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HomeMy WebLinkAbout2025-03-20 Budget Work Session and Agenda Review NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION AND AGENDA REVIEW, MARCH 20, 2025 PAGE 459 ASSEMBLY The New Hanover County Board of Commissioners met on March 20, 2025, at 1:33 p.m. for a Budget Work Session and Agenda Review in Conference Rooms 138-139, held in-person and remotely at the New Hanover County Government Center, 230 Government Center Drive, Wilmington, North Carolina. Members present: Chair Bill Rivenbark (remote); Vice-Chair LeAnn Pierce; Commissioner Dane Scalise; Commissioner Stephanie A.C. Walker; and Commissioner Rob Zapple. Staff present: County Manager Chris Coudriet; Clerk to the Board Kymberleigh G. Crowell; and County Attorney K. Jordan Smith. Vice-Chair Pierce called the meeting to order, stating that the purpose is for the Board to discuss budget priorities for the 2025-2026 fiscal year and the March 20, 2025 regular meeting agenda. FISCAL YEAR (FY) 2025-2026 BUDGET WORK SESSION PRIORITIES DISCUSSION Chief Financial Officer Eric Credle and Budget Officer Amanda Kostusiak presented the following information concerning the FY 2025-2026 budget:  Budget Work Session 3: Preliminary Tax Rate, Preliminary Recommended Enhancements, Capital Planning:  Agenda:  Preliminary recommended revenues: preliminary tax rate and modified General Fund  Preliminary recommended expenditures: continuation, recommended enhancements, unfunded enhancements/items  Capital Improvement Plans  Overview:  Preliminary recommended budget balanced at 35.5 cents:  Pending items: request from the schools and employee compensation adjustments  2024 value tax bill versus 2025 value tax bill:  Total revenue, excluding property tax and loan proceeds, is flat with FY25:  1% higher budgeted sales tax offset by lower interest income  No debt issuance proposed for Capital Outlay versus $8.8 million in FY25  Higher expenditures of $43.9 million: detail provided later in this report In response to questions, Ms. Kostusiak confirmed that the monthly impact of the tax increase is approximately $42 for the mean home value and $25 for the median home value. County Manager Coudriet added that the tax rate will decrease; however, unless the Board adopts a revenue-neutral rate below the statutory definition, most people will still pay slightly more in property taxes.  Escrows:  Revenue Stabilization Fund (RSF): all interest transferred to General Fund ($6.6 million)  Mental Health and Substance Use Disorder (MHSUD): principal usage of $5.7 million – strategy programs and school therapists  Debt Service Fund: budget includes $2.4 million of fund balance that had been built up Discussion ensued regarding surplus debt service funds. County Manager Coudriet explained when property tax collections exceed projections, such as collecting at 99.6% instead of a budgeted 99.1%, the surplus accrues to the debt service fund balance. Higher-than-projected sales tax revenue also adds to the fund. This strategy is intentional, allowing excess funds from stronger years to support future debt obligations. Mr. Credle added that debt service requirements are expected to decrease by $6 million in FY 2026, following a peak in FY 2025 due to Project Grace and a borrowing last fall. He noted that the debt service fund only grows when actual revenue surpasses budgeted amounts.  Revenue/Expense changes: NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION AND AGENDA REVIEW, MARCH 20, 2025 PAGE 460 In response to questions, County Manager Coudriet confirmed that $3 million of the transfers back to the General Fund are from the Board’s commitment to provide $15 million for workforce housing over five years. While the commitment was initially funded with American Rescue Plan (ARP) dollars, the fourth-year commitment will require a transfer from the debt service fund to the General Fund. He also noted that two years remain in the commitment, FY 2026 and FY 2027. Additional discussion continued about the absence of debt revenue compared to financing for needed items. Mr. Credle explained when the County pays cash for short-term assets instead of using financing, it avoids future debt service payments. Typically, debt is issued for 20 years, and approximately 10% of the total debt is allocated as the first-year payment in the following fiscal year. By avoiding financing in FY 2026, the County will save $800,000. County Manager Coudriet added the approach to funding needs has varied year-to-year, depending on revenue levels and the requirement to balance the budget. In some years, the County has used available cash; in others, it has relied on debt financing. Although the preference is not to borrow for ongoing maintenance, it has had to do so in past years. During the discussion about shifting school nurse funding back to the General Fund, County Manager Coudriet explained that the current recommendation continues funding for approximately 30 school-based mental health therapists using the MHSUD corpus. Although a higher cost was presented during the prior budget work session, staff believe this approach aligns with the intended use of MHSUD funds while still supporting these therapist positions. If the Board disagrees, the General Fund will need to cover an additional $4 million. He clarified that while the public and school board often focus on direct appropriations like capital funding and current expense (average daily membership), the County provides tens of millions of dollars in additional support to schools. This includes school resource officers, school-based mental health therapists, school nurses, and facility maintenance. He noted that the County permanently absorbed a $4 million annual debt service payment previously funded through school allocations, an ongoing contribution not reflected in education budget increases. Regarding school- based mental health therapists, he added that the County will eventually need to transition away from using the MHSUD corpus to fund those positions.  