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2024-02-19 Budget Work Session NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, FEBRUARY 19, 2024 PAGE 142 ASSEMBLY The New Hanover County Board of Commissioners held a Budget Work Session on February 19, 2024 at 1:33 p.m. in Conference Rooms 138-139 at the New Hanover County Government Center, 230 Government Center Drive, Wilmington, North Carolina. Members present: Chair Bill Rivenbark; Vice-Chair LeAnn Pierce; Commissioner Jonathan Barfield, Jr.; Commissioner Dane Scalise; and Commissioner Rob Zapple. Staff present: County Manager Chris Coudriet; Clerk to the Board Kymberleigh G. Crowell; and County Attorney K. Jordan Smith. Chair Rivenbark called the Budget Work Session meeting to order and announced that the purpose of the meeting is to discuss Fiscal Year 2024-2025 budget priorities. FISCAL YEAR (FY) 2024-2025 BUDGET WORK SESSION PRIORITIES DISCUSSION Chief Financial Officer Eric Credle and Budget Officer Michelle Daniels shared the following information concerning the FY 2024-2025 budget:  FY24-25 Budget Work Session:  Agenda:  FY23-24 General Fund and New Hanover County Schools (NHCS) snapshot  Current position:  Current economy  Headwinds  Revaluation  American Rescue Plan (ARP) sunsetting  ARP budget  Property taxes  Sales taxes  Non-county agencies  County spending per average daily membership (ADM) for the 2022-2023 school year:  FY23-24 General Fund adopted expenditures:  FY23-24 NHCS contribution: Discussion ensued regarding the County’s appropriation per student. County Manager Coudriet confirmed, in response to questions, that the state ADM is between $7,000 and $9,000 per student and that the County’s ADM is $3,434. He further explained that in addition to the $3,434, when including County funding for school resource officers (SRO), school nurses, and community resource coordinators through Port City United, it equates to the school district receiving approximately $5,200 per student. Mr. Credle and he speak regularly with the NHCS superintendent, but he cannot speak about the fears being expressed about losing teachers. He does not believe the school board is behind the numerous emails the Board is receiving about the NHCS budget. Mr. Credle stated he has NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, FEBRUARY 19, 2024 PAGE 143 stayed abreast of the Board of Education (BOE) budget work sessions, but an NHCS budget request has not been received to date. County Manager Coudriet stated that the deadline for a BOE to present its budget request to its th respective county is May 15 each year. Board discussion ensued about the need for the community to have patience, as the budget process is still in its early stages and how the County has a longstanding success in serving the school district's needs. Mr. Credle confirmed, in response to questions, that the number of students in the public school system is 24,858, which does not include charter schools. He does not believe that physical and occupational therapists are included in the local budget as they are not listed, but he will confirm their funding source. County Manager Coudriet stated that the only funding shared proportionately with charter schools comes from the $94 million in operating expense. If charter schools choose to have an SRO, they would contract that independently.  FY23-24 Position:  General Fund overview:  Property taxes tracking slightly higher than budget  Sales taxes tracking right at budget  Expenditures in line with budget  Budgeted appropriated General Fund balance – approximately $12 million  All accumulated fund balance in escrows budgeted for use Mr. Credle explained in response to questions that during the last two budget years, sales tax has increased during the last six months of each year. However, staff kept sales tax level when budgeting for the current fiscal year. It has since trended downward but has started to show an increase, which gives him pause when budgeting sales tax for the next fiscal year. As for the earned interest, the Revenue Stabilization Fund (RSF) has earned $10 million, and the Mental Health Fund has earned $3.2 million, which has been appropriated for use in the budget for the current fiscal year.  Current position:  Economy continues to be strong:  Low unemployment  Decreasing inflation over the past year  Soft landing despite rising interest rates  Higher investment income  Growing tax base  Headwinds:  Final year prior to property tax revaluation:  Since last revaluation (1/1/21), inflation is up 19.5% thru Jan 24 (South Atlantic CPI)  Based on appx. FY21 General Fund Expenditures of $300 million – amounts to $58.5 million  Budgeted property tax revenue is up 0.49% from FY22 to FY24:  Property tax rate cut 4.2% for FY 2023 and 1.1% for FY24 ($12.5 million total impact)  Debt service up $3.7 million  Higher public safety costs – estimate of FY25 recommended budget over FY24 adopted budget is currently $9.5 million  ARP Sunsetting - $8.3 million in programs sunset on 6/30/24 or 12/31/24:  $3.2 million in unspent ARP % being recommended today to fund part of that amount Regarding the revaluation, County Manager Coudriet clarified that although the values will be set in January 2025, the tax rate will not be set until June 2025 for the revaluation cycle. As to the sunsetting of $8.3 million in programs related to ARP, affected employees know that their positions are grant funded. A brief discussion ensued regarding the revaluation timeline. Although revaluations must be completed at least every eight years, the County adopted a resolution to change that to every four years and is currently held to that.  