AGENDA #1

MEMORANDUM

TO: Mayor and Town Council

FROM: W. Calvin Horton, Town Manager

SUBJECT: Public Hearing on the Recommended Budget and Capital Program

DATE: May 18, 2005

INTRODUCTION

The purpose of this memorandum is to provide background information for the Council’s public hearing on the recommended 2005-06 budget, the recommended 2006-2020 capital program and on use of transit grants and downtown service district taxes in 2005-06.

We suggest that the Council receive comments tonight in a combined hearing format in which citizens may make comments regarding any of the topics.

OVERVIEW OF THE TOWN’S BUDGET

Through the Town's annual budget process, the Town Council makes decisions on the level and types of services to citizens. The Town’s service year begins on July 1 in accord with State law.

Adoption of a budget determines in many respects the level of resources available for Town services over the coming budget year. Normally, there are limited options for adding to the budget after it is adopted.

The budget process is one of the most important functions and responsibilities of the Mayor and Council, and is a key opportunity for citizens' participation in Town government.

BACKGROUND

Process for Participation by Citizens

Citizens may make comments to the Mayor and Council by letter, fax or e-mail at any time in the budget process.

Notices of the budget forum and hearing were published in the Chapel Hill News on May 8th. Letters inviting citizens to attend and speak at the forum were e-mailed last week to about 200 community organizations and citizens. A copy of the notice is attached.

Public forums on preliminary budget reports were held on January 26^th and March 23^rd. Because of the work that the Council did as a part of the Citizens Review Advisory, the Council did not hold a separate meeting with Town Advisory Boards, but invited the Advisory Boards to speak at the March 23^rd Public Forum. The Council held budget work sessions on April 6^th, April 27^th and May12^th. The Council may hold additional work sessions as needed.

The budget process adopted by the Council includes consideration of adopting a budget on June 27^th. Under State law, the Council must adopt an annual budget or an interim budget by July 1^st.

Recommended Tax Rate

The recommended total tax rate for 2005-06 is 53.27 cents, or 4.23 cents below the present tax rate. New debt service that must be paid in 2005-06 totals $2,035,000 which is equivalent to 3.8 cents on the tax rate.

The current tax rate for the General Fund and the Transportation Fund is 51.6 cents and 5.9 cents respectively. Orange County real estate was revalued as of January 2005. As a result of real estate valuation, property values increase about 20%.

The equalization rates for the General Fund and the Transportation Fund are 44.2 cents and 5.1 cents, respectively. The proposed budget rates, which cover continuing services and priority additions for the General Fund and the Transportation Fund are 48.44 cents and 4.83 cents, respectively for total tax rate of 53.27 cents. The combined rate is 4.23 cents below the combined tax rate for 2004-05.

The table below summarizes the comparable tax rates:

SUMMARY OF BUDGET OPTIONS

The Manager’s recommended budget for the General and Transportation Funds for 2005-06 is presented as a base budget that would continue most General and Transportation services as in past years, and includes recommended priorities for addition to the base budget for the Council’s consideration.

General Fund

Under the recommended 2005-06 budget, services would continue as in past years. The General Fund base budget of about $44,136,000 could be funded without a tax rate increase; $63,700 would be available for priority additions.

The recommended General Fund budget of about $46,968,000 contains priority additions for a number of items, including:

· Increased fees and new fee proposals ($503,900).

· Reserve for pay adjustments needed to be competitive in the Triangle labor market ($746,000).

· Incentives to retain police officers ($70,000). This option would provide educational incentive pay for police officers having bachelor’s degrees.

· Maintenance of Town properties through capital improvement program ($1,390,000).

· Information systems GIS programmer/analyst ($62,000). The position is needed to develop geographic information systems applications for use by Town departments and citizens. The applications would help improve efficiency and effectiveness in land development activities and public safety, in particular.

