BUDGET MESSAGE
I. SUMMARY OF PROPOSED BUDGET AND KEY ISSUES
TO: The Honorable Mayor and Town Council Members:
We are pleased to present for your consideration the Manager’s Proposed Budget for services from July 1, 2000 through June 30, 2001.
The recommended budget for all funds totals $51,180,000. The recommended property tax rate totals 59.2 cents, an increase of 2.9 cents over the present rate.
All Funds Summary
The recommended 2000-2001 budget for all funds totals $51,180,000 compared to a total of $47,885,000 for the original fiscal 1999-2000 budget.
We note that the 2000-2001budget proposal reflects the transfer of the Landfill Fund to Orange County.
The major components of the total budget are in seven funds totaling $49,236,000, as shown below:
$33,551,000 General Fund
6,961,000 Transportation Fund
1,403,000 Public Housing Fund
2,539,000 Debt Service Fund
1,204,000 Capital Improvements Fund
1,048,000 Off-Street Parking Facilities Fund
2,530,000 Vehicles Replacement Fund
All other funds total $1,943,000 as proposed for 2000-2001.
We discuss each fund in following sections of this budget message.
Tax Rate Summary
The Town relies on property taxes to pay a major portion of the costs in two operating funds: the General Fund and the Transportation Fund. A cent on the tax rate will produce about $302,000 in 2000-2001.
Present Tax Rate: The present tax rate totals 56.3 cents. Of this amount, 52.4 cents is for the General Fund and 3.9 cents is for the Transportation Fund.
General Fund Proposal: The proposed budget includes a 2.5 cents tax rate increase in the General Fund. We believe a tax rate increase is necessary to help pay for:
· new debt service payments ($430,000)
· employee pay and classification adjustments recommended by consultants ($789,000)
· an increase in the allocation for capital improvements ($190,000)
· A cost increase in employee medical insurance ($113,000)
· Higher workers’ compensation insurance costs ($54,000)
· An allocation for higher fuel costs ($46,000),
The recommended budget also includes $15,700 for the costs of providing services in areas proposed to be annexed effective June 30, 2000, principally for public works services, and $99,000 related to the planned annexation of Southern Village effective June 30, 2001. Costs of the Southern Village annexation include $65,000 for six firefighter positions to be filled in the last quarter of the fiscal year and $34,000 for a sanitation crew and installment purchase of equipment.
Transportation Fund Proposal. The present Transportation Fund tax rate is 3.9 cents.
Based on present information, we estimate costs next year would total about $6,961,000. Costs are projected to increase primarily because of:
· Employee pay and classification adjustments recommended by consultants ($245,000)
· An allocation for higher fuel costs ($128,000)
· Increased overtime costs because of inability to fill regular positions ($109,000)
· Higher workers’ compensation and medical insurance costs ($47,000), and
· Costs of one service attendant position ($24,000) and one mechanic position ($30,000) necessary to provide proper maintenance for the bus fleet.
We estimate base revenues of $6,492,000 in 2000-2001. Additional revenues of $469,000 would be necessary to balance the budget. We recommend use of about $225,000 in fund balance, similar to past years; and, implementation of the special $5.00 vehicle registration fee authorized by the Legislature to support transit services ($125,000). In addition, a tax rate increase of 4/10ths of a cent would be needed, raising the tax rate to 4.3 cents for the Transportation Fund.
Option: We recommend that the Council also consider an option that would provide fare-free bus services for all passengers on all routes at a cost to the Town of about $177,000 in 2000-2001, a tax rate equivalent of about 6/10ths of a cent. This proposal is discussed further on page 24 and in a separate working paper already presented to the Council.
Proposed Combined Tax Rate. The proposed tax rate for 2000-2001 would total 59.2 cents, with a General Fund tax rate of 54.9 cents and a Transportation Fund tax rate of 4.3 cents.
The cost of a 2.9 cent tax rate increase for a property valued at $150,000 would be $43.50 per year, or $3.63 per month if paid on a monthly escrow basis.
Cost of implementing the fare-free bus service option would require additional funding equivalent to 6/10ths of a cent on the tax rate.
GENERAL FUND BUDGET PROPOSAL
The General Fund budget provides for basic Town services, including: fire and police protection; solid waste collection and street maintenance; recreation and library services; planning, engineering and development inspection; park construction and landscape maintenance; traffic control and stormwater management; and, other general government services.
In general, the 2000-2001 budget proposal would continue present services, provide for annexations planned by the Council, improve maintenance of Town buildings, and enhance capital improvement funding.
Service Elimination. We recommend no service elimination in the proposed budget for 2000-2001, but will continue to evaluate services as the Council continues to work toward a final budget.
Continuation of 1999-2000 Service Reductions. We recommend that three service reductions initiated in 1999-2000 be continued in next fiscal year.
New Service Reductions. Two new service changes are recommended for 2000-2001.
