AGENDA #7b

 

MEMORANDUM

 

TO:                  Mayor and Town Council

 

FROM:            W. Calvin Horton, Town Manager

 

SUBJECT:       Recommended Use of Additional Revenue Estimated for Current Budget Year

 

DATE:             November 11, 2002

 

 

The previous agenda item (originally submitted to the Council on October 21, 2002, and carried over to tonight’s agenda) provides information on revenues to date and estimates of additional State-shared revenues now expected based on the final State budget and legislation recently adopted the N. C. General Assembly.

 

This memorandum provides information on recommended uses of the additional revenue consistent with potential uses originally discussed by the Council at the June 12 budget work session.

 

The attached budget ordinance would amend the current year’s General Fund and Capital Improvements Fund budgets to add the recommended appropriations as discussed below.

 

BACKGROUND

 

Based on the final State budget for 2002-03 and other legislation recently adopted by the N. C. General Assembly, we estimate that additional revenue will be received in the current year.  Under a conservative scenario assuming partial withholding of State-shared revenues as in the past year, we estimate the additional revenue would be about $1,630,000.  Under the best-case scenario assuming full receipt of State-shared revenues, we estimate additional revenues of about $2,600,000. The agenda item regarding current revenues to date presented to the Council on October 21 and carried over to tonight’s agenda provides detailed estimates and assumptions about each scenario.

 

DISCUSSION

 

Based on our estimates of additional revenue for the current year, we believe it would be reasonable for the Council to consider allocating funds for employee compensation adjustments and for additional capital improvements projects as the first priority uses as previously discussed by the Council in the June budget deliberations.  

 

In addition, we also recommend the Council consider allocating funds that would allow us to initiate implementation of the first phase of the stormwater management program and recommendations as presented to the Council on June 24, 2002, and restoring most of debt service reserve funds used last year to help balance the General Fund budget.

 

Below is a summary of the estimated costs of these four priorities, followed by a brief discussion of each. 

 

Recommended Uses of Additional Revenue in Current Year

 

            General Fund Pay Adjustments – Effective December 1, 2002

      (Step increases of 3.78% for those below the job rate

                   and average merit increases of 3.78% for those above

       the job rate) $ 478,000

 

            Additions to Capital Improvements Budget

                  (See Attachment II) 815,000

 

            First Phase Cost of Recommendations of Stormwater

      Management Consultant                                                                      170,000

 

Replacing most of the $200,000 in debt service reserve funds

      used last year to address revenue shortfall caused by the

      State budget crisis                                                                    167,000

           

                                                                                                Total               $ 1,630,000

 

Employee Pay Adjustments ($478,000)

 

Information about recent pay surveys and an analysis of the current pay levels for Town employees was provided to the Council in the Budget Work Session of April 24, 2002. A copy of these materials is attached. On June 12, 2002, the Council discussed a potential pay adjustment of 3.78% for all Town employees.

 

Monitoring and analysis of recent labor market changes by Town Human Resources staff indicate that the identified trend of pay adjustments averaging 4% per year continues to be valid. As also mentioned in the report, specific jobs in the labor market are moving at a more rapid rate than others. Further research and analysis will be conducted in the next few months to confirm and further define these changes.

 

The recommendation for pay adjustments for Town employees continues to be an increase of one step (3.78%) for employees below the job rate and average merit increases of 3.78% for employees above the job rate.

 

We recommended making the adjustments effective December 1, 2002.   The cost of the proposed adjustments in the General Fund would be $478,000, and would come from estimated additional revenue as discussed above.  The cost of these adjustments for other funds would be about $118,000 in the Transportation Fund, $21,340 in the Public Housing Fund and $9,370 in the Parking Funds.  The cost of these increases could be funded from reserves available in each of the funds.

 

Additions to the Capital Improvements Budget ($815,000)

 

We have reviewed the additional capital project recommendations tentatively approved by the Council on June 12 totaling $815,000.  Attached is a copy of the June 12 memo outlining the projects originally recommended for funding.  We recommend that the Council consider reallocating $40,000 originally included for aerial topography maps to supplement existing bond funds for a drainage improvement project on Burning Tree Drive.  (Please see Attachment 3 for details of this project).  We recommend funding the aerial mapping as part of the Stormwater Management project as discussed below. 

