The Watauga County Board of Commissioners started its
annual planning retreat last Thursday with a statement of the
obvious — a tough budget year lies ahead.
County manager Rocky Nelson said in his budget memo, “Even
though not as affected as other areas of the state or nation,
the local economy is not immune from the current recession.
“The decline in the housing market has had and will continue
to have a drastic effect on related departmental (planning and
inspections and register of deeds) revenues.
“The general downturn in the economy will affect the county’s
sales tax collections, the second-largest revenue source. Revenues
will have to be monitored closely during budget preparations,
as well as throughout the year.”
Nelson predicted a budget shortfall of between $60,000 and $80,000
in the current fiscal year. In addition, costs for workers’
compensation and medical insurance are expected to increase dramatically.
Nelson has asked department heads to prepare two budgets, one
with a 3 percent decrease, with no cost-of-living increases for
employees.
Nelson said the key this year was to prioritize goals since funds
were limited.
Last fiscal year, sales tax increased 1.6 percent after an 8 percent
increase in 2006-07, though sales tax is expected to decline this
year.
Nelson said federal stimulus money should help offset state education
cuts and spur transportation projects.
December’s sales tax revenue dropped by about $150,000 over
November’s amount, with a 3 percent decline in sales tax
revenue projected for the remainder of the fiscal year ending
in June.
County finance director Doris Isaacs said the county had been
“fairly insulated” from previous economic downturns
due to tourism and Appalachian State University. “I don’t
think that’s the case currently,” Isaacs said.
The county Parks and Recreation Department projects a shortfall
this year of between $35,000 and $55,000, coupled with shortfalls
of $261,000 from the register of deeds and $231,000 in planning
& inspections.
Commission chairman Jim Deal said he would prefer a furlough system
instead of job cuts, so the loss of income would be spread around
by employees taking some time off instead of eliminating positions.
Each department could be reviewed if workload had declined.
“It’s not one shoe fits all,” Deal said. “The
theory behind it is everyone sharing the pain instead of one person
bearing all the pain.”
“I don’t want to be an alarmist, but we’re in uncharted
waters, and if we get in the 5 percent range (budget deficit),
we can’t get there without job cuts,” Nelson said, noting
there was no sentiment to raise taxes during a recession.
Nelson also warned that the state was facing a budget shortfall
of up to $2.5 billion, which could lead the state to freeze some
revenue distribution to counties.
The state has taken over funding of Medicaid, but will not pay
the full county share until 2010.
The county should save about $730,000 if the state funds all Medicaid
next year.
The county has an assessed property valuation of $8.5 billion,
an increase projected at 2.2 percent after a 12 percent increase
last year and a 26.5 percent increase in 2006-07, when the last
revaluation figures took affect.
Isaacs also said Laurelmor, the large-scale development in southeastern
Watauga County, was now back on track with new owners after a
financial restructuring, though the development would likely be
on smaller scale than originally projected.
Nelson said the county had never used Laurelmor projections in
budget planning, but instead used the actual property values currently
on the books.
“We believe they’re going to build the project out,
but it’s going to be three to five years longer than originally
planned, which doesn’t help us in the short term,” Nelson
said.
Tax administrator Kelvin Byrd said 200 lots had been sold in the
development, and some had been recombined into acreage that could
be of lower property value than smaller, subdivided lots.
The county has debt service of $8.2 million this year, $7.9 million
next year, and $32.4 million in 2010-11, including $25.8 million
for the new high school.
The commissioners plan to offset that by selling the current high
school facility in Boone.
Isaacs said in the event the high school wasn’t sold, the
county could refinance the loan, possibly at a lower interest
rate. The commissioners turned down sales offers several years
ago, avoiding leasing the property while the new school was finished.
The new school is expected to be complete in 2010.
In 2011-12, the debt service dips to $5.9 million a year.
In 2015-16, the debt service is scheduled to decline to $4.1 million,
as debt on a 1992 school bond and a baler and transfer station
for waste disposal will be retired.
The county also dipped into its fund balance to offset revenue
declines, holding an undesignated fund balance of $13.1 million
in June 2008, or about 38 percent of the annual budget. That has
decreased to 27 percent.
The state recommends a minimum of 8 percent to maintain cash flow,
with 25 percent suggested.
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