Expenses exceed revenues by $822,365 in a preliminary fiscal year 2021-22 Town budget prepared by Town Manager Cliff Ogburn, which he based on requests he has received from the heads of the Town’s governmental departments. Mr. Ogburn will ask for the Town Council’s direction in prioritizing expenditures that are driving Southern Shores’ largest-ever proposed operating budget at its 9 a.m. workshop Tuesday.
The Town Council will meet Tuesday in the Pitts Center. The workshop will be open to the public, with COVID-19 safety protocols in effect, and will be live-streamed on the Town’s You Tube website at https://www.youtube.com/channel/UCL821bGo6ti5DxmyixPZh4w.
There will be one public-comment period before the Council takes up its business agenda, which consists solely of considering two bids received from construction contractors ($449,000 and $452,000) for the Sea Oats Trail improvement project and evaluating Mr. Ogburn’s proposed 2021-22 budget.
We strongly encourage you to read the materials prepared by the Town Manager for the meeting: https://www.southernshores-nc.gov/wp-content/uploads/minutes-agendas-newsletters/Meeting-Packet_2021-03-16.pdf.
If the Town Council decides at a later budget meeting to raise the ad valorem tax rate, which is currently 19.58 cents per $100 of property value, for a reason other than beach nourishment, you should know why.
As you will recall, the 19.58 tax rate was adopted pursuant to Dare County’s revaluation of properties. Between FY 2014-15 and FY 2019-20, the rate was consistently 22 cents.
In the workshop meeting packet, Mr. Ogburn reports an impressive property-tax collection rate in Southern Shores of 99.65 percent.
THE PRELIMINARY BUDGET NUMBERS
Mr. Ogburn’s preliminary FY 2021-22 budget projects $6,271.359 in revenues, of which $3,226,644 comes from ad valorem (real estate) taxes and $2,240,000 represents occupancy, sales, and land-transfer taxes.
Annual revenues in the five fiscal years from 2015-16 through 2019-20 roughly averaged $6.5 million, according to our research. In FY 2019-20, they totaled $6,858,286.
According to Mr. Ogburn’s report, revenues to date in FY 2020-21—a decidedly unpredictable year because of the pandemic—amount to $5,376,726. His calculated estimates show that the Town’s occupancy, sales, and land-transfer taxes will all increase in FY 2020-21 over recent years, dating back to FY 2017-18, but he suggests that this growth will be “short-lived.”
Vacation home rentals and land and house sales have been booming during the past year.
As for expenses, Mr. Ogburn’s FY 2021-22 budget shows $7,093,724 in department requests, as follows:
Administration: $1,048,589 (15 percent of the budget)
Planning and Code Enforcement: $317,600 (4 percent)
Police Department: $1,891,194 (27 percent)
Streets, Bridges, and Canals: $1,245,416 (17 percent)
Public Works: $593,349 (8 percent)
Sanitation Services: $822,198 (12 percent)
Fire Contracted Service: $989,378 (14 percent)
Ocean Rescue Contracted Service: $186,000 (3 percent)
Mr. Ogburn’s budget does not present an itemization of estimated expenses for each department, but he does reveal how much each department proposes to spend on personnel. The estimated totals in FY 2021-22 for salaries and benefits are:
Administration: $514,389 (49 percent of the department’s budget)
Police Department: $1,379,935 (73 percent of the police budget)
Planning and Code Enforcement: $298,350 (94 percent)
Public Works: $405,849 (68 percent)
Overall, the Town’s personnel costs total an estimated $2,598,523, which is 37 percent of the proposed budget. The lion’s share of those costs—53 percent—goes to the police department.
Among the capital projects that Mr. Ogburn will be asking the Town Council to consider and “to provide input and direction to town staff regarding its priorities,” as he writes in the meeting agenda item summary, are:
- The implementation of an employee pay and classification study that the Council “put on pause” in February 2020;
- Street improvements, the selection of which is likely to be based on a pavement condition study whose “results are not expected until sometime in June”;
- Mitigation of seasonal cut-thru traffic (“Some measures may require the purchase of new equipment that might come from the current year’s budget as well as next year’s budget,” Mr. Ogburn writes);
- Other capital improvements, in addition to Town streets, such as upgrades to municipal buildings.