Tax rate impact: Mr. Credle explained that the County needs an additional $56.08 million in revenue to balance the budget based on current expenditure projections. As each penny on the tax rate generates $8.1 million, this shortfall translates to a 6.9-cent increase over the previous year’s revenue-neutral rate. Last year’s rate needed to generate the same property tax revenue was 28.5 cents, making the proposed new rate 35.5 cents. Although the statutory revenue-neutral rate, factoring in projected growth, differs slightly, the County is still required to present it publicly. For context, applying a cumulative inflation adjustment of 23% since January 2021 would suggest a tax rate of about 36.9 cents. County Manager Coudriet emphasized that the 35.5-cent rate reflects the current status based on staff analysis and is not a final recommendation to the Board. Mr. Credle confirmed that organic growth is approximately 2.3%, based on trends over the last four years and the last revaluation. This figure is part of the statutory calculation and does not necessarily reflect changes in market value. He also noted that to reduce the tax rate by one cent, the Board would need to cut $8.1 million from the budget. During a brief discussion about municipal tax rates, County Manager Coudriet clarified that North Carolina municipalities are only required to provide building inspections and streetlights. In contrast, counties are responsible for a broad range of services, so the County must set its tax rate based solely on its state-mandated obligations, independent of municipal rates.  Incremental expenses:  Committed continuation:  Full-time employee (FTE) additions:  Project Grace: 8.0  Northchase Library: 13.0 NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION AND AGENDA REVIEW, MARCH 20, 2025 PAGE 461 A brief discussion ensued regarding the Northchase Library and Project Grace regarding staff and materials. County Manager Coudriet explained that with both facilities coming online, there is a need to fully staff the Northchase Library and add staff to Project Grace. Regarding the collections, the main library's collection will be relocated to the new library at Project Grace; however, a separate collection is needed for the Northchase Library.  Enhancements summary:  Enhancements detail: Discussion ensued about the recommended departmental enhancements. Ms. Kostusiak noted that a new point-of-sale system for the museum is included in the proposal to improve ticketing and scheduling, enhance the visitor experience, and operate separately from Project Grace. She also confirmed the Board of Elections enhancements are what is being proposed for that department. County Manager Coudriet explained that the proposed elections education and communications coordinator is a reassigned position from a current vacancy. The role is recommended without requiring additional funding. In his opinion, the increases to the Board of Elections budget directly respond to the department’s requests. While not all funding is tied to specific personnel positions, the recommended allocation provides equivalent financial resources and allows the department flexibility in determining how to best meet its operational needs. Regarding alignment with the Parker Poe report, he noted that although the report did not assign dollar amounts, the proposed staffing and support align with its position-based recommendations, depending on how the Board of Elections chooses to use the funding. Regarding concerns about funding staff positions during a mid-term election cycle, County Manager Coudriet acknowledged the concerns and clarified that the Board of Elections did not request additional staffing during the recent cycle. However, the County proactively provided people support for traffic management. While the Board of Elections operates independently and determines how to use its resources, the Board of Commissioners is responsible for providing the level of funding it believes appropriate. Alt hough this governance structure presents challenges, the County cannot direct NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION AND AGENDA REVIEW, MARCH 20, 2025 PAGE 462 operations or mandate improvements. Therefore, the most effective response is to allocate additional resources where direct authority is limited. He expressed support for the department hiring a dedicated communications role, which the County helped facilitate, as well as for retaining external legal counsel. He added that the department views staffing increases as the best way to address deficiencies. The $150,000 recommendation is based on the information presented, with the understanding that the Board of Elections knows its operations best and can allocate the funds accordingly. Discussion ensued about the other recommended enhancements. In response to questions about the computer-automated dispatch (CAD) system, County Manager Coudriet explained that the County currently uses Central Square, but the existing system, implemented in 1996, is outdated and cannot support necessary