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Consider the Final Budget and Related Items for FY 2024-25.
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Staff: |
Department: |
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Chris Blue, Town Manager |
Manager’s Office |
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Amy Oland, Director |
Business Management |
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Recommendation(s): |
That the Council enact the FY 2024-25 budget ordinance to establish the budget for FY 2024-25 and authorize the related items.
Discussion:
The proposed Budget Ordinance constitutes the annual budget for 2024-25. The ordinance reflects the Manager’s Recommended Budget as amended based on discussions with the Town Council.
Strategic Priorities:
Vision, innovation, collaboration, and dedicated employees serve as the foundation of the Town’s efforts to build a community where people thrive. Our workforce is committed to meeting the expectations of the community and supporting the strategic goals of the Council. The FY 2024-25 Manager’s Recommended Budget is reflective of, and responsive to, Council’s strategic focus areas and goals for FY 2023 - 2025. A description of the Strategic Goals is provided below.
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Strategic Focus Area |
What Success Looks Like |
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Environmental Stewardship |
To mitigate effects of climate change through management of Town resources, partnerships, and natural environment and as we densify to also strengthen protection of sites in our natural areas plan and parks master plan. |
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Economic & Financial Stewardship |
To support a vibrant economy by supporting business development, jobs creation, and entrepreneurship by balancing our tax base to support a diverse community. |
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Affordable Housing & Housing Production |
To increase housing across a range of incomes and housing types and achieve equitable housing outcomes for historically marginalized populations. |
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Connected Community |
To create a highly connected community where bicycling, walking, and transit are convenient, everyday choices for our neighborhoods, businesses, and public spaces are accessible to all residents without a car. |
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Heathy & Inclusive Community |
To collaborate with communities and institutions to eliminate inequities, build community, and enrich the health and lives of those who live, work, and visit Chapel Hill. |
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Safe Community |
To embrace a holistic approach to making Chapel Hill a healthy, safe, and supportive community in which to live, work, and visit. Stable and safe housing makes stable and safe communities. |
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Employee Recruitment & Retention |
To attract top talent across the organization, offer fair and competitive compensation, and ensure that all employees have the resources, knowledge, and training to do their best work every day. |
Budget Highlights:
A municipal budget is an expression of a community’s values. This year’s budget proposes a 2-cent tax increase to provide the funding needed to continue to deliver high-quality, core services to our residents, businesses, and visitors. This increase is necessary to help offset inflation which has caused the cost of doing business to go up and to address the backlog of needs in operations, maintenance, fleet replacement, street resurfacing, and transit. Our goal now is to continue to rebound and move our strategic interests as a community forward. These investments in safety, diversity, climate, and quality of life are important steps in the right direction. Recovery will include immediate action with one-time funding as well as a return to our longer-term vision and 5-year plan for ongoing budgets.
In the FY 2024-25 budget:
• The FY 2024-25 budget includes a property tax rate of 59.2 cents per $100 of valuation. This represents a 2.0 cent increase, with 1.5 cents dedicated for the General Fund and 0.5 cents to the Transit Fund. The tax increase focuses on the increased cost of existing services, facilities, fleet, and streets.
• Employee compensation changes included in the recommended budget are designed to keep the Town competitive in attracting and retaining the excellent employees who provide the excellent service recognized in the biennial survey.
o A 6% of market rate cost of living pay increase for all full-time and part-time employees employed with the Town as of June 10, 2024 to be effective with the July 12, 2024 payroll. Market rate is defined as the midpoint of each pay grade.
o $2,000 cost of living increase for the Mayor and each Council member.
o No increase in the cost of providing employee health insurance.
o A 0.75% increase to the employer share of the North Carolina Local Government Employees’ System contribution.
o Funding to address the living wage adjustments required to recertify with Orange County Living Wage.
• There are no recommended reductions or changes to core service levels provided by our operating departments.
• The FY 2024-25 budget adds the following priorities:
o Adds $271,525 for three new positions (1 paid from the Affordable Housing Development Reserve Fund and 2 Transit Fund) - Housing Program Coordinator, Transit Planner, and Amenities & Facilities Specialist.
o Adds $242,492 to community partner funding.
o Adds $312,878 for cost-of-service increases.
o Adds $147,025 for technology needs.
o Adds $250,000 for facilities maintenance.
o Adds $250,000 for streets.
o Adds $500,000 for Vehicle Replacements.
BUDGET SUMMARY ALL FUNDS
The following table compares the FY 2023-24 Adopted Budget with the FY 2024-25 Proposed Budget for all Town funds.
