Town of Franklin Proposed Budget

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Town Managers Proposed Budget Message
Fiscal Year 2024-2025

May 6, 2024

The Honorable Mayor Horton and Members of the Town Council
Town of Franklin

Dear Mayor and Council Members:

In accordance with the provisions of the North Carolina General Statutes, staff presents the proposed Municipal Operating and Capital Budget for Fiscal Year 2024-2025.

SUMMARY

This document represents the Town's financial plan for the next fiscal year, considering experience, forecasting efforts, and Council direction. The budget ensures the continued provision of high-quality service and identifies the anticipated revenue sources necessary to support our operations. The 2024-2025 fiscal year budget was developed based on a prioritization of needs for a well-rounded, full-service town. As with recent years, time was devoted in 2023/24 towards evaluating options for increased operational efficiencies and cost savings. We also spent time evaluating existing staffing levels to identify needs based on shifting workload and recruitment and retention pressures. 

Due to the conscientious decision making and fiscal responsibility of the Town Council and Town Staff, the Town of Franklin remains in a strong economic position. With the adoption of the fund balance policy, the Town has funding available to complete certain one-time capital purchases within the next 36 months which will help to enhance quality of life and economic development opportunities. 

The Leadership Team entered this budget development with the goal of keeping expenditures as close to the previous year as possible and to do so with minimal to zero use of fund balance; however, there are some increases that we will be facing in the upcoming year. In preparation of the 2024-2025 budget, we face several familiar structural cost drivers that once again compete with desired projects for funding. These structural costs are similar for municipalities across the state and country: rising healthcare costs, unfunded pension (retirement) liabilities, related salary increases, and post-employment benefit liabilities (insurance and LEO separation).  High inflation rates have created cost pressure on almost every aspect of our budget. Lingering supply chain disruptions from the pandemic and increased demand for material goods are combining to create extreme price increases that have caused the cost of most goods to increase by double- or triple-digit percentages from just a year ago. These dramatic inflationary cost pressures make it necessary for the Town to more carefully consider expenditures, utility rates, and fees for service to ensure that our service provision continues at current levels.

The largest increases in expenditures comes from health and dental insurance premiums, a mandatory increase in employer retirement contributions, retiree health insurance, worker's compensation and property and liability insurance, utility increases proposed by our energy provider and other material costs. This budget also incorporates a step adjustment for employees per the Step and Grade policy. No additional salary adjustments are recommended other than increases for certifications and for the end of probationary terms.

Specific capital spending is recommended in the Water/Sewer fund as the Clearwell and High Service Pump Station is a necessary improvement at the Water Treatment Plant.  A sewer line improvement project on Wilkie Street which has been deferred for several years can no longer wait. Other collection and distribution line improvements are included as budgeted items utilizing water/sewer revenues.

The Town has $421,761.55 remaining in American Rescue Plan Act (ARPA) funds.  All funds must be allocated (meaning contracts executed) by December 31, 2024 and funds must be expended by December 31, 2026.     

Tax Rate

This budget presented is balanced utilizing a rate of $0.33 per $100 valuation. This is the same tax rate as the previous year.  The combined collection rate is predicted to be 95% which is in line with previous years. Franklin's tax base (real property and personal property) was estimated to be $3,229,698.72 after adjustments by Macon County. 

Personnel

The largest General Fund expense for local governments is personnel. Due to the face-to-face nature of their work, the goal of all towns is to attract, train and retain a workforce that understands their jobs and provides service in a professional and personable manner.  

In the upcoming year we are faced with three items that will increase our personnel costs considerably, employee health/dental insurance including retiree insurance and an increase in NC Local Government Retirement contributions. The proposal that is before you includes the increase in employee health insurance premiums, increase in dental premiums, and state mandated increases to the NC Local Government Retirement System (LGRS) (1.0% for LEO and 0.74% for all other employees).

There is one (1) part-time position being recommended for conversion to a full-time position under the General Fund for Finance.  This is the Accounting Assistant position.  This position would be classified as an Accounting Technician and already appears on the pay scale.  Total cost for this change, including salary and benefits is $30,000.  

