As The Beacon reported earlier this month, the Southern Shores Town Council unanimously voted at its Nov. 7 regular meeting to approve construction of the new $5.4 million SSVFD fire station and to fund it, according to mortgage terms secured by SSVFD Chief Edward Limbacher.
It also unanimously approved the new 10-year fire services (FY 2019-2029) contract with the Southern Shores Volunteer Fire Dept., which is expected to have a base annual compensation in its first fiscal year of $545,914. (See The Beacon’s blogs, Nov. 7-8.)
The new fire station will be built on the site of the current station at 15 S. Dogwood Trail. According to Chief Limbacher, construction is expected to begin Jan. 2, 2019 and to take 12 months to complete. The mortgage on the project is for 25 years.
During its displacement, the SSVFD will be based in a temporary structure in the back of the Kitty Hawk Elementary School, the Chief told the Council, “right next to the batting cages.”
Work on setting up this site began two years ago, he said, and involved the approval of the Dare County Board of Education. (Protecting the fire trucks is vitally important. “They have to stay warm,” the Chief said.) The SSVFD’s administrative headquarters relocated roughly two months ago to the Southern Shores Crossing.
“It’s going to be rough next year,” the Chief acknowledged.
How will the Town cover the new fire-station costs, along with expenses for fire services, continuing infrastructure improvements, and maintenance of other Town services? Is a property-tax increase inevitable? Or, as Town Manager Peter Rascoe would say, will “revenues” have to be increased?
Before answering these questions, I would like to review some background on the new station. I will say, however, that I was pleased by the numbers that accountant Teresa Osborne gave in her fiscal year 2017-18 audit report, which she presented at the Council’s meeting, and by Mr. Rascoe’s “fiscal note” about the new station.
A COLLABORATION OF NEARLY FIVE YEARS
The new fire station, according to the SSVFD Chief, is the result of “five years of effort.” It is the culmination of a lot of “hard work,” he said, involving a collaboration of many people in Town Hall, the Southern Shores community, the SSVFD, and elsewhere in Dare County.
Whether or not you believe the Town should be footing the entire bill for the new fire station, I believe you can feel confident that the considerable planning involved in taking it from a vision to a near-reality has been competent, smart, and highly professional.
“The Town and the fire department need each other,” Chief Limbacher said in his presentation to the Town Council, in which he emphasized the cooperation and good feeling between TOSS and the SSVFD. The fire station “is an investment in our town.”
After the Town Council had green-lighted the new fire station and its funding, the Chief gave a prepared thank-you speech with many names in it. The speech was one of two speeches he had at the ready to deliver and certainly was the one he had hoped to give.
Upon leaving the lectern, at which he had stood for a slide presentation and lengthy discussions concerning the fire station’s conditional use permit and the debt funding, the Chief gave a thumbs-up sign to the many volunteer firefighters who had filled chairs in the Pitts Center.
It was definitely a happy moment for the SSVFD’s 53-member firefighting force.
NOW, THE BACKGROUND
The Town Council unanimously accepted Chief Limbacher’s choices of A.R. Chesson Construction Co. of Elizabeth City for construction of the new 14,000-square-foot fire station and United Financial of Asheville to service the debt.
Project architect Kenneth C. Newell, who is a partner in the Gastonia, N.C.-based firm of Stewart, Cooper, Newell, PA, participated in this decision-making.
Chesson was the winning bidder out of three companies that bid on the fire-station project; it submitted the lowest qualified bid of $5,409,223. Chief Limbacher said that this amount represents $376 per square foot, which is within the range of between $325 and $425 per square foot that Mr. Newell gave the Town Council at its Sept. 5 meeting. (If you do the math, you’ll figure out that either the fire station will be larger than 14,000 square feet or the cost per square foot is slightly more.)
United Financial offered financing over a 25-year term of $5,419,223, at an initial interest rate of 3.71 percent. The interest rate would be fixed for the first 10 years and reviewed at the end of the 10th year. Any adjustment to the rate would be based on the interest rate for a 10-year Treasury bill, according to a bank official.
The Chief sent a Request for Proposal to five lending institutions. The second best proposal that he received, he said, came from PNC Bank of Raleigh, which proposed a 10-year loan with payments based on an amortization of 25 years.
The mortgage amount includes $10,000 over Chesson’s bid because it covers “regulatory inspections as required by code,” according to Chief Limbacher. (See The Beacon’s report, Nov. 5.)
The Town Council decided to add another cost to the fire-station construction after hearing from several homeowners in Southern Shores Landing that they would like a barrier erected. The Landing is the housing development that borders the south side of the fire-station property.
The homeowners requested a noise buffer, as well as a fire-retardant barrier that would reduce the effect on their homes of the heat emitted by training exercises performed by the volunteer firefighters.
The Council ultimately framed a somewhat protracted motion to approve the conditional use permit with the Planning Board’s conditions and with the further condition that a vegetative buffer and/or a fence or “a combination thereof” be constructed between the fire station and the adjacent Landing properties. The motion specified that no barrier be constructed of masonry, the cost of which greatly concerned Councilman Jim Conners.