Service Improvements. The proposed budget includes $100,000 in additional funding for capital maintenance and $90,000 for installment financing of renovation of key Town facilities totaling $1.3 million.
New Services. We recommend no new services for 2000-2001.
Annexations. The Council has initiated the annexation of the Englewood subdivision and the area around the University-owned property that is the location of the faculty club, effective June 30, 2000. This annexation will result in additional revenues of about $96,000 and additional costs of about $15,700 in the proposed budget. The additional costs are principally for public works services.
The Council also has directed that we prepare for the annexation of Southern Village effective June 30, 2001. In order to proceed on this schedule, we recommend adding six firefighter positions in the last quarter of next fiscal year at a cost of about $65,000. We also recommend adding a sanitation crew in the last quarter of the year and provision for installment purchase of a truck, totaling $34,000 in 2000-2001.
Summary of General Fund Revenues and Costs
The proposed budget for all General Fund services totals $33,551,000, an increase of $1.8 million or 5.7 % over the 1999-2000 original budget.
These costs could be balanced by $32,751,000 in current revenue and the use of $800,000 in carry over of funds from the 1999-2000 budget. Carry over of funds at this level is consistent with past practice, and is made possible by conservative revenue estimates and careful expenditure control.
A budget at this level would require a 2.5 cents tax increase. The General Fund tax rate for 2000-2001 that would be 54.9 cents.
GENERAL FUND REVENUES
The Town’s major revenue sources for 2000-2001 will be the same as those in past years: taxes; State-shared revenues; grants; charges for services; licenses, permits, fines and forfeitures; interest on investments; and, miscellaneous revenues. Each of these major sources and their main sub-categories are discussed briefly below and presented in greater detail in the General Fund section of the budget beginning on page 72.
Taxes
Property taxes, cable television franchise taxes, and hotel/motel occupancy taxes constitute the largest category of General Fund revenues at 52% of the total.
Property Taxes. Property taxes would continue to be the largest single revenue source in the General Fund, representing about 49% of total revenues, based on the proposed tax rate of 54.9 cents and an estimated tax base of $3,020,000,000. Revenues from this source would be about $16,268,000.
The tax base is estimated to be about $75 million above the 1999-2000 level, with about $60 million in normal growth, and $15 million from annexations effective June 30, 2000.
Cable Television Franchise Taxes. The Council has authorized a non-exclusive cable television franchise to Time Warner Cable. Time Warner must pay the Town 5% of gross receipts from their operations in Chapel Hill as a condition of the franchise. This is the maximum allowed under federal regulations. We expect next year’s revenues from this source to be about the same as in the present fiscal year: $275,000. This amount does not reflect the public access fee that the Town receives and remits to The People’s Channel for provision of public access services. We expect this fee will total $80,000 next year. It is accounted for in a separate fund, the Cablevision Public Access Fund.
Occupancy Taxes. The Town’s 3% tax on hotel/motel occupancy is estimated to produce about $585,000 in 2000-2001, about the same as in this fiscal year.
State-Shared Revenues
State-shared revenues are collected by the State of North Carolina and distributed to local governments based on specific formulas for each category of revenue. This source of revenue produces about 33% of total General Fund revenues.
Local Option Sales Taxes. There are two forms of local option sales taxes: one is based on sales in Orange County; the other is based on sales State-wide and distributed on a State-wide per capita basis.
We project that the Orange County tax will increase by about 5% in 2000-2001, from $2,313,000 to $2,440,000. The State-wide tax is estimated to increase about 5%, from $3,414,000 to $3,584,000. Estimates are based on trend analysis and economic forecasts.
Utility Franchise Taxes. The State collects a franchise tax on utility company gross sales and an excise tax on piped natural gas, and distributes about one-half of collections to local governments. Once frozen during a State government budget crisis, this revenue is now based on growth within the Town. Total receipts are expected to increase from $1,651,000 this year to about $1,780,000 in 1999-2000.
Motor Vehicle Fuel Taxes. Also known as Powell Bill revenue, the fuels tax is collected by the State and distributed to local governments based on local street mileage and population. Funds may be used only for street-related purposes. We estimate about a 2.7% increase next year, with the distribution rising from $1,318,000 in 1999-2000 to $1,353,000 in 2000-2001. Total street maintenance and related costs will exceed this amount.
Intangibles Tax Replacement Fund. The tax on money, stock and other intangibles has been eliminated and replaced with State general revenue. Intended as a “hold harmless” measure, total distributions are based on 1995 levels for each county. Within each county, distribution is based on relative tax valuations and tax levies of the governmental units. We expect no change in revenues from this source, expected to continue at about $520,000.
State Fire Protection Funds. The State appropriation to reimburse local governments for fire protection services provided to State facilities was static at $296,000 from its initiation in 1983 until 1998. We expect the present level of $850,000 to continue in 2000-2001
Other State-Shared Revenues. The beer and wine sales tax, inventory tax exemption fund, and food stamp tax exemption fund comprise the remaining State-shared revenues. No change is expected next year, with total receipts for these sources expected to be $377,000.
Grants From Others
The Town receives grants from Orange County, the State of North Carolina, the federal government, and occasionally from others. The total of grants varies substantially from year to year based on specific activities eligible for funding.
Orange County Grants. The County makes grants to the Town to support Project Turnaround ($45,000), parks and recreation services ($71,000), and library services ($224,000). Grant amounts for 2000-2001 have not been established by the County Commissioners, so we have assumed no change in our budget estimates. The County also collects and remits court fees in exchange for use of the court facilities at the Old Post Office, totaling about $65,000.
State Grants. State library aid is estimated to be about $34,000 next year.
Federal Grants. Presently committed federal grants for support of law enforcement services will expire next year. A total of $27,000 is expected to be available in 2000-2001, unless other grants are awarded.
Charges For Services
The Council has established a variety of charges for services, listed in detail in the General Fund Detail Revenues section of the budget document beginning on page 73. Based on the Council’s discussions to date, total charges for services are expected to increase significantly from about $747,000 this year to about $888,900 in 2000-2001. Major service charge categories and proposed increases are discussed below.
We note that we have requested a consultant to estimate the cost of providing an independent study of all development review costs, with the objective of maximizing fees while establishing a legally defensible system.
Planning Fees. Early in the budget process, the Council directed that we report on the full costs of reviewing development applications, including the direct and indirect labor costs of all persons involved and the related overhead costs. We did so and submitted a report to the Council this month. Based on our review, we recommend increases in planning fees and believe it would be reasonable to estimate that revenues will increase from $90,000 in 1999-2000 to $250,000 in next fiscal year.
Public Works Fees. The Public Works Department provides a variety of services on a fee basis, including: special refuse collection services; street cut repairs; maintenance of traffic signal systems for the State and the Town of Carrboro; sale of fuel to UNC Hospitals; and a miscellany of other services. The estimated total of service charges for next year is $249,000, about the same as in 1999-2000.
Parks and Recreation Fees. A variety of fees and charges are collected from participants in recreation programs and recreation facility users. In accordance with Council policy, recreation fees are reviewed each year and adjusted as necessary to take into account actual costs and the Council’s policy objectives. Total collections are estimated to be $297,000 in 2000-2001.
Licenses, Permits, Fines and Forfeitures
Revenues from licenses, permits, fines and forfeitures will total about $1,352,000 in 1999-2000. For 2000-2001, we recommend increases in various permits as discussed below to bring estimated revenue in the category to $1,429,000.
Privilege Licenses. Often called business licenses, these fees are established by the State and collected from all business operators and professionals in the corporate limits. The fee for the majority of businesses is limited by State law. However, we recommend an increase in the annual fee for miscellaneous businesses not limited by State law, from $10 to $50. The increase is expected to generate about $25,000 in additional revenue.
Vehicle Licenses. A $15 licensing fee is currently charged against all vehicles registered to addresses within the Town limits. The fee is collected by the County as a part of tax bills. The total next year for the General Fund is expected to be about the same as this year, $383,000. The fee now is set at $15.00, the maximum now allowed by law for general purposes.
However, existing special legislation would allow a $5.00 increase for support of public transit services so long as present local funding is not reduced. We recommend that this increase be authorized by the Council and have included $125,000 of estimated revenue in the Transportation Fund budget proposal.
Building Inspection Fees. Fees charged for building inspections are recommended to remain the same as in the current year and are expected to recover the full costs of services. Total collections vary each year based on the level of building construction in the community. For 1999-2000 we estimate collections will be about $600,000, and for 2000-2001 about the same.
Engineering Inspection Fees. The Engineering Department inspects streets, sidewalks, storm drainage systems and other infrastructure. Fees for inspection services are set to recover estimated costs. An increase of about 15% in these fees is also proposed for next year that would generate an additional $10,000, for a total of $85,000.
Special Use Permits. Fees charged for Special Use Permits would increase along with other development review fees, from $40,000 to $70,000 in 2000-2001.
Library Fines and Fees. Fees for services and fines for overdue materials are estimated to be about the same next year as this year, $110,000.
Interest on Investments
Town funds are invested as allowed by State law until needed for use. Interest rates for the past year have averaged about 6%. We estimate that the General Fund share of interest on investments next year will be about $387,000 for regular funds.
For 2000-2001, we recommended allocating about $215,000 in interest income from the newly issued bonds to help pay the additional debt service on these bonds in the first year. With this addition, interest income for the General Fund would total $602,000 for 2000-2001.
Miscellaneous Revenues
Sale of cemetery lots, proceeds from sale of fixed assets, and gifts constitute the most significant categories of miscellaneous revenues. The total expected in 2000-2001 is $248,500.
