webadmin posted on February 01, 2010 06:41
My March 2009 column outlined the City of Statesville’s response to the sudden collapse of the national economy.
Council and staff were concerned about the impact on the budget, but years of steady growth in our economy and enviable tax base mix of 60% industry and 40% residential gave us the ability to provide the citizens with an adequate level of service at a reasonably low tax rate.
Thanks to 12 years of an annual growth of between four and seven percent in the tax base, I was able to recommend increases in the level of service, fund construction projects with case and finance all General Fund functions with our current 38-cent tax rate.
That was the 2009-2010 budget. The 2010-2011 budget may be quite different.
We are now preparing for several years of depressed growth. We must consider aggressive methods of marketing Statesville as a technologically savvy community with amenities that attract working families, business and industry.
We will be challenged to provide the same level of service, make improvements to our infrastructure and keep up with the cost of living while also fighting to keep the tax rate at our traditionally low level.
We will have less revenue from taxes, as well as utilities as a result of industrial closings and a slow housing market. Even though we have announced several industrial additions and expansions in the past sixty days, their improvements will not go online before January of 2011. Given this reality, we will most likely enter the next budget year with around the same revenue as this year.
As we face the new economic reality, the City Council and staff are watching for opportunities to save money in the market place. We will have to make our choices carefully and probably resort to financing our projects more often than in the past.
We have followed the construction industry and found that prices have dropped considerably due to the recession. As a result of the City Council’s direction to proceed with the construction of Fire Station #4, we will be able to build the station for $1,571,000; $1.2 million less than its $2,8 million estimate.
The Council is taking advantage of the Federal Stimulus Package, using a special borrowing opportunity to finance the new fire station at an extremely attractive interest rate. A taxable bond will be issued by the City and the Federal Government will issue a tax rebate of up to 45% on the interest charged by the bank. By using this financing we will free up cash to use for other projects.
With the encouraging results of the fire station construction bid fresh in our memories, the Council has also moved ahead with the renovation of the City Hall. They hope to move this project forward and send it out to bid by early summer.
Thanks to help from the NC DOT, the FAA and our Congressional delegation, we were able to fund an eight million dollar upgrade to the runways and taxiways at the Airport. This joint City/County program ended up costing each government about $400,000. Because of the new strength of our runway, our industrial recruiters will be able to attract industries that need larger and heavier aircraft to import and export their products internationally. We have increased the tax base at the Airport from $20 million in 2002 to almost $300 million in 2009 due to our improvements.
We will continue to look at other ways to save money, but we have tough challenges ahead.
The Finance staff is studying the end of year property tax collections and the monthly sales tax remittance from the State Department of Revenue to help us predict our revenues for the upcoming year. The impact on the tax rate is of great concern. We are also concerned the recession’s impact on our utility rates.
Last year we experienced deficits in our water, sewer and our electric fund as a result of significant declines in consumption by large customers. We have several maintenance projects in the water and sewer department that must be carried out in the near future to ensure our permit limits are met.
The City may be forced to raise electric rates to meet our debt payment for Statesville’s ownership in the Catawba Nuclear Plant. The cost of debt service and wholesale power is the single biggest expenditure in the electric fund. The entire operation and maintenance budget for the Electric Department is only 14% of the total budget.
We will most likely enter the next budget year with the about the same revenue as this year. But Statesville must continue to move forward. Our challenge is to develop a budget plan that will move us forward at a speed we can afford.