MEMORANDUM

AGENDA #4f

MEMORANDUM

TO: Mayor and Council

FROM: W. Calvin Horton, Town Manager

SUBJECT: Budget Ordinance for Current Year Expenditure Reductions and Other Adjustments in Response to Revenue Shortfalls and Governor’s Withholding of State-Shared Revenues

DATE: May 29, 2002

The attached budget ordinance would revise the current year’s budget to reflect expenditure reductions in the General Fund, reductions in the Capital Improvements Fund and transfers from other funds to the General Fund for use in accord with plans approved by the Council in January and February, 2002. The approved changes are in response to estimated revenue shortfalls and the withholding of State-shared revenues by the Governor. The ordinance reflects those expenditure reductions and transfers that require formal amendments to the budget.

BACKGROUND

At the Council’s planning session on January 19, 2002, we presented an update on estimated current year revenues and expenditures indicating significant revenue shortfalls as a result of economic conditions following the September 11 tragedy. Based on the anticipated shortfalls, we recommended expenditure reductions in the General and Capital Improvement Funds totaling about $975,000 that were approved by the Council.

On February 8, 2002, in reaction to the Governor’s announcement of the withholding of approximately $1.2 million in State-shared revenues budgeted for the current year and further declines in estimated sales tax revenues, the Council approved recommendations for additional expenditure reductions and transfers from other funds to maintain a balanced General Fund budget in the current year.

DISCUSSION

The projected State budget deficit for the current year is now larger than the State originally anticipated. The Governor will not be able to release the withheld funds before or after June 30 of the current year, according to all recent reports. Therefore, we propose no adjustments to the original recommendations approved earlier by the Council to maintain a balanced General Fund budget this year.

In order to reflect the approved changes in the final current year budget, a formal budget amendment is necessary as follows:

Reducing General Fund vehicle use charges due to unanticipated funds from the sale of surplus property ($100,000).
Reducing General Fund vehicles use charges by delayed vehicle replacements initiated after January 1 ($150,000), and using additional fund balance from the Vehicle Replacement Fund in the current year ($100,000).
Delaying the financing of planned capital improvements projects in current year ($300,000).
Using existing fund balance in the Capital Improvements Fund for the General Fund ($125,000).
Using undesignated interest earnings in the Capital Reserve Fund for the General Fund ($125,000).
Using fund balance in the Debt Service Fund for current year debt service payments ($200,000).
Using fund balance in the Off-Street Parking Fund for the General Fund ($100,000).
Increasing the contribution from the Library Gift Fund to the General Fund ($50,000).
Reducing the General Fund transfer to the Capital Improvements Fund by postponing various budgeted capital improvement projects ($205,000).

RECOMMENDATION

We recommend that the Council adopt the attached budget ordinance.

AN ORDINANCE TO AMEND “THE ORDINANCE CONCERNING APPROPRIATIONS AND THE RAISING OF REVENUE FOR THE FISCAL YEAR BEGINNING JULY 1, 2001 (2002-05-29/O-1)

BE IT ORDAINED by the Council of the Town of Chapel Hill that the Budget Ordinance entitled “An Ordinance Concerning Appropriations and the Raising of Revenue for the Fiscal Year Beginning July 1, 2001” as duly adopted on June 25, 2001, be and the same is hereby amended as follows:

ARTICLE I

Current Revised

APPROPRIATIONS Budget Increase Decrease Budget

GENERAL FUND

Engineering 990,149 6,995 983,154

Inspections 602,924 3,106 599,818

Public Works 9,852,181 173,954 9,678,227

Fire 4,919,055 33,230 4,885,825

Police 9,018,229 129,176 8,889,053

Parks & Recreation 2,087,870 3,539 2,084,331

Non-Departmental

Transfer to Capital

Improvements

Fund 637,000 630,000 7,000

Transfer to Debt

Service Fund 2,423,000 200,000 2,223,000

CAPITAL RESERVE

FUND

Transfer to General

Fund 0 130,000 130,000

VEHICLE REPLACE-

MENT FUND 3,596,671 150,000 3,446,671

Current Revised

APPROPRIATIONS Budget Increase Decrease Budget

OFF-STREET

PARKING FUND

Transfer to General

Fund 0 100,000 100,000

LIBRARY GIFT FUND

Transfer to General Fund 45,000 50,000 95,000

CAPITAL IMPROVE-

MENTS FUND 2,660,051 630,000 2,030,051

ARTICLE II

Current Revised

REVENUES Budget Increase Decrease Budget

GENRAL FUND

Fund Balance 1,689,576 1,460,000 229,576

Transfer from Capital

Reserve Fund 0 130,000 130,000

Transfer from Library

Gift Fund 45,000 50,000 95,000

Transfer from Parking

Fund 0 100,000 100,000

CAPITAL RESERVE

FUND

Fund Balance 0 130,000 130,000

VEHICLE REPLACE-

MENT FUND

Vehicle Use Charges 826,390 350,000 476,390

Fund Balance 1,255,381 200,000 1,455,381

Current Revised

REVENUES Budget Increase Decrease Budget

DEBT SERVICE FUND

Transfer from General

Fund 2,423,000 200,000 2,223,000

Fund Balance 0 200,000 200,000

OFF-STREET

PARKING FUND

Fund Balance 0 100,000 100,000

LIBRARY GIFT FUND

Fund Balance 80,840 50,000 130,840

CAPITAL

IMPROVEMENTS FUND

Transfer from General

Fund 637,000 630,000 7,000

This the 29th day of May, 2002.