Transfers
Transfers are made from other funds in accordance with the Council’s policies, primarily to pay for administrative and indirect services provided by the General Fund for Enterprise Funds. Major transfers proposed for 2000-2001 are:
$360,000 Parking Funds
$490,000 Transportation Fund
In past years, transfers also have been made from the Landfill Fund. Operation of the Landfill Fund now is the responsibility of Orange County, so no indirect costs will be incurred and no transfer will be made next year or in future years.
General Fund costs are recorded under 16 major account groups or departments. The Council has received individual budget presentations from each department head. Below we review key issues on a department by department basis. Line-item detail for each department and for divisions within each department is presented in following sections of the budget.
Note: Certain line-item expenses that in previous years were accounted for in a single department now are charged to the departments and divisions that generate the costs, e.g., telephone service charges and workers’ compensation insurance. Capital equipment replacement costs and computer replacement costs now are reflected in a line-item for annual “Vehicle Replacement Charges” and “Computer Use Charges”, reflecting the implementation of capital equipment replacement programs authorized by the Council.
Mayor and Council
No service changes are proposed. The Council recently agreed to consider an increase in the allocation for Business Meetings and Training Expense. We will include an additional $2,200 for this purpose in the final budget, unless otherwise directed by the Council.
Town Manager
No service changes are proposed.
Town Clerk
No service changes are proposed. Costs associated with copying are increased because of replacement of equipment that had become unreliable.
Personnel Department
No service changes are proposed. Costs are reduced because no special studies are required in 2000-2001.
Finance Department
No service changes are proposed. Improved telephone/data lines will add about $20,000 of cost.
Required computer systems training for information technology staff will increase by $6,000.
Town Attorney
No service changes are proposed. Costs estimated for engaging outside counsel for specific cases is reduced by $20,000, based on experience in the past year.
Planning Department
No service changes are proposed. A Zoning Enforcement Officer position formerly budgeted in the Planning Department was transferred to the Inspections Department mid-year in 1999-2000. Full cost transfer is reflected in the 2000-2001 budget. Cost of professional services is reduced because of the completion of comprehensive plan revision work.
Inspections Department
No service changes are proposed. As noted above, a Zoning Enforcement Officer position was transferred from the Planning Department mid-year in 1999-2000. Full costs of this position now are budgeted in the Inspections Department.
Engineering Department
No service changes are proposed. Full costs of a Stormwater Management Engineer budgeted only part of the year in 1999-2000 will be budgeted for the full year in 2000-2001.
Public Works Department
No service changes are proposed except in the Solid Waste Services Division. Provisions are made for annexation of the Englewood subdivision and the area around the University Faculty Club effective June 30, 2000; and, for the planned annexation of Southern Village effective June 30, 2001.
The Public Works Department manages fuel purchasing, dispensing and accounting for all General Fund operations. Costs for these services are charged to the departments generating the costs. Overall, we expect an increase in fuel costs of about $46,000 in 2000-2001.
Management and Support Services Division. No service changes are proposed. Computer use charges are included for the first time in the proposed budget.
Field Operations Division. No service changes are proposed. The Englewood annexation will add costs of about $12,600. The allocation for street resurfacing is increased by $13,500 to approximate the inflation of materials costs. Vehicle replacement charges are increased consistent with the planned implementation of the Capital Equipment Replacement Fund authorized by the Council.
We will continue to hold open one vacant construction worker position, avoiding costs of about $31,700. The main effect of this action would be to reduce the number of small construction projects that could be completed next year.
Internal Services Division. No service changes are proposed. We note one changed practice: in prior years, fuel sales to other agencies were relatively minor. The volume of such sales and the cost of fuel has increased to a point that requires separate accounting. We have added $40,000 in costs in the Internal Services Division budget, which will be entirely offset by revenues from sales to other agencies.
Landscape Division. No service changes are proposed. Personal service costs are increased by about $16,000 to reflect career progression of employees. Vehicle replacement charges and fuel costs are increased about $20,000.
Solid Waste Services. The recommended budget is based on implementing once-weekly curbside refuse collection using rollcarts, as discussed earlier by the Council, with first-year savings of about $53,000. The Council already has received a separate report on this proposal and will receive additional information at a future budget work session.
The budget proposal includes $25,000 for an anticipated $1.00 increase in the tipping fee charged by the Orange County Regional landfill.
A sanitation crew would be added in the final quarter of next fiscal year, along with cost of installment purchase of a collection truck, to prepare for the planned annexation of Southern Village. Costs are estimated to be $34,000.
Police Department
The recommended budget reduces the cost of providing Police School Resource Officers to $54,750. This amount is set aside in a reserve pending a decision by the Chapel Hill – Carrboro City Schools on the number of such positions that they wish to fund. The reserve is 25% of the estimated cost of four positions. Funding of the additional 75% of costs would require a payment from the Schools of $164,250.
We would continue to hold vacant one police officer position in 2000-2001, as we have in the past fiscal year, avoiding costs of $36,000.
