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HomeMy WebLinkAboutAgenda - 02-24-2003-ws1ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: February 24, 2003 Action Agenda Item No. 1 SUBJECT: Fiscal Outlook DEPARTMENT: Budget PUBLIC HEARING: (Y/N) No ATTACHMENT(S): Chart -Potential Phased Implementation For Allocating Additional Sales Tax PowerPoint Slides (to be provided at work session) INFORMATION CONTACT: Donna Dean. ext 2151 TELEPHONE NUMBERS: Hillsborough 732-8181 Chapel Hill 968501 Durham 688-7331 Mebane 336-227-2031 PURPOSE: To provide the Board of Commissioners with an update on the budgetary outlook for the remainder of FY 2002-03, with emphasis on implementation of additional half cent sales tax authority under Article 44. BACKGROUND: At the Board's annual planning retreat on January 25, 2003, the Budget Director made a brief presentation regarding the County's overall financial picture, current revenue trends, and anticipated "budget drivers" for FY 2003-04. She indicated staffs intention to provide an additional update at the Board's February 2003 work session. The principal focus of the presentation is to provide the Board with an update of the second quarter sales tax reimbursements that the County received mid-February which included the recently implemented Article 44 half-cent sales tax. Pursuant to the levying resolution adopted by the BOCC in October 2002, this tax took effect on December 1, 2002. The additional sales tax authority was granted during the 2002 General Assembly legislative session to address substantial revenue shortfalls created for North Carolina local governments in FY 2001-02 and FY 2002-03 from the withholding of reimbursements due from the State to those local governments. The impact of those losses exceeded $700,000 for Orange County in FY 2001- 02, and more than $3.1 million for FY 2002-03. As a result, the Manager recommended, and the BOCC acted on, 2002-03 budget reductions during the June 2002 budget work sessions to accommodate the loss of reimbursements. BOCC actions included postponing capital project expenditures and freezing vacant positions. 2 The Budget Director will present information indicating that the County's revenues and expenditures for FY 2002-03 are on track with the County's budget, and that the first receipt of Article 44 sales tax proceeds in mid-February suggest that revenue of $1.7 million to $1.8 million projected (by the North Carolina Association of County Commissioners) for FY 2002-03 also appears to be on track. During the FY 2002-03 budget process and in several work session settings since, the Board has reviewed broad options for allocating additional half-cent sales tax revenue that include implementing postponed employee pay and benefit initiatives, reinstatement of some capital project funding that was delayed, replenishment of fund balance, and other related options. With Article 44 sales tax receipts appearing to be on track with projections, staff believes the Board can comfortably make allocation decisions now or in the coming weeks that could provide up to $1.2 million for employee pay and benefit initiatives and capital project restoration. The remainder of FY 2002-03 Article 44 collections (some of which will not actually be received until August 2003) could reasonably be allowed to accumulate without being appropriated, resulting in an increase in fund balance in the General Fund in FY 2003-04. FINANCIAL IMPACT: As noted above, Article 44 collection estimates for Orange County total $1.8 million for the period December 1, 2002 -June 30, 2003. Beginning with FY 2003-04, there is a provision in the new law which will ensure that local governments are "held harmless", and do not receive less funding from the new sales tax than they would have received from the series of reimbursements being terminated by the State. Orange County does not expect to need "hold harmless" funding, as preliminary forecasts anticipate that FY 2003-04 receipts from Article 44 sales tax will approach $3.8 million, compared to the approximately $3.2 million that Orange County might otherwise have received from reimbursements. Because of the tendency of sales tax revenues to grow annually, it is anticipated that Orange County will benefit in subsequent years from the exchange of reimbursements for Article 44 sales tax proceeds to an even greater extent than in FY 2003-04. RECOMMENDATION(S): The Manager recommends that the Board receive the update and provide guidance to the Manager and staff regarding how the additional sales tax revenue should be allocated among the purposes outlined above. 2/24/03 Potential Phased Implementation Approach for Allocating Effective December 1, 2002 Date of Receipt from State February 15, 2003 O R 7 O O O !-' ' d O O ~ f0 'O ~ EH R Date of Receipt from State May 15, 2003 O R O 7 O O !-' ' d O O ~ f0 'O ~ EH R Additional '/2 Cent Sales Tax Date of Receipt from State August 15, 2003 O R O O 7 O !_' C O 'O ~ f0 'O y EH R ~ Examples of items that the BOCC may wish to consider funding with additional'/: cent sales tax revenue anticipated this quarter Examples of items that the BOCC may wish to consider funding with additional'/: cent sales tax revenue anticipated this quarter Examples of items that the BOCC may wish to consider funding with additional'/: cent sales tax revenue anticipated this quarter / Restore some portion of County's fund balance / Begin phased-in implementation of the County's classification and pay study (with possible Phase 1 implementation date of April 14, 2003 based on information presented at the October 21, 2002 BOCC work session) / Restore some portion Public School Building Funds that were "frozen" in the State's approved budget for this year (total amount anticipated in current CIP is around $794,000) / Reinstate some portion of Schools' recurring capital (amount of reduction reflected in current year budget totals $924,000) / Restore some portion of contributions to County capital projects and other initiatives such as Affordable Housing / Other items that the Board may wish to consider / Restore some portion of County's fund balance / Restore some portion Public School Building Funds that were "frozen" in the State's approved budget for this year (total amount anticipated in current CIP is around $794,000) / Reinstate some portion of Schools' recurring capital (amount of reduction reflected in current year budget totals $924,000) / Restore some portion of contributions to County capital projects and other initiatives such as Affordable Housing / Other items that the Board may wish to consider / Restore some portion of County's fund balance / Restore some portion Public School Building Funds that were "frozen" in the State's approved budget for this year (total amount anticipated in current CIP is around $794,000) / Reinstate some portion of Schools' recurring capital (amount of reduction reflected in current year budget totals $924,000) / Restore some portion of contributions to County capital projects and other initiatives such as Affordable Housing / Other items that the Board may wish to consider Estimates prepared by the NC Association of County Commissioners project an additional $1.8 million for Orange County in fiscal year 2002-03. 2/24/03 Estimates prepared by the NC Association of County Commissioners project an additional $1.8 million for Orange County in fiscal year 2002-03.