Property tax revaluation impacts for FY25-26:  Home price inflation since the last revaluation:  From 2021 to 2022 (most recent available), the New Hanover County Home Price Index rose 19.9%  Per the Federal Reserve:  From January 2021 to November 2023, the National Home Price Index rose 32.1%  The 1/1/21 revaluation increased the tax base by 33%  ARP sunsetting: NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, FEBRUARY 19, 2024 PAGE 144  ARP financial summary – projected unspent is $3.2 million: * Includes projected revenues earned by six-month program extension in FY25  ARP - Recommended additional expenditures:  Funding the highlighted items above for ½ Year + funding Pre-K expansion with ARP (vs. RSF) = $3,178,000 Mr. Credle responded to questions stating that revenue for Mental Health comes from insurance proceeds that the County can collect. Further discussion ensued regarding the tax rate.  New Hanover County property tax rate history: Discussion ensued about how the County’s property tax rate compares to other counties in the state. County Manager Coudriet explained that the County has the lowest tax rate compared to the other fifteen urban counties and is the lowest in the region. Commissioner Barfield commented that the property values and provided services need to be part of the full picture, not just the property tax rate.  FY25 Property tax estimate: NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, FEBRUARY 19, 2024 PAGE 145  Sales tax estimates:  Non-county agencies:  FY24-25 budget timeline: County Manager Coudriet concluded the presentation by stating that staff assumes the tax rate will remain at $0.45 per $100. Commissioner Zapple requested a report to see what a half-cent tax decrease would look like. County Manager Coudriet confirmed, in response to questions, that a half-cent equates to a $2.5 million reduction. Discussion ensued regarding the sunsetting of the ARP funding. County Manager Coudriet stated he does not presume the General Fund will fully support all programs unless directed by the Board. A plan has been developed to fund some of the programs with the last of the ARP funding until December 31, 2024. Commissioner Barfield stated the importance of not cutting any program related to school mental health, highlighting the value of the mental health expansion, the Elements and Too Good for Violence programs, and community care coordinators through Port City United to the school system. Even though it will be a challenging budget year, he believes items as is without increasing or decreasing taxes is the best plan. Commissioner Scalise commented that each budget line item should be independently evaluated each year. County Manager Coudriet stated in response to questions that any remaining funds at the end of a fiscal year revert to the General Fund. The County does not utilize performance based budgeting but instead assesses recurring costs of doing business and works with departments to identify savings, with every enhancement request being independently reviewed. Discussion ensued regarding various operations and programs. County Manager Coudriet stated that the program is in the process of being phased out. The County has ceased having contact tracers and certain school nurses, previously funded through the program, have transitioned into permanent roles within the Public Health Department, ensuring the department's continued capacity for this work. The Film Crew Internship program is a collaborative program with The Film Partnership of NC and StepUp Wilmington. He provided a brief overview of the program, noting that it is a one-time grant. Regarding the Senior Resource Center Congregate Meals funding, County Manager Coudriet explained that the funds ramped up the program and assured the Board that meals will continue to be provided after the ARP funding ends. In response to questions regarding investments, Mr. Credle stated that the County has received $13.9 million from all investments. As to operational efficiencies, County Manager Coudriet confirmed there is a proposal for building safety inspectors to transition to County fleet vehicles instead of receiving mileage reimbursements, which is expected to result in long term savings. Regarding the reduction in the budget for The Healing Place, staff proposes using funds from the opioid settlement to fund the beds at The Healing Place for the next fiscal year. A brief discussion ensued regarding the reductions in the Facilities Maintenance budget. Chief Facilities Officer Sara Warmuth explained that the reductions are a result of utilities cost savings at the Government Center and other County facilities. There is also a reduction due to being proactive with replacing chiller systems, hot water heaters, and other mechanical items that help save on utilities and maintenance costs. ADJOURNMENT There being no further discussion, Chair Rivenbark adjourned the meeting at 2:42 p.m. Respectfully submitted, Kymberleigh G. Crowell Clerk to the Board Please note that the above minutes are not a verbatim record of the New Hanover County Board of Commissioners meeting. The entire proceedings are available online at www.nhcgov.com.