Cost of mandatory law enforcement early retirement benefits have increased by $100,000, because of retirements. Salary costs have increased for two reasons: because of career progression of employees; and because salary increases budgeted for only nine-months this year are budgeted for full-year costs in 2000-2001.
Fire Department
No service changes are proposed. The Council has directed that we prepare for the annexation of Southern Village effective June 30, 2001. In order to proceed on this schedule, we recommend adding six firefighter positions in the last quarter of next fiscal year at a cost of about $65,000.
The recommended budget also reflects full-year costs of six firefighter positions budgeted at only six months of cost this year; and full-year costs of pay increases budgeted at only nine months of cost this year.
Parks and Recreation Department
No service changes are proposed, although numerous new recreation programs will be offered in 2000-2001. Organization changes presented in the departmental budget proposal are included in the budget proposal.
The recommended budget continues to hold vacant one Recreation Specialist II position that would be involved in serving special populations, avoiding costs of $37,500.
Library Department
No service changes are proposed.
Non-Departmental Costs in the General Fund
Although most services are associated with a particular department, there are a number of key cost areas that are budgeted in the Non-Departmental group of accounts, as follows.
Grants to Others
Funding for grants to other agencies in exchange for specific services would continue at about the same level as in this year.
$ 178,200 Human services agencies performance agreements
129,750 Hotel/motel occupancy tax performance agreements, including:
87,750 Chapel Hill-Orange County Visitors Bureau
20,000 Arts Center
7,000 Chapel Hill Public Arts Commission
10,000 North Carolina High School Athletics Association
5,000 Fiesta del Pueblo
77,000 Orange Community Housing Corporation
30,000 Orange County Senior Center
18,900 Joint Orange-Chatham Community Action Agency
12,300 Orange County Retired Senior Volunteer Program
6,000 Orange County Economic Development Commission
6,000 Shaping Orange County’s Future planning process
$452,150 Total
New Debt Service:
The cost of new debt service for 2000-2001 totals $430,000. We recommend allocating $215,000 of interest income from the newly issued bonds to help pay the additional debt service on these bonds in the first year. By allocating these earnings for the new debt service, the budget impact of the additional expense could be phased in over a two-year period.
Transfers from the General Fund and interest earnings will be sufficient to make scheduled payments of $2,539,000 for principal and interest on the Town’s bonded debt.
Capital Improvements Funding
For 2000-2001, the recommended budget provides $783,000 for the capital repair and maintenance program, an increase of $190,000 over the present budget.
Of this increase, $100,000 would be allocated for various pay-as-you-go capital improvements projects. An additional $90,000 would be used to begin installment financing to pay for renovation of the Hargraves Community Center, the A. D. Clark Swimming Pool, and structural repairs and exterior renovation of the Old Post Office and the Old Town Hall (Inter-Faith Council Community Shelter). Total costs of $1.3 million would be repaid over a ten-year period. Payment in the first year would be $90,000 and about $180,000 in succeeding years.
The recommended budget includes $800,000 from the General Fund for costs in 2000-2001 of the vehicle replacement program established in 1998-99. Additional information about this fund is provided on page 205.
In addition, $100,000 in the General Fund budget is included for replacing computer equipment on a three-year cycle as authorized by the Council last year. Information about this fund is provided on page 204.
Reserve for Salary Adjustments
We have reserved $789,000 in the General Fund to continue implementation of the second phase of compensation adjustments as recommended by consultants. Proposals are discussed briefly in a later section of this Message and in detail in a separate report that will be distributed on May 3, 2000.
TRANSPORTATION FUND BUDGET PROPOSAL
The Transportation Fund provides basic transportation services to the community through programs for fixed-route bus services, demand responsive services in areas not served by fixed routes, special services for persons having disabilities, and special event transportation. Transit services are provided on the University campus and within the Town limits of Carrboro as well as within the Town limits of Chapel Hill.
Transportation Fund Services Summary
In general, the 2000-2001 budget proposal would continue present services. We note, however, that discussions with the University and with the Town of Carrboro about desired service levels in the coming fiscal year are not yet finalized. The Council will meet with the Carrboro Board of Alderman and representatives of the University on April 26, 2000 to discuss transit issues.
Summary of Transportation Fund Revenues and Costs
The proposed budget for all Transportation Fund services totals $6,961,000, an increase of $710,000 or 11.4% over the original 1999-2000 budget.
These costs would be balanced by $6,616,000 in current revenue, the use of $225,000 in carry over of funds from the 1999-2000 budget, and a proposed increase in the Transportation Fund tax rate of .4 cents. The Transportation Fund tax rate would increase from 3.9 cents to 4.3 cents.
Costs assigned for transportation services are determined in accordance with a Memorandum of Understanding entered into by the Town of Chapel Hill, the University, and the Town of Carrboro. In general, revenues and costs are assigned on the basis of “population” represented by each of the parties. The population share for Chapel Hill in 2000-2001 will be 44.5%; for the University, 40%; and, for Carrboro, 15.6%.
