Working on Waynesville: Aldermen look to avoid budget crunch

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Working on Waynesville: Aldermen look to avoid budget crunch

Waynesville’s Board of Aldermen has some difficult budgetary decisions to make this year. Town of Waynesville photo

The Town of Waynesville’s municipal expenditures and revenue streams have all come in as expected during the 2022-23 fiscal year, but with a long and growing list of deferred maintenance needs and purchases, aldermen are looking for places to save money while once again raising the specter of a general obligation bond initiative.

“What we’re trying to do is give you a glimpse of reality,” said Town Manager Rob Hites during a Feb. 24 budget retreat.

First, the good news. Current year ad valorem tax collections are currently at 97.3% of the general fund’s $18.2 million budget, with four months remaining to collect the rest.

Last year’s collection rate was 97.4%. Collection rate is important, because aldermen must factor the prior year’s collection rate into the upcoming budget. Ad valorem taxes are the largest single source of revenue for most towns, including Waynesville.

Prior-year ad valorem taxes — overdue or delinquent taxes dating as far back as 2011 — have thus far been collected at a rate 138% above budget, although the total is a relatively miniscule $188,000.

The top 10 delinquent property owners still owe 20% of the total outstanding balance from 2011 through 2022.

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Finance Director Misty Hagood asked aldermen to become more aggressive and pursue garnishments and attachments, so Aldermen Chuck Dickson responded by offering a motion directing the tax collector to pursue all legal means to collect the taxes. The motion passed unanimously.

For the third straight year, sales tax collections continue to surpass previous year collections. Like most Western North Carolina municipalities, Waynesville has seen a substantial uptick since the Coronavirus Pandemic began in early 2020.

Right now, collections are running 11% over prior year but the data that suggest the sales tax surge may finally be cooling off, as February’s distribution (for sales made in the month of November, 2022) is only 2% above last February’s distribution.

The town’s enterprise funds are likewise all on track, although the electric fund is still feeling the pinch from when aldermen suspended cutoffs for a time during the Coronavirus Pandemic.

Approximately 300 payment plans were signed by electric customers who couldn’t pay. Currently, there are 30 remaining. According to Hagood, 24 customers signed payment plans but have since moved away.

Since there’s no “blacklist” of delinquent customers shared between Waynesville’s electric billing service and Duke Energy — because of Duke, said Hites — those customers can still seek service with Duke and won’t feel compelled by the lack of electricity to pay their debts to Waynesville.

Estimated write-offs for three years will be around $500,000, Hagood said, which is more than double what they should be, meaning the town’s electric fund budget of $10.3 million will likely take a $250,000 hit.

The town’s total fund balance is hovering around $9.7 million, good for 65.5% of general fund expenditures. Unrestricted fund balance stands at $7.4 million.

Those figures, however, are somewhat deceptive.

“In order to get the best borrowing [interest rate] we can for the fire station, for fire trucks, for any borrowing, we need to stay within the percentage of our peers in cities of 10,000 to 30,000 people,” said Hagood.

Hites said that number is about 46%, meaning there’s really only $500,000 of available fund balance for aldermen to appropriate. He went on to warn against large cash incentives for development projects, and asked the board to focus on smaller façade grants.

Although the town’s financial position would be considered strong in any other given year, more than $9.7 million in capital improvements are waiting to be funded — and that’s just for this year alone.

The finance department wants a new SUV at $40,000, and more meter reading devices costing $18,000.

Development services also wants a new SUV, and $130,000 for greenway work.

The police department wants $88,000 for bodycams and car cameras.

The recreation department wants to resurface the tennis courts at a cost of $600,000, a bathroom at Obama-King park for $80,000, a truck for $60,000 and a new mower for $12,000.

Streets and sanitation wants $300,000 for bridge repair, a new $200,000 loader, a $75,000 leaf collector and three trucks averaging $95,000 each.

The Cemetery Committee wants $40,000 for a master plan, and $30,000 for arch repair.

