HomeMy WebLinkAboutORD-2023-003-Allocation of $12 Million in Excess Fund Balance from FY 2021-22 through Budget Amendment #5-A 1
ORD-2023-003
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: January 17, 2023
Action Agenda
Item No. 6-a
SUBJECT: Allocation of $12 Million in Excess Fund Balance from FY 2021-22 through
Budget Amendment #5-A
DEPARTMENT: Finance and Administrative Services
ATTACHMENT(S): INFORMATION CONTACT:
Attachment 1. Year-to-Date Budget Kirk Vaughn, (919) 245-2153
Summary Gary Donaldson, (919) 245-2453
Attachment 2. FY 2021-22 Budget vs.
Actual Results and Fund
Balance Classification
PURPOSE: To approve the allocation of $12 million in excess fund balance that was created by
a budget surplus from FY 2021-22.
BACKGROUND: At the end of FY 2021-22, the County has identified $12 million of fund balance
that exceeds the County's 16% unassigned fund balance policy. This budget adjustment is
recommended by the County Manager to reduce the tax impact of increasing debt service while
investing in both School and County capital needs.
Reduce the Tax Impact of Debt Service
The FY 2022-33 Capital Investment Plan and the Long Range Financial Model both anticipate the
need to raise the property tax rate by one (1) cent in FY 2023-24 to fund an increase in debt
service that persists over the next three years. This amendment would transfer $6,000,000 of the
FY 2021-22 excess fund balance to a new Debt Service Fund to negate the need for a one (1)
cent tax increase in FY 2023-24. These funds will be appropriated over the next three fiscal years
to fund the scheduled spike in debt service during that time. The Capital Investment Plan currently
includes the first tranche of borrowing for a general obligation bond to occur in FY 2026-27 when
a tax rate increase may be required to fund related debt service.
School Capital Reserve Fund
The School Capital Needs Work Group has identified the need to diversify funding for School
Capital. This amendment transfers $3,500,000 of the excess fund balance to the School Capital
Reserve Fund to provide additional pay-as-you-go (cash)funding to the school districts. The funds
will be used to pay for the upcoming School Capital Needs consultant, and the remainder will be
allocated between the school districts based on FY 2022-23 Average Daily Membership.
County Capital Reserve Fund
This amendment allocates the remaining $2,500,000 to a County Capital Reserve Fund to provide
additional pay-as-you-go (cash) funding for one-time or capital needs. The first use will be funding
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the upcoming Strategic Plan consultant. The remaining funds will be identified on future budget
amendments to support other capital or one time spending needs.
SOCIAL JUSTICE IMPACT: There is no Orange County Social Justice Goal impact associated
with this item.
FINANCIAL IMPACT: This budget amendment provides for the allocation of $12,000,000 in
General Fund reserves for the amounts as referenced in the Abstract narrative. The amendment
creates the Debt Service Fund with an initial budget of $6,000,000. The School Capital Reserve
Fund will increase by $3,500,000, and the County Capital Reserve Fund will increase by
$2,500,000.
ENVIRONMENTAL IMPACT: There are no Orange County Environmental Responsibility Goal
impacts associated with this item.
RECOMMENDATION(S): The Manager recommends the Board approve Budget Amendment#5-
A for Fiscal Year 2022-23 to allocate $12 million in excess fund balance to the following funds:
• $6 million to create and fund a new Debt Service Fund;
• $3.5 million to the School Capital Reserve Fund; and
• $2.5 million to the County Capital Reserve Fund.