updates. Staff recommends replacing it to improve data reporting and integration with other public safety systems, including 911, jail management, and law enforcement data. He also noted that other agencies in North Carolina use this system. Regarding the Register of Deeds office request for a dedicated passport agent, County Manager Coudriet said the position is needed due to the closure of the UNCW passport office and limited availability at the downtown post office. These changes have reduced the number of passport service options. The request includes associated revenue and fills a gap in access to passport services. For the Family Support Services Pilot Program, County Manager Coudriet stated that the Department of Social Services will run the program, with staff working directly in schools to address truancy. These positions will collaborate with school social workers and will be funded through the MHSUD Fund. The goal is to improve attendance and academic performance. Social Services Director Tonya Jackson confirmed that the program will work in partnership with the school district. While the positions are not formal social workers, they will help eliminate barriers that keep students from attending school consistently. The initiative will run for three years, and staff will track outcomes to measure its effectiveness. The decision has not yet been finalized about which schools will participate. Federal and state reimbursements will fund the program, and after accounting for revenue, the net cost to the MHSUD Fund is projected at $462,282, with no direct impact on the tax rate. Regarding the building code compliance. County Manager Coudriet explained that the County could meet the need by using either full-time employees or contracted personnel. The cost would be passed on to the end user, making the program cost neutral. While the current plan calls for full-time staff, final details are still in development. Each municipality would need to adopt an ordinance for the program to take effect. The County has identified 361 buildings over 100 years old, and the program would focus solely on commercial properties. Staff will return to the Board in about a month with more information. If the Board chooses not to proceed, staff will remove the program from the budget. Regarding the Veterans Services request, County Manager Coudriet stated the recommendation would be to add an additional outreach staff member to help manage the growing caseload. Concerning the mass spectrometry machine for drug toxicology, County Manager Coudriet stated that trained staff are already available to operate it, and the recommendation is contingent on the City of Wilmington’s financial participation, as outlined in the memorandum of understanding (MOU).  Transfers back to General Fund and people investments: A brief discussion ensued about people investments. County Manager Coudriet stated that while a final recommendation has not yet been made, the current estimate is to reinvest approximately 4% in the organization. This includes targeted efforts to address public safety compensation specifically for fire, 911, the jail, and the Sheriff’s Office. For employees in those areas, the average raise could be 5.3%, with some receiving higher increases. Final recommendations will be developed as more information becomes available.  Education increases:  Schools’ operating increase recommended of $4,000,000 comprised of:  $3,000,000 inflation increase  $1,000,000 School safety measures: four (4) safety officers, metal detectors, classroom behavioral training  The request is expected to also include $4,000,000 for one additional specialized employee per school (two-year pilot): recommend a joint request from the school board and commissioners to the New Hanover Community Endowment to fund this pilot  Cape Fear Community College (CFCC) operating request is $1,654,670 higher than the amount recommended ($14,912,831) NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION AND AGENDA REVIEW, MARCH 20, 2025 PAGE 463 Discussion ensued about the funding requests for Cape Fear Community College (CFCC) and New Hanover County Schools (NHCS). County Manager Coudriet noted that CFCC’s request includes some statutorily required items, such as custodial staffing, while other elements likely fall outside those obligations. This distinction accounts for the gap between CFCC’s request and staff’s recommendation. He confirmed that staff will provide the Board with the crosswalk analysis and a detailed breakdown of the request. Regarding NHCS, he stated that although the County has not yet received the formal funding request, staff plan to recommend an additional $4 million in operating support and will explore alternative funding sources for specialized school programs. NHCS is expected to submit its budget request by April 15, 2025. On the capital side, he noted that while NHCS has not shared a specific figure, the request may align with this year’s $9 million appropriation for New Hanover High School. In response to questions about the average daily membership (ADM) rate, he stated that the current rate is $3,703 per student, and staff plan to recommend an increase to $3,863 per student for FY 2026. Mr. Credle added that CFCC’s capital request totals $2,121,000, an increase of $201,000 over the prior year.  Other increases: Mr. Credle stated in response to questions about contingency that last year's budget only included $15,000 for contingency, as it was set at a very low level. He added that it is challenging to fund surprises, so $1.6 million has been allocated as a contingency for FY 2026.  