The city’s proposed $16,771,496 budget for the upcoming fiscal year will keep its operations at the current level, City Manager Kelly Traynham said in her budget message to the council Wednesday night.

It is a proposed financial plan which continues to hold the tax rate at 65 cents per $100 of valuation.

“The growth rate of many of the city’s general fund revenues is directly tied to the state and local economics as well as population growth within the city,” Traynham said. “In order to maximize the use of available revenues the fiscal year 2022-2023 budget was prepared as a continuation budget, providing only for the continuation of city operations at their current level.”

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Government funds

At the end of the 2020-21 fiscal year the unreserved fund balance in the general fund was $4,118,325 while the total fund balance reached $5,535,399.

The unreserved fund balance represented 16 percent of total general fund expenditures while the total fund balance represented 26 percent.

At the close of the prior fiscal year, the city’s government funds included a combined fund balance of $5,562,408 with a net increase of $1,376,077, according to the 2021 audit report.

For the current fiscal year the council adopted an ordinance establishing a $15,850,253 budget.

Two weeks later another ordinance revised the initial budget to include additional tax revenue and a tax expenditure of $120,000 to be paid to the Roanoke Valley Rescue Squad while keeping the financial plan at the $15,850,253 amount.

Budget amendments

On July 20, 2021, city council approved an ordinance which amended the FY 2021-2022 budget by transferring $22,000 from fund balance to the general fund for expenditures required for the North Carolina Department of Corrections Inmate Worker Program. 

On August 3, 2021, city council approved an ordinance which amended the FY 2021-2022 budget by transferring $612,100 from fund balance to the general fund for COLA salaries and benefits for city employees — $3,000 per full-time employee and adjusted for part-time employees. 

On November 16, 2021, city council approved an ordinance which amended the FY 2021-2022 budget by transferring $29,000 from fund balance to the general fund for the purchase of roll-out trash carts. 

On March 15, city council approved an ordinance which amended the FY 2021-2022 budget by transferring $171,497 from fund balance to the general fund for the increased expenses in automotive fuels — $100,000 — due to unforeseen global increases and to fund the expense of E-911 system costs — $71,497. 

On Wednesday city council approved an ordinance which amended the FY 2021-2022 budget by transferring $75,000 from fund balance to the general fund for the emergency repair of the stormwater drainage system in the area of Jackson and First streets. 

Budget summary

“This budget was drafted based upon estimated revenue from all usual sources, just as previous years’ budgets,” Traynham said.

The operating budget does not include any resources from the American Rescue Plan Act funding from the federal government. “We anticipate the city will be able to use them in the FY 2022-2023 budget and it is recommended that these funds be utilized for specific program, project, or equipment expenses.” 

This current budget allows departments to maintain a minimal level of services to the city while not recommending raising any taxes. 

However, the FY 22-23 proposed budget includes approximately $500,000 in money from the undesignated fund balance. 

“This proposed budget includes minimum department manning levels and no capital projects or equipment acquisitions,” Traynham said. “It includes the minimum level of any travel or per diem expenses as required licensing and certification. However, it also does not include any cost-of-living/merit salary increases or employee bonuses.” 

The city manager said, “We did not include any potential grants in the budget that departments might apply for. If any grants are approved for use, we will ask city council at that time for a budget amendment for the grant amounts plus any matching funds requirement.”

Economic outlook

Traynham said the economic outlook at the time of this year's annual revenue forecast is largely focused on the recovery from COVID and a transition to a post-COVID era. 

The American Rescue Plan Act has provided $2.281 million during FY 21-22 and the city expects a final allocation of $2.281 million during FY 22-23. 

The city will use these funds to reimburse for salaries and benefits expenditures during FY 21-22 and FY 22-23 under the Standard Allowance of the Revenue Replacement Category per the United States Treasury’s Uniform Guidance. “The city should strategically plan expenditures with the ‘offset’ revenues following completion of the standard allowance. I am hopeful that the funding will be transformational for our city.”

COVID-19 and the new normal 

Similar to last year’s economic outlook, further recovery from the COVID-19 pandemic and the continuing transition to a new normal are major drivers causing uncertainty around projections, the city manager said. “Within the last year, COVID-19 vaccines have become widely available, and the North Carolina Department of Health and Human Services estimates that 76 percent of North Carolina adults have received at least one dose.” 

While cases declined throughout the back half of 2021, the rapid spread of Omicron throughout the winter led to a new spike in cases. “Regardless, Americans are reporting that they are increasingly more comfortable with activities such as visiting grocery stores, eating out, and attending indoor concerts and events, which is hopefully a positive indicator for economic activity,” she said.

However, as the impact of the pandemic wanes somewhat, another source of uncertainty has emerged in the form of the Russian invasion of Ukraine. “Sanctions by the U.S. and other countries throughout the world on Russia include a ban on importing Russian oil, a move that has contributed to rising fuel prices in the U.S. There may still be impacts to come on items like food prices and the availability of raw materials, to say nothing of the potential implications were the conflict to escalate.”

Since the final round of federal stimulus checks in early 2021, consumer spending has continued to increase in North Carolina, but future outlooks grow more uncertain and less optimistic. 

As of late March, North Carolina total consumer spending increased by 16.6 percent when compared to January 2020. 

Yet, data from the U.S. Census Bureau’s Household Pulse Survey Interactive Tool notes that in the first half of March, an estimated 34.4 percent of North Carolina adults report difficulties in covering normal household expenses, up from 29.9 percent in the same period last year. 

