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HomeMy WebLinkAbout2025-04-21 Budget Work Session NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, APRIL 21, 2025 PAGE 492 ASSEMBLY The New Hanover County Board of Commissioners met on April 21, 2025, at 1:30 p.m. for a Budget Work Session 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 Stephanie A.C. Walker; and Commissioner Rob Zapple. Commissioner Dane Scalise arrived at 1:35 p.m. Staff present: County Manager Chris Coudriet; Clerk to the Board Kymberleigh G. Crowell; and County Attorney K. Jordan Smith. Chair Rivenbark called the meeting to order, stating that the purpose is for the Board to discuss budget priorities for the 2025-2026 fiscal year. FISCAL YEAR (FY) 2025-2026 BUDGET WORK SESSION PRIORITIES DISCUSSION County Manager Coudriet thanked the Board for the opportunity to hold the fourth work session of the FY 2025-26 budget. He then turned over the presentation to Chief Financial Officer Eric Credle and Budget Officer Amanda Kostusiak. Mr. Credle and Ms. Kostusiak shared the following information concerning the FY2025-26 budget:  Budget Work Session #4 – Education and Preliminary Recommended Update:  New Hanover County Schools (NHCS):  County spending per average daily membership (ADM) in public schools based on the FY 2022- 23 school year:  NHCS ADM:  Source for 2016-2024: New Hanover County Board of Education 6/30/24 Annual Report: NC Department of Public Instruction (DPI) final ADM  Source for 2025: NHCS staff for the month of November 2024  Excludes Charter Schools During discussion of the downward trend in school enrollment, Ms. Kostusiak explained that data from the NC Department of Public Instruction (DPI) reflects how the agency calculates county spending per ADM. She clarified that the County’s ADM figure of $3,703 includes charter school students, while DPI’s calculation does not. The 2025 enrollment figure is 24,528 students, based on the state's “best of the first two months” method, which excludes approximately 1,000 charter students. She noted a visible decline in enrollment that mirrors national trends. Ninth grade currently has the highest enrollment, with smaller class sizes in earlier grades, indicating the decline will likely continue as these smaller cohorts progress. The discussion also addressed declining birth rates locally and nationwide, which are expected to contribute to future enrollment drops. When asked if dropout rates explain the decline between 9th and 12th grade, Ms. Kostusiak stated that the data reflects raw enrollment by grade level and committed to providing additional dropout data. She also noted that although public school enrollment has declined, the overall student population in the County has remained steady due to increased participation in charter and alternative schools.  NHCS enrollment by grade level FY2024-25: NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, APRIL 21, 2025 PAGE 493  https://www.dpi.nc.gov/districts-schools/district-operations/financial-and-business- services/demographics-and-finances/student-accounting- data#Best1of2AverageDailyMembershipADM-959  Student-to-Teacher ratio:  Source: NHCS annual comprehensive financial report: June 30, 2024  ADM budget versus actual:  Includes charter schools In response to questions about the ADM Budget versus actual slide, Ms. Kostusiak confirmed there is no claw back of funds when there is an overpayment to the NHCS. County Manager Coudriet added that historically, the ADM rate established each year becomes the base rate for the following year, and the County has never lowered the rate. He also confirmed that when the County comes up short, such as in FY2022- 23, it covers the difference.  NHCS operating request:  *Not being recommended by County staff for FY2025-26 Budget In response to questions, Ms. Kostusiak confirmed that the Board of Education (BOE) is requesting funding for a pay increase for its members, who currently earn about $12,000 annually. Although the BOE reallocated most of its budget to support the increase, it is seeking an additional $7,942 from the County. BOE members do not receive cost-of-living adjustments (COLA) like teachers. Addressing the request for school specialist positions, County Manager Coudriet explained that these roles would provide support in areas such as academics, mental health, and special education, based on each school's needs. He noted that while the BOE had used its fund balance earlier this year to reinstate some previously eliminated positions, it remains unclear whether those positions are included in the continuation budget or could be reassigned to fulfill the specialist roles. He clarified that the specialist positions are part of a proposed two-year pilot program, with $4 million requested for the first year and a total of $8 million anticipated. He also stated that the superintendent has approached the New Hanover Community Endowment (NHCE) for potential support, with the expectation