June 12, 2018
MEMO TO: Mayor Barber and Board of Commissioners
FROM: Frank A. Rush, Jr., Town Manager
SUBJECT: FY 18-19 Budget - (Summary & Suggested Motions)
The Board of Commissioners is scheduled to formally consider the FY 18-19 budget ordinance, fee schedule, 5-year capital replacement / improvement program, and FY 18-19 pay plan at the June 12 meeting.
FY 18-19 Budget Ordinance
The attached FY 18-19 budget ordinance is identical to the Town Manager’s Recommended Budget presented on May 8 and reviewed by the Board at its May 16 and June 5 budget workshop meetings, with a few minor adjustments (discussed with the Board at the May 16 and June 5 meetings) that appropriate an additional $20,000. As you know, the required public hearing was held on June 5, and the FY 18-19 budget ordinance is presented for formal consideration and adoption at the June 12 meeting.
The total FY 18-19 Recommended Budget is $10,689,900, an $803,733, or 8.1% increase from the adopted FY 17-18 budget. The Board should note that this increase is skewed by an accounting change for EMS service fees ($215,000), and also by the one-time inclusion of proceeds from the Islander Drive land sale ($200,000) that will reimburse the Future Beach Nourishment Fund. Without the inclusion of these two revenue sources, the increase would be $388,733, or 3.9%. The General Fund is the largest component of the Town’s budget, with total expenditures of $10,018,100, which is a $563,924, or 5.96% increase from the adopted current year budget. Without the accounting change for EMS service fees, the increase would be $348,924, or 3.7%. The Future Beach Nourishment Fund budget is $939,500, which includes $200,000 from the Islander Drive land sale proceeds, and is thus more than recent years. The full amount of $939,500 would be reserved for future beach nourishment activities. Appropriations are also included for the Half-Marathon Fund ($72,000), the Beach Music Festival Fund ($55,300), and the EMS Volunteer Fund ($5,000).
In accordance with the Board’s top budget priority, the FY 18-19 budget includes no increase in property tax rates, and only a few minor fee adjustments. The General Fund tax rate for FY 18-19 is unchanged at 15.5 cents per $100 of assessed value, with 14 cents allocated for general Town services and 1.5 cents specifically earmarked for beach nourishment. The Primary Benefit District (oceanfront and inlet-front properties only; for beach nourishment) property tax rate would remain at 4 cents, and this rate, along with the $400,000 transfer from the General Fund, will enable the Town to reserve the historical annual amount for future beach nourishment activities (plus the $200,000 Islander Drive land reimbursement). There is also no change in the Town’s annual solid waste fee, and this fee would remain at $228 for all developed residential properties, which equates to $19 per month for all Town solid waste services (trash, recycling, yard debris collection, beach strand collection, and more). The budget does include two relatively minor fee increases: a $50 annual (or $4.17 per month) increase in all Community Center membership categories, and the addition of Fridays for regional beach access parking fees. These fee increases will impact approximately 350 of the Town’s 7,370 real property taxpayers.
The FY 18-19 budget includes sufficient resources to enable Town staff to maintain the high service quality expectations of our residents and visitors, and includes funding to compensate Town employees fairly, replace necessary vehicles and capital equipment, meet inflationary and other service demand pressures, and enhance staff capabilities. The budget includes a few notable service enhancements, including:
- funding (total of $30,000) for additional NC 58 corridor aesthetic enhancements, including the conversion of “downtown” street lighting to LED fixtures, initial funding to replace pine straw with river rock, and additional uplighting near the NC 58 bridge,
- additional lifeguard coverage during the summer season ($11,907), increasing the Town’s daily summer staffing to 6 on the beach strand each day,
- funding for a new financial, tax, and payroll software system to improve efficiency and enhance public access to tax payment information ($17,000),
- full-year funding for the new EMS department (total annual budget of $653,982), and
- the establishment of a reserve fund for future golf cart path infrastructure improvements ($18,000).
The budget also facilitates a few significant capital projects, including:
- a major beach nourishment project in eastern Emerald Isle, at a total cost of $9.2 million – funded by State funding, County room occupancy taxes, and Town beach nourishment reserve funds,
- significant streetscape improvements along Islander Drive and improvements to the Western Ocean Regional Access, at a total cost of $263,000 – funded by Islander Drive land sale proceeds and a State grant, and
- and initial park improvements at the new McLean-Spell Park, at a total cost of $58,000 – funded by the remaining installment financing proceeds associated with the land acquisition.