The same data set notes that in the first half of March, 23.3 percent were worried about their ability to pay an energy bill, up from 19.1 percent in the previous summer. 

The Bureau of Economic Analysis estimated personal savings as a percentage of disposable income in February at 6.3 percent compared to 13.5 percent at the same point last year. 

At the time of this year’s memo, gas prices in North Carolina hover around $3.98 per gallon, compared to $2.63 per gallon at this time last year, which will also likely impact the availability of consumers’ disposable income. 

Inflation is another issue which has greatly affected consumers across the country in recent months. 

The February 2022 Consumer Price Index Summary indicated an increase of 7.9 percent over the previous year. 

As a measure to combat inflation, the Federal Reserve recently raised interest rates from 0.25 percent to 0.5 percent and indicated that further hikes are expected throughout 2022. 

In addition to other factors outlined, inflation and rate hikes may eat into the disposable income of North Carolina consumers.

Revenue source estimates

The city’s revenue estimates were based on historic review of source trends, review of economic trends at the national and local levels, and guidance from the North Carolina League of Municipalities, Traynham said.

Expenditures

During FY 2021-2022, the city satisfied two debt instruments by making the final payment for the New Town Resource Center and the early pay-off of the 2017 Series B Bond Loan for the Music & Entertainment District — Roanoke Rapids Theatre. 

Budgeting for FY 2022-2023 includes an expenditure of $1,404,241.30 in currently obligated tax supported debt among six financing instruments consisting of the annual payment on the 2017 Series A Bond Loan, which is projected to be $952,136 and the remaining debt service payments for the fiscal year will be $452,105.50. 

Long-Term Schedule of Tax-Supported Debt 

The table in the gallery entitled Long-Term Schedule of Tax-Supported Debt reflects the financial obligations, or debts encumbered by the city in prior fiscal years. 

“As you can see, if the city does not take on any additional debts, then in 2033, the city will have zero debt payments,” the city manager said. “Is this likely? No. It is realistic to expect the city to choose debt financing instruments to fund capital projects and equipment into the future.”

She said North Carolina General Statutes limit the amount of general obligation debt that a unit of government can issue to 8 percent of the total assessed value of taxable property located within the government’s boundaries. 

General administration

Because the city is a service provider, personnel costs are its greatest expenditure. 

The proposed budget does not include a cost of living/merit increase or bonuses for city employees but does include a $250 holiday bonus for all full-time employees. 

Benefits costs have increased due to retirement contribution percentage increases mandated by the state treasurer’s office. 

Funding has been requested to continue the city’s longevity program and a 401(k) supplemental compensation program of 3 percent for non-law enforcement personnel. 

Another item provided for in the proposed budget is an increase in employee health insurance premiums with most all the same plan benefits. The net increase is due to the rising costs of elective dependent coverage.

In the near future, Traynham said, the city should consider amendments to the shared costs to keep employee coverage at 100 percent city-funded.

The general government and administration budget totals $3,680,661 and includes legislative, general government, administration, human relations, elections, finance, information systems, revenue collections, legal, miscellaneous contributions, debt service, and capital reserve departmental budgets. 

Police

The proposed budget for the department is $3,903,503. 

Two of the frozen positions requested for funding are not allocated. 

During FY 21-22, two positions were funded that were previously not. “Chief (Bobby) Martin is hopeful that the salary adjustments to increase starting pay for police officers will aid in recruitment to fill vacancies.”

Two funded positions remain open per Martin due to the lack of qualified candidates. 

Traynham said she recommends opening the employment opportunity to potential candidates from external agencies. 

With the adjustments made during FY 21-22, the department should be able to provide acceptable service levels for traffic safety, investigations, security, and community policing.

Fire

The proposed budget for the department is $2,253,755. 

The department will be able to maintain service levels for fire prevention, fire response and first responder activities. 

Reductions were made in training, equipment, and career development budget lines.  

Public works 

The proposed budget for all facets of public works is $4,612,958. 

It does not include any capital items/equipment or street resurfacing funding, but does fund minor street repairs and patching. 

Three positions in the street department remain unfunded. 

Parks and recreation 

The proposed budget for all departments under parks and recreation is $1,774,692. 

Funding is provided to maintain operations at the Aquatic Center while recommending the outdoor pool remain open and reducing part-time staff in other operations. 

There are no major project grants included. 

Funding for the library may continue to increase with grants, state aid and donations. 

Funding for inmate labor is included. 

Planning and development 

The proposed budget for the department is $545,926. Minimal funding was provided for expenses related to future demolition needs.

Summary

Traynham said the proposed budget is balanced in accordance with the Local Government Budget and Fiscal Control Act. “We have attempted to address maintaining minimum service levels while maintaining our current tax rates. As always, we will continue to explore ways we can minimize our costs and improve efficiencies.” 

Traynham said many departments, especially public works, police and fire, have major capital needs that have been delayed over the years and will need to be seriously considered for resourcing in future years. “Infrastructure maintenance and upgrades, especially street repairs, need to be programmed for funding as well. Also, continued minimum department manning and the inability to offer meaningful starting salaries or increases will have an impact on recruitment and retention of city employees.” 

Said Traynham: “I hope we will be able to use American Rescue Plan Act funds to invest in the transformation and growth of our community in order to compete with other cities and towns. The ARPA funds will allow the city to move forward with innovations and improvements in technology to become more efficