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HC budget process begins in the red

WINTON – Beginning a budget process is always a challenging effort, even in a healthy economy, so imagine trying to balance a financial spreadsheet when times are tough and money is tight.

The latter is what’s facing Hertford County Manager Loria Williams as a flat economy coupled with rising costs, some coming by way of unfunded state and federal mandates, has produced a not-so-rosy financial forecast.

Upon presenting her initial budget preparation report (for fiscal year 2010-11) to the board of commissioners at their May 3 meeting, Williams said her efforts began with a $320,397 deficit. She said that shortfall was due to a reduction in sales tax revenue, a significant decrease in interest income, increases in the county’s annual contributions to local government employees’ retirement and retirees’ benefits, the state mandated assumption of Child Support Enforcement and the impact of Article 42 (sales tax), moving it from per capita funding to point of sale and the “hold harmless” provision in that funding.

“The Article 42 tax fund is now a double whammy for the county,” Williams noted. “Not only have we lost the per capita end of the deal, but we are required to still pay every town in the county the money they would have received if Article 42 was not changed. We are required to hold our towns harmless on this. Since it became effective, we’ve gone to paying our towns, on average, $9,000 a month to $23,000.”

Meanwhile, Williams noted that tax base growth in the county was currently less than one percent. She said that the projected tax base (estimated at $1.21 billion) is expected to generate $114,967 for every penny of the tax rate (91 cents per $100 of valuation). That is a very slight increase over what the current tax base is generating per penny ($114,192). All figures are based on a tax collection rate of 95 percent.

“There’s nothing left to cut,” Williams told the commissioners, again citing the lack of growth within the tax base coupled with rising costs. “We are at a bare-bone budget. What is included in my budget proposal is exactly what we need to provide the level of services we currently offer to our citizens.”

Without a healthy fund balance (projected at just over $6 million), Williams said she would be forced to recommend an 8-cent property tax hike in order to fund all expansion items and outside agencies requests as submitted during the budget planning process.

Instead, Williams is recommending maintaining the current tax rate (91 cents), but to do so would require appropriating $887,021 from the general fund balance. That amount reflects a 23 percent increase over the current year’s fund balance appropriation.

“This amount is recommended in lieu of a tax increase to our citizens during these tough economic times,” she stressed.

Williams pointed out that the general fund balance has grown from just under $4 million in 2005 to just over $6 million in 2009.

“We have appropriated fund balance for each of the past five years in order to present a balanced budget, but we wound-up not spending that money and returning it to the fund balance,” she said. “I’m afraid that will not be the case with the 2010-11 budget.”

Her recommended general fund budget – totaling a shade over $23 million, represents a four percent reduction over the current fiscal year’s revised budget. The proposal does provide level funding to all outside agencies – education, the local public health authority and all fire departments within the county.

As far as overall expenditures are concerned, education within the county (public schools and Roanoke-Chowan Community College) consumes the lion’s share of spending at 32 percent of the general fund. Public Safety (Sheriff’s Office, jail, Emergency Management, EMS, fire and Code Enforcement) is next at 23 percent. Human Services is extended 30 percent of the general fund, but with $4.45 million of those operational costs coming back in the form of revenues, the county winds up committing an estimated 10 percent on this public service.

While Williams’ proposal holds the line on the property tax rate, the same cannot be said of the user-paid Enterprise Fund. Her proposed budget does not call for any increase in the Solid Waste disposal fees currently charged, but does hike the user fees for those connected to the county’s Northern and Southern Water Districts. She is proposing an increase of the current $20 flat fee per month to $25. Both rates are for the first 2,000 gallons of use.

The proposed hike, according to Williams, is not necessary due to either water district operating at a deficit.

“Both are in the black financially,” she said. “However, what we take in goes right back out in operating the system. We have no fund balance to speak of in either district. This proposed rate increase gives us that…money that can make major repairs if needed.”

The budget proposal does not include any cost of living increases for county employees.

“We’ve made it through this current year without having to mandate unpaid furloughs or cutting positions or salaries of our county employees…I’m very proud of that,” Williams said. “We were able to make cuts in other areas without sacrificing services to our citizens. But we’ve got our work cut out for us in the coming fiscal year.”

Williams and the commissioners were expected to meet last week in their initial round of budget workshops. Whatever comes out of those workshops and approved by the board becomes effective July 1.