In addition to the items discussed above, some of the other more notable items in the FY 18-19 budget are highlighted below:
- a total of $2,000,000 of sales tax revenue is anticipated in the General Fund, which is an increase of $150,000 over the FY 17-18 adopted budget, which included an intentionally conservative estimate due to potential sales tax threats that (thankfully) were not adopted by the NC General Assembly,
- for the first time, EMS service fees are included in the General Fund budget, and a total of $215,000 is anticipated in FY 18-19,
- a total of $185,000 of regional access parking fees are anticipated in the General Fund budget, including an additional $30,000 projected as a result of the Town’s plan to now charge for parking on Fridays (in addition to Saturdays, Sundays, and holidays),
- an additional $18,000 of Community Center membership fees associated with the planned $50 increase in the annual membership fee across all membership categories,
- General Fund balance is projected at nearly $2.3 million at June 30, 2018, the highest in the Town’s history, and there is no reliance on General Fund balance for the FY 18-19 budget,
- a total of $81,420 is included for the first annual debt service payment for the McLean-Spell land acquisition and initial park improvements,
- with the planned sale of the Islander Drive land, a total of $200,000 of the total sale proceeds will be credited to the Future Beach Nourishment Fund, and this land sale will enable the General Fund transfer to the Future Beach Nourishment Fund to be reduced to $400,000 (the annual historical appropriation necessary to meet the Town’s future beach nourishment needs; the equivalent of 1.5 cents on the Town’s General Fund tax rate),
- a total of $15,000 is again included for the installation of small storm water solutions to address very localized storm water flooding areas in certain locations,
- a total of $90,000 is included for the replacement of beach access walkways at Randy’s Way (Page Place), Channel Drive, and Joel Street,
- a 2.3% cost of living adjustment (equal to the CPI change as of March 2018) is included for all Town employees, at a total additional annual cost of $97,084, along with an additional $40,000 for targeted salary adjustments (the equivalent of approximately 1% of the Town’s payroll),
- a total of $16,000 is included for the establishment of a new retiree health insurance program for Town employees with 20 or more years of service to the Town,
- as discussed with the Board at the May 16 and June 5 special meetings, a total of $25,000 is now included for the construction of one new pickleball court at the Town Government complex,
- funding is included for the replacement of Police and Parks and Recreation vehicles, and also the replacement of asphalt repair equipment ($156,000),
- a total of $18,000 is included for July 4 fireworks, with the Town funding 100% of the cost this year, and
a total of $15,000 is included for the replacement of the Lee Avenue culvert over Archers Creek.
Overall, I believe the FY 18-19 budget represents a fiscally responsible spending plan for the next year, that it addresses the Board’s expressed priorities, and that it will continue to move the Town forward.
The Town’s official fee schedule for FY 18-19 is presented in conjunction with the budget ordinance. As noted above, the fee schedule includes only a few minor fee adjustments, and these adjustments are in bold in the attached fee schedule. Recommended fee adjustments include:
- a $50 increase in annual Community Center membership fees for each membership category; individual taxpayer memberships would increase to $150, family taxpayer memberships would increase to $200, non-taxpayer memberships would increase to $350, and non-taxpayer memberships would increase to $500; these fees have not been increased since 2009 and would impact approximately 350 Emerald Isle taxpayers,
- the implementation of a $10 per vehicle per day parking fee on Fridays at the Eastern Ocean Regional Access and Western Ocean Regional Access; Emerald Isle residents and property owners would not be impacted by this fee increase because they receive free parking permits, and
- the elimination of the $100 fee charged by EMS for calls that involve minimal treatment but no transport; the application of this fee has been inconsistent in the past, causing confusion and concern, and does not generate significant annual revenues for the Town.
5-Year Capital Replacement / Improvement Program
I have also attached an updated copy of the 5-Year Capital Replacement / Improvement Program, and request that the Board formally adopt this plan in conjunction with the budget ordinance and fee schedule. The attached 5-year plan is similar to the plan included in the Recommended Budget and discussed at the Board’s budget workshop meetings (with two minor adjustments), and includes all capital expenditures included in the FY 18-19 budget ordinance (planned beach nourishment project, Islander Drive / Western Ocean Regional Access improvements, initial McLean-Spell Park improvements, replacement vehicles and equipment, beach walkway replacements, and others noted above).
The total investment included in the attached 5-Year Capital Replacement / Improvement Program is approximately $30.8 million, and is funded with a mixture of pay-as-you-go funding, installment financing proceeds, grant funding, and fundraising proceeds. The Board should note that $24.2 million of this amount is allocated for two significant beach nourishment / inlet management projects in FY 18-19 and FY 21-22. As discussed with the Board in recent months, the planned eastern Emerald Isle beach nourishment project is expected to be constructed this coming winter, and we have also included a “placeholder” in FY 21-22 for the next planned relocation of the main Bogue Inlet ebb channel and associated beach nourishment in western Emerald Isle. The main Bogue Inlet ebb channel is currently located approximately 1,300 feet from The Point vehicle ramp, and the Town intends to relocate the channel once it encroaches within 1,000 feet of The Point. If the migration of the main ebb channel occurs faster or slower than anticipated, the schedule for this $15 million project will be adjusted accordingly. The total estimated cost of $15 million is expected to be funded by a combination of State funds ($10 million; Shallow Draft Channel Dredging and Lake Maintenance Fund), County room occupancy tax funds ($3.75 million), and Town reserve funds in the Future Beach Nourishment Fund ($1.25 million).
The other most significant project included in the 5-year capital plan is the renovation of Fire Station 1 in FY 19-20, at a total estimated cost of $1.5 million, to be financed by a new installment financing agreement. As discussed during the Board’s review of the budget, the exact scope of this project will be carefully reviewed and finalized during FY 18-19 in order to have the Town in a position to proceed with detailed design and construction in FY 19-20. The 5-year capital plan also includes the expansion of Fire Station 2 ($450,000) in FY 19-20, the replacement of the Fire Department’s ladder truck ($1 million) in FY 19-20, and the replacement of an EMS ambulance ($225,000) in FY 19-20. The exact timing and cost of these planned initiatives will likely have a significant impact on the Town’s future General Fund property tax rates, and the Board will need to carefully consider these initiatives over the next few years.
The 5-year capital plan also includes scheduled vehicle replacements and other minor capital initiatives over the next five years, to be funded primarily with pay-as-you-go funding in the General Fund.
The two minor adjustments to the 5-year capital plan that was presented on May 8 include the earlier construction of one new pickleball court ($25,000) in FY 18-19, and the reduction of funding for initial McLean-Spell Park improvements from $70,000 to $58,000 based on actual remaining project funds after the completion of the land acquisition in mid-May.
FY 18-19 Pay Plan
The Board is also asked to approve the attached FY 18-19 Pay Plan at the June 12 meeting.
The attached Pay Plan includes a 2.3% across-the-board adjustment to the pay grades established for all Town positions, in accordance with the Board’s decision to provide a 2.3% cost-of-living adjustment for all Town employees as part of the FY 18-19 budget. The hiring rate, minimum salary, mid-point, and maximum salary for each position is increased by 2.3%, and will insure that the Town’s overall pay plan remains competitive in retaining existing employees and recruiting new employees in the future.
Additionally, the salary grades for EMT-Basic (grade 6 to grade 8) and EMT-Intermediate (grade 10 to grade 12) positions have been adjusted to more accurately reflect the value of these positions. As you recall, the Town initially integrated the new EMS personnel into the Town pay plan at the same pay grades / rates utilized by Emerald Isle EMS, Inc. We have been incrementally working to increase EMS pay grades / rates since the transition, and this change represents additional progress on this effort. I hope to continue this approach, incrementally, in the future.
Additional FY 18-19 Budget Information
I have again included summary information about the FY 18-19 Budget in your agenda packets. This summary information is consistent with the budget totals included in the attached FY 18-19 budget ordinance and the attached 5-Year Capital Replacement / Improvement Plan.
The following information is attached:
- “Quick Summary” of the FY 18-19 Budget
- “All Funds” Summary
- General Fund Budget Summary
- Net Change in Annual Town of Emerald Isle Tax Bill (for selected property values)
- Graph – General Fund Property Tax Rate History
- Graph – Primary Benefit District Property Tax Rate History
- Town Organization Chart and Summary of Authorized Positions
- General Fund 5-Year Forecast
- Graph – Adjusted General Fund Balance
- Property Tax Rate Breakdown
- Itemized Property Tax Receipt
- Graphs – Annual Solid Waste Service Fee History and Annual Solid Waste Service Fee Revenues
- Graph - Annual Bill – Average Value Property Owner
- General Fund Tax Rates for NC Beach Towns (FY 17-18 Actual)
- Graph – General Fund Revenues
- Graph – General Fund Expenditures by Function
- Graph – General Fund Expenditures by Category.
As you know, the detailed FY 18-19 Recommended Budget was distributed under separate cover on May 8, and copies have been made available for public review since that time. The FY 18-19 Recommended Budget has also been posted on the Town’s website since early May. A full copy of the FY 18-19 Approved Budget will also be made available in Town buildings and on the Town’s website after Board approval.
I will be happy to answer any questions about the budget ordinance, fee schedule, capital replacement / improvement program, and pay plan at the June 12 meeting.