The Manager will present a budget proposal on May 9; a public hearing on the recommended budget is scheduled for May 18.

The Council is scheduled to consider adoption of the budget on June 27.

 

PRELIMINARY GENERAL FUND BUDGET

 

Update on Current Year Revenues

 

Revenues in the current year are expected to be about $846,000 higher than budgeted.  The primary reason for the higher projection is the overall increase in sales tax estimates.  We receive sales tax from the State about three months in arrears.  Receipts have been especially volatile this year.  Seasonal increases in sales tax receipts for November and December were disproportionately larger this year than in 2003-04.  We currently expect sales tax revenues to exceed budget by approximately $521,000 based on our overall expected increase of 7%.  We have reviewed this assumption with the League of Municipalities and have confirmed it as reasonable based on their overall view of state sales tax projections.

 

As we reported in January, fuel taxes are approximately $159,000 above our budgeted amount.  Licenses and fees are higher than budgeted by about $131,000 because of higher fees charged to developers for traffic impact studies ($50,000, offset by costs of the same amount) and by increased receipts for special use permits ($80,000).  Hotel and motel occupancy has been greater than anticipated, and we estimate that receipts from this source will exceed budget by about $33,000. 

 

Property tax revenues are projected to be as budgeted.  Collections of prior year taxes were a concern in our preliminary report, but after reviewing additional months’ receipts, we expect to achieve budgeted projections. 

 

Update on Current Year Expenditures

 

Expenditures are anticipated to be lower than budget by approximately $669,000.  These savings are primarily a result of salary savings from unfilled positions and positions held vacant totaling about $290,000.  The other major sources of savings are in debt service.  We were able to save about $200,000 in debt service payments because we had sufficient cash on hand to eliminate the need for a bridge loan for the Town Operations Center as originally budgeted.  In addition, we were able to secure a lower than expected interest rate of 4.019% on the $4 million in General Obligation bonds issued in the fall of 2004, for savings of about $100,000.  The unused portion of the budget allocation for medical insurance for Council members provided a savings of approximately $45,000.

 

Cost estimates for the current year include a reserve of approximately $204,000 for possible extra staffing needs related to the participation of the University of North Carolina’s men’s basketball team in the National Collegiate Athletic Association tournament.  If the team is successful, these funds will be spent to manage celebrations and the related clean-up.

 

Summary of Estimated Current Year Revenues Less Current Year Costs

 

In summary, total estimated current revenues for 2004-05 (excluding any use of fund balance) are expected to be approximately $42,109,000.  Total estimated current expenditures (excluding accruals from the prior year) are expected to be approximately $42,371,000.  The difference of $262,000 can be paid from fund balance.

 

At the beginning of the year, we had expected to use $1,499,000 in fund balance.  During the course of the year, the Council authorized $278,000 in additional uses of fund balance, for a total of $1,777,000.  We now expect to use only $262,000, leaving $1,515,000 available for use in 2005-06 rather than the $800,000 originally projected.  This amount is equivalent to 2.76 cents on the tax rate.

 

General Fund Revenues for 2005-06

 

We anticipate continued, but slower growth in both the State and Orange County economies next year.  In addition to the effects of our local economy on our budget, federal deficit spending can affect the State budget and, as a result, the Town budget indirectly.  However, the most recent forecasts for the State budget include no changes directly affecting our State-shared revenues. 

 

Property Taxes and Revaluation

 

Every four years Orange County revalues all county properties to adjust real property for changes in market values.  The County just completed a revaluation and has established current values for county properties as of January 1, 2005.  The new values will be the basis for assessing property taxes for fiscal year 2005-06.  Properties located in Durham County and vehicles are not included in the revaluation.

 

For the purpose of our January report, we estimated that the entire property tax base (including real estate, personal property, motor vehicles and utility properties) had increased about 22%.

 

Based on present data, we now expect that Orange County real estate values will increase about 25%, in addition to normal growth.  We expect only about a 2% growth in real estate values in Durham County.

 

For personal property, motor vehicles and utility properties, we now estimate about a 3% increase in values.

 

Overall, we continue to estimate a 22% increase in the property tax base, from $4.5 billion to $5.49 billion.

