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Tuesday, May 14, 2013

Davidson 2014 Budget Hearing This Tuesday

Davidson Staff and Commissioners have been working to put together a budget for the next fiscal year which starts in July.  By law municipal budgets must be approved by the end of June, and to meet that date the Town scheduled a public hearing for this Tuesday, 5/14.

Here's a link to the proposed budget if you are interested in some light reading.

Some of this year's highlights:
  • How much does Davidson owe to Mooresville after the renegotiated interlocal agreement for Mi-Connection which caps Davidson's payments and ownership of the company?  Answer:  At the end of this current fiscal year, Davidson will have $574,121 on the Mooresville credit card for what the Town owes but has not paid for Mi-Connection subsidies.  This accounts for money Davidson had "overpaid" in previous years due to the retroactive nature of the updated interlocal signed last year.  Under next year's proposed budget this debt to Mooresville will go up to a total $1,278,268.  Against these debts, Davidson has socked away $600,000 in it's capital project account.  This debt will continue to grow until Davidson's portion of the annual subsidy drops below $1,000,000.  This year it will be over $1,700,000.
  • Will Davidson's Fund Balance be comparable to other towns its size under this budget? Answer: Davidson will remain below the average fund balance for municipalities our size - 39% vs a 49% average.  That's a result of a conscious decision by the Board to spend rather than save. When the Mi-Connection interlocal was renegotiated and Davidson freed up $1,000,000 in cash flow last year. the Town Staff initially indicated the money would be socked away to raise Fund Balance up to the 49% level and get Davidson in line with our peers financially. (See "EFFECT ON DAVIDSON BUDGET" in the linked article from DavdisonNews.net.)  The Town Board thought otherwise.  Davidson elected officials chose to use all of the available cash on more spending - approving a Capital Improvement Plan with many millions in spending over the next 5 years.  The Town fund balance will likely go down some when Davidson gets the final numbers on the County revaluation fiasco.  That may result in the Town paying up to a few hundred thousand dollars over the next couple of years for the overpayments since 2011.  
  • Will Davidson's Town Board meetings be televised under this budget?  Answer:  It appears not.  However, meetings may have audio recordings made available. There's simply not enough money left to video meetings - something that would truly help engage the public and give people who can't attend a better sense of what goes on at these meetings.  While the Town can't find the technological resources to enhance government interaction with the citizens in this way, it has found dollars for resources targeted at visitors.  The budget includes $26k for 3 digital information kiosks at South Main, Downtown, and Circles areas.
  • What's the good news out of this year's budget? Answer: No property tax increase.  Remember, it's an election year.

4 comments:

  1. Rick, while certainly anyone can find something not to like in a $9 million budget, when you look at the town's budget on a high level it's hard to support an assertion that it represents the work of drunken sailors. Last year's budget was $8.9 million; this year $9.2 million. That 3% increase is about in line with population growth.

    Fund balance is also something that can be measured different ways. While you are projecting it will go down, Cindy Jones is projecting it will go up to the mid 40s, which is pretty close to our peer group. And, if you add in the other $600,000 that is put away for MI-Connection, one could make an argument that our overall savings account represents nearly half of our annual budget. While I recognize the need to have a fund balance, I'm not obsessed by it. Why should we levy taxes just so we can take the citizens money and put it in a savings account earning less than 1%? If anything towns with too high of a fund balance could be accused of overtaxing their citizens and being poor stewards of their money.

    The capital improvement plan is just that, a plan. We've never authorized the expenditure of millions of dollars via a capital improvements plan. Actual authorizations are only made in the budget. And, some of the big ticket items in the capital improvement plan have grant funding that will pay for them.

    Having been part of the budget process for 2 years now I can tell you it is pretty meat and potatoes. Again, someone can always point to items they don't like, but by and large I don't feel this budget is the work of tax and spend commissioners. We cut several hundred thousand dollars of worthwhile projects from the proposed budget, rather than fund them by dipping into fund balance or raising taxes. The tax rate stayed the same, just as it did last year (which was not an election year).

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  2. Hey Rodney, thanks for the comment. But, please don't put words in my mouth. I didn't call anyone a "drunken sailor". In fact, I would agree that when you look at the budget detail line by line (as I did) there is not a lot that jumps off the page as totally unnecessary (the kiosks being the exception).

