Town of Franklin Proposed Budget

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Town Managers Proposed Budget Summary
Fiscal Year 2023-2024

May 1, 2023

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 2023-2024.

SUMMARY

The Town of Franklin continued to navigate changing economic times in Fiscal Year 2022-2023. Due to the meticulousness and fiscal responsibility of the Town Council and Town Staff, the Town of Franklin remains in a strong economic position. We faced circumstances that were beyond the control of staff including supply chain and material cost issues, and while these issues are improving, we are projecting revenues may not equally offset expenditures in the coming year requiring minimal use of fund balance to ensure that certain one-time operational expenditures can be met.

Some of the largest increases in expenditures comes from a 10% increase in health insurance premiums, 13% dental insurance increase, a mandatory increase in employer retirement contributions, retiree health insurance, utility increases proposed by Duke Energy and other material costs. This budget also incorporates salary adjustments recommended by the Compensation and Classification Study that was completed by the Archer Company at the direction of Town Council. No additional salary adjustments are recommended other than increases for certifications and probationary terms ending.

Specific capital spending is recommended in the Water/Sewer fund. As part of the Lead and Copper Rule Revisions (LCRR) published December 16, 2021, the Environmental Protection Agency (EPA) requires that all community water systems develop an inventory of all service line connections, both system-owned and customer-owned. The inventory must identify the potential presence of lead within each service line connection. The initial inventory must be completed and submitted to the North Carolina Public Water Supply Section by October 16, 2024. These regulations have prompted a request for a full-time employee to satisfy this requirement. Also required is leak detection to monitor for potential water losses in the water system under the state’s Drought Bill. This will require purchase of leak detection equipment. Other collection and distribution line improvements are included as budgeted items utilizing water/sewer revenues.

American Rescue Plan Act (ARPA) funds in the amount of $350,000 for the General Fund for use with sidewalk repair and construction which was not realized in FY 2022-2023 has been included in the budget, as well as a recommended appropriation of ARPA funds to complete the greenway extension off of Allman Drive estimated at $160,000.

Tax Rate

On the years when there is a revaluation completed, the revenue neutral tax rate is required to be published by the Municipality as part of the budgeting process and budget message. The Governing Board does not have to adopt this rate. NCGS 159-11(e) - In each year in which a general reappraisal of real property has been conducted, the budget officer shall include in the budget, for comparison purposes, a statement of revenue-neutral property tax rate for the budget. The revenue-neutral property tax rate is the rate that is estimated to produce revenue for the next fiscal year equal to the revenue that would have been produced for the next fiscal year by the current tax rate if no appraisal had occurred.

Based on the information provided by Macon County and including a small growth factor, the revenue neutral tax rate for fiscal year 2023/2024 for the Town of Franklin is 0.29 cents per $100 in value. The current tax rate is 0.35 cents.

This budget presented is balanced utilizing a rate of $0.33 per $100 valuation. The combined collection rate is predicted to be 95% which is slightly lower than in previous years as trends have shown a lower collection rate in revaluation years. One penny on the tax rate is estimated to yield $89,176. Franklin’s tax base (real property and personal property) was estimated to be $ 938,705,109 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. The Town Council adjusted Police Department salaries in July 2022 in an effort to assist with recruitment as the department held a vacancy rate of approximately 40% at the time. The Town Council authorized a Compensation and Classification study in FY 2022-2023 to address town-wide deficiencies in regional market competitiveness. The challenge for the Town is to continue funding competitive salaries and benefits when the cost of living is rising faster than the Town’s tax base. The recommendations in this budget will stabilize the pay scale versus the region and allow for improved recruitment and retention. Across all funds, the amount required to raise salaries to a regionally competitive rate and to eliminate the compression within the current pay scale is $234,203 across all funds; approximately a 6% increase in salaries.

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 0.7% for all other employees). The cost of health/dental benefits and retirement adds an additional $115,359 over last year’s rates.

There is one (1) new position recommended under the Water/Sewer fund – this position would be in Public Works and classified as utility maintenance technician. This position will be assigned to completion of the required Lead and Copper recording and subsequently would serve on one of the water/sewer crews. Total cost for salary and benefits is $60,700.

There is one (1) part-time position (20 hours per week) recommended under the General fund for Finance. This position would assist with customer service and accounts payable, as well as other clerical tasks such as filing. Total cost is $15,000.

General Fund

This budget reflects a General Fund Budget of $4,896,750, a 13% increase overall from the previous year. It is of note that in FY 2022/2023 there was $150,633 utilized from fund balance to achieve a balanced budget. 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 and staff should be commended for keeping expenditures low.

Water/Sewer Fund

The proposed budget for the Water/Sewer Fund is $4,892,506. Capital projects equal $726,400 for distribution and collection line replacements and improvements to pump stations, this proposed budget does not utilize any ARPA funding for these improvements; however, there are funds available.

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 3% 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 $838,506.03

Fire Department Fund

Based on current estimates fire tax revenues are projected at $1,183,250 for fiscal year 2023-2024. The Fire Department’s proposed fire district tax rate is $0.522 cents per one hundred dollars ($100) of valuation.

**At the time of this message, it is not known if Macon County will make any additional adjustments to the fire district tax as it considers the tax rates for the county.

Fire call pay for volunteers is expected to remain at current rates.

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 for a tanker and pumper/tanker to remain in compliance with NFPA standards. It is becoming increasingly apparent that without assistance from an additional funding source, it may not be possible to make capital purchases of new fire trucks. Due to the lead time that new trucks take to be built, it will most likely be late in FY 2024/2025 before delivery can be expected.

Conclusion

This budget for the Fiscal Year 2023-2024 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 through the changing economy and creates a competitive salary structure within the region for employees. The costs of services, materials and supplies and salary adjustments have impacted operational expenditures. However, every effort has been made to closely monitor expenditures, find efficiencies and plan for the future. The budget reflects 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 2023-2024 is $10,972,506. The proposed budget for Fiscal Year 2023-2024 addresses critical infrastructure needs at the Water Treatment Plant, beautification and sidewalk improvements, recreational opportunities and recruitment and retention of employees, while maintaining a healthy fund balance and providing quality services 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.

I appreciate the time and consideration of the Town Council as they review and discuss the budget and provide input, direction and guidance.

Respectfully submitted,

Amanda W. Owens, Town Manager