that the state will assume ongoing funding if the pilot succeeds. The Board raised concerns about the pilot program’s lack of clear success metrics, how results would be evaluated, and the risks to employees if funding is not renewed after two years. Questions were also raised about whether newly hired staff would be informed that their positions are time limited. County Manager Coudriet commented that after American Rescue Plan (ARP) funding expired, the County absorbed the ongoing costs for school-based mental health therapists and nurses into its recurring budget. He noted that the County has historically funded school nurses, but reimbursement changes by the school system created confusion during the budget process. Regarding a request for school safety officers, County Manager Coudriet explained that the request is not NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, APRIL 21, 2025 PAGE 494 for additional school resource officers (SROs) but for safety directors at each high school. These directors would be responsible for operating portable metal detectors, coordinating safety drills, and monitoring security systems.  NHCS capital request:  *Staff is recommending $2,604,211. When combined with lottery funds, the expected capital budget for NHCS is $5,821,000.  Note: Unspent School Capital Funds as of 4/15/25 are $13,729,262  Appendix A: NHCS capital projects FY2025-26:  Appendix B: three-year capital plan: Discussion ensued regarding the $13.7 million in unspent capital funds currently available to NHCS. County Manager Coudriet clarified that while the funds are earmarked, they have not yet been transferred and are only released to NHCS as expenditures occur; the funds are not available for other uses. Approximately half of the funding is designated for New Hanover High School repairs, with the remainder allocated based on project timing and scheduling, often planned around school breaks. County Manager Coudriet reported that the New Hanover High School survey is expected to be completed by the end of the month and will be presented first to the BOE and then to the County. Regarding the technology request, Ms. Kostusiak explained that the request is for technology replacements, including one-to-one student device replacements and desktop computer updates. Discussion ensued regarding the recommendation to spread out the $19 million capital request over three years, using $2.6 million and lottery funds for FY2025-26. County Manager Coudriet explained that the recommendation is based on lived experience, noting that the school system may not have the staffing capacity to execute all projects within a single year. A three-year Capital Improvement Plan (CIP), outlined in Appendix B, was proposed to better manage project timing and resources. As to facility ownership, County Manager Coudriet clarified that unless the County uses limited obligation bonds for construction, it does not own or manage school properties; its role is limited to funding capital projects and managing cash flow. Unlike County-managed facilities, where staff routinely assess needs and maintain an annual capital work plan, the County has no direct role in the school district’s capital planning or property inspections. The Board stressed the importance of establishing a clear, rolling five-year Capital Improvement Plan (CIP) to improve predictability and accountability in budgeting. County Manager Coudriet stated that while the superintendent has expressed interest in developing such a plan, it remains incomplete. He confirmed that the $19 million request reflects entirely new projects and does not include any of the $13.7 million in unspent funds from previous allocations. Commissioners also questioned whether the school system has the capacity to complete all proposed projects within a single year, especially given recent staffing losses in the operations team. Additional concerns focused on the appropriate division of funding responsibilities between capital and curriculum needs, particularly technology expenses, which may fall outside the County’s statutory capital obligations. NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, APRIL 21, 2025 PAGE 495  NHCS requested vs. recommended: A brief discussion ensued about the memorandum of understanding (MOU) for disaster response between the two entities. Mr. Credle explained that the MOU intends to allow quick financial action following disasters, such as hurricanes, by providing the NHCS with immediate access to funds without waiting for a Board of Commissioners meeting. County Manager Coudriet commented that the school system’s concerns reflect a “deficit of trust,” despite the County’s past quick responses, such as after Hurricane Florence, when schools relied on their fund balance. He noted that with the school system’s fund balance significantly reduced, they lack the cash flow to manage emergencies independently. Mr. Credle confirmed that the County’s unassigned fund balance