    However, when one realizes that the budget was only balanced by adding $400k of unfunded liability to the Mooresville credit card, it's hard to get too excited. Yes, Mi-C is doing better, but these unfunded liabilities will likely increase for 2 more years - at least. To me, the more conservative approach would have been to not add any more recurring cost (as this budget does with increased staff) until we know with more certainty how Mi-C growth appears to be playing out. While it's good that the Town didn't fund "several hundred thousand dollars of worthwhile projects" with money we don't have, it does fund things like new travel expenses, money reserved for unplanned greenways, additional expenses for "events", and an increase to arts funding - in addition to the kiosks. All of these are "nice to have's" but not "needs" in my opinion.

    So, in light of the unknown total expense from the property tax revaluation issue and the increasing unfunded debt to Mooresville for Mi-C, looking at the fund balance % does not seem "obsessive" to me.

    I guess we're just different that way.

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  3. Rick, thanks. I did not mean to imply that it was your assertion that the budget was the work of 'drunken sailors.' I just casually used a term that describes people who aren't wise with their money. I think the term was used quite a bit by John McCain (although not to describe the Davidson Town Board).

    Regarding a few specifics: public art funding is increasing only because our occupancy and food taxes are increasing, and public art funding is a fixed % of those taxes. Our funding for public art is still well below what it was in 2008, and as you know we recently leveraged private and corporate funding to cover 90% of the costs of the book garden that was installed by CVS.

    Greenways are probably the most supported infrastructure project we have (per our citizen survey). The overwhelming majority of our citizens say they support investing in greenways. The $10,000 we set aside for greenways is about 1/10 of 1% of our budget. We've missed out on grant funding for greenways because we did not have an acquisition fund. This small amount of funding responds to what our citizens tell us and tries to position us to take advantage of funding that might become available.

    Regarding MI-C, if we to fully fund what you are calling the unfunded liability, then there would have been no point in changing the interlocal agreement. We'd decided that the (at the time) roughly $2mm annual subsidy was not sustainable, so we agreed to cap it at $1mm (I am sure you are very familiar with the agreement so I won't go into detail). Yes, we are "betting on the come" as they say, but based on the last several quarters of results our contributions to MI-C are trending very favorably. I acknowledge there is always risk with this business, but we also have an agreement that we won't let the 'unfunded liability' grow beyond a certain point. The $300K we've set aside each of the last 2 years is our best estimate of what we need to set aside each year in order that we never get beyond a certain balance on what you're calling the 'Mooresville credit card.'

    Finally, regarding the property tax revaluation, we took the most conservative approach we could take. We assumed the worst case with the reval and consequently made some cuts to our expenses. The alternative would have been to increase the tax rate about a penny, but we decided to cut expenses rather than raise taxes to deal with the uncertainty around the reval.

    Thanks!

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    Replies
    1. Rodney, thanks for the good back and forth.

      For the record I love the Book Garden and greenways just as much as the next guy. In fact I bet I use them more than the average citizen.

      Here are a couple of questions.

      Does the Board have any discretion on the % of the occupancy and food taxes that go towards the arts? If so, then things like the Book Garden could still be built with a lower % as the tax dollars rise. The fact that the Book Garden exists proves that point. Same goes for the greenways. What we have now was built without a standing fund (I believe), so adding one seems unnecessary to me. Also, if I remember correctly there isn't anything on the books for greenways this year anyway. Finally, in the event that some unbelievably good matching grant opportunity came up, the Board would always have the option of doing a budget amendment. As an alternative, I'd even be open to a general "matching grant" pool for all matching grants. Bascially, I favor more flexibility in this type of spending than creating dedicated funding which allow people to say "our hands are tied, we had to spend the money that way".

      On the Mi-C deal, to me the most important benefit was to get the Local Govt Commission off the Town's back by stabilizing the Fund Balance and preventing it from dropping year over year indefinitely to the point where the LGC took action. That benefit was almost entirely achieved by the portion of the renegotiation that caps Davidson's ownership % at 30%

      This year's "lights on" budget estimate presented in February was about $8.3m for the General fund, and that includes the $1.3m for Mi-C. The current proposed budget calls for $9.1 million in General Fund spending. There is roughly $800k in additional spending above "lights on" in the budget.

      To me (and maybe it's just me), saying things like not spending all the Mi-Connection excess cash flow defeats "the point" of the interlocal renegotiation and implying that the only "alternative" is to raise taxes, well, those statements just aren't entirely believable to me.

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