 

On the following page, we calculate an estimated equalization rate that would allow the Council to raise the same amount in revenues as would have been raised without the revaluation.  Current tax rates are 51.6 cents and 5.9 cents for the General Fund and the Transportation Fund, respectively, for a combined rate of 57.5 cents.  After revaluation, the tax rates are 42.3 cents and 4.9 cents, for a combined rate of 47.2 cents. 

 

The chart on the following page shows the estimated equalization rate for the Town’s property tax rates based on the revaluation:

 

 

Before revaluation, the property tax base is estimated to have increased by about 60 million to $4.5 billion next year, assuming about a 2% growth over an estimated base this year of $4.4 billion.  Revenue on the estimated base would be about $23 million.  After revaluation, the property tax base is estimated to be about $5.5 billion.  Using the equalization rate of 42.3 cents, the General Fund would collect the same $23 million.

At a tax base level after revaluation of $5.49 billion next year, each 1 cent of the tax rate would generate about $549,000.   The current revalued General Fund tax rate of 42.3 cents on this base would generate about $23 million in property tax revenue.

 

 

 

Other Local Taxes

 

·  Cable franchise revenues represent a tax of 5% on local Time Warner gross receipts.  We expect revenues to be about $410,000 in the current year and remain at the same level next year.

 

 

 

State-Shared Revenues

 

Sales Taxes

Sales tax revenue from both the 1% sales tax based on Orange County receipts and the two ½ % sales taxes based on State-wide collections are expected to be higher than budgeted in the current year at $7,906,000, $521,300 or 7% over the budget of $7,384,700.  We project the 2005-06 sales tax revenues to grow by about 3% to $8,140,000, $234,000 more than current year estimates.   

 

Motor Fuel Taxes (known as Powell Bill funds)

Motor fuel tax revenue is based on receipts of 1¾ cents of the State gasoline tax allocated to local governments, based on population and local street mileage in each jurisdiction.  This revenue totaled $1,473,800 in the current year, or about $158,000 more than last year.  For next year, we anticipate revenues will remain at $1,473,800.

 

State Fire Protection Funds

We anticipate no change next year in the level of State Fire Protection Funds, totaling $850,000.   If State Fire Protection Funds were to increase, we would recommend that this increased funding be used to hire additional firefighters.

 

Franchise Tax

Franchise taxes are derived from a 3% tax on gross revenues from public utilities in each jurisdiction, and are collected by the State for distribution to cities and towns.  We estimate that utility franchise fee distributions will meet the current year budget of $2,040,000 and will be the same next year.  Because the fees are dependent upon utility charges, they are affected by weather conditions and can vary from year to year. 

 

Beer and Wine Taxes

Assuming full receipt of the Beer and Wine tax revenue normally distributed in May to cities and counties, we estimate allocations from this source of about $205,000 for the current year and $210,000 next year.

In summary, we estimate State-shared revenues would total about $12,714,000 for next year. 

 

Other Revenue Sources

 

 

 

 

 

 

Summary of Revenues

 

In summary, we estimate General Fund revenues, including the normal use of $800,000 from the current year and a one-time use of $715,000 carried forward from 2004-05, would total about $44.0 million.  However, our estimates at this point are subject to change based on changing local, State and national economic conditions.

 

The table below shows comparative estimates of total General Fund revenues for the current year and next year.

 

 

 

General Fund Costs

 

As requested by the Council, the preliminary estimate of General Fund costs for next year’s budget is shown in a format separating the base budget costs from optional additions to the base budget that could be considered by the Council. The table on the following page is provided to compare the preliminary base budget for next year to the current year’s base budget.  Attachment I is provided to show estimated costs for the base budget next year with additional columns to show preliminary options for consideration by the Council. 

 

Base Budget

The base budgets submitted by departments would allow continuation of basic services, but with little flexibility for unexpected occurrences.  The increase in the base budget before debt service is about $183,000 or .5%. 

 

 

We have been able to off-set new costs with reduced costs in other areas in the base operating budget, except for about $183,000.  Items of increase include the following:

 

·        the full-year cost of pay increases authorized for nine months this year ($210,000)

·        Increased cost of employee medical ($440,000) and workers’ compensation coverages ($40,000)

·        Increase in utilities ($67,000)

·        Increase in computer use charges ($9,000)

·        Increase in vehicle replacement charges ($100,000)

·        Potential increase in landfill tipping fees ($22,000)

·        Increase in fuel costs ($46,000)

·        Cost of data cards used in Police Mobile Data Terminals in patrol vehicles ($20,000)

 

The base budget does not include contributions to human service agencies except for the Chapel Hill Downtown Economic Development Corporation ($70,000), the Chapel Hill Public Arts Commission ($125,000) and $60,000 for visitor information and events as required by the laws regarding Hotel/Motel taxes.  Capital improvement costs in the base budget are limited to items involving contracts or other binding commitments made by the Council.