Transportation Fund Revenues
Major revenue sources for 2000-2001 will be primarily the same as those in past years: property taxes; payments by the University and the Town of Carrboro for services received; federal and State assistance; and service charges paid by patrons through fares and bus passes. Each of these major categories is discussed below and presented in detail in the Transportation Fund section of the budget beginning on page 170.
For 2000-2001, we recommend an increase of $5 in the vehicle license tax, with revenue from the increase designated for the Transportation Fund, as provided by law. The increase would generate about $125,000 next year.
Property Taxes. The Town’s costs for transit services to Chapel Hill citizens are paid primarily through property taxes. For 2000-2001, taxes would total about $1,270,000 based on a proposed tax rate increase of .4 cents (total rate of 4.3 cents) and an estimated tax base of $3.02 billion.
Payments by the University. The net payment for services received by the University, after crediting their share of federal and State assistance and general operating revenues, is estimated to be $1.553 million in 2000-2001.
Payments by the Town of Carrboro. The net payment for services received by the Town of Carrboro, after crediting their share of federal and State assistance and general operating revenues, is estimated to be $608,700 in 2000-2001.
Federal Assistance. As in past years, the exact level of federal assistance will not be known for several months. However, based on the most recent information available, we expect the total for 2000-2001 will be about $735,000 and that this funding level would continue for the foreseeable future.
State Assistance. The State’s contribution to operations is expected to be $550,000 in 2000-2001. The additional State assistance received this year ($515,000) from a special appropriation is not expected to continue next year.
Service Charges. Service charges paid by patrons through individual fares and bus passes, including $800,000 in UNC pass sales, are estimated to total about $1.7 million in 2000-2001, equal to about 24% of total costs.
Transportation Fund Costs
The major costs of providing transit services will continue to be employee salaries and benefits, estimated at a cost of $5,246,791 for 2000-2001. We expect that continuing difficulty in hiring qualified drivers will result in continuing high overtime salary costs.
The largest categories of operating costs other than personnel are:
A contribution to the capital equipment replacement fund is scheduled at $165,000.
A total of $245,000 is reserved for employee compensation increases as recommended in the consultant’s pay and classification study.
\We also recommend addition of one service attendance position and one maintenance mechanic position to provide adequate bus repair and maintenance at a cost of $54,000.
Transportation Fund line-item detail is presented in the budget document beginning on page 172.
Transportation Fund Option
We recommend that the Council consider an option that would provide fare-free bus services for all passengers on all routes.
Under a proposal being discussed by staff representatives of the Town of Chapel Hill, the University and the Town of Carrboro, the University would pay the full costs of fixed-route services that are used almost exclusively by University students, staff, and faculty. Specifically, these services are for routes on the campus and express services from park-ride lots. Each of the transit partners would share remaining system costs based on the “share of population” method now in use for all cost sharing. Passengers would be able to board any bus and ride to any part of the system without charge.
Passenger fares and passes now generate about one-quarter of transit system income. Under this proposal, the transit partners would be responsible for full system costs. The Town would pay about $177,000 more in next fiscal year if the fare-free proposal is adopted, equivalent to a tax rate increase of about .6 cents. The University would pay about $1.3 million more for its services under this proposal, and Carrboro would pay an additional $59,000 for its share of services. We estimate that total ridership would increase by 5-10% if the proposal is implemented.
The costs of implementing the fare-free system are not included in the recommended budget total.
The Council has received a separate report on the fare-free transit system option and will discuss the option further at the April 26th meeting with University representatives and the Carrboro Board of Aldermen.
PUBLIC HOUSING FUND
The Public Housing Fund accounts for the costs of operating the Town’s 336 public housing units and the revenues generated by their operation.
In accordance with federal regulations, the Council must submit a budget proposal to the Department of Housing and Urban Development by April 1st of each year. Thus, the Council considered and authorized a budget for the Public Housing Fund on March 3, 2000. The budget approved by the Council for 2000-2001 is presented in the Other Funds section of the budget document, beginning on page 195.
Services Summary
No change in services is proposed for 2000-2001. The Housing Department will continue to operate two major programs: housing management and resident services.
Enhanced resident services and the ACHIEVE self-sufficiency program will continue next fiscal year.
The five-year refurbishing program originally authorized by the Council in 1993 will be continued, so that all public housing units will have living spaces refurbished every five years.
The Department also will continue 24-hour response to emergency calls, the program for quick response to regular work order requests, and quarterly inspections for safety compliance and preventive maintenance.
A combination of federal Community Development Block Grant funds and federal Comprehensive Housing Grant funds will be used to continue the Council’s public housing modernization program, with rehabilitation of units at the Lindsay Street neighborhood to be undertaken next year.
Summary of Public Housing Fund Revenues and Costs
The budget for 2000-2001 totals $1,403,400, a $2,000 decrease over the present year’s original budget.