remains at a minimum of 18%, or about $80 million, which also serves as the schools’ reserve in the event of a disaster. Regarding cost-of-living adjustments for pre-K teachers, Ms. Kostusiak explained that while the NHCS request did not specifically mention it, the County’s budget includes a 3% increase for County-funded pre-K teachers. In response to questions, County Manager Coudriet added that pre-K funding has traditionally been handled separately, with annual allocations based on the number of classrooms. He noted that the current recommendation includes funding to align with the anticipated state market adjustment. He further confirmed that County-funded pre-K teachers would receive the same 3.3% raise as other certified teachers under the state’s plan.  NHCS Operating funding, including Pre-K:  Does not include nurses, therapists, deputies (SROs)  NHCS Capital Outlay:  Unspent bond, lottery, and prior years’ County capital commitments amounted to approximately $13.7 million at 4/15/2025  * FY2024-25 Capital consisting of New Hanover High School repairs and facilities study paid for directly from fund balance  Total County Support for New Hanover County Schools: Further discussion ensued regarding a possible blended funding approach for the pilot program, where the County could contribute a portion of the $4 million request and provide a letter of support for the NHCS’ application to the NHCE for the balance, which traditionally prefers to be the last contributor. Board members expressed NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, APRIL 21, 2025 PAGE 496 concerns about endorsing a letter of support to the NHCE without more information, with some emphasizing a preference for directing funds toward teacher pay rather than hiring non-student-facing staff. In response to questions, Ms. Kostusiak provided an overview of the data showing that County operating support for NHCS has grown from $75 million in FY2017-18 to more than $105 million in FY2025-26 with the proposed funding, despite a decline in student enrollment. She reported that total County support, including nurses, counselors, SROs, pre-K programs, debt payments, and other initiatives, would increase by $7.1 million compared to FY2024-25. The per- pupil operating funding would rise from $3,703 to $3,872, and when factoring in all support programs, from $4,145 to $4,372 per student. In response to questions about the DPI information, she cautioned that statewide comparisons are based on DPI’s FY 2022–23 data. Regarding the increases for the Elements and Too Good for Violence programs, she confirmed that the budget increases are primarily due to staff pay adjustments. It was further noted that Elements staff are civilian employees under the Sheriff’s Office. Mr. Credle confirmed a projected 5% market adjustment increase for these roles in FY2025-26. BREAK: Chair Rivenbark called for a meeting break from 2:48 PM to 3:00 PM.  Cape Fear Community College (CFCC):  Education increases:  The recommended amount focuses on building maintenance and capital needs In response to questions, Ms. Kostusiak explained that while some salary increases are included in the recommendation for CFCC, the primary focus is on salaries tied to capital needs, building maintenance, and operating requests. Salaries and associated benefits were considered, but the funding is primarily directed toward the upkeep and maintenance of facilities. County Manager Coudriet added that the salary increases are specific to employees responsible for maintaining County-owned buildings. He noted that, unlike the school system, where the County funds approximately 600 additional positions, many being classroom-related, the County does not fund any instructional positions at CFCC.  CFCC County Funding Operating Budget:  The County also pays $9-10 million annually in debt service on the 2008 $164 million General Obligation Bonds  CFCC County Funding Capital Outlay: In response to questions regarding debt service for CFCC, Mr. Credle stated that the last of the bonds were issued in 2015. Regarding CFCC capital outlay, Ms. Kostusiak confirmed that the request for FY2025-26 is for repairs to roofs as well as a small amount for vehicle replacement. County Manager Coudriet stated that, to his knowledge, the County is not funding the work at the Wilson Center.  