 

As we have previously reported, the major increase in the base budget is for debt service.  Payments for debt previously obligated will increase $285,000, from about $2.8 million to about $3.1 million.  Debt service payments for the new Town Operations Center are estimated to be about $1,750,000. 

 

Total debt service will increase by $2,035,000, an amount equivalent to 3.7 cents on the tax rate for next year.  Including both elements of debt service, the estimated base budget totals about $44.2 million, or about 5.3% more than the original current year’s operating budget. 

 

The preliminary base budget includes costs necessary to continue current operations, but does not include costs for competitive employee compensation adjustments, any new positions or funding for contributions to other agencies those listed above. 

 

Capital Improvement Costs

 

The base budget for the capital improvements program would require a $290,000 transfer from the General Fund and would limit costs to current installment debt payments and contractual obligations.   This base level would include the following:

 

·        157,000           Annual installment payment on renovations at Hargraves Center and A. D. Clark Pool

·          57,000           Annual payment on proposed contract for repairs at the Inter-Faith Council shelter

·           8,000            Annual payment on roof repairs at the Chapel Hill Museum

·          37,000           Annual payment on roof repairs at the Town Hall, Fire Stations #2 and #3

·          31,000           Annual payment on repairs to various tennis and basketball courts

 

Summary of Revenues and Expenditures and Fund Balance

 

With estimated costs as discussed above and no reserve for pay adjustments or agency funding, the preliminary General Fund base budget costs would be about $44.2 million for 2005-06, and could be funded with total estimated revenues next year of $42.4 million and the use of $1,515,000 ($800,000 normal use and $715,000 additional) in fund balance, leaving a shortfall of approximately $283,000, equivalent to about .5 cents on the tax rate. 

 

In Attachment I, we have shown optional additions to the base budget.  In evaluating alternatives, we recommend that the Council consider the importance of retaining a reasonable level of unreserved, undesignated fund balance.  Council policy suggests that fund balance should be between 10% and 12%, so that the Town will have funds for cash flow needs, emergencies, unexpected opportunities, and to preserve the Town’s current credit ratings of AAA and AA+.  We believe that we should prepare a budget that retains an unreserved, undesignated fund balance of 12% of budget, so that balances would remain to allow the Town to retain its credit rating, even if emergencies or opportunities arise that might require the use of fund balance reserves during the year.  

 

With a budget that included base costs of $44.2 million and additional options of $2,952,000 for a total of $47,152,000, a fund balance of 12% would equal $5,658,000.

 

If the Council uses $1,515,000 as projected in this report, the remaining fund balance would be $5,357,000 or 11.4%.

 

Optional Additions to the Base Budget

 

The preliminary status report includes a list of options that we are considering recommending:

 

Reserve for Pay Adjustments

·        The preliminary base budget expenditure estimates do not include a reserve for pay adjustments needed to be competitive in the Triangle labor market ($750,000).  We will present specific pay recommendations as a part of the recommended budget on May 9, 2005.

 

Information Technology

·        Information systems GIS analyst ($78,470).  Additional position needed to develop geographic information systems applications for use by Town departments and citizens.

 

Public Works

·        First year costs for purchase of a combination vacuum/flusher truck, offset by transfer from Stormwater Management Fund ($29,700, which represents one year of financing costs).  This truck would be used to clear debris from storm drain systems to prevent restricted water flow and remove blockages in the Town’s drainage system. 

 

·        Equipment Operator for vacuum/flusher truck, off-set by transfer from Stormwater Management Fund ($45,550). 

 

Police

·        Incentives to retain police officers ($61,700). This option would provide educational incentives for police personnel, including an increase in tuition reimbursement amounts and annual stipends for officers having college education.

 

Parks and Recreation

·        Increase Recreation Specialist from part-time to full-time ($8,720). This Recreation Specialist position works with the Apple Chill program.  An increase in hours to full-time is necessary to meet the needs associated with the recent expansion of the Apple Chill Street Fair. 