 

The revised table summarizing the recommended projects is as follow:

 

Revised Recommendations for Use of Capital Improvements Funds

 

            Maintenance of Public Assets

Extraordinary Maintenance: Buildings $ 75,000

Extraordinary Maintenance: Infrastructure                                  40,000

Fire Station #4                                                                          70,000

Fire Station #2 (installment)                                                       12,000

Town Hall Roof 110,000

Americans with Disabilities Act Ramps 25,000

Library Telephone System                                                        25,000

Facilities’ Parking Lots                                                  25,000

Tennis and Basketball Court Resurfacing (installment)         40,000

Post Office Renovation (installment) 180,000

Small Park Improvements                                                         25,000

Burning Tree Drive Drainage Project                             40,000*

 

            Public Safety

Police Department Emergency Generator (installment)   22,000

Town Hall Emergency Generator (installment)               26,000

 

            New Facilities

Sidewalks/bicycle Facilities 75,000

Greenways                                                                               25,000

 

TOTAL $815,000

 

*Originally allocated for aerial photography maps now recommended to supplement funding for Burning Tree Drive Project (see Attachment 3).

 

The attached budget ordinance would increase the General Fund transfer to Capital Improvements Fund to provide additional funding for these projects.

 

 

 

Stormwater Management Recommendations by Consultant ($170,000)

 

During budget discussions in June, the Council received a report from our stormwater management consultant outlining the initial tasks, steps, and costs of implementing a comprehensive storm water management program for the Town.  We recommend that the Council consider allocating $170,000 from the additional revenue expected this year to begin development of a Town Stormwater Utility. 

 

The first step necessary to begin this development would be updating our aerial photography to define impervious surface areas in conjunction with establishing a rate structure.  This photography must occur during the winter months, when leaf cover is minimal. The annualized cost of the photography if done through an installment contract is about $40,000 based on a four-year update cycle.  We recommend allocating $40,000 of available funds this year for new aerial photography to be completed during the winter of 2002-2003.  We believe that the University and the Town of Carrboro may also be interested in participating in the aerial photography project and would potentially share in the total cost of the project.  If so, the Town’s final cost would be reduced.

 

Concurrent with the aerial photography, our consultant could begin development of some elements of the proposed Stormwater Utility structure.  These phase one elements include identification of program priority and policy issues, establishment of a Stormwater Advisory Committee, recommendations for program organizational structure and resource requirements, and determination of alternatives for program administration and management.  The estimated cost of this phase one work is $130,000, subject to contract negotiation with the Consultant.

 

If the Council approves funding for phase one development of the Stormwater Utility, we would return during the spring 2003 budget discussions with recommendations for a phase two budget which would allow a Town Stormwater Utility to be established before the end of fiscal year 2003-2004.  The estimated phase two costs are $180,000 to $200,000. We note that revenue from the Stormwater Utility once established could be used to repay the Town’s development costs as discussed above.

 

Replacing a Portion of Debt Service Reserve ($167,000)

 

The recommended uses above total $1,463,000.  With a conservative estimate of additional revenue this year totaling $1,630,000, a balance of $167,000 would be available for other uses.

 

Last year, the Council approved a recommendation to use $200,000 reserved in the Debt Service Fund to help balance last year’s General Fund revenue shortfalls caused by the recession and the withholding of State-shared revenues by the Governor.  These funds had been reserved to help fund a higher debt service payment in the Town’s current debt service schedule in fiscal year 2005-2006. 

 

We recommend using the balance of funds expected this year under the conservative scenario, $167,000, to partially replace the debt service reserve funds used last year.  A gradual replacement of these funds would relieve pressure on the tax rate that could be required in future years to fund the higher debt service payments.  The attached budget ordinance would transfer $167,000 to a reserve account in the Debt Service Fund.

 

SUMMARY

 

Based on our overall review of revenue to date and additional State-shared revenue now expected, we believe it would be reasonable for the Council to make additional appropriations to the current budget at this time totaling about $1,630,000 as outlined above.  The attached budget ordinance would amend the current budget to provide for these appropriations. 

 

We will keep the Council informed on the actual receipt of revenues during the year.  If the additional revenues exceed our conservative estimate of $1,630,000 this year, we will present additional recommendations to the Council. 

 

Potential uses of additional funds could include:

 

·        reserving additional funds for the initial professional services required for designing and developing plans for a new Public Works facility

·        additional capital improvements such as sidewalks

·        reserving funds for new debt service on the final general obligation bonds to be sold later this year 

·        increasing fund balance reserves in the General Fund

·        replacing a portion of funds transferred to the General Fund in 2001-02 to address budget shortfalls

·        other uses as the Council may desire.

 

RECOMMENDATION

 

We recommend that the Council enact the attached budget ordinance allocating additional revenues expected this year as discussed above.

 

ATTACHMENTS

 

1. Human Resources Compensation Report of April 24, 2002 (p. 8).

2. Capital Program Memorandum of June 12, 2002 (p. 51).

3. Memorandum to Manager regarding Burning Tree Drive drainage project (p. 55).

4. Recommendations of Stormwater Management Consultants presented on June 24, 2002 (p. 56).