AGENDA #1

 

BUDGET WORKING PAPER

 

TO:                  W. Calvin Horton, Town Manager

 

FROM:            Kay Johnson, Finance Director

 

SUBJECT:       Changes since the Preparation of Recommended Budget

 

DATE:             June 15, 2005

 

 

The purpose of this working paper is to update the Council on changes since the presentation of the Manager's Recommended Budget for 2005-06 on May 9, 2005.

 

BACKGROUND

 

On May 9, 2005, the Council received the Manager's Recommended Budget for 2005-06.  The Council held a Budget Work Session on May 12 and a Budget Hearing on May 18.  As a result of decisions made by the Council at the Work Session and additional information we have received since the presentation of the Manager's Recommended Budget, we have prepared revised Revenue and Cost Estimates for 2005-06.  Attachments 1 and 2 show summary information for the General Fund and the Transportation Fund, respectively.

 

DISCUSSION

 

The property tax rates in the Manager's Recommended Budget for the General Fund and the Transportation Fund were 48.44 cents and 4.83 cents, respectively, for a combined rate of 53.27 cents.  With the changes the Council has requested and the changes we have made based on additional information we have received, we currently estimate the property tax rates for the General Fund and the Transportation Fund to be 47.40 cents and 4.80 cents for a combined tax rate of 52.2 cents.  The combined rate shows a reduction of slightly more than 1 cent from the combined tax rate in the Manager's Recommended Budget as shown in the chart below, resulting in an effective tax rate increase of 2.9 cents.

 

Proposed Changes in the General Fund

 

• Through negotiations with insurers and making changes in the benefits packages, we were able to reduce the estimate of increases in the cost of medical insurance from $300,300 to $143,740, a reduction of $156,560. 

 

• We received notice from the Superintendent of the Chapel Hill-Carrboro Schools that the budget for the schools will not be adopted before July 27, 2005.  As a result, the schools may not have funds for the three School Resource Officers currently assigned to the middle schools.  We had already reduced the Recommended Budget to reflect the reduction in reimbursement from a full year to 10 months.  As a result of the uncertainty, we have reduced the reimbursement amount from the Chapel Hill-Carrboro Public Schools by $144,780 for the remaining reimbursement for the Middle School Resource Officers and reduced the Police Department Budget by the same amount.  We would reassign the current officers assigned to the middle schools and remove the budget for three positions that are currently vacant.  If the schools are later able to reimburse the Town for the school resource officers for the middle school officers, we would return to the Council and request that the Police Department Budget be increased in an amount equal to the reimbursement from the schools for the school resource officers for the middle schools.

 

• We received notification that natural gas prices are increasing by 13.4 percent which will require an additional $9,900. 

 

• Funds allocated for the Greenhouse Gas Emissions Measurement Study in 2003-04 were not included in the 2005-06 budget, but will be needed in the 2005-06 budget at a cost of $13,000. 

 

• The Council voted to make additional donations to human service and arts organizations as follows:
• • Interfaith Council Homeless Shelter       $20,000
  • Chapel Hill Public Arts Commission $25,000
  • Human Services Advisory Board          $19,000
  • Carrboro Arts Center                           $10,000

 

• The Council voted to reduce the Capital Improvements Program additions by $504,000 from $1,390,000 to $886,000, by eliminating funds for the air conditioning system in the Town Hall ($280,000) and for the first payment on renovation work at the Estes Community Center ($224,000).

 

• The proposed increase in revenues from commercial garbage fee collections were reduced from $149,000 to $136,000 to reflect the decision not to charge multi-family residential properties for additional commercial garbage fees.

 

Proposed Changes in the Transportation Fund

 

• Through negotiations and changes in the benefits packages, we were able to reduce the estimate of increases in the cost of medical insurance from $103,010 to $45,890 for a reduction of $57,120. 

 

• We received notification that natural gas prices are increasing by 13.4 percent which will require an additional $5,100. 

 

On April 5, the Council arranged for a study by Maximus to evaluate the indirect cost rate charged by the General Fund to the Transportation Fund, and we recently received the results from Maximus.  The study shows that we would not have a basis for increasing our rate for the 2005-06 budget.  Federal regulations require that we use audited financial statements as the basis for an A-87 indirect cost study.  As a result, we are only permitted to use the actual calculated amount for 2003-04 (the last audited year) to apply to the 2005-06 budget, which would be less than the amount allowed by our current method of calculation. 

 

However, the study does provide the basis for possible increases in the rate for 2005-06 after the year is complete.  If we conduct an indirect cost study again after the completion of the year, we can recover costs of undercharges in the indirect rate in the following year.

 

ATTACHMENTS

 

1. General Fund — Revised Revenue and Cost Estimates for 2005-06 (p. 4).
2. Transportation Fund — Revised Revenue and Cost Estimates for 2005-06 (p. 5).