For the first time, the Town's budget is made up of department budgets, developed by the member of the staff responsible for each area. The planning director created the first draft of the budget for the planning department, the public works coordinator developed the first draft of the public works budget, and so on. This is different from the past, where the budget was put together by the planning consultant, Roy DeHaven.
There have been two budget workshops where members of Town Council had an opportunity to discuss each department budget with the appropriate member of the staff. A draft for a complete budget passed Ways and Means last Tuesday, but this simply moved it forward to the Public Hearing on April 4th. After the hearing, there will be another budget workshop to provide an opportunity to make adjustments based on public comments, after which a final budget will be developed for a first reading on April 19th. The second and final reading is scheduled for May 3, well before the deadline of June 30.
For the current draft budget, total expenditures are $2,050,000, which is approximately the same amount as was budgeted in 2010-11. That was the budget that was very late, failing to pass in June of 2010, and then, in a modified form, being passed first in October and then modified in November.
As with the current fiscal year, I have proposed substantial expenditures on deferred maintenance on drainage over the coming year. Deferred maintenance means spending money on catching up on drainage projects that should have been done in past years. In other words, it represents regular annual maintenance that was neglected in the past. Drainage ditches were allowed to fill up and become overgrown.
How much deferred maintenance does the Town's drainage system have at this time? Unfortunately, we still do not have a complete account. Because the Town participates in the Charleston County Storm Water Utility, we have access to the County's database, but the system is still under development. It was supposed to have been ready last December, but is now expected later this spring. Still, when I asked the Director of Charleston County Public Works for a rough estimate, he said approximately $1,000,000.
We are looking at approximately $460,000 in total expenditures on drainage maintenance for the coming year. We budgeted $600,000 for 2010-2011, and so these add up to approximately the estimated amount. Of course, after we catch up with the deferred maintenance, we will still need to keep up with regular, annual maintenance to avoid falling behind again.
How can the Town afford to pay for this backlog of drainage projects? Fortunately, according to our February financial report, the Town has a net funds balance of nearly $1.4 million dollars. Over the past 5 years, the Town collected money from the taxpayers and didn't spend it on anything. The Town accumulated savings, which we call the net fund balance.
Isn't it good to accumulate savings? Perhaps, if it is your own money. I am sure that many taxpayers would have preferred to keep their money rather than having the Town take it and just leave it in the Town's bank account. Worse, putting money in the bank while letting the roof fall in is hardly wise. Is is essential to keep up with necessary maintenance. In my view, the Town did need the money and should have spent it on needed drainage projects. (This is easier said than done, however, and even today, the Town is making only slow progress in catching up on deferred maintenance. Projects must be identified, planned, bid out, and then completed.)
As the Town spends down these savings, there are three possible scenarios for 2012-13. One possible scenario is that the Town will fully catch up with deferred drainage maintenance and still have savings in the net fund balance. In my view, a capital expenditure, like a down payment on a Town Hall, would be an appropriate use of those funds. (Hiring additional employees or creating a new, continuing spending program would not be a responsible use of the funds.)
A second, less favorable scenario, is that we will still be behind on drainage maintenance even after our net funds balance is reduced to the level we need to manage our cash position over the year--something between $500,000 and $250,000.
At that point, we must reduce our expenditures to match our current revenues. Fortunately, as the U.S. and South Carolina economies continue to recover, our current revenues should increase to $1.7 or $1.8 million per year. If we have fully caught up with deferred drainage maintenance, a substantial reduction in drainage expenditures will be possible. Otherwise, catching up with deferred maintenance will need to slow.
A third possibility is that we will still have deferred maintenance because we have yet to spend the budgeted funds. If that happens, the net fund balance will carry forward to the next year, along with the need to use it to fund additional drainage projects. (This scenario is looking more and more likely for the 2010-11 fiscal year.)
If it turns out that current revenues are not sufficient to keep up with regular maintenance and other needed expenses, (or catch up with any remaining maintenance,) current expenditures must be reduced or more current revenue obtained.
It is important to understand, however, that the Town in no danger of going broke, even if we maintain expenditures at the $2 million dollar level. The Town will be receiving about $1.2 million each year in Local Option Sales Tax Property Tax Credit funds.
For the 2011-12 fiscal year, I have proposed that the Town pay out this $1.2 million to the taxpayers. (I hope that this credit will appear on next year's tax bills and so reduce the amount paid by the taxpayers, with the Town directly paying the funds over to the JIPSD. We would stop mailing checks to taxpayers.)
The Town has been receiving approximately this amount for the last several years, but has paid out about 3/4 to the taxpayers. As of last month, more than $2.5 million of tax credits payable had been accumulated. So, by reducing the size of the tax credits to approximately what was paid in 2008 or 2009, the Town can easily afford to maintain expenditures at $2 million per year.
I consider this approach to be a last resort, and believe that the funds the Town receives for the property tax credit should be given to the taxpayers as a property tax credit. Because we don't have a Town millage, and the people of the Town pay the JIPSD millage instead, we are under no legal obligation to make these payments. But I think providing this credit is the right thing to do. Still, it is very important for everyone to understand that the Town could afford to operate at a substantially higher level of expenditure if necessary.
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