The recommended budget includes a number of fee increases in the General Fund over revenues reflected in the base budget. These include a variety of fees related to land development ($197,000), refuse collection for governmental and not for profit organizations not currently charged ($15,000), increase in current commercial refuse collection rates ($50,000), other public works fees and cost avoidance ($109,000), privilege licenses ($60,000), parking fees ($34,400), parks and recreation fees ($33,500), and an increase in library fees for out-of-county cardholders ($5,000) for a total of $503,900.

Transportation Fund

The Transportation Fund base budget and recommended additions would continue fare-free services for all routes. The estimated Transportation base budget that would continue current services totals about $11,885,000 and in addition provide a reserve of $278,000 in Town funds which could be used for additions to the base budget.

Priority options to the base Transportation Department budget would include:

· Potential cost of competitive employee pay adjustments effective October 1, 2005 ($192,400).

Additional staffing for a Para-Transit Services Supervisor position ($53,000 for 9 months).
Additional staffing for a Mechanic Specialist ($59,000).

· Additional staffing for a Service Attendant ($38,000).

A Transportation Fund budget with priority options would total about $12.3 million, with the additional costs being shared among the Transportation partners or by other revenue increases. The proposed budget including priority options could be accommodated and still permit a tax rate reduction of .27 cents for a revised rate of 4.83 cents.

Stormwater Management Fund

The Stormwater Management Fund was established in 2004-05 to account for the Town’s Stormwater Management Program, including maintenance of streets and drainage systems, reduction of soil erosion, and mitigation of flood damage. The Stormwater Management Fund would: pay for programs necessary to meet the requirements of federal stormwater management regulations; provide for the development of a master plan to identify and schedule stormwater management capital improvements in future years; provide a comprehensive public education and participation plan; and enhance stormwater management services provided by the Town.

The Stormwater Management Fund’s estimated revenues for 2005-06 total about $1,639,000, approximately $121,000 less than budgeted in 2004-05, the first year that the fund was in place. The original projection of the total billable property for 2004-05 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, with the exception of the one-time transfer of $402,000 in 2004-05.

Key Factors Influencing the Budget

Key Factors influencing the proposed budget and tax rates include the following:

We have received and will be evaluating developer proposals for Lots 5 and the Wallace Deck. The economic development consultant’s model for the proposal includes financing issues that would need to be considered within the context of overall Town goals for development and fiscal stability.

Our projections include significant needs for capital repair and maintenance of the Town’s assets that would require funding of between $1.7 million and $2 million in each of the next five years.

The Council adopted a schedule with General Obligation bond issuances in 2006-07, 2008-09 and 2009-10. Debt financing will go up in each of the years following a bond issuance when debt repayment begins. The first year payment on the 2006-07 bond issuance is expected to be about $814,000 in 2007-08; the first year payment on the remaining two bond issuances is expected to be about $925,000 in 2009-10 and 2010-11, respectively.

PROPOSED USE OF TRANSPORTATION GRANT FUNDS

Operating Assistance

Operating assistance funds would support services of the public transit system in the Chapel Hill/Carrboro area. We currently operate twenty-two bus routes, demand responsive shared ride service and service for people who have disabilities that preclude use of regular fixed route services.

The estimated amount of federal and State operating assistance to be requested for 2005-2006 is $1,116,000 and $2,500,000 respectively, or about 22% of the cost of the transit system.

Capital Projects

Up to $10,888,000 of federal funds would be requested. In addition, State grant funds (10%) would be requested to help cover matching costs.

Proposed uses of grants are:

· If funds are available, the Town may purchase twenty replacement buses, and six replacement support/shared ride vehicles. Funds for ten expansion buses, two expansion lift-equipped vans, and purchase of land, funds for design of a park/ride lot in the 15-501 corridor and funds for the purchase of land and design of a multimodal center for the Town have also been requested.

· Purchase of technology for the bus fleet, including mobile data terminals for the demand response services and a new radio system.

· Purchase of associated capital maintenance items, including air conditioning compressors, bus tires, and engine rebuilds.

Planning

About $275,000 of federal funds would be requested for short-range transit planning projects, including a feasibility study for a proposed transfer facility.

