May 27, 2015
Dear Mayor Hutchens, Town of Elkin Board of Commissioners, and Citizens:
I am pleased to present to you the 2015-2016 Annual Budget for your consideration. The proposed budget represents a compilation of priorities expressed at one (1) workshop held on April 23rd along with the annual retreat held in February.
The budget was prepared in accordance with N.C.G.S. 159, Article 3, of the North Carolina Local Government Budget and Fiscal Control Act. All funds within the budget are balanced, and all revenues and expenditures are identified for fiscal year 2015-2016.
TOWN OF ELKIN
FY 2016 BUDGET
GENERAL WATER TOTAL
TAX RATE/$100 (no change from prior year) $ 0.55 – $ 0.55
WATER MINIMUM BILL (2,000 GALLONS) (increase of $0.50/2,000 gallons or $6 annually) – $ 15.50 $ 15.50
WATER VOLUMETRIC RATE/1,000 GALLONS – $ 6.00 $ 6.00
(no change from prior year) TOTAL PROJECTED EXPENDITURES – FY ‘16 $ 5,008,027 $ 1,179,058 $ 6,187,085
TOTAL PROJECTED EXPENDITURES – FY ‘15 $ 4,867,211 $ 1,235,660 $ 6,102,871
CAPITAL OUTLAY EXPENDITURES $ 339,050 $ 177,000 $ 516,050
FUTURE CAPITAL OUTLAY EXPENDITURES $ 3,307,766 $ 11,000,000 $ 14,307,766
# OF EMPLOYEES (no change from prior year) 54 5 59
PROJECTED FUND BALANCE BUILD $ 33,217 $ 103,179 $ 136,397
OUTSTANDING DEBT 7/1/2015 (see note below) $ 832,878 $ 1,490,505 $ 2,323,384
AIRPORT GRANT REVENUE – FY ‘16 HISTORICAL GRANT REVENUES THRU FY ‘15 $ 525,000 $ 5,895,621 – $ 7,081,417 $ 525,000 $ 12,977,038
NOTE: Debt Showing in Water Fund is Sewer Debt being reimbursed by the Yadkin Valley Sewer Authority
Real and Property Tax Rate
Based in part on tax scrolls provided by Surry County dated May 8, 2015, the estimated tax base for the Town of Elkin is $469,245,400 which is an increase of $16,978,346 from the actual 2013-2014 tax base. The FY 2015-2016 estimated values represent a 3.7% increase in property tax values as compared to FY 2013-2014 values. The vast majority of this increase is due to the increase in personal property by Pittsburgh Glass Works.
The proposed tax rate for FY 2015-2016 remains the same from the prior year at $0.55 per $100 in property tax value.
Per General Statute 159-13 (b)(6), the estimated percentage of collection of property taxes shall not be greater than the percentage of the levy actually realized in cash as of June 30 during the preceding fiscal year. The collection rate as of June 30, 2014 was 98.39% and thus is the same amount projected to collect in FY 2015-2016. Based on this percentage, it is estimated that $2,539,298 in property taxes will be received by the Town of Elkin in the upcoming fiscal year. When combined with the projected receipt of motor vehicle taxes for FY 2015-2016, the total equals $2,741,850 based on the $0.55 tax rate.
The Municipal Service District (MSD) projected tax base is $13,665,155 which includes both real and personal property. The proposed MSD tax rate for the Town of Elkin for FY 2015-2016 is $0.10 per $100 which represents the same tax rate as in previous years. It is estimated that approximately $13,665 will be received in FY 2015-2016 by way of the MSD tax.
Loss of Certain Revenues:
This proposed budget does not include any revenue provision for privilege licenses. This revenue is no longer available to municipalities due to changes in recent State laws. This lost revenue amounts to approximately $43,000 annually. The town is currently working on a joint effort with the Town of Jonesville to consolidate ABC Board operations and build a new ABC store that will serve both towns and the surrounding area. Due to these pending changes, the ABC revenue projections for next fiscal year have been reduced from $72,350 down to $50,000. The combined revenue loss from these two revenues sources is equivalent to approximately 1.3 cents of the proposed tax rate for next fiscal year.
This year’s budget document presents the revenues and expenditures in a departmental fund format by which it is adopted. The budget is designed to function as a work plan in guiding departmental operations, in an attempt to accomplish all the goals and objectives established by the Mayor and the Board of Commissioners. Line items are shown in each fund for informational purposes only.
Insurance – Due to our ongoing health and wellness efforts, we are expecting a 5.0% increase in individual health care premiums for FY 2015-2016 which is somewhat lower than what others
are experiencing across the state. A 0.08% increase is anticipated for dental insurance. No increase is expected for vision or life insurance. We currently cover 100% of employee cost and 10% of dependent coverage.
