4/26/20: COUNCILMAN NEAL STEPS UP: THE TOWN COUNCIL BUDGET WORKSHOP REPORT CONTINUED.

trashcans
The Beacon will discuss the possible future of Southern Shores’ curbside recycling program in an upcoming post.

The Beacon would like to appoint Town Councilman Matt Neal to be town manager, mayor, planner, and all-around problem-solver and fixer for the Town of Southern Shores.

But first we would like Mr. Neal to take elocution lessons so he can learn to speak up, project out, and not mumble—or at least mumble less.

And we would like the Town staff to ensure that, as long as the public has to participate in Town Council meetings by Zoom videoconferencing, we can hear Mr. Neal! Town Councilman Jim Conners’s voice is also hard to pick up.

After painstakingly reviewing the videotape of last Tuesday’s Town Council budget workshop, we still could not hear Councilman Neal well—and closed captions didn’t help!—but what we could hear, we liked. He was knowledgeable, prepared, and on the ball. We did not always agree with his priorities, but we respected his thinking.

In his speed to wrap up the budget workshop, however—or, just simply, because his mind works quickly—Mr. Neal inadvertently stoked the confusion upon which we commented, with dismay, last week.

After Town staff spent 2 ½ hours last Tuesday morning, painstakingly going over the proposed fiscal year 2020-21 budget—department-by-department, line-by-line, nickel-by dime—the Town Council finally got a chance to analyze the proposal and weigh in on how they would like to eliminate a projected $348,853 shortfall.

(This tedious process has to end. A town manager, who is also the town budget officer, does not need to present to the Town Council at a public meeting every line-item cost of every town department. We hope the new town manager will mercifully create a new process. The Town Council will be electronically interviewing top candidates for the job next Friday in a closed session.)

The proposed FY 2020-21 budget prepared by Interim Town Manager/Budget Officer Wes Haskett and Finance Officer Bonnie Swain projects $5,953,243 in revenues and $6,302,096 in expenses, hence, a deficit of $348,853.

Mayor Tom Bennett suggested using monies from the Town’s undesignated fund balance to cover the deficit and balance the budget, but he received no support from other Town Council members for this proposal. After his idea met with silence, Mr. Neal essentially took over the discussion—politely, of course—framing an analysis and approach that eventually held sway.

There is no question that the young builder likes numbers, and he knows how to work with them. The Beacon endorsed him last fall for this aptitude, as well as others that he possesses. We just wish we could hear him!

TAXES AND SAVINGS

Key to Mr. Neal’s analysis and Council members’ discussions that culminated in unanimous approval of Mr. Neal’s analysis were figures provided by Finance Officer Bonnie Swain in a handout that was not included in the meeting packet posted online.

Ms. Swain presented these figures before the line-by-line examination of the proposed budget. They were of some FY 2019-20 budget revenues and expenses that showed how the current fiscal year has been up-ended by the coronavirus pandemic.

According to Ms. Swain, the Town this year has collected about 70.52 percent of the occupancy taxes that she and former Town Manager Peter Rascoe budgeted for FY 2019-20. Of the sales taxes budgeted for the current fiscal year, 73 percent have been collected, she said; and of the budgeted land-transfer taxes, 78.38 percent.

Dare County pays towns their proportionate share of occupancy taxes on a monthly basis, Ms. Swain explained. Southern Shores’ share of May and June occupancy taxes will not be paid to the Town until July and August.

How much LESS tax money will the Town receive in FY 2019-20 than the staff budgeted to receive?

In a “worst-case scenario,” the Finance Officer said, where “no more money comes in” for FY 2019-20 occupancy, sales, and land-use transfer taxes, the Town’s revenues from these taxes would be $595,048 less than budgeted. That’s the bad news.

The good news, she said, is that the Town has “savings” in the current fiscal-year budget from projects that came in under budget, projects that did not get done, and expenses that were not incurred. We’ll call these savings “surplus.”

This surplus includes $278,000 left over from the $1 million appropriated for the South Dogwood Trail sidewalk; $315,000 in capital-improvement project money that was not spent; $314,000 for a year’s debt service on the new fire station that will not be paid until July 1; and $194,030 in funds budgeted for Town building upgrades that did not occur.

(SSVFD Fire Chief Ed Limbacher is now projecting a completion date of the new fire station in June or July.)

The Town also expects to receive a grant from the Dare County Tourism Bureau of $260,993, to offset some of the costs of the South Dogwood Trail sidewalk.