The last page of the Tuesday meeting packet is a draft of a Capital Improvement Plan for the Town. It shows Southern Shores being obligated for each of the next five fiscal years to pay $1,224,775 in debt service for the proposed 2022 beach nourishment project and $314,020 in debt service for the new fire station, and it proposes increasing the Town’s Capital Reserve Fund in order to invest $1 million per fiscal year in street improvements.
When you consider that the Sea Oats Trail construction project, which will improve a section of that street from Eleventh Avenue to Duck Road, will cost $450,000, $1 million per year is not a very big price tag for infrastructure repair and maintenance.
The new fire station on South Dogwood Trail cost the Town $5,419,223, a debt payable over 25 years, at 3.71 percent interest.
USE OF TOWN’S UNASSIGNED FUND BALANCE
Mr. Ogburn also will be asking the Town Council how it wishes to use the Town’s large unassigned fund balance, which auditor Dowdy & Osborne valued at $5,995,546 at the end of the 2019-20 fiscal year.
The Town Council subsequently approved a policy of maintaining $3 million in the fund, subject to the exception that the Council may withdraw funds below that balance if they are needed for disaster relief.
In past fiscal years, the fund balance has been used to balance budgets that had a revenue-expenditure shortfall. The ad valorem tax rate has not been increased.
In a page of his meeting packet ominously titled “Potential Causes [for] Future Tax Increases,” Mr. Ogburn observes that “the use of [the] fund balance to offset [a] tax increase is unsustainable.”
He cites as other “causes” for raising taxes the “need to start to invest in capital improvements,” especially street improvements; payment of the fire department debt service; and an expected increase in contracted services, such as those for the Town Attorney, the Town Engineer, ocean rescue, trash and recycling, and ATX’s tree services.
Mr. Ogburn writes that “Town staff is continuing to work on presenting a balanced budget” and that revisions to departments’ funding requests and revenue projects are “ongoing.” With his preliminary budget, he intends only to “give the Council an approximation of the Town’s financial position at this time.”
The Town Manager recommends the following FY 2021-22 budget adoption timeline:
May 4, at Town Council’s regular 5:30 meeting: presentation of the Town Manager’s recommended budget and recommended Capital Improvement Plan.
May 5 to June 14: budget workshops held by the Town Council.
June 1, at Town Council’s regular 5:30 p.m. meeting: a public hearing on the recommended budget and any tax-rate increase, with possible adoption of the budget by the Town Council.
June 15, at Town Council’s 9 a.m. workshop meeting: possible adoption of FY 2021-22 budget if it has not already been adopted.
The budget must be adopted by the end of June, in order to conform to State law.
OTHER MEETINGS THIS WEEK/PUBLIC HEARING ON MSDs
The next two days will be busy for the people who serve the Town of Southern Shores government, and for those of us who cover what the Town does or who simply wish to be informed about Town business.
Besides the budget workshop on Tuesday morning, the Town Planning Board will meet tomorrow at 4 p.m. to continue its discussion about CodeWright Planners’ Town Code rewrite, which has been short-circuited by the Town Council; and the Town Council will hold a public hearing Tuesday at 5:30 p.m. about establishing two municipal service districts for the purpose of taxing certain Southern Shores property owners more for the Town’s proposed 2022 beach nourishment project.
For the agenda of the special meeting/public hearing, see https://www.southernshores-nc.gov/wp-content/uploads/2021/03/Special-Meeting-March-16-2020.pdf.
Both the Planning Board meeting and the special meeting for the MSD public hearing will be held in the Pitts Center and will be live-streamed on the Town’s You Tube website. Please note: You cannot comment during the public hearing via the live-stream platform.
You may participate in the MSD public hearing in one of the following ways:
- You may attend in person and address the Town Council from the lectern.
- You may submit written comments to the Town Council by emailing email@example.com. Please put “public comment” in the subject line.
- You may watch live and comment via Zoom. To do so, you must register in advance at https://zoom.us/meeting/register/tJcoduGqqTksG9FO-toke6-JRDWakH7fMpnu. After registering, you will receive a confirmation email with information about how you can join the meeting.
We will do our best to report on all three public meetings, but we make no promises about when we will be able to do so.
If important breaking news occurs, we will definitely report it—giving you the “headline,” if you will—and follow up later with more details.
Ann G. Sjoerdsma, 3/14/21