BUDGET SUMMARY - ALL FUNDS
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Fund |
FY 24 Adopted |
FY 25 Proposed |
Incr./Decr. $ |
Incr./Decr. % |
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General Fund |
$ 84,879,000 |
$ 89,473,000 |
$ 4,594,000 |
5.41% |
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Transit Fund |
32,149,890 |
36,656,438 |
4,506,548 |
14.02% |
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Stormwater Fund |
3,059,200 |
3,283,000 |
223,800 |
7.32% |
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Parking Fund |
6,089,089 |
5,510,121 |
(578,968) |
-9.51% |
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Housing Fund |
2,588,770 |
2,699,400 |
110,630 |
4.27% |
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Debt Service Fund |
12,752,312 |
9,654,100 |
(3,098,212) |
-24.30% |
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Capital Project Fund |
2,386,104 |
2,713,591 |
327,487 |
13.72% |
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Other Funds |
6,180,105 |
6,959,379 |
779,274 |
12.61% |
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Total |
$ 150,084,470 |
$ 156,949,029 |
$ 6,864,559 |
4.57% |
Note: includes intrafund transfers
THE FINAL BUDGET ORDINANCE
• The General Fund tax rate, Debt Management Fund tax rate, and Transit Fund tax rate represent a 2.0 cent increase, with 1.5 cents to the General Fund and 0.5 cents going to the Transit Fund.
o The tax rates included in the Budget Ordinance are:
§ General Fund 43.7
§ Debt Management Fund 8.8
§ Transit Fund 6.7
Total 59.2 cents
• The Budget Ordinance also:
o Sets the Downtown Service District tax at 6.4 cents per $100 assessed value.
o Establishes the Town’s Fee Schedule for FY 2024-25.
o Uses about $2.5 million in existing fund balance to balance the budget.
o Includes a 6% of market (midpoint) rate cost of living pay increase for all full-time and part-time employees employed with the Town as of June 30, 2024.
FEE SCHEDULE
• The Manager’s Recommended Budget for FY 2024-25 proposes the following changes to the existing fee schedule.
o Reduction in Building & Development Services’ Permit Conference Fee
o New Emergency Management fees for special events and hazardous materials incidents
o Increase to Fire Department fees for inspection and plan review
o Removal of Library card replacement fee
o Multiple Parking fee changes, including increased monthly permit and special event fees, and changes to downtown employee permit fees
o For Parks & Recreation, a new athletic event maintenance fee, and an increased additional staff fee
o A new Planning zoning compliance fee for minor RCD encroachment for small projects
o Increase to Police Department fees for criminal history checks and fingerprints, and a new officer request for secondary employment fee
o Several Public Works fee changes, including increased and new fees in Traffic, Engineering, and Stormwater
FUND BALANCE
The Recommended Budget appropriates $2,485,658 from the Town’s fund balance to balance the General Fund budget. Based on our preliminary estimates it looks like we will finish the current fiscal year by using about $2.3 million of fund balance. This is a planned use of fund balance resulting from the FY 2022 excess fund balance due to much higher than anticipated sales tax revenues, lapsed salary savings, and conservative budgeting practices that carried forward into the current year to complete the projects. Use of this fund balance keeps us at our 22% target. Maintaining an adequate level of fund balance is critical to meet the cash flow requirements of this municipal corporation and to provide an emergency fund to safeguard the Town against the costs of recovering from unforeseen economic, emergencies, and natural disasters.
We recommend that each fall following the issuance of the Annual Comprehensive Financial Report (ACFR), we return to Council to consider appropriating fund balance above the 22% target, if available, for capital or other one-time expenditures. In this manner, depending on the level of fund balance, Council will have a method for funding priority capital projects.
DEBT ISSUANCE AND THE CIP BUDGET
The Debt Management Fund is the Town’s primary source of repayment for capital borrowing. The fund was established in FY 2010 to isolate debt service payments from the General Fund so that capital investment decisions could be made independent of the operating budget. In other words, by assigning a dedicated tax to the debt fund, increases in capital investment would be dependent on the adequacy of Debt Fund revenues instead of competing with the cost of providing core services.
• Pay-Go CIP - For FY 2024-25, the recommended Pay-Go CIP is up $327,487 from FY 2024, due to additional funding for facilities maintenance. The Pay-Go CIP is funded from the annual operating budget and includes small-scale projects that can be completed within the fiscal year. The projects listed below are our highest priority small-scale projects.
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CIP Project |
2024-25 Recommended Budget |
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Municipal Facilities |
$ 910,000 |
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Housing Rental Facilities |
70,188 |
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Infrastructure |
587,403 |
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Parks Facilities |
1,146,000 |
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Total |
$ 2,713,591 |
• General Obligation (GO) Bond Referendum - The Town is pursuing a referendum for general obligation bonds for affordable housing ($15.0M), public facilities ($15.0M), streets & sidewalks ($7.5M), parks & recreation facilities ($4.5M), and open space/greenways ($2.0M) in the amount of $44 million for the November 2024 ballot.
• The successful 2015 bond referendum authorized $40.3 million in GO Bonds, including $34.4 million of General Fund Projects and $5.9 million of Stormwater projects. To date $29.2 million of the authorized bonds have been issued, as shown in the following table:
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Bond Order |
Authority |
Issued |
Balance |
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Streets & Sidewalks |
$ 16,200,000 |
$ 16,200,000 |
$ 0 |
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Trails & Greenways |
5,000,000 |
5,000,000 |
0 |
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Recreation facilities |
8,000,000 |
5,300,000 |
2,700,000 |
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Solid waste facility |
5,200,000 |
0 |
5,200,000 |
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Stormwater improvements |
5,900,000 |
2,700,000 |
3,200,000 |
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Total |
$ 40,300,000 |
$ 29,200,000 |
$ 11,100,000 |
The authority to issue the remainder of the 2015 Bonds, after receiving a three-year extension from the Local Government Commission expires in November 2025. The Town intends to issue the stormwater improvements bonds in early 2025 but will let the recreation facilities and solid waste facility authorization lapse.