 

Inspections

·        Online Inspections permits ($7,500).  This includes the purchase of software and training to allow the availability of online permitting.

·        Eliminate Rental Licensing costs ($51,580 cost reduction).  While the Council Committee reviewing the rental licensing program has not yet delivered its report, based on staff evaluation we believe it would be reasonable to eliminate the Rental License Program.  The reduced costs include the elimination of salaries and benefits for the Code Enforcement Officer and Part-time Administrative Clerk whose duties relate to the Rental Licensing program.  The reduction also reflects a decrease in postage, fuel, computer use charges and vehicle maintenance all related to the Rental License program. 

 

If the program were eliminated, there would be a $75,000 revenue reduction.  The revenue level was established to cover the full cost of the program in the year it was established and continued with an allowance for unforeseen costs based on program experience.  Those costs included start-up costs for computers and software programming which would not be incurred in 2005-06.

 

Fire

·        Fire attack nozzles ($1,820).  These are replacement costs to ensure adequate inventory of nozzles. 

·        Voice amplifiers for self-contained breathing apparatus ($2,000).  These amplifiers enable firefighters to speak and hear each other while in firefighting suits, thereby improving safety while in fire attack situations. 

·        Replace two thermal imaging cameras for searches ($36,000).  These cameras assist firefighters in locating victims in a fire situation and help them to determine the source of the fire.

·        26 pairs of boots for search/rescue ($6,240).  These boots are National Fire Protection Association compliant Urban Search and Rescue (USAR) boots, which protect against impact and blood-borne pathogens.  They are needed to properly equip members of the USAR team.

·        Washer/dryer at fire station ($2,600).  This equipment would be used to wash towels and contaminated uniforms in replacement of the current linen service.

 

Performance Agreements with Other Agencies

·        Level provided for human service contracts, hotel/motel allocations and grants to other agencies in past years ($420,200). This represents a continuation of payments made to various recipients for human service contracts and allocations and grants at the same level as the current 2004-05 fiscal year.  Note that the base budget includes $255,000 for Performance Agreements with other Agencies:

o       Chapel Hill Downtown Economic Development Corporation ($70,000)

o       Chapel Hill Public Arts Commission ($125,000)

o       Hotel/Motel tax required allocation for visitor information and events ($60,000)

 

 

Capital Improvement Program

·        Optional capital improvements presented for consideration in the 2005-06 budget include the following and would have a total cost of $1,455,000.

 

Projects proposed for cash financing

 

·     70,000       Town Hall generator

·   225,000       Police department generator

·     65,000       Building condition assessment

·     76,000       Extraordinary maintenance, emergency repairs

·     75,000       Fire Station #2 capital repairs

·     30,000       Parks and Recreation Administration capital maintenance

·   280,000       Town Hall, replacement of heating, ventilating, and air     conditioning units

·     25,000       Curb repairs, Americans with Disabilities Act compliant

·     40,000       Parking lots/Bike and pedestrian paths/Greenways

·     50,000       Small park improvements


·     90,000       Traffic signal system upgrade local match

·   100,000       Town Hall telephone system replacement

·     20,000       Cemetery beautification

·     35,000       Greenways

·     50,000       Library capital maintenance

 

      Projects proposed for installment contract financing

 

·   224,000       Community Center capital repairs (Total cost $1,440,000)

 

Annexation

 

Annexation is the process by which towns and cities expand their corporate limits to provide for the orderly extension of municipal services to areas that are becoming urbanized.  Annexation of two areas located northwest of the present Town limits, the Larkspur Area and the Vineyard Square area are currently under consideration.  When an area is annexed the Town incurs additional costs for extending services to the area and receives additional revenues from property tax and State-shared revenues, such as sales tax.  Full reports were presented at the Public Hearings on the Larkspur and Vineyard Square proposed annexations on March 21, 2005 including a listing of the specific costs and revenues associated with the proposed annexation. 

 

Annexation of Larkspur and Vineyard Square, currently under consideration for annexation on June 30, 2005 at 11:59 p.m. would result in revenues of approximately $289,000 and costs of about $99,000 for a net revenue of about $190,000.

 

Attachment I provides summary budget information showing the base budget request as discussed above and two columns showing potential additions to the base budget in two priority sets.

 

Priority additions and estimated costs are shown in Attachment I.  Adding the potential priority options to the base budget would result in a General Fund of about $47.1 million and would provide additional revenues of about $289,000.  A budget at this level would require approximately $3.3 million in additional revenues from a tax rate increase, additional fees, or cost reductions in other programs. 