Including this year and the next four, the total approaches $21 million. And that doesn’t include surprises, like equipment breaking down unexpectedly.

The current ad valorem tax rate is 45.92 cents per $100 in assessed value, up from 43.95 cents the previous year. At present, that means once cent on the tax rate is worth about $156,000 in collections to the town. If taxes go up by a cent, the town should realize another $156,000 in revenue. If taxes go down by one cent, the town would lose the same amount in revenue.

With those figures in mind, the town would have to raise taxes by a whopping 62 cents to pay for all the current year asks.

For a homeowner with a $100,000 assessed value, their annual property tax bill would jump from $459.20 to $1,079.20.

By far the biggest request this year is $6 million for the new fire station, and $1.5 million for an addition to the existing station.

Waynesville Fire Chief Joey Webb, Sr. will likely approach Haywood County Commissioners in the coming weeks or months to ask for an increase in the fire tax for districts the department serves that lie outside municipal boundaries. A one-cent increase in the fire rate would raise approximately $77,000.

Webb, however, was recently congratulated by North Carolina’s Insurance Commissioner and State Fire Marshall Mike Causey for raising the department’s rating, which means both a huge savings in homeowners insurance and a little less sting from any tax increase commissioners decide to grant them.

But there’s another way for the town to address all these needs without raising taxes by 62 cents — to be clear, a preposterous and unsustainable proposition that nobody has seriously entertained.

One additional penny on the ad valorem tax rate would support around $1.33 million in borrowing, meaning the town could pay for all $9.7 million in current requests with an 8-cent tax increase. That would take a $100,000 property’s annual tax bill from $459.20 to $539.20.

Unfortunately, there are already $5.5 million in requests for the next budget, including a $2 million ladder truck. If all else stays the same economically, the town would only have a few hundred thousand dollars to spend, thus creating another backlog with $2.6 million in requests already on paper for 2026, $1.8 million for 2027, and $1.3 million for 2028.

Only about $427,000 in new revenue will be generated over the next five years if all development that is currently scheduled takes place, but due to escalating prices and salaries, most of that will be eaten right up, providing negligible growth in the tax base.

Borrowing for every single ask on the five-year, $21 million needs assessment would cost at least 16 cents on the tax rate.

Indeed, some of the requested items won’t make the cut this year, and may never, but Hites cautioned aldermen that they need to determine the difference between needs and wants and should be focused on public safety.

Alderman John Feichter raised the possibility of issuing general obligation bonds, just like he did last year, but it’s a gamble. If voters do not approve of the bonds, the interest rates on them would be higher by half a percent or more.

Hites told aldermen that generally speaking, such bonds can be “sold” to the general public to pay for items like affordable housing, parks or stadiums in larger municipalities, but would be a much tougher sell for decidedly un-sexy requests like air compressors and lawnmowers.

With all that being said, Recreation Director Luke Kinsland, who was appointed director late last year after the retirement of Rhett Langston, got a rough introduction to municipal finance during the budget retreat.

Kinsland, who’s worked for the department since starting out as a lifeguard as a teen, presented the recreation master plan that was created in 2017. The plan requests around $4.7 million over the next 10 years, including more than $500,000 this year.

Given Hites’ “needs and wants” advice, it’s difficult to imagine most or all of these requests being fulfilled any time soon, if at all.

Much of the budget retreat was focused on proposed spending, but aldermen are also looking for ways to cut costs and raise cash.

For example, aldermen have continually rejected appeals to raise non-resident rates at Kinsland’s rec center off Howell Mill Road. Residents who pay property taxes to the town, some of which go towards rec center operations, pay the same rate as visitors from outside the county, state and country — visitors who pay nothing towards the upkeep of the facilities.

Hites said that non-residents are being subsidized by residents to the tune of about 3 cents on the tax rate. Aldermen asked Kinsland to draft recommendations for a new schedule of fees. An increase that eliminates that “subsidy” would take a substantial chunk out of any proposed tax increase.