Personnel – The proposed budget includes a Base Compensation Adjustment increase of 2% across the board for all employees. Last year’s budget “caught up” those employees who were below the MAPS salary and wage study that was conducted in 2008. It is important to note however that the minimum pay for employees is based on 2008 data and needs to be updated sometime in the near future. An additional 1% of base wages has been proposed for merit increases effective January 1, 2016. These merit increases will be in the form of a bonus check as opposed to adding the percentage increase to the wage of the employee. The amount of merit increase will vary by employee based on individual employee job performance with the average for all employees being at 1% of base wages.
The operating budget is divided into several funds. Following is a description of these funds and any changes that may have occurred for fiscal year 2015-2016.
GENERAL FUND: The portion of the Town budget that accounts for revenues and expenditures of governmental operations, including governing board, administration, finance, legal, planning, police, fire, streets, and parks and recreation.
Fees – A few fee increases have been proposed and are contained within the schedule of fees. They are as follows:
Increase in Summer Pool Pass (Individual) from $150 to $170.
Various Additions to the Schedule of Fees for new fees in relation to Fire Administrative Services
A general explanation for each fund’s expenditures can be found listed below.
Governing Body: No major changes are noted in the operating expenses. Below are the various local and outside agencies approved for funding per the Board’s discussion at the budget workshop. The Elkin Library’s funding has for the third year been “made whole” by the use of a supplement from the Lillard Funds in the amount of $10,000. The current balance in the Lillard Fund is approximately $50,000 prior to the use of the supplement above.
ELKIN JAYCEES $ 4,000 $ 3,500
ELKIN RESCUE SQUAD $ 4,500 $ 4,500
FOOTHILLS ARTS COUNCIL $ 11,000 $ 11,000
WATER SHED NOW $ 3,500 $ 1,500
ELKIN VALLEY TRAILS ASSOCIATION $ 50,935 $ 18,500
SURRY COUNTY ECONOMIC DEV PARTNERSHIP $ 15,000 $ 15,000
NORTHWESTERN REGIONAL LIBRARY $ 85,868 $ 85,868
Continued funding (in the form of dues) is allocated to the following organizations: Yadkin Valley Chamber of Commerce, North Carolina League of Municipalities, UNC School of Government, Northwest Piedmont Council of Government, National League of Cities, and other professional organizations.
Administration: No major changes are noted in this Department.
Finance Department: No major changes are noted in this Department.
Legal: No major changes are noted in this Department.
Planning: A total of $12,000 is included in this department’s cost for the demolition of (3) structures.
Community Development: This Department houses the Economic Development Director and the Main Street & Community Manager.
The funding for miscellaneous economic development projects has been reduced from $15,000 in the current fiscal year to $10,000 in next year’s budget. This line item is utilized for various expenses/opportunities which arise throughout the year.
Incentive agreements are in place with Prism Medical, PGW, and The Liberty. These projected incentive costs in 2015-2016 are expected to be $255,707 (up from $109,000 in FY 2014-2015) and are housed in the Economic Development Department and is the reason for the overall increase in this Department’s budget. Specifically, the incentive payout to Pittsburg Glass Works is projected at $237,231 which is the reason for the incentives line item expense increase.
Public Buildings: No major changes are noted in this Department.
Police Department: No major changes are noted in this Department.
Fire Department: No major changes are noted in this Department.
Garage: No major changes are noted in this Department.
Streets: An additional $74,000 will be appropriated from the General Fund to further the Town’s efforts to pave streets. This will cover Woodruff Street, Wiles Street, Millview Drive, Shore, and Marion Road.
Powell Bill: $77,000 is allocated from the Powell Bill allotment for paving Hawthorne Road and Lauren Drive. Coupled with the $74,000 from the Street Department, roughly $147,000 of street paving/resurfacing will be accomplished in the coming year.
Sanitation: A 2.0% increase in fees from Waste Management for our garbage and recycling services are anticipated. I believe we can absorb the increase and keep our garbage and recycling rates intact.
Recreation and Parks: No major changes are noted in this Department.
Library: No major changes are noted in this Department.
Cemetery: No major changes are noted in this Department.
Airport: No major changes are noted in this Department.
Debt Service: Our debt service will remain approximately the same as it is for the current FY ’15 fiscal year.
Non-Departmental: This fund shows expenses not directly attributable to one specific Department. No monies are anticipated to transfer to the Water Fund in the coming year. $58,334 is included to reflect our 10% match for Airport projects in the coming year.
Capital Reserve Funds: For the second year in a row, the FY ’16 budget includes provisions for contributions to the following Capital Reserve Accounts:
Economic Development Capital Reserve Fund: For the following purposes: (1) redevelopment of the Smith-Phillips property, (2) purchase of additional land for development, and/or (3) development of existing Town-owned property. Included as part of this budget is $33,216 to be allocated to this fund for the 2016 fiscal year.
Recreation and Parks Capital Reserve Fund: For the following purpose: (1) maintenance and/or replacement of the bridges on the Town-owned trails and/or (2) any other capital improvements or purchases for the trails. Included as part of this budget is $5,000 to be allocated to this fund for the 2016 fiscal year.
Capital: Below are the General Fund capital item expenditures which are included in the proposed budget.