 

Other Options (not included in base budget)

 

Optional additions in this category and estimated costs are included in Attachment I.  The list includes additional options for consideration by the Council that were requested by Departments to enhance existing programs and services for 2005-06.

 

A budget with these additions totaling about $796,000 would require an adjustment in the current General Fund tax rate, additional fees or cost reductions in other programs.  We note that Other Options includes the cost of increasing a Recreation Specialist serving the special needs community from part time to full time at a cost of $15,900.  Because of the demand for services, the program has grown 477% in the last ten years.  Currently participants from Orange County, but outside of Chapel Hill, make up about 36% of the participants in the special needs programs. As a result the Council has requested funding from Orange County.

 

As Council has requested, we are currently developing an estimate of the possible net saving related to a reduction or elimination of a portion of our commercial refuse collection services.  While we have not completed our estimates at this time, we expect to prepare a Budget Working Paper on alternative proposals shortly.

 

We will continue to work with the Council in evaluating potential budget reductions as we work toward preparation of a recommended budget.

 

PRELIMINARY TRANSPORTATION FUND BUDGET

 

Key issues for the Transportation budget for next year include:

 

·        The level of State and federal operating assistance available next year

·        Funding increases in employee medical insurance, workers’ compensation insurance and unemployment insurance costs

·        Adequate staffing of services for the Town’s bus system

·        Beginning work on the Transit portion of the Town Operations Center

 

Preliminary estimates of revenues and expenditures for the Transportation Fund base budget for next year of $12.1 million indicate that no tax increase would be necessary to continue current services.  Using the preliminary estimates, reserves of about $200,000 would be available for additions to the budget or for a property tax reduction.

 

Expected revenue available for the system is based on preliminary estimates of federal and State operating assistance, and assumes that contractual arrangements with Carrboro and the University would continue based on current cost sharing agreements.  Discussions are underway with the University and Carrboro regarding specific services desired for 2005-06.  The final level of State and federal operating assistance will not be known until later this spring.  Preliminary estimates suggest that both federal and State funding will increase next year.

 

Transit Town Operations Center Funding

 

We had considered the possible need for a short-term loan to ensure that we have sufficient funds on a timely basis to build the Transit Operations Center.  After discussions with federal and State grantors, we believe that we will be able to receive grant funds on a sufficiently timely basis so that we will not have to borrow for cash flow purposes at this time.

 

Budget Revenues

 

For the Transportation Fund budget for 2005-06, revenue sources are expected to remain about the same next year with estimated amounts as follows:

 

·         Federal operating assistance is expected to be about $1,116,000, an increase of about $92,000 over the current year.

·        State operating assistance is expected to be about $2,500,000, an increase of approximately $934,000 from the current year.

·        University payments would be about $4.4 million based on its share of requested services.

·        Carrboro payments would be about $856,000.

·        The Town’s share of costs would be about $2.5 million.

 

We assume continuation of vehicle license fees as in past years.  With assumptions as noted above, we estimate total revenues of about $12.1 million next year, which is approximately equal to projected expenditures.

 

Transportation Budget Costs

 

The cost of providing the base budget Transportation services next year is estimated to be about $12.1 million or about 5.8% over the current year’s amended budget, with key cost increase areas as noted below:

 

·        Funding for expected increase in fuel costs ($340,000)

·        Funding the full-year costs of pay increase authorized for 9 months in the current year ($61,000)

·        Funding expected increases of 15% in employee medical costs and  5% in worker’s compensation costs ($154,000)

 

Summary of Revenues and Expenditures and Fund Balance

 

Preliminary cost projections equal preliminary revenue projections at about $12.1 million.  The preliminary budget includes an allocation to reserves of about $284,000.  Based on current estimates, we would need to retain about $84,000 in reserve to provide adequate fund balance.  The remaining portion of the reserve ($200,000) could be used to reduce the Transportation Fund tax rate or for additions to the base budget.

 

Potential Additions to the Transportation Base Budget

 

 

The base budget was held to a zero base for most operating costs.  As a result, the list of priority options includes a number of operating items totaling $33,000 that we feel are worth consideration.  The list includes marketing supplies, uniform replacements, additional maintenance parts and ground maintenance.