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Year-To-Date Budget Summary
Fiscal Year 2022-23
Debt Service School County
Fund Budget Summary General Fund Fund Capital Capital
Reserve Reserve
Original Budget Revenue $255,500,691 $0 $0 $0
Interfund Transfer Revenue $76,740
Fund Balance Appropiation $2,608,888
Total Original Budget $258,186,319 $0 $0 $0
Additional Revenue Received Through
Budget Amendment#5-A (January 17, 2023)
Grant Funds $2,029,181
Non Grant Funds $231,175 $250,000
Additional Interfund Transfer Revenue $6,000,000 $3,500,000 $2,500,000
Additional Fund Balance Appropriation $12,126,566
Total Amended Budget $272,573,241 $6,000,000 $3,500,000 $2,750,000
Dollar Change in 2022-23 Approved Budget $14,386,922 $6,000,000 $3,500,000 $2,750,000
% Change in 2022-23 Approved Budget 5.63% 100.00% 100.00% 100.00%
Authorized Full Time Equivalent Positions
Original Approved Full Time Equivalent Positions
(includes Permanent and Time Limited) 983.505 0.000 0.000 0.000
Changes to Full Time Equivalent Positions 3.700
Amended Approved General Fund Full Time
Equivalent Positions 987.205 0.000 0.000 0.000
Total Approved Full-Time-Equivalent Positions
for Fiscal Year 2022-23 987.205 0.000 0.000 0.000
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ORANGE COUNTY
NORTH CAROLINA
FINANCE and ADMINISTRATIVE SERVICES
Gary Donaldson,CTP,Chief Financial Officer I gdonaldson@orangecountync.gov I PO Box 8181, Hillsborough, NC 27278 919.245.2453
INFORMATION ITEM
To: Board of County Commissioners
From: Gary Donaldson, Chief Financial Officer
Date: November 25, 2022
Re: FY 2021-22 General Fund Budget versus Actual Results and Fund Balance Classification
As additional supporting information to a forthcoming Budget Amendment and Audit Presentation on December 13,
2022, please find attached a summary of FY 2021-22 General Fund Financial results.
Fiscal Year 2022-General Fund
Budget vs
Original BudgelRevised Budget Actual Actual Variance Percentage%Variance Explanation
Revenue
40-PROPERTY TAXES $177,399,692 $177,399,692 $180,701,712 $3,302,020 102% Reflects higher collection rate,natural growth and higher motor vehicle assessments
41-SALES TAXES $28,952,047 $28,952,047 $37,996,379 $9,044,332 131% Reflects stronger performance from Articles 39,40 and 42=$5.6M and$31A more in Hold Harmless
42-LICENSES&PERMITS $274,550 $274,550 $268,824 ($5,726) 98% Reflects lower Gross Receipts from Franchise Fee
43-CHRGS FOR SERVS $11,470,907 $11,961,766 $13,811,583 $1,849,817 115% Reflects$1.2 million in Register of Deeds and$1 million Emergency Service billings.
44-INTERGOVERNMENTAL $16,598,606 $21,879,314 $18,865,133 ($3,014,181) 86% Timing Variance on State Grant Awards
45-BONDS&ALTERN FINAN $0 $772,494 $585,885 ($186,609) 76% Qualified School Bond Reimbursements and Cost of Issuance fro Financings
46-INVESTMENT INCOME $10,300 $10,300 $84,805 $74,505 823% Reflects increasing Interest Rate environment
47-MISCELLANEOUS $4,013,571 $4,157,258 $4,189,002 $31,744 101% Various items including Donaltions,Lease Rentals and Items subject to Audit reclassification
49-APPROP FUND BAL $1,968,184 $14,412,746 $0 ($14,412,746) 0% No actual FB appropriation needed due to strong Budget versus Ac
48-TRANSFERS OUT $74,504 $95,552 $106,691 $11,139 112% Reflects transfers-Article 46($74K),Jail Inmate($11K),County Capital($20K)to support Facility Master Plan
Total $240,762,361 $259,915,719 $256,610,014 ($3,305,705) 99%
Expense
40-COMMUNITY SERVICES $13,621,295 $14,465,523 $12,966,062 ($1,499,461) 91% Reflects Salary Attrition and Non-Personnel Savings
25-GENERAL GOVERNMENT $10,277,361 $11,640,646 $11,282,740 ($357,906) 97% Reflects Salary Attrition and Non-Personnel Savings
50-PUBLIC SAFETY $28,528,552 $28,683,878 $27,822,848 ($861,030) 98% Reflects Salary Attrition and Non-Personnel Savings
30-HUMAN SERVICES $40,547,146 $44,188,765 $39,736,329 ($4,452,436) 90% Reflects Salary Attrition and Non-Personnel Savings
20-SUPPORT SERVICES $12,881,850 $16,069,316 $15,220,129 ($849,187) 97% Reflects Salary Attrition and Non-Personnel Savings
80-TRANSFERS $1,044,002 $9,256,798 $9,320,892 $64,094 101% Reflects$6.2M to County Capital,$1.3M Lottery,$790K Sportsplex,$560K Visitors,$339K Afford Housing
70-EDUCATION $93,834,876 $95,583,514 $94,916,033 ($667,481) 100% Monthly fixed payments
90-DEBT SERVICE $40,027,279 $40,027,279 $39,951,459 ($75,820) 100% Fixed costs paid on maturity dates
Total $240,762,361 $259,915,719 $251,216,492 ($8,699,227) 96.7%
Revenues over Expenditures Revenues over Expenditures $5,393,5220$12,004,932 $2 Million added to Restricted by State Statute and$10 Million added to Assigned Fund Balance
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As indicated on the above, General Fund revenues exceeded expenditures by$5.3 million for FY 2021-22. Additionally,
the bottom line highlighted in green indicates a budgetary savings of$12 million in FY 2021-22.This $12 million is
recommended to fund a December 13, 2022 Budget Amendment while achieving the County's current 16% Fund Balance
Policy. The major budget versus actual variances are explained herein.
