Northampton faces ‘break even’ year
Published 8:12 am Thursday, February 24, 2011
JACKSON — There’s good news and there’s bad news.
On Monday, the Northampton County Board of Commissioners received both during their mid-year financial analysis from J.P. Jones with Martin-Starnes & Associates.
In good news, Jones told the board the county’s finances would break even. However, tight financial times are requiring county officials to postpone local projects and possibly dig deeper into in the county coffers to make up for budget responsibilities passed on by the state.
The audit information prompted the commissioners to agree to keep the new Department of Social Services (DSS) office construction as well as the Phase V Water Improvement project on hold.
According to Jones, as of last year the county’s projected fund balance was $5.03 million. At the end of the year, the county ended up with $4.45 million with a variance of $582,000.
“The reason for this from what we projected it to be and what actually happened was sales tax; it was a huge contributor to this,” he said.
Jones added he did not expect sales tax to increase as spending has not come around like many thought it would.
“I know that you might be hearing that sales tax is going to start increasing, but we’re just not seeing that across the state,” he said. “There are still a lot of people unemployed and people are still holding onto what money they have not knowing what is going to happen tomorrow.”
The county’s general fund (as of Dec. 31), revenues were at $15.85 million while expenditures at $13.13 million.
“You’re revenues are about $2.7 (million) to the good,” Jones said. “Our projection is that you will break even this year. You’re going to spend more in the second half of the year than the first half.”
Jones said the county appropriated $255,000 of fund balance.
“Some of the reasons you’re breaking even are some of the capital projects-purchasing sheriff’s vehicles, copiers, ambulances- you have issued debt to offset those expenses, over the next five years you’re going to be paying that off,” he said. “Your debt service is going to go up the next five years—that’s roughly $630,000. In the current year you have revenue equal to what you were spending.”
Jones said the county’s projected fund balance this year will be roughly the same as last year with the total being $4.45 million (15.64 percent) with unreserved fund balance at $2.08 million (7.33 percent).
Jones noted that last year the county’s unreserved fund balance stood at 8.28 percent and the reason for the dip in that percentage is because total expenses are going up.
He said this year the county has roughly $1.7 million budgeted in capital outlay and so far $1.3 million has been spent. Jones said next year the county will probably not see the same expenses in capital outlay, therefore the unreserved fund balance will go up in percentage.
In the meantime, Jones said county officials need to prepare for a letter from the Local Government Commission, a group that imposes minimum fund balance requirements. The county can only appropriate unreserved (available) fund balance and the most recent statistics published by the LGC, the average available fund balance percentage for counties with a population of 25,000 or less, like Northampton County, was 20.76 percent. Jones said the LGC will ask for the county’s intended plan.
Jones said the water and sewer fund’s actual numbers puts revenues over expenditures by $570,000, but it’s projected that the county will spend more than it will bring in for the second half of the year with projected revenues at $1.34 million and expenses at $1.67 million. He added the fund’s net assets will increase by $240,000 and therefore revenues will come in over expenses. He said water and sewer cash is at approximately $100,000. Cash flow for the fund is only sufficient to cover operations and debt service, but not major repairs or improvements.
The solid waste fund stands at $204,000 revenues over expenditures. However, Jones said at the end of the year expenditures are projected to be over expenditures with a loss of $120,000.
Jones noted that this fund also owes money to other funds totaling roughly $400,000 as of June 30, 2010.
In other mid-year analysis highlights, Jones noted the expenditures in the county’s DSS fund was a little inflated because of the purchase of land for the new DSS facility and architect fees.
It was the same situation for the ambulance fund because of the capital purchases for new vehicles.
Jones also noted the inmate housing revenues and expenditures, in which over the past five years expenditures have exceeded revenue by $4.6 million.
“Your revenue has steadily decreased over the past four years,” he said. “What can be done here? It’s a question that you need to look at as things are changing in the state budget.”
Jones offered the board some actions to consider, including in the upcoming budget to plan to fund recurring expenses with recurring revenues; be aware of the effects of financing projects with general fund borrowings even if the intention is to pay it back; maximize hire-gap savings and require department heads to justify why a position must be filled and to take a “zero-based” budgeting approach. He added that new water and sewer debt needs new revenue stream to match.
Jones also spoke about new budget responsibilities the county could be picking up from the state.
“Some of the things that have changed in the new budget that the governor has submitted to be approved; workers’ comp for state funded school personnel is going to be a local responsibility now,” he said. “There’s a ten percent reduction to central administration, I think it estimated at a budget of a loss of 140 administrative positions.”
Jones added school bus replacement will be a local responsibility.
“There are a lot of things that are changing, especially with education,” he said. “When things need to be replaced they will be coming to you all.”
County Manager Wayne Jenkins also noted that there was going to be a reduction of North Carolina Lottery funds from 40 to 10 percent for the schools and a set aside in the corporate income tax that will be picked up by the county.
“Northampton County will take a hit of $422,000 for two years; that’s (close) to a million dollars,” he said.
Jones encouraged the commissioners to regularly check the North Carolina Association of County Commissioners’ web site to see what’s “coming down the pipeline.”
In other county financial news, Jenkins presented the commissioners with a mid-year financial review of the county’s departments. According to information provided by Jenkins, by December 31 the departments had expended $9.12 million of the county’s $21.56 million. His presentation showed departments running $1.19 million under their $10.31 million spending plan.
“We have actually under spent our spending plan by 12 percent in six months,” he said.
Jenkins also presented a 2011-12 budget formulation in which he recommended Northampton County Schools level of funding stay the same as the current year.
Under the budget formulation, the school district would get a total of $3.84 million with $3.5 million going toward current expense and $345,000 toward capital outlay.
For general county government, mileage reimbursement would remain at 48 cents per mile, there would be no cost of living increase and critical capital outlay would be addressed.
After further discussion, the commissioners agreed to keep the DSS and Phase V Water projects on hold.
“I don’t see how you can move forward with it,” said Commissioner Virginia Spruill.
Commission Chairperson Fannie Greene agreed by saying she thought the board should wait until July 1 for a decision.