Revenues. The two major revenue sources for the Public Housing Fund will be similar in 2000-2001 as in past years:
¨ Operating assistance from the federal Department of Housing and Urban Development is expected to be about $872,000 compared to $727,000 in 1999-2000.
¨ Rental fees paid by residents in accordance with federal regulations are expected to be about $497,000 in 2000-2001.
Other current income is estimated to total about $31,000; and use of $19,000 in fund balance is anticipated. Remaining fund balance of $395,000 would be within the guidelines established by the Department of Housing and Urban Development.
Costs. The major cost category, as in past years, will be for maintenance of public housing apartments at $945,000. Capital outlay for replacement of vehicles, playground equipment, computers and other items will total about $27,000. Resident services cost is estimated to be $136,000 and housing management and administration will be about $411,000.
A reserve of $42,000 is made for proposed employee compensation increases
OTHER FUNDS
The purpose of the Cablevision Public Access Fund is to separately record revenues (about $80,000) collected from cablevision customers by Time Warner Cable and then transferred to The People’s Channel, the operator of the Town’s public access channel (page 187).
Capital Improvements Fund
The purpose of the Capital Improvements Fund is to account for small capital projects authorized by the Council, including proposed appropriations and re-appropriation of funds from prior periods.
New appropriations recommended for 2000-2001 total $783,000, an increase of about $190,000 over last year’s funding level. Recommended re-appropriations total $421,000. Revenues are from transfers and interest earnings, with $43,000 from rental of cellular telephone tower sites.
The proposed Capital Improvements Fund budget is presented beginning on page 191. Recommended capital improvements are discussed in detail in a companion document.
Debt Service Fund
The purpose of the Debt Service Fund is to account separately for the funds necessary to pay principal and interest on the Town’s bonded debt. Sources of revenue for this Fund are transfers from the General Fund and interest on investments.
A transfer of $2,539,000, which includes $430,000 for additional debt service on new bonds, is proposed from the General Fund to the Debt Service Fund in 2000-2001, a net increase of $349,000 over the current year.
Of the total debt service payments, about $1,520,000 will be for payment of principal and $1,019,000 for payment of interest on bonds.
Downtown Service District Fund
The Council established the Downtown Service District in 1989-90 to provide supplemental services in a special district under procedures in State law. The District includes most of the properties on Franklin and Rosemary Streets in the downtown, except for residential properties.
A special property tax is levied on all properties within the District to pay for special services provided within the District. The present tax rate is 6.2 cents. No change is proposed for 2000-2001.
State law requires using District funds for purposes consistent with the Council’s service plan for the downtown. The plan as amended in 1995 allows the Council flexibility to use these funds for any service permissible under State law for the Downtown Service District. The Town held the annual public hearing on the Downtown Service District tax on March 21, 2000.
Services have been provided in past years through a performance agreement with the Downtown Commission. The Commission proposes to continue services in 2000-2001, including:
¨ promotional events and publications,
¨ marketing,
¨ supplemental sidewalk cleaning, and
¨ Downtown Welcome Center operations.
The recommended tax rate would produce about $46,000 in 2000-2001.
Housing Loan Trust Fund
The Housing Loan Trust Fund was established in 1973 to assist low-income families with purchase of a new home or renovation of an existing home. Until the mid-1980’s, the Trust Fund was used solely for Community Development projects. In 1986, the Council authorized use of funds for deferred second mortgages. Construction loans also are an eligible activity, as are loan-to-grant conversions when approved by the Council.
The recommended budget for 2000-2001 totals $205,400. Revenues of $25,000 would come from interest earnings and the remainder from use of fund balance.
Expected costs would be: $40,400 for the HOME program matching requirement next year; $10,000 for interest expense; $75,000 for second mortgage assistance; and $80,000 for a proposed contribution to the Meadowmont affordable housing project.
Internal Services Funds
The Computer Replacement Fund was established by the Council on October 28, 1999 for the purpose of separately recording the costs and revenues necessary for the management of a computer replacement program. The primary benefits of such a program are to facilitate the replacement of equipment at the end of its useful life and to regularize annual equipment cost outlays while taking advantage of the Town’s ability to borrow funds for lease-purchases at tax-exempt rates.
For 2000-2001, revenues will be $100,000 in computer usage charges to the various departments of the General Fund.
The value of equipment purchases next year will total about $150,000 using lease-purchase arrangements.
The Vehicle Replacement Fund was established by the Council on March 22, 1999 for the purpose of separately recording the costs and revenues necessary for the management of a modern vehicle replacement program. The primary benefits of such a program are to facilitate the replacement of equipment at the end of its useful life and to regularize annual equipment cost outlays while taking advantage of the Town’s ability to borrow funds for lease-purchases at tax-exempt rates.
For 2000-2001, revenues will be $800,000 in vehicle usage charges to the various departments of the General Fund.
The value of equipment purchases next year will total about $1,567,000 using lease-purchase arrangements.