Budget requests not recommended: A brief discussion was held about film internships, which are not recommended in the FY 2026 budget. In response to questions, County Manager Coudriet explained that the program was previously funded with ARP dollars. Since those funds have expired, continuing the program would create a new cost for the County. He stated he does not plan to recommend funding it unless the Board provides direction to do so. Mr. Credle added that staff use a disciplined process to review enhancement requests. Of the $5.4 million in requests submitted, approximately $5.6 million were recommended, meaning staff approved of about half and did not recommend the other half.  FY2026 preliminary budget revenues:  FY2026 preliminary budget expenditures: NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION AND AGENDA REVIEW, MARCH 20, 2025 PAGE 464  Five-year Capital Improvement Plan (CIP):  General Characteristics:  Fixed asset with a useful life greater than five years  Cost of $100,000 or more  Requires more than 12 months to complete  Process:  CIP Committee evaluates capital improvement project requests  Current capital projects: A discussion ensued regarding the Market Street and Middle Sound Loop Connector, the Northside Co-op, Project Grace, and Smith Creek Park. Regarding the Northside Co-op, County Manager Coudriet confirmed that the project is on hold. However, as it is an existing capital commitment it is part of a capital project ordinance. The Northside Co-op is stepping back and reevaluating its next steps, aware that another grocery store is likely to come downtown. The Board could direct those funds back to the General Fund or fund balance if the project does not move forward. For Project Grace, the $75,936,698 represents the total cost of the project, not the amount borrowed. The amount includes cash on hand and debt. Regarding Smith Creek Park phase two, there is no funding to request, as the Board has already allocated those funds as part of a capital project ordinance. Regarding the Middle Sound Loop Corridor, residents will be able to travel from Oyster Bay to Market Street, north to Walmart, cross Market Street to access the Military Cutoff Extension, or go south to connect with the cross-city trail.  FY26-30 Capital Improvement Projects - General Fund:  FY26-30 Capital Improvement Plan – Fire Fund:  FY26-30 Capital Improvement Plan – Environmental Management Fund: NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION AND AGENDA REVIEW, MARCH 20, 2025 PAGE 465 A discussion ensued regarding the remaining years of the landfill’s life and the need to start working towards having a place in place for when it reaches capacity. Regarding potential recycling requirements, County Manager Coudriet commented that recycling is a requirement of franchise contracts for trash haulers. There is no mandate that consumers recycle, but haulers are required to offer it. Following further discussion on recycling mandates, the Board expressed a preference for education and incentives to encourage increased recycling.  Budget timeline: A brief discussion ensued about the tax rate discussed at the start of the work session. County Manager Coudriet confirmed that 29.2 cents is the revenue-neutral rate, and 35.5 cents is preliminary where budget is currently at, which is $4 million of difference. He further confirmed that every cent is valued at $8.1 million so for every cent the Board desires to reduce the tax rate, it will need to cut $8.1 million from the budget or find $8.1 million in new revenue. Hearing no further discussion, Vice-Chair Pierce stated the Board will move to the Agenda Review portion of the meeting to review and discuss items for the March 24, 2025 Regular Meeting agenda after a short break. BREAK: Vice-Chair Pierce called for a break at 3:20 p.m. The Board reconvened at 3:35 p.m. DISCUSSION OF MARCH 24, 2025 AGENDA ITEMS Regular Agenda Item #9: Consideration of Resolution in Support of Awarding the Medal of Honor to Retired Major James Capers, Jr. Executive Aide Crystal Whittaker explained that Commissioner Zapple agreed to sponsor this resolution in honor of retired Major Capers, Jr. He served much of his career in South Carolina and served in the Vietnam War, where he earned several medals. At the time, however, African Americans were not eligible for the Medal of Honor. A national campaign is now underway to secure that recognition for him. Several neighboring counties and the City of Wilmington have passed similar resolutions in support. Retired Major Capers, Jr., a North Carolina resident, lives near Fayetteville. This resolution is intended solely to provide him with the opportunity to receive the Medal of Honor, a congressional award presented by the President and Congress, an honor he has yet to receive. Commissioner Scalise suggested coordinating with senators and representatives to maximize the resolution's impact. Ms. Whittaker confirmed that the local congressional delegation has completed and submitted letters of intent, which have also been received by the President. Regular Agenda Item #11: Presentation of the 3990 Independence Boulevard Tract: Historical Background, Preservation, and Conservation Considerations. County Manager Coudriet stated that Dr. Shew is not present for agenda review but will be available on Monday to make the presentation. ADJOURNMENT There being no further discussion, Chair Rivenbark adjourned the meeting at 3:42 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.