FY 2021-22 General Fund- Budget versus Actual Results
Property Tax
Property tax favorable budget versus actual variance is a result of higher than budgeted collection rate. The budget
assumed a 98.7% collection rate, and the Tax Administration Office posted a 99.4%collection rate. The County took a
careful posture as this budget represented a revaluation year. Programs like the Long-Time Homeowners Tax Relief is
another example of Federal ARPA relief and the favorable impact on the local economic base. Additional budget versus
actual factors included additional natural growth and higher Motor Vehicle assessments.
Sales Tax
Sales tax favorable budget versus actual variance is due to several factors including the higher pricing on goods and
services.The 2% local option tax (Articles 39, 40 and 42) applies to food and the food price index has exceeded the
consumer price index during the current inflationary period.This coupled with impacts from the Federal Stimulus relief to
residents and sustained e-commerce are part of the favorable revenue variance explanation. Another factor is the Hold
Harmless Sales tax which replaced the State Medicaid revenue. The Hold Harmless exceeded the budget by$3 million
with the remaining Articles 39, 40 and 42 accounting for$5.6 million over the budget. The NC State Treasurer has
previously stated that local governments exercise conservative forecasting on the Hold Harmless sales tax revenue.
General Fund Expenditures
All of the Functional Leadership Teams were within the Board authorized budgets. The Budget versus Actual
variance was 96.7%. This variance was primarily attributed to salary attrition and secondarily due to contractual
obligations and other related non-personnel savings. The FY 2021-22 Budget included a $3 million attrition
target which was exceeded. The 96.7% budget versus actual expenditure savings has been consistent with prior
fiscal years.
FY 2021-22 Estimated Fund Balance Classifications
The FY 2021-22 Fund Balance classification has been reviewed with the County's Audit Managing Partner and
should be consistent with the FY 2022 Annual Comprehensive Financial Report (ACFR) to be presented at the
December 13, 2022 BOCC meeting.
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FY 2022 Estimated
Fund Balance Classifications
Non-Spendable $ 51,529
Restricted by State Statute $ 18,669,724
Committed $ 7,543,841
Assigned $ 14,608,888
Unassigned $ 40,445,676 16.7%
Total Fund Balance $ 81,319,658
Similar to the prior fiscal year, the amounts above the current 16% Unassigned Fund Balance provide additional
funding opportunities for a mid-year FY 2022-23 Budget Amendments from the Assigned Fund Balance at the
December 13, 2022 BOCC meeting. As part of the County's long-term financial planning, funding allocations for
School Capital Reserves and County Capital Reserves are recommended for this year's prioritization. The
recommended funding to these reserves supports a request by the School Capital Work Group to find
additional funding for the Schools Capital Improvement Plan (CIP). Pay-As-You-Go (PAYGO) is an established
funding mechanism for governments to support their CIPs. The use of fund balance above the 16% stipulated
policy conform to the non-recurring nature of these revenue and expenditure streams. The mid-year Budget
Amendment will include seeding funds for a new Debt Service Fund and reserve. The new Debt Service Fund
reserve will serve as a rate stabilization fund to blunt a portion of the required tax rate to fund the Schools CIP
requirements.
Finally, following future years financial audit results, we are recommending a formal fund balance flow of funds
for funds above the unassigned fund balance policy target. This new policy is being drafted as part of the FY
2023-24 Budget development process.
cc: Bonnie Hammersley, County Manager
Travis Myren, Deputy Manager
Kirk Vaughn, Budget Director
Rebecca Crawford, Deputy Finance Director
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