 

The cost of any additions to the base budget would be shared by the Town and our transit partners, the University of North Carolina at Chapel Hill and the Town of Carroboro.  The Town pays approximately one-third of the cost of any additions.  Priority options total $395,000, and the costs would be shared by the partners.  The $200,000 available in current reserves is sufficient to cover the Town’s cost of additions in the priority options list.

 

OTHER FUNDS

 

We are developing budget recommendations for the following other funds and present a preliminary budget picture below.

Stormwater Management Fund.  Stormwater Management Fund estimated revenues for 2005-06 total about $1,583,000, approximately $177,000 less than budgeted in 2004-05, the first year that the fund was in place.  The original projection of the total billable property was overestimated.  We believe that the lower budget will more correctly state anticipated revenues for the Stormwater Fund. The $532,000 transfer to the General Fund for current operations is expected to remain about the same as in 2004-05.

On-Street Parking Fund:  On-street parking revenues are expected to be about $551,000,  $89,000 less than estimated for 2004-05.  There has been a decrease in on-street parking revenues based on present data and preliminary review.  We believe that much of the decline can be attributed to free parking available at a large property on the west end of Franklin Street, a decrease in past due collections and a decline of business activity in the downtown.  For 2005-06, we estimate revenues to be sufficient to allow a transfer of about $104,000 to the General Fund. 

Off-Street Parking Facilities Fund:  Revenues for the off-street parking lots are estimated to be about $20,000 less than the original budget for the current year.  We estimate revenues will be adequate to meet operating costs and debt service payments this year and next year.  For next year, we estimate total revenues of about $1,277,000 and costs for a base budget of about $1,205,000, leaving a difference of $72,000 which we consider essential for basic maintenance on the deck as recommended by the Public Works department.

Housing Fund:  Because of the budget schedule required by the Department of Housing and Urban Development (HUD), the Council adopted a budget on March 7 for the Town’s public housing program for 2005-06.

Estimated costs for next year total about $1,550,000, a decrease of about $103,000 from the original 2004-05 budget of $1,654,000.  The decrease is a result primarily of reduction in the federal subsidy for the public housing program.  As a result of the decrease, we have made significant budget reductions including the elimination of one resident services position.  We propose to continue the current level of maintenance services.

Debt Service Fund:  A transfer from the General Fund of approximately $4,817,000 would be required to make scheduled payments for principal and interest on the Town’s debt obligations for next year.  The debt payments include about $3,067,000 for on-going debt and an estimated $1,750,000 for the debt service payments related to the Town Operations Center.

Capital Improvements Fund:  A transfer of $290,000 is included in the base General Fund budget proposal.  The base amount excludes payment for land purchased for the Town Operations Center which we plan to refinance as a part of the Town Operations Center financing, as required by the Local Government Commission.  Optional funding levels for the capital improvements program are presented in a separate report.

Housing Loan Trust Fund:  Projects will be funded as directed by the Council, with costs restricted to be in balance with revenues.

Library Gift Fund:  For the preliminary base budget, we project a transfer to the General Fund of $45,000 as in past years. 

Downtown Service District Fund: The current tax rate of 6.2 cents is estimated to generate about $70,000 in revenue in the current year.  We believe that property revaluation will allow an equalization rate of 5.1 cents to generate the same level of revenues next year based on information currently available.  Downtown district revenues are allocated entirely to the Downtown Economic Development Corporation. 

 

 

The Chapel Hill Downtown Economic Development Corporation brings the resources of the Town, University and downtown community together to maintain, enhance and promote downtown as the social, cultural and spiritual center of Chapel Hill through economic development.

Requests by Others

The Council has received funding requests from other agencies which are not included in the base budget or in the list of priority additions for the Council’s consideration.

Some of these requests are appropriate for consideration through Community Development or HOME Program funding and are discussed in separate reports in this agenda item. All requests will be considered as we work toward preparation of the Manager’s recommended budget.

CONCLUSION

We hope that this status report on the development of the 2005-06 budget will help the Council as it continues its deliberations. We look forward to receiving further feedback, advice and instruction from the Council as we continue work on the budget. The Manager’s recommend budget will be presented to the Council on May 9.

 

ATTACHMENTS

 

  1. General Fund – Revenue and Cost Estimates for 2005-06 (p. 21).
  2. Transportation Fund – Revenue and Cost Estimates for 2005-06 (p. 22).