“BCBS [Blue Cross/Blue Shield] requested a 45.6 percent increase in rates for the upcoming year,” said Waynesville Town Manager Rob Hites in his annual budget message to aldermen. “Through our broker, we negotiated with BCBS and were able to reduce their request to 26.2 percent increase.”

A Pyrrhic victory, to be sure, and one that will add nearly $500,000 to the town’s annual spending, but as Waynesville enters year three of Hites’ cautious five-year budget planning roadmap, not only will there be no tax increase, the budget is actually shrinking by more than 3 percent.

“In 2019-20 the staff is continuing its very conservative approach to preparing our annual budget proposal,” said Hites. “We do not recommend an ad valorem tax increase and use a small allocation of fund balance which we believe we will make up in savings during the year.”

To the extent one could call the health insurance increases a personnel-related expense, two other personnel issues will demand a larger share of the town’s proposed $15.1 million general fund, 70 percent of which goes toward paying town staff.

A change in the North Carolina Local Government Retirement System’s contribution requirements will add 1.2 percent to that line item, and a 1.5 percent increase in the “career track” program — designed to retain employees in an environment where the cost of living is rising faster than the tax base — will also drive up costs.

Those increases, though are offset by reductions in capital costs, operating costs and loan payments that present a $300,000 reduction in general fund spending.

That $300,000 alone isn’t enough to make up for the personnel increases, which also include the addition of another police officer due to increased call volume, so more than $522,000 in general fund balance will be appropriated for the coming fiscal year.

Fund balance is akin to a government savings account, usually reserved for unforeseen events that could result in the interruption of revenue collection or dramatic spending increases, like natural disasters.

There is, however, a difference between “appropriated” and “spent” — appropriated means the money’s been set aside for possible use, and spent means it’s already gone.

For example, in last year’s budget, the town appropriated — planned to spend — $891,000 from its savings, but as the fiscal year ends June 30 will likely use less than $4,000 of that.

Hites said in his budget message he expects the town won’t use all $522,000 appropriated for this year, either.

Since 2014, Waynesville’s available fund balance has hovered between $5.1 million and $5.8 million. Fund balances are usually measured in percentage of yearly expenses, meaning that when weighed against a roughly $15 million budget, the town right now has enough money to continue operating for about a third of the year without additional income.

Those percentages are also weighed against similarly-situated municipalities for comparative purposes.

As a so-called “electric city” — i.e. one that buys electricity wholesale from providers and then resells it to municipal customers — Waynesville’s of late been near or above the electric city’s group average. In 2014, Waynesville was below the average by about two points. In 2015, it was above the average by about two points. In 2016, it was about half a point below average, and in 2017, the last year for which group data was available, Waynesville was very slightly above average.

Outside the general fund, perhaps the most ominous issue coming down the pipe is a state-mandated $17.4 million renovation or replacement of the town’s crumbling sewage treatment plant.

When weighed against the town’s $15 million general fund, that’s a staggering cost, but the plant’s financing won’t come from the general fund — it will come from a combination of grants and loans from the state and/or the U.S. Department of Agriculture.

For that to happen, there has to be a revenue stream; this year’s budget includes a 10 percent rate increase that will only cost the average Waynesville customer about $4 a month, but it’s certainly not going to be the last rate increase customers see.

“As the town moves into the full debt service cycle it will need to increase rates several times over the next decade,” Hites said.

Still, things seem to be on the up-and-up in Waynesville, compared to the situation in 2018, when Hites and the board came away from their annual budget retreat with the sobering realization that the town could no longer expect the average 7 percent annual growth in property tax base is had enjoyed throughout the 1990s and into the 2000s until the recession hit.

“The town is experiencing more growth than it has seen since the recession of 2008 and that new tax base will hopefully fund increases in the town’s operating budget,” said Hites.

Budget fast facts

• Total tax base: $1.198 billion
• All funds budget: $33.7 million
• General fund budget: $15.15 million
• Fund balance available: $5.09 million
• Ad valorem tax rate: 49.57 cents/$100
     assessed value
• One cent of ad valorem tax equals:
       $115,270
• Growth in tax base since last year:
       0.64 percent