SUMMARY OF THE RECOMMENDED CAPITAL PROGRAM

For 2005-06, the base budget for the capital improvements program would total about $290,000 and would limit costs to funding 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

Funding for a capital improvements program at this minimum level would require a transfer of $230,000 from the General Fund, and would be supplemented by $60,000 in estimated cell tower rental fee revenue in the Capital Improvements Fund.

Capital Improvement Program

Optional capital improvements presented for consideration in the 2005-06 budget include the following and would total $1,390,000.

· 76,000 Extraordinary maintenance, emergency repairs

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

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

· 50,000 Small park improvements

· 35,000 Greenways

· 225,000 Police department generator

· 70,000 Town Hall generator

· 90,000 Traffic signal system upgrade local match

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

· 100,000 Town Hall telephone system replacement

· 75,000 Fire Station #2 capital repairs

· 50,000 Library capital maintenance

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

· 30,000 Parks and Recreation Administration capital maintenance

· 20,000 Cemetery beautification

USE OF DOWNTOWN SERVICE DISTRICT TAXES

The Town Council established the Downtown Service District in 1989-90 to provide supplemental services in a special district under procedures in State law. Most property with Town Center zoning is in the service district. A few properties used only for residential purposes have been excluded through the Council’s decisions on the district boundary. State law requires using the district tax funds in accord with the Council's service plan for the downtown.

While we do not anticipate a change in revenues of $70,000 for the Downtown Service District, the Downtown Service District tax rate would change as a result of the Orange County real estate revaluation. The current tax rate for the Downtown Service District is 6.2 cents per $100 assessed value. The equalization rate based on the current estimate of the revaluation of $132,000,000 is 5.3 cents per $100 assessed valuation as shown in the chart below.

Downtown Service District	Original 04-05 Budget	Equalization Rate	Base 05-06 Budget

Amounts	70,000		70,000
Tax Rates	6.2	5.3	5.3

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.

OTHER FUNDS

Other major funds include the Public Housing Fund, the Stormwater Management Fund, and the Parking Funds.

Since the Public Housing budget was adopted on March 7, we have been notified that federal operating assistance is proposed to decrease from the original estimate of $1,123,000 by $64,000 to $1,077,000 for 2005-06. A portion of the decrease may be offset by dwelling rents, but a portion will require additional use of fund balance. However, we will still be able to retain the federally required fund balance.

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. 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. Revenues for the off-street parking lots are estimated to be about $1.5 million for 2005-06, about $244,000 more than budgeted in 2004-05. The increase is primarily associated with increases in revenues at Lot 5 because of increased business activity in the immediate area.

For other operating funds, service levels in the recommended budget for 2005-06 would remain about the same as in the current year.

MANAGER’S RECOMMENDATION

That the Council refer comments and questions to the Manager for consideration and follow-up reports as needed in the budget process.

NEXT STEPS

If the Council chooses to hold an additional Budget Work Session, a follow-up report will be provided.

The Council is scheduled to consider adoption of a budget on June 27, 2005.

ATTACHMENTS

1. Notice of Public Hearing on Town Budget (p. 9).

2. Notice of Public Hearing on Proposed Transit Projects (p. 11).

3. Summary of General and Transportation Base Budgets and Recommended Options (p. 13).

ATTACHMENT 1

PUBLIC HEARING ON TOWN BUDGET

BY THE MAYOR AND TOWN COUNCIL OF CHAPEL HILL

7 p.m., Wednesday, May 18, 2005

Council Chamber, Town Hall

405 Martin Luther King Jr. Blvd.

You are invited to express your views at a Public Hearing by the Mayor and Town Council of Chapel Hill at 7 p.m. on Wednesday, May 18th, regarding:

Town services and projects for the budget for July 1, 2005 through June 30, 2006;

Capital improvement needs for 2006-2020;

How to use the 2005-2006 Community Development grant to address housing and other community needs of lower income households and areas;

How to use the 2005-2006 federal Housing Capital Fund grant for improvements, renovations and related items in public housing neighborhoods;

How to use the 2005-2006 federal HOME grant in Orange County to address housing needs of lower income households;

How to use the 2005-2006 federal and State transit grants for capital projects, operating costs, and transportation planning; and

The Downtown Service District boundary and services in the year beginning on July 1, 2005; and

Potential Legislative requests to 2005 session of North Carolina General Assembly.