Considering the more than $1 million surplus, which will roll over into the undesignated fund balance, Ms. Swain said, “I think that we’re in pretty good shape.”

As for the undesignated fund balance itself, the Finance Officer said, “You can only get a true picture of the fund balance on June 30” each year, because it’s a “moving target every day,” what with receivables and payables.

“It’s a hard thing to predict,” she said.

The Beacon would have liked Ms. Swain to guesstimate what is in this reserve fund, which is used for emergencies and for budget amendments throughout a fiscal year. A Southern Shores financial officer certainly should have a general sense of how much the Town has in reserve, especially since the Town is required to maintain a minimum for disaster relief.

As of June 30, 2019, nearly 10 months ago, the Town’s auditor reported the balance was $4,173,321. During FY 2019-20, according to Town budget accounting, $1,406,411 were appropriated from the fund for expenditures, chiefly the construction of the South Dogwood Trail sidewalk.

Ms. Swain also explained that in estimating tax revenues for FY 2020-21, she and Mr. Haskett figured that the Town’s share of the County’s occupancy taxes in July would be reduced by 50 percent; in August, by 30 percent; in September, by 20 percent; and in October, by 10 percent. After October, she projected that the revenues would be flat, with no reduction.

Ms. Swain said that Dare County towns have “worked collectively” on these projections, but acknowledged that no one has a “crystal ball.”

“When we open, are the people going to come?” she asked. No one knows.

Over the full proposed FY 2020-21 budget, occupancy taxes are 20 percent lower than last year’s revenue, “a number we feel comfortable with,” Ms. Swain said.

She also calculated an overall reduction in sales tax revenue of 5 percent over last year, and a 2.5-percent reduction in land-transfer taxes.

Ms. Swain included no expenses in the proposed FY 2020-21 budget for hurricane cleanup and recovery. If the Town does incur hurricane-related expenses—which, eventually, the Federal Emergency Management Agency would reimburse—it will have to do a budget amendment and appropriate monies from the undesignated fund balance.

“We’re being optimistic,” Ms. Swain said, “we’re not going to have any hurricanes.”

COUNCILMAN NEAL’S ANALYSIS

Councilman Neal considered the additional worst-case scenario tax shortfall of $595,048 in the current fiscal year; the surplus this year of over $1 million; the estimated reductions in occupancy, sales, and land-transfer tax revenues; and the possibility of hurricane expenses—in addition to the $348,853 budget deficit and a “short list” of elective expenses that he sought to prioritize—and came up with a plan.

And he did this without being clearly audible to the Zoom audience.

The first step, he said, was not the one suggested by the Mayor. It was to remove from the proposed budget $662,340 in expenses that had been allocated for infrastructure projects. This dollar amount was the same amount set aside during the current fiscal year. It is “revenue derived from 5 cents on the current [ad valorem] tax rate,” as Mr. Rascoe explained in his draft FY 2019-20 budget proposal.

In comparison to the details included by Mr. Rascoe, and presumably, Ms. Swain, in last year’s draft proposal, the memorandum accompanying the draft FY 2020-21 proposal is skimpy.

Mr. Neal subtracted the $348,853 deficit from this amount and then started subtracting other expenses from the roughly $313,000 that remained. Some of these expenses had been proposed by Mr. Haskett and Ms. Swain; some of them were scheduled on the agenda to be decided later; and one of them Mr. Neal initiated on his own. They were:

*$35,000 to pay the salary for six months of a new full-time building inspector/code enforcement officer (staff);

*$20,000 or so (someone said $24,000; the public did not receive the dollar amount) for three no-left-turn weekends (on agenda for discussion later);

*incidental costs for a beach nourishment project (later);

*increased costs for a recycling contract (about $6,000 more; discussion on-going)

*$35,000 for one-time COVID-19 bonus payments to staff members (Mr. Neal suggested rewarding the staff, who were not getting cost-of-living increases under the proposed budget, and Mr. Haskett and Ms. Swain had a bonus system at the ready: $1,000 for full-time employees, $500 for part-timers.)

This is when the meeting went off the rails, but it was not Mr. Neal’s doing, it was Mr. Haskett’s.

The Interim Town Manager opened up the afternoon deliberation session by inviting the Town Council to address balancing the budget before they considered what Mr. Neal referred to as “elective” expenses, chiefly, beach nourishment, the no-left turn weekends, and capital street projects. Mr. Haskett needed to be more directive and not so open-ended—especially now that Mr. Neal is on the Council.