Preliminary recommended budget update:  Tax rate update: NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, APRIL 21, 2025 PAGE 497 While reviewing the tax rate update slide, Ms. Kostusiak presented updated options for the preliminary FY2025–26 budget. The original recommendation of a 35.5-cent tax rate was reduced to 35 cents after identifying approximately $4 million in savings by deferring half of the planned vehicle purchases, lowering projected medical costs, and adjusting departmental requests. The updated recommendation includes funding for film internships ($75,000), a federal lobbying contract ($60,000), and a museum exhibition position to support the new facility. To offer the Board additional flexibility, Ms. Kostusiak outlined two further options to reduce the rate to 33.55 cents: issuing $8 million in debt for capital outlay, which would lower the rate by about 1 cent, and shifting $3.7 million in school nurse funding back to the Mental Health Substance Use Disorder (MHSUD) fund, which would reduce the rate by approximately 1.5 cents. The Board discussed the updated preliminary recommended budget. County Manager Coudriet reviewed potential funding strategies, noting that while the County has occasionally borrowed for capital items like vehicles, doing so is not financially sound due to their short lifespans and the long-term costs of debt, including interest. He also cautioned that using the MHSUD fund to cover school nurses would accelerate the drawdown of the principal. Although the fund was never intended to preserve its corpus indefinitely, more aggressive use would reduce future interest income and likely deplete the fund by 2029. While the Board recognized that the MHSUD fund was not designed to last indefinitely, members emphasized the need for more sustainable long-term funding strategies to reduce reliance on it. Commissioners also raised concerns about underfunded programs. In response to questions, County Manager Coudriet stated that although a plan is in place for the Senior Resource Center, no new enhancements were recommended due to budget constraints. County Manager Coudriet then introduced a dynamic spreadsheet tool developed for the Board’s use to model the financial impacts of potential budget changes. Ms. Kostusiak demonstrated its functionality and explained how it can be used to evaluate additions or reductions. County Manager Coudriet stressed that the spreadsheet reflects options generated from Board input, not staff recommendations. The Board discussed the FY2025–26 preliminary budget recommendation and the updated proposed tax rate of 35 cents, noting the challenge of staying closer to the revenue-neutral rate of 29.1 cents. Feedback was given on the need for clarity to distinguish between essential needs and discretionary wants within the budget. Concerns were raised about the amount of new programming included, which pushes the tax rate further from the revenue- neutral target. There was also discussion regarding assistance from staff or potentially a third party auditor to help identify options to maintain a tax rate as close to revenue neutral as possible. County Manager Coudriet stated that the current budget reflects Board-adopted policies and stated priorities, and that final decisions rest with the Board. He noted that some Commissioners have already identified potential additions or removals, and that staff developed the dynamic spreadsheet to model the impact of those changes. While he reiterated that he does not make policy decisions, he confirmed that staff can provide financial analysis to support the Board’s decision-making. During further discussion, Commissioners expressed differing views on the County’s proposed budget and its impact on the tax rate. County Manager Coudriet noted that the budget includes detailed agency-level recommendations and cuts and offered to provide additional information if needed. Board feedback was also provided about trying to understand which operations fell under the “General Government" and "Human Services" sections to assess various expenditures. Some Commissioners emphasized the need for greater fiscal restraint and a focus on core government functions, while others viewed recent budget growth as necessary to support a growing community, such as investments in parks, stormwater management, and services for seniors and veterans. There was also discussion about the value of using the dynamic spreadsheet tool to model potential budget adjustments and assess their impact on the tax rate. A brief discussion ensued regarding workforce housing. County Manager Coudriet stated that the workforce housing fund was initially supported by ARP funds and is now funded through general fund revenues. He added that none of the projects have failed. Not all projects have been completed, but those that have not are in process.  Preliminary recommended budget, enterprise funds recap:  Stormwater:  No fee change - $6.14/month/ERU  Fire Rescue:  Maintain a 7.25 cent tax rate:  Supports additional fire stations and increased staffing  Landfill:  No Change to Tip Fee - $52/ton  Expected to recommend an increase next fiscal year  Budget review items: Budget timeline: NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, APRIL 21, 2025 PAGE 498  *Budget to be adopted at one of the June meetings County Manager Coudriet stated that the dynamic spreadsheet and all the information requested during the work session will be sent to the Board. ADJOURNMENT There being no further discussion, Chair Rivenbark adjourned the meeting at 4:00 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.