There is one (1) new position being requested for the Streets Division of Public Works.  This position would be added due to the increasing maintenance responsibilities associated with new parks and to assist in better managing when crews could be in different areas to complete more tasks.  Total cost for this addition, including salary and benefits is $41,500.

There is one (1) new position being requested for Administration for a Main Street Coordinator.  This is a position that had been discussed by Town Council in previous budget years and would be responsible for coordinating the Main Street Program for the Town.  Total cost for this addition, including salary and benefits is $54,500.

General Fund

This budget reflects a General Fund Budget of $5,197,500.  In this budget, we are proposing to use zero dollars ($0.00) from fund balance.  In order to reduce the budget to the full extent possible we have reduced the General Fund operating budget to minimal levels.

Water/Sewer Fund

The proposed budget for the Water/Sewer Fund is $5,105,930.  Capital purchases equal $1,243,800 for distribution and collection line replacements and other improvements.  The Clearwell and High Service pump station is noted in the Capital Improvement Plan; however, due to the fact we will be financing a portion of the construction, it is not included in the overall budget numbers. The estimated cost of this improvement is $4,200,000.      

In order to fund the repairs and improvements to the Water Treatment Plant, Phase II and to ensure stability for the revenue stream to finance such, a recommended 5% increase in water and sewer fees is proposed. The 10-year capital improvement plan was approved in 2020 and allotted for minimal annual increases as the Town moves toward the full debt service cycle under a State Revolving Fund Loan.    

There is a need to appropriate from the fund balance (retained earnings) in order to ensure that we meet the requirements of a balanced budget.  The amount required is $875,500.

Fire Department Fund

Based on current estimates fire tax revenues are projected at $1,638,019 for fiscal year 2024-2025. The Fire Department's proposed fire district tax rate is $0.07 cents per one hundred dollars ($100) of valuation.  The Board of Directors for Franklin Fire and Rescue requested a return to this amount to ensure that citizens and visitors continue to receive the best services possible, coupled with well-trained staff with proper gear, technology and equipment ready to respond in emergencies.  This amount is contingent upon approval by the Macon County Board of County Commissioners. 

The Fire Department will be moving to a 14-day pay period to be in line with the other Town departments. 

The Fire Department continues to look for grant funding opportunities for various apparatus and gear and has done a capital improvement plan for expenditures needed to remain in compliance with NFPA standards.  

Conclusion

This budget for the Fiscal Year 2024-2025 is balanced as required by law and continues to provide existing services while meeting the governing body's priorities and policies. The proposal that is before you is one that continues to carry the Town into the future while being cognizant of the changing economic climate and maintains a competitive salary structure within the region for employees.  The costs of services, materials and supplies and salary adjustments have impacted overall operational expenditures.  However, every effort has been made to closely monitor expenditures, find efficiencies and plan for the future. The budget reflects a stable tax rate of $0.33 cents per $100 valuation in order to continue to operate effectively. 

Included in this budget is a copy of the five-year capital improvement plan (CIP) for all departments. 

The total proposed budget for Fiscal Year 2024-2025 is $11,941,449; this is an 8% increase from last FY.  The proposed budget for Fiscal Year 2024-2025 addresses critical infrastructure needs including sidewalk improvements, recreational opportunities, water and sewer infrastructure and continued quality service provision all while maintaining a healthy fund balance and doing so in a cost-effective manner. 

The staff of the Town Franklin is committed to providing a high level of service at a reasonable cost to its citizens. I wish to thank the all of the Department Directors and staff for submitting operating budgets that were fiscally responsible and weighed carefully with knowledge of the current economic climate and tempered with the uncertainty that a presidential election year brings.  Special thanks to the Finance Director and Budget and Fiscal Analyst for their careful monitoring of expenditures throughout the year and for finding new ways to make the budget process more expedient and comprehensive.   

I appreciate the time and consideration of the Town Council as they have reviewed and discussed the budget and provided input, direction and guidance.

Respectfully submitted,

Amanda W. Owens, Town Manager