Understandably, given the opening, Mr. Neal was off and running—his mind was clicking, and the morning session had been long and tedious—until Mr. Haskett eventually stopped him. But the young Councilman’s big-picture analysis was out of the box, and it influenced later proceedings.

As The Beacon complained in our first blog about the budget workshop, the Town Council voted to apply for two beach nourishment grants from the N.C. Dept. of Environmental Quality’s Coastal Storm Damage Mitigation Fund without first approving beach nourishment itself and then choosing a project from among the four options it had to consider.

This was highly irregular. Now we understand better what happened because we have heard more of what happened.

FINISHING UP AND COUNCILMAN CONNERS’S ‘MY BAD’

We will tie up this budget workshop report here and pick up tomorrow or Tuesday with amplification, based on the videotape, on the decision-making about the recycling contract, the no-left-turn weekends, the beach-nourishment grants, and the engineering consultant’s contract, which expires June 30.

We believe some of the Town Council members did not appreciate that a fixed-rate recycling contract for five years—which RDS of Virginia has offered—is preferable to a contract with a price that is market-variable.

Under RDS’s contract, the recycling company assumes the risk of the market volatility, not the Town, but the Town has to do something about contamination in recyclables. And we believe it should. Abandoning the program should not be an option on the table.

Councilman Neal propounded a policy of “pushing down the road” decisions that could be delayed, and the Council embraced this approach. It voted unanimously, for example, to delay a decision on spending money on rebuilding Dewberry Lane until the fall, when the Town will know better what financial shape it is in.

“In 90 days,” Mr. Neal suggested, the financial picture will be “less uncertain.”

The Dewberry construction project has been bid, and the low bidder, RPC, came in at $85,250, Mr. Haskett said.

It is a shame that Mr. Haskett and Ms. Swain did not propose this approach themselves, instead of the Town Council. They  should have generated ideas and recommendations for the Council to consider.

‘OUR BAD’

Although we think we were justified in believing that Councilman Conners admitted to an open-meeting violation at the workshop, we now know that Mr. Conners’s precise words were: “We talked about that [the proposed recycling contract] at length earlier, inappropriately, and that’s my bad.”

Mr. Conners was difficult to hear, and we did not believe he had talked inappropriately about anything during the meeting, but he apparently believed he had.

The Councilman discussed the proposed recycling contract during a morning breakdown of proposed costs in the sanitation department budget. It came up because Mr. Haskett and Ms. Swain have budgeted $189,500 for FY 2020-21 recycling collection, an amount to be paid to Bay Disposal and Recycling to haul curbside recycling to the Wheelabrator incinerator in Portsmouth, not to a recycling facility.

This amount would increase to roughly $195,000, Ms. Swain said, if the Town were to contract with RDS of Virginia and Bay Disposal separately. Bay Disposal would haul the Town’s curbside recyclables to RDS’s processing facility where they would be recycled, not burned.

The morning discussion on recycling seemed quite appropriate and informative and certainly nothing for which Mr. Conners had to apologize. The recycling contract was not on the afternoon meeting agenda.

We regret the error in our interpretation. In normal times, we would have contacted Mr. Conners and confirmed the meaning of his statement. But, with all of the COVID-19 reporting we have been doing, we were pressed for time. No excuses. We should have reached out to Mr. Conners.

Our bad.

We would like to end this blog by giving more credit where credit is due. Mayor Pro Tem Elizabeth Morey was the Council member who spoke of a worse worst-case scenario, not Mr. Neal, as we thought.

“This thing could come back,” she said in reference to the coronavirus.

The thoughtfulness in Ms. Morey’s decision-making came out in the afternoon session after Mr. Neal unveiled his analysis.

Town Councilman Leo Holland also sought austerity in these uncertain and hard times, as did Mr. Conners, both of whom tried to reduce or stagger some big-ticket expenses in the police and fire department budgets, respectively.

“I don’t think it’s [the economy] going to come back as quick as we all think it is,” Mr. Holland said, after relating a Wall Street Journal item he had read that predicted it would take 27 months for the national economy to rebound.

To which, Mr. Neal replied: “I don’t disagree with you, Leo.”

Time—even just 90 days—will tell more.

Ann G. Sjoerdsma, 4/26/20

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