The hearing on May 18th is for comments on the 2005-2006 recommended

budget, capital program and related items listed above.

An initial report by the Town Manager regarding the 2005-2006 budget is available for citizens to review in the Town Manager's and Clerk's offices in Town Hall and at the reference desk at the Chapel Hill Public Library.

If you would like to express your views in writing at any time, please feel free to send a letter to:

Mayor and Town Council

Town of Chapel Hill

405 Martin Luther King Jr. Blvd.

Chapel Hill, NC 27514

You may also send a letter by fax to the Town at 919-967-8406 or by electronic mail to [email protected]. Town staff will forward your letter or comments to the Mayor and each Council Member.

If you would like to have additional information, please feel free to visit the Town Manager's Office at Town Hall, send a fax or e-mail as indicated above, or write to:

W. Calvin Horton, Town Manager

405 Martin Luther King Jr. Blvd.

Chapel Hill, NC 27514

By phone:

Annual budget	Finance Department (968-2706)
Capital improvement program	Planning Department (968-2728)
Community Development grant	Planning Department (968-2728)
HOME grant	Planning Department (968-2728)
Transit grants	Transportation Department (968-2755)
Housing Capital Fund Grant for public housing renovations and related items	Housing Department (968-2850)
Downtown Service District	Manager's Office (968-2743)

ATTACHMENT 2

NOTICE OF PUBLIC HEARING

PROPOSED TRANSIT PROJECTS – TOWN OF CHAPEL HILL

Transportation Department – Program of Projects for 2005-06

Notice is hereby given that the Town of Chapel Hill is developing a program of projects for submission to the Federal Transit Administration and the North Carolina Department of Transportation for federal and state grant funding for fiscal year 2005-06. A public hearing will be held by the Chapel Hill Town Council on Tuesday, May 18, 2005, at 7:00 p.m. on the Transportation Department’s FY2005-06 Program of Projects.

The proposed uses of transit grant funds are:

Preventive Maintenance Assistance

To provide subsidy for the operation of the Chapel Hill public transit system in the Chapel Hill/Carrboro area, which currently operates twenty-two bus routes, demand responsive shared ride service and service for elderly and handicapped people.

The federal and State operating assistance requested would provide approximately $3,616,088 or about 30% of the operating budget.

Capital Projects

a. Section 5309 capital funds, if received, would be used to purchase twenty replacement buses, ten expansion buses, two expansion lift-equipped vans, and six support/shared ride vehicles. Funds would also be used to purchase land and design a park/ride lot in the 15-501 North corridor and to purchase land and design a multimodal center for the Town.

b. Section 5307 capital funds would also be used to purchase major spare parts such as engine and transmission rebuilds, air conditioning compressors and bus tires.

The total amount of capital grant funds to be requested for capital projects is about $10,888,000.

Planning Projects

a. Planning grant funds are to be used for short-range transit planning projects such as service analysis, passenger and route surveys and monitoring of public transportation activities. The amounts proposed for planning projects are $88,641 for Section 5303 and $186,360 for Section 5307.

Citizens may make oral or written comments and recommendations on the transit projects at the public hearing to be held at 7:00 p.m. on Tuesday, May 18, 2005 in the Council Chambers at the Chapel Hill Town Hall, 405 Martin Luther King Jr. Blvd (same as previous location of 306 North Columbia Street). If no comments are received, the proposed Program of Projects may become the final Program of Projects.

W. CALVIN HORTON

TOWN MANAGER

SUNDAY, MAY 8, 2005 - CHAPEL HILL NEWS/VILLAGE ADVOCATE CLASSIFIEDS

ATTACHMENT 3

GENERAL FUND

TRANSPORTATION FUND