STAFF REPORT To:
Town Council
From:
Rick Sawyer, Town Manager Theresa Young, Finance Director
Date:
January 10, 2018
Re:
2018 BUDGET ANALYSIS/OPTIONS
TOWN MANAGER’S COMMENTS – RECOMMENDATION The Town Council changes at the December 13, 2017 meeting accomplished changes that reduced the proposed 2018 Town Tax Rate by $.07 to $4.51. Additional discussion during the meeting prompted other potential changes. Those changes, as discussed in this report, would reduce the rate by another $.12 to $4.39. This is a $.26 increase from the 2017 tax rate of $4.13. As the Council knows the projected 2018 tax rate is significantly impacted by the $.33 increase from the debt service associated with selling the second installment of the $30M road bond approved in 2014. Without the debt service increase, the 2018 tax rate would have been $.07 lower than the 2017 at $4.06. While not currently included in the proposed 2018 budget the three pending union contracts represent another 1.9% increase in the budget or $.08. Both the Public Works and Police contracts have been ratified. The related cost items for these two contracts would add $.05 to the tax rate are included below and in separate warrant articles in the Town Meeting Handout. I respectfully request the Council to
Recommend the revised budget with a projected tax rate of $4.39.
Recommend moving $174k in unreserved Fund balance as the result of 2017 surplus to the Capital Reserve Fund.
Move the 2018 budget as amended to the next public hearing.
DISCUSSION Town Council met on December 13, 2017 to move the 2018 budget to public hearing. The additional Senate Bill 38 (SB 38) Highway Funds of $487k were discussed. As a result, the Town Manager was given direction to provide a plan for the use of the SB 38 funds that maximizes a reduction in the 2018 projected tax rate. The use of the SB 38 funds is recommended for Highway expenses that were anticipated for 2018 as follows:
$348k for two dump trucks ($174 each)
$ 40k for a Hot Box
$ 40k for the purchase of a pickup truck
$ 59k for 2018 road maintenance expenditures $487k
Use of the funds in this manner allow the 2018 tax burden to be further reduced. These items did not have available funding and would have to be budgeted. In December 2017, Town Council did originally consider using remaining 2017 appropriations to purchase one of the dump trucks. Now that the SB 38 funds will be used, the 2017 remaining appropriations are recommended to be used to fund some of the Capital Reserve Projects
totaling
$174k
that
would
otherwise be included in the 2018 Budget proposal.
A motion is provided to
accomplish this recommendation below. If
the
Council
accepts
the
Town
Manager’s recommendations then the proposed 2018 tax rate would be further reduced from $4.51 to $4.39.
Use of 2017 Appropriations-Updated from 12/13/17 At the December 13, 2017 meeting Town Council approved the use of 2017 appropriations as follows:
Town Manager is recommending that $174k be used to fund deposits to the Capital Reserve Fund for previously approved projects that otherwise would be included in the 2018 Budget proposal. The change is reflected below:
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$487k in Reductions to the 2018 Budget – In addition to the changes above we recommend that Town Council act on the following:
$174k in appropriations be reduced for a dump truck be purchased with SB 38 funds
$10k in appropriations be reduced for the contribution towards a purchase of a hotbox be purchased with SB 38 funds.
$30k in appropriations for a capital reserve contribution for the transfer station reducing the funding from $132k to $102k.
$40k in appropriations be reduced for the purchase of a pickup truck be purchased with SB 38 funds.
$59k in appropriations to be reduced for local road expenditures be paid with SB 38 funds
$174 in appropriations for capital reserve deposits be reduced. The deposits will be funded with remaining 2017 appropriations.
Capital Reserve Fund – Now that the hotbox is being purchased with SB 38 funds, $30k in capital reserves proposed to be funded in 2018 is not needed. As a result the $30k can be reallocated from the compressor reserve to the transfer station reserve. In addition, if the $174k in remaining 2017 appropriations is to be used to fund capital reserve deposits, thus reducing the need for 2018 appropriations, the warrant article 7 would be revised to reflect the vote to move the funds from the General Fund to the Capital Reserve Fund. Additional Considerations: Union Cost items – Should the Council choose to incorporate the costs for the public works and police proposed union contracts into the 2018, appropriations would increase by $192k and a $.05 increase to the anticipated 2018 tax rate or a total of $4.44. Fire Captain – An additional Fire Captain was proposed by the department and later eliminated by Town Council at the budget meetings. However, renewed discussion was had at the December 13, 2017 Town Council meeting. The cost to add this position for 6 months of the year would be $54,082 and a full separate memo on this subject has been provided.
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COST and FUNDING The adjustments associated with this report, if approved, decrease the 2018 proposed tax rate of $4.51 by $.12 to $4.39. RECOMMENDATIONS. 1) Reallocate 2017 funding as proposed. 2) Reallocate $30k in Capital Reserve Funds from the compressor funds to the transfer station funds. 3) Authorize the proposed changes to the 2018 budget proposal RECOMMENDED MOTIONS FOR THE COUNCIL: 1) I MOVE THAT THE TOWN COUNCIL authorize the movement of $174k in remaining 2017 appropriations to the Capital Reserve Fund and include the change in proposed Warrant Article 7 Capital Reserve Fund- Projects and Equipment. 2) I MOVE THAT THE TOWN COUNCIL authorize the reallocation of $30k in Capital Reserve Funds from the compressor funds to the transfer station funds. 3) I MOVE THAT THE TOWN COUNCIL make the recommended budget changes that result in a $487k reduction in appropriations as discussed and move the recommended 2018 Municipal Operating Budget for public hearing consideration in the following amounts: As of 1/10/2018: General Fund
$27,211,599
Special Revenue Funds
38,000
Recreation Day Camp
80,415
BCTV Sewer Fund
472,321 2,158,389
Total Appropriation $29,960,724
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