Library Gift Fund
The Library Gift Fund is presented on page 206 of the budget document. Revenues come from gifts of citizens and interest earnings. Expenditures are limited to contributions to the General Fund in support of specific Library functions. These funds are intended to be used as a supplement to regular Town funding rather than as a replacement of such funding.
The transfer to the General Fund in 2000-2001 is recommended to be $36,000, about the same as this year
Parking
Off-Street Parking Facilities Fund
The Off-Street Parking Facilities Fund is used to separately account for all revenues and costs of operating the Town’s parking deck and four parking lots.
No service changes are proposed for 2000-2001. Basic hourly rates are proposed to remain the same.
Revenues are estimated to total $1,048,000 in 2000-2001. Most revenues would come from operations at the parking deck ($491,000) and the lot at the corner of Rosemary and Columbia Streets ($350,000). Revenues from other lots would total about $207,000.
Expenditures are estimated to total $1,017,000 in 2000-2001. Of this amount, $548,600 would be for debt service payments, $279,000 would be for employee salaries and benefits, and $190,000 for other costs. Parking deck maintenance costs are budgeted at $35,000.
Detailed budget information is presented beginning on page207.
On-Street Parking Fund
The On-Street Parking Fund records the revenues and operating costs for regulating on-street vehicle parking within the Town limits, with operations principally in the downtown and in nearby neighborhoods. The budget proposal is presented beginning on page 214.
Revenues from operations are expected to be about $611,000 in 2000-2001, with costs of $279,000. Costs are mainly for personnel, totaling $223,000. A transfer of $332,000 to the General Fund is proposed for 2000-2001.
OTHER BUDGET ISSUES
Issues that extend across all funds are discussed below, including: employee compensation recommendations and revenue and cost projections for future years.
Employee Pay and Classification Recommendations
Town employee compensation increases recommended for fiscal year 2000-2001 would implement the second phase of the pay system review that began in 1998:
Implementing Classification and Pay Study results: Projections from other employers show that area organizations anticipate a pay increase averaging 4% to 5% for their workers, and the employment market in the Triangle area is competitive due to the low unemployment rate. To attract and retain good workers, it is important that the Town's wages be competitive and that employees at all levels of the organization receive a reasonable increase in their salary.
Every four to five years the Town conducts classification and labor market reviews of all positions. The Council approved funds in the 1999-2000 budget for a consultant to conduct this survey, and Condrey and Associates from Athens, Georgia, has been conducting this review since July 1999. The consultant’s pay study will provide the basis for recommendations on classification and pay.
Along with authorizing a classification and pay review, the Council adopted a resolution to set a policy on the Town’s competitive position within the area labor market. The resolution adopted by the Council said, “The approximate third quartile of market data shall be used to determine local market comparability for Town positions.”
Paying salaries tat are current with the market and competitive at the 75th percentile for all positions should allow the Town to be more successful in recruiting and retaining employees in the competitive Research Triangle Area labor market. The consultants have collected this market data and are making recommendations on implementing salaries at the 75th percentile of the local market for all classifications.
Implementation costs: Costs for classification and pay plan implementation would include several components:
Increases would be implemented October 1, 2000. Costs for these increases and related benefits, implemented as of October 1, are anticipated to be $1,088,000 in all funds ($789,000 General Fund, $242,000 Transportation Fund, $15,000 Parking Fund, and $42,000 Housing Fund).
The Personnel Director and the pay consultant will present reports on the new employee pay system and comparative labor market data for the Council’s consideration at future budget work sessions.
The budget document includes a section that projects revenues and expenditures of major funds over the next five years, beginning on page 33. The estimates are based on generally conservative assumptions affecting projections for revenues, future costs, wage rates, and potential additions to current services.
For the General Fund, our projections indicate a potential need for a tax rate increase of about 4.1 cents in fiscal 2001-2002, with further increases totaling about 6.4 cents in the next four years. In the Transportation Fund, we estimate an increase of 3/10ths of one cent may be necessary in 2001-2002, and in each of the next four years, based on current services and trends.
We note specifically that the projections for future years do not include the effects of a revaluation of real property scheduled for both Orange and Durham counties next year. In addition, the projections do not include at this point the potential revenues and costs associated with the planned annexation of the Southern Village area in June, 2001. Our preliminary rough revenue and cost estimates indicate that revenues should be sufficient to cover annexation costs, but these estimates would also be affected by the revaluation of real property and actual growth in this area in the next year.
Parking enterprise activities are expected to remain self-supporting in future years.
The projections information is followed by five-year financial history summaries of the Town’s major operating funds.
As is always the case, actual costs and revenues in future years will be significantly influenced by decisions made by the Council, particularly decisions about service levels and services provided.
CONCLUSION
We look forward to working with the Council, advisory boards, and citizens as the 2000-2001 budget development process continues.
We will be pleased to provide any additional information and analysis that the Council may need.
Respectfully submitted,
W. Calvin Horton
Town Manager