Dickson also led the charge on the creation of a new advisory board that could not only help make Waynesville cleaner and greener, but also save money.

“The environment is what drives our economy,” Dickson said in pushing for the board, which will focus on sustainability.

Hendersonville has such a board, Dickson said, which advises the town on long-term strategies that could actually save the town money while also focusing on clean energy benchmarks the town set six years ago for 2050 and keeping an eye out for grants.

“Setting up a board is a big thing, so we need to make sure it is something it will work,” he said. “I’ve been saying this for a year and a half now. There’s lots of money out there.”

Increased grant funds also come with increasing grant administration, so Dickson also proposed the addition of a grant administrator to satisfy reporting requirements and ensure overall compliance with the terms of such agreements.

Feichter offered a note of support, saying that the median salary of $79,000 would be money well spent.

“What I would urge this board to think about is not how much it would cost to hire a grant administrator, but how much such a position could bring in,” Feichter said.

Alderman Julia Freeman, who works as the executive director of a domestic violence nonprofit called REACH of Haywood County, said that in her experience grant administrators are often paid out of grant funding, and that their pay could be contingent on their performance.

Dickson’s motion passed unanimously.

One final action that also passed unanimously will also help with the town’s forthcoming budget-balancing act will be seen as bittersweet at best.

Every budget season, aldermen set aside around the equivalent of around one cent on the tax rate ($156,000) for what’s called “special appropriations.” These are small grants made to area nonprofits.

“For instance, last year we had some funds for [substance abuse treatment provider] Meridian [Behavioral Health Services] for some capital items, furniture, stoves, that kind of thing,” Hites said.

As it turns out, the General Assembly does not authorize municipal governments to spend money in this manner.

Assistant Town Manager Jesse Fowler recommended lowering the amount to $100,000 and including a legal review on the applications.

“I think this would be an administrative nightmare and it would be too much to ask,” said Alderman Anthony Sutton, who suggested the town halt the spending altogether and put the money towards the grant administration position.

Mayor Gary Caldwell mentioned that Haywood County commissioners had gotten out of the business of making similar appropriations years ago.

Freeman, who works in the nonprofit industry, said the funds neither make nor break any of the local nonprofits that receive them, and that the concept itself may have run its course.

Feichter wasn’t too happy about the prospect of axing the line item, but it’s perhaps the least difficult decision aldermen will make concerning the 2023-24 fiscal year budget. The motion to discontinue was unanimous.

“I feel like the money we spend on helping these nonprofits comes back to us tenfold,” he said. “It’s frustrating that we’re faced with a decision to essentially do nothing.”

Waynesville’s top 10 tax delinquents

With inflationary pressures, rising costs and millions in deferred maintenance needs all impacting Waynesville’s budget, collecting every last cent of the annual property tax levy is more important than ever. During a Feb. 24 town budget retreat, Finance Director Misty Hagood said that the top ten tax delinquents owed 20 percent of all delinquent taxes in Waynesville, dating back to 2011.

1. Welch, James Timothy: $42,388, 4 properties, 2020-2022

2. Burgin, William P. Jr.: $20,395, 6 properties, 2011-2022

3. Kirkpatrick Management LLC: $16,037, 1 property, 2012-2022

4. Schulhofer, William D/LT: $9,537, 5 properties, 2018-2022

5. Farmer, Shirley: $1,292, 5 properties, 2018-2022

Grasty, Shirley Hooper (Farmer): $8,206, 1 property, 2017-2022

6. Medford, Brittany Jane: $7,517, 1 property, 2018-2022

7. Bryant, Thomas Edward: $7,039, 1 property, 2011-2022

8. Kitzis Holdings LLC: $6,528, 1 property, 2020-2022

9. Mathews, Paula P.: $6,107, 1 property, 2012-2022

10. Rathbone, Kristy Williams: $4,774, 4 properties, 2018-2022

TOTAL: $129,820.24