PAYING THE DEBT
Mr. Rascoe informed the Town Council that the impact of the 25-year fire-station mortgage on the Town’s budget, starting in FY 2019-2020 and continuing for at least nine fiscal years thereafter, would be an additional annual expense of $333,551.96, if the debt were paid in quarterly payments. He also made a point of saying that the financing did not require a guarantee from the Town.
The Town Council has already appropriated $267,700 in FY 2018-19 toward the debt service, he observed, so that interest payments during the next two quarters can be paid from this amount.
According to Mr. Rascoe, if the Town Council keeps in FY 2019-20 its “current level of services” to Southern Shores citizens and appropriates the same amount for infrastructure improvements as it did in FY 2018-19—that being $654,870—then:
“The cost of funding the Fire Department’s debt service of $333,551.96 can be absorbed into your balanced general operating budget for next year with no or little use of the fund balance. That would negate the necessity of having to increase your revenues [i.e., raise taxes] otherwise.”
This additional cost, Mr. Rascoe clearly told the Council, “can be absorbed into the operating budget. . . . It would represent 2.55 cents of the town’s current 22 cents of ad valorem tax rate.”
The rub is the “what-if” of new projects or unanticipated expenses for FY 2019-20.
Say, for example, the Town Council voted to take on building a sidewalk along the east side of South Dogwood Trail, as the Capital Infrastructure Improvement Planning (CIIP) Committee discussed doing at its Nov. 15 meeting. With only $654,870 appropriated for “infrastructure improvements,” the Town would be lacking in necessary funds.
Mr. Rascoe responded to speculation like this from Town Councilman Fred Newberry that, if Council, indeed, proposed new projects for 2019-20, “You would certainly have to also consider increasing revenues [i.e., raising taxes] for your increased budget or using the town’s undesignated fund balance at that time.”
As of June 30, 2018, according to Ms. Osborne’s audit, the Town had an unassigned fund balance of $4,752,187, of which $1,750,000 must be maintained as “working capital.”
She also said that the $4,752,187 is about 80 percent of the Town’s “annual general fund expenditures.”
Ms. Osborne, a CPA who is owner of Dowdy & Osborne, LLP, in Nags Head, reported that the Town is in “great financial condition.” In FY 2017-18, revenues exceeded expenses by $617,759, she said. Revenues from land-use, occupancy, and sales taxes were all up, as were investment earnings.
The discussion among Council members about absorbing the debt service into the general operating budget was a thoughtful one. Councilman Conners, who is a co-chair of the CIIP Committee, with Mayor Tom Bennett, said he would consider transferring some of the $654,870 annual appropriation for infrastructure “back to the general budget,” if it was needed.
“I’m just feeling very cautious here,” Mr. Conners said during deliberation over the fire-station debt.
At the CIIP meeting a week later, however, Mr. Conners expressed an interest in building sidewalks throughout Southern Shores, especially on South Dogwood Trail, which he called a “thoroughfare,” according to a Beacon correspondent who attended the meeting.
Mayor Bennett, the correspondent reported, expressed an interest in widening and straightening South Dogwood Trail. Generally speaking, Mr. Conners and the Mayor agree with each other and obtain a majority of three on the five-man Council with Councilman Chris Nason’s vote.
In fact, Mr. Nason’s suggestion that the word infrastructure be added to what was once just the capital improvements committee resulted in the committee’s current name, which I’ve seen in various word combinations. He wanted “to include paths,” Mr. Nason said, at the Nov. 7 Council meeting.
But 5-foot-wide concrete sidewalks—which, incidentally, are not every property owner’s preference in a beach and maritime forest environment—are not part of a town’s “infrastructure.” Roads, bridges, water supply, and other services and facilities necessary for an economy to function constitute infrastructure.
According to the correspondent’s report, Town Engineer Joe Anlauf of Deel Engineering recommended dividing South Dogwood Trail into three sections/phases, for purposes of building a sidewalk, similar to the one that was built recently on East Dogwood Trail. Mr. Anlauf designated the first section/phase as being from the three-way stop at East Dogwood Trail south to the Tall Pine Bridge, a relatively easy project.
Mr. Anlauf reportedly is already at work designing the sidewalk with the existing road footprint, not with a wider one, as suggested by the Mayor. He recommended starting with an easy section and leaving other sections that have more curves and hills, and the need for more tree removal, for later.
According to The Beacon’s correspondent, Mayor Bennett suggested an FY 2019-20 budgetary allocation of $250,000 for the first sidewalk section on South Dogwood Trail.
(You will find the official meeting minutes here: https://www.southernshores-nc.gov/wp-content/uploads/2018/11/CIIP-Cmttee-Meeting-Minutes-Nov-15-2018.pdf. For some reason, they do not identify Mr. Anlauf.)
FY 2019-20 BUDGET
Line items for the Town’s FY 2019-20 budget will come together in April and May next year, and budget approval will occur in June. The designation of infrastructure projects for the fiscal year, however, does not occur until July and is based on recommendations from the CIIP Committee.
So, can the Town pay for the new fire station debt without raising property taxes? The answer depends on what other projects a majority of the Town Council decides to tackle and whether unanticipated expenses, such as those related to a severe storm, arise.
There is always the possibility, as Town Councilman Newberry suggested, that current budgetary expenses could be reduced, but I have not seen majority support for that strategy in budget-planning sessions held by the Council during the past few years.
Ann G. Sjoerdsma, 11/23/18