PUBLIC BUILDINGS ROCK FACADE $ 30,000
PUBLIC BUILDINGS SMITH PHILLIPS BUILDING (DEMOLITION) $ 20,000
POLICE (3) POLICE VEHICLES $ 94,000
FIRE DEPT. RESPIRATORY PROTECTION (REPLACE 2 SCBA UNITS) $ 15,000
FIRE DEPT. PROTECTIVE ENSEMBLES (3 COMPLETE SETS) $ 15,300
FIRE DEPT. PORTABLE VHF RADIOS $ 19,500
FIRE DEPT. SAWS $ 5,500
FIRE DEPT. GAS DETECTION SYSTEM $ 5,000
FIRE DEPT. STATION FURNITURE $ 11,000
FIRE DEPT. HOSE (ANNUAL PURCHASE) $ 18,750
GARAGE BACKUP GENERATOR (PW BUILDING & SCADA SYSTEM) $ 27,000
POWELL BILL SALT SPREADER $ 10,000
RECREATION FITNESS EQUIPMENT $ 20,000
RECREATION RECREATION CENTER – NEW HVAC ZONE CONTROLS $ 10,000
RECREATION MUNICIPAL PARK – TENNIS COURT RESURFACING $ 38,000
TOTAL $ 339,050
Based on the current Town of Elkin – Capital Improvement Plan, General Fund capital expenditures for the next five (5) years are projected to be $3,307,766.
WATER FUND: The Water Fund is considered an enterprise fund. Enterprise funds account for those operations that are financed and operated in a manner similar to private business enterprises where the intent of the governing body is that costs (expenses including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user fees. Rates charged for water service account for most of the revenue. Expenditures go toward system maintenance and operations and debt service on water improvements.
Fees – A minimum bill rate increase has been proposed and is contained within the schedule of fees. During the Board Retreat held in February, a rate study prepared by staff was presented that indicated an increase is in order based on our operating costs, rates charged by other municipalities of comparable size, and the need to begin the process of building a fund balance in order to provide future funding for approximately $11 million in future capital improvements and replacements as contained in the Town of Elkin – Capital Improvement Plan.
Volumetric Rate: No rate change is recommended.
Minimum Bill: A $0.50 cent increase to the minimum bill is recommended which represents an increase from $15.00 to $15.50. This equates to a 3.3% water rate increase for those customers using the monthly minimum of 2,000 gallons or less.
Debt Service: The only debt is a “pass thru” as we are reimbursed the debt payments from the Yadkin Valley Sewer Authority.
Non-Departmental: No major changes are noted in this Department.
Admin & Billing: No major changes are noted in this Department.
Water: No major changes are noted in the Department.
Capital: Below are the Water Fund capital item expenditures which are included in the proposed budget.
WATER DEPARTMENT SERVICE TRUCK $ 23,000
WATER DEPARTMENT HIGH SERVICE PUMP VALVE $ 17,000
WATER DEPARTMENT EFFLUENT VALVE CONVERSION $ 12,000
WATER DEPARTMENT METER REPLACEMENT $ 125,000
TOTAL $ 177,000
Based on the current Town of Elkin – Capital Improvement Plan, Water Fund capital expenditures for the next five (5) years are projected to be approximately $11,000,000.
FUND BALANCE: The Local Government Commission recommends that municipalities retain a Fund Balance level of at least 8% when compared to annual General Fund expenditures. The Undesignated Fund Balance for the General Fund was $1,892,794 on June 30, 2014. This amount equates to 38% of the annual FY ’16 estimated General Fund expenditures. Thus the required minimum Fund Balance level is satisfied. This budget projects to transfer $33,217 to the General Fund Balance at the end of FY 2015-2016.
The Restricted Fund Balance is included within the General Fund. The monies contained in this fund are set aside for specific purposes and cannot be spent for just any reason. According to the audit for the fiscal year ending June 30, 2014, there is $996,574 available in the Restricted Fund Balance. The two aforementioned capital reserve funds are now housed in the Restricted Fund Balance.
CLOSING: As usual, our Annual Retreat in February began the budget process by open discussion on the financial condition of the Town. While we continue to maintain healthy fund balance levels, we have pulled substantial amounts of money out of General Fund reserves to
balance both the Water Fund and the General Fund. Since 1994, the Town of Elkin’s General Fund contributed $3,565,827 to the Water Fund. This practice had to stop for several reasons. The Local Government Division of the NC Department of State Treasurer has increased its efforts in past years to warn municipalities that enterprise funds must be self-sufficient. Granting agencies also have specific requirements that water rates must be at a certain level in order to qualify a utility for possible grants and low interest loans. Over the past three years, the Board has increased water rates which had a positive impact on the financial results of the Water Fund which included ceasing transferring money from the General Fund to the Water Fund. This proposed budget is indicative of these increases and the positive financial results are evident.
For the second year in a row, we project to have an increase in Water Fund net assets due to increased water rates and the increased volume of water sold.
I am proud of the hard work and effort put forth this year by staff and the Board to complete the attached budget.
I welcome comments, questions, and/or inquiries on the proposed budget for the coming year.