PERFORMANCE AGREEMENTS WITH OTHER AGENCIES
The FY 2024-25 budget includes an additional $123,876 for the Partnership to End Homelessness for the SOHRAD program, an additional $7,974 for the Interfaith Council to support its homeless shelter operations, and an additional $110,642 for the Community Home Trust. The proposed amounts include the following changes:
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Performance Agreements with Other Agencies |
2023-24 Adopted Budget |
2024-25 Proposed Budget |
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Human Services |
$ 602,516 |
$ 602,516 |
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Arts |
43,500 |
43,500 |
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Affordable Housing |
861,467 |
1,103,959 |
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Economic Development |
270,000 |
270,000 |
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Total Contributions to Agencies |
$1,777,483 |
$ 2,019,975 |
MAINTAINING BASIC SERVICES
The Town is a service-based organization that relies on a skilled and flexible workforce to deliver a broad scope of governmental services. Personnel related costs account for 71% of the FY 2024-25 General Fund Recommended Budget. The costs of maintaining a high performing workforce are increasing. For the most part, the market dictates salary levels and we continue to experience turnover, difficulty filling key positions, and retirements of long-serving employees. The Town strives to remain competitive in the labor market by maintaining its comprehensive benefits package and through annual salary adjustments.
The FY 2024-25 Recommended Budget includes a 6% of cost-of-living market rate pay increase for all classified employees employed with the Town as of June 10, 2024. This adjustment will be based on the market rate (midpoint) within each pay grade so that employees currently making less than market will receive slightly larger percentage increases than those currently making more than the market.
FARE FREE TRANSIT SYSTEM
Chapel Hill Transit operates as a pre-paid system in partnership with the University of North Carolina at Chapel Hill and the Town of Carrboro (Transit Partners). The FY 2024-25Transit operating budget reflects a 14% increase mainly due to increased personnel costs and the cost of fleet maintenance. While transit maximizes the use of grant funding to reduce Transit Partner contributions, there are no new grants that help with these expenses. The budget assumes maintaining existing services and personnel levels and no new investments in capital, which will need to be revisited in FY 2025-26. Corresponding Partner (UNC & Town of Carrboro) increases, and anticipated decreases in both federal and state annual operating assistance are included.
BUDGET ORDINANCE
The components of the Budget Adoption Ordinance for FY 2024-25 are as follows:
1. Appropriations - Authorization of funds to be expended in the FY 2024-25 Budget by function and fund.
2. Revenues - Estimated revenues expected to be available during the FY 2024-25 Budget Year.
3. Tax Levy - Tax rates for the General, Debt, and Transit Funds expressed per $100 of valuation of taxable property as listed by the County Tax Assessor for January 2024.
4. Special District Tax Levy - Tax rate for the Downtown Service District expressed per $100 of valuation of taxable property as listed by the County Tax Assessor for January 2024.
5. Authorities for Transfers and Adjustments - Defines the authority to move funds among and between functions, projects and funds.
6. Classification and Pay Plan - Establishes salary grades, position classifications, and certain general provisions concerning payment of Town Employees for the FY 2024-25 Fiscal Year. The Manager is authorized to make changes to the Plan during the fiscal year within the adopted budget.
7. Recommended User Fees - Establishes all fees, fines and charges that may be imposed during the FY 2024-25 Fiscal Year.
8. Stormwater Fee - Establishes the stormwater fee for FY 2024-25.
9. Reappropriation of Outstanding Purchase Orders - Appropriates encumbered balances from prior fiscal year so that financial obligations created in FY 2023-24 can be paid in FY 2024-25.
10. Performance Agreements - Authorizes allocation of funds to agencies participating in the Outside Agency application process for performance agreement funding, in the aggregate amount approved by Council.
11. Recycling Collection Services - Authorizes Orange County to provide recycling collection services within those areas of the Town situated in Durham County and to impose and administer a basic services fee for recycling services and a solid waste convenience center fee for residents within those areas of the Town situated in Durham County.
12. Micro-Purchase Threshold - Authorizes the Town to increase our micro-purchase thresholds related to the expenditure of federal funds.
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Attachments: |
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• Budget Ordinance |
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• Classification & Pay Plan Effective July 1, 2024 |
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• Fee Schedule Effective July 1, 2024 |
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• Draft Staff Presentation |
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The Agenda will reflect the text below and/or the motion text will be used during the meeting. |
presenter
PRESENTER: Chris Blue, Town Manager
RECOMMENDATION: That the Council enact the FY 2024-25 budget ordinance to establish the budget for 2024-25 and authorize the related items.