The countdown is on for county employees: the manager’s recommended budget is due to be delivered into the hands of the county commissioners on May 9.

It’s a complicated process, made more challenging by the fact that both the county manager and chief finance officer positions have turned over several times over the past several years.

But for County Manager Brian Alligood and Chief Finance Officer Anita Radcliffe, who both made the move from Washington city government to county government in the past year, the goal is clear: to not only present a guide for county expenditures in the fiscal year 2016-17, but a readable document that anyone can access.

“More than anything, I think it’s an educational document,” Alligood said. “The public should be able to read it. … Really get an understanding of what county tax dollars are being spent on.”

 

Funding the county budget

In this transition year, Alligood and Radcliffe are mapping out the 2016-17 budget based on funding departments and outside agencies at the same amount as last year.

Last year’s budget came in at $57,703,622, with a $1,077,865 appropriation from the fund balance written into the budget, Alligood said. Over the past eight months, an additional $1,488,274 has been tacked on to the original budget — amendments approved by commissioners as requests were made.

“Ideally, we want to account for everything. We don’t like budget amendments, but sometimes they occur,” Alligood said.

Some of those budget amendments include $293,000 in salaries, equipment and a contract with Universal Protection Security Systems for increased security at the Beaufort County Courthouse, as well as $203,269 to establish Beaufort County EMS, which involved purchase of an ambulance, Quick Response Vehicles and salaries for the paramedics who man them. Others expenditures were for property purchases: land at Wright’s Creek ($200,000), near Belhaven, and the First Bank property ($440,000) on Second Street in Washington. Both purchases were the result of county policies put in place by the Board of Commissioners: consider purchase of properties that could provide increased public access to the water, as well as properties near the Beaufort County Administrative Office — between the county tax office, sheriff’s office, courthouse and administrative office occupying the same block, a lack of parking space for county employees has become an issue.

The county also spent $150,000 on another piece of property adjacent to Beaufort County Community College, a facility that continues to grow.

“They were expenses that weren’t anticipated when the initial budget was built,” Alligood explained.

Each was purchased out of money from the fund balance, an account that holds a percentage of the county’s operating budget. Alligood refers to the fund balance as the county’s safety net: there in case of emergency, such as a natural disaster and its costly aftermath, and allowing the county to continue to operate as usual even during times that little-to-no revenue is coming in.

“What we like to see is government spend fund balance on one-time expenditures,” Alligood said. “You get yourself in trouble when you start spending money on ongoing expenditures.”

Alligood said the ongoing expenditures in the 2015-16 budget that have been purchased from fund balance money, like salaries for paramedics and courthouse security officers, will be absorbed in the budget for 2016-17.

 

Lower taxes vs. fund balance safety net

As of Friday, $19.3 million was in the fund balance, according to Radcliffe. The number represents 33.5 percent of the county’s budget.

The argument has been made that the county doesn’t need that much cash in its fund balance — that a smaller fund balance would mean a reduction in taxes for county residents.

“There’s no reason for the county to pile up money like that, that we know we’re not going to use,” Beaufort County Commissioner Hood Richardson said. “That money is better in the hands of the taxpayer.”

Richardson said the county is taxing people about $5 million more per year than they need to be. He’s been advocating for years to drop the fund balance to 20 percent of the county’s budget — the county really only needs so much cushion for operating expenses and none in case of emergency, he said.

“With our credit rating we can always go to the bank and borrow money,” Richardson said.

Commissioner Frankie Waters said it’s because of the generous fund balance that Beaufort County has such a good credit rating, which also puts the county in an advantageous position should a new, major project, such as a school, needs to be financed.

“My background is in banking and finance, so I’m probably more in tune to having a larger fund balance,” Waters said. “I think minimum target should be somewhere around 30 percent.”

Waters pointed out that because real estate values have dropped dramatically since the last property revaluation in 2010, the county will already see a decrease in tax revenue — and residents, likely a decrease in their tax bills — with the new revaluation.

“(The fund balance) gives us a cushion as we approach this Jan. 1, 2018 deadline for revaluation,” Waters said. “We could lower the tax rate for a year, and lower taxes by $5 million, but then we’d have to raise them again the next year. To me, it’s better to keep the tax rate as stable as possible. … You and I and businesses would rather have stability in the tax rate than the variations from year to year.”

 

Where Beaufort County stands

The Local Government Commission has a rule: a local government’s fund balance cannot sink below 8 percent of its operating budget, or they’ll be hearing from them, as it’s the state agency overseeing operations for the North Carolina’s county and city governments.

In 2013, the Beaufort County Board of Commissioners passed a financial policy that set the fund balance goal at 35 percent. It may seem excessive to some, but according to Radcliffe, Beaufort County’s percentage is right in the middle, percentage-wise, of surrounding coastal communities: Craven County is 26.4 percent; Martin County, 28 percent; Pamlico County, 45.2 percent; Washington County, 48 percent; and the City of Washington, 42 percent. Of those, Craven County’s budget is more than twice that of Beaufort County; Martin County’s is approximately half. The percentage doesn’t define how much money is in each county’s fund balance — the budget does.

Radcliffe said Beaufort County’s hefty fund balance is a necessity: between the start of a new fiscal year in July and the point where people begin paying their taxes late in the year, there is little money flowing into county coffers, yet salaries, operating costs and bills still need to be paid. Not having the backup of a flush fund balance could be a dangerous prospect, she said.

“You’d be robbing Peter to pay Paul when you sit down to pay your bills,” Radcliffe said. “You’d be paying them out of other funds.”

Richardson said a three-month cushion would be adequate to get the county through those dry months.

“You need about three months of revenue. You really need August, September and October — about $15 million,” Richardson said.

A $15-million fund balance is approximately 26 percent of the county budget.

Alligood said the policy to aim for a 35 percent fund balance was set by the county and his role is to follow that policy.

“If they want to review that policy and change it, they obviously can do that, but we’re right there where they say we need to be,” Alligood said.

 

Moving forward

Alligood has a plan to remove spikes in the budget caused by emergency expenditures, creating comprehensive plans that map out county expenditures in the long term. In November, commissioners authorized the hire of REI Engineers to make a report on the state of every roof on every county building. The next report will have a breakdown on the state of every building, the maintenance it requires and when.

“What you really want to do is plan it out,” he said. “Our goal is to see level lines.”