City Council looks at proposals for cuts, fee increases in upcoming budget

Published 12:00 am Wednesday, April 29, 2020

By Liz Moomey

SALISBURY — The City Council on Tuesday got its first glimpse of the 2020-2021 fiscal year budget draft from City Manager Lane Bailey.

The budget has no property tax increases. It does, however, include increases in city fees.

Finance Manager Wade Furches explained the impact of shutdowns cause by COVID-19 on sales tax revenue will be unknown until June. For the current fiscal year, the city has collected $900,000 more than expected at the beginning of the fiscal year. Furches said he doesn’t expect March’s sales tax revenue to be greatly impacted since the stay-at-home order was not in effect the whole month.

The League of Municipalities has estimated cities may experience a 10-25% decrease in sales tax revenue. A 10% decrease would be $290,000 in revenue. A 20% decrease would be $580,000 in revenue. A 25% decrease would be $725,000.

Furches said the finance department is trying to be conservative.

“Still thinking we’ll come in on budget on sales tax going forward, it’s just a guess,” Furches said. “There’s no way to know. We’ll start to get some semblance of what’s going on in June.”

On property tax, the city has exceeded the year’s budget estimates. For the coming fiscal year, which starts July 1, Furches expects the city will receive $22.36 million property tax revenue with a collection rate of 98.6%.

Furches said he’s looked at the most recent recession in preparing for the coming year’s budget. If the city dipped to that 2012 levels of collection, it would receive $21.62 million in property tax revenue, a loss of about $740,000.

Even with an uncertain future, Bailey says he does not feel comfortable proposing an increase when Salisbury residents are struggling. He is proposing fee increases for residential and commercial landfill and waste collection, water volume charge, sewer volume charge and for residential and commercial stormwater.

Councilwoman Tamara Sheffield said the City Council is “fooling themselves” by saying they aren’t doing a property tax increase while increasing fees.

“There is a lot more moving pieces here,” Sheffield said. “We’re not going to do a property tax increase. We’re just going to tag it everywhere else. I’m glad this is just our first conversation.”

Councilman David Post said he wants to see different budgets to reflect different amount of revenues.

“I could see revenues not keeping up even with these conservative estimates,” he said.

Councilman Brian Miller said he would like to see some worst-case scenarios proposed, including potentially implementing rolling furloughs of city employees.

Also during budget discussions:

• Finance Director Shannon Moore proposed other revenue sources that may be impacted for fiscal year 2021.

This month, 427 water/sewer accounts met the governor’s cutoff requirement. Those residents will not have their service turned off because of the COVID-19 pandemic. The budget impact of that is $144,000 along with $18,000 that could have been collected in penalties.

Moore said the governor’s executive order requires a six-month payment plan to pay their water/sewer bill.

• Moore also said the city may face potential revenue reductions because of no facility rentals through the city’s Parks and Recreation Department.

Rentals alone give the city $60,000 per year. The city may see a reduction in interest earnings of $165,600 and sale of assets of $135,000.

• Furches said the city has budgeted to use $4 million of its fund balance, which sat at 33% at the end of 2019 fiscal year and is designed to be used as a savings account in tough economic times. The city is expected to only take about a $1.8 million total hit to its fund balance.

• Bailey listed a number of city projects that would be deferred, including Fire Station No. 3, estimated to cost $6.75 million.

Some projects will continue that are currently in progress, including the Grants Creek Greenway, Newsome Road repaving and Brenner Avenue sidewalks installment.

• Bailey said city employees would not receive a raise in the coming year and there would be a hiring freeze for vacant positions.

Bailey said he was asking department heads to make cuts that are painful. He said the city doesn’t have a lot of options.

Bailey spoke about when he came to the city after the recession and during the city’s grappling with Fibrant’s financial future. Bailey said he felt like the city was rebuilding and doing wonderful things.

“I’m very proud of what we’re doing to rebuild those, and I think in some ways we’re undoing,” Bailey said. “I don’t think we have any other choice. We’ve got to get a budget passed that we can live with through this period and think about what life looks like afterward when we come out of this.”

Miller said the first budget presentation was a great place to start and more discussion was needed.

“The rest of it is going to be scratching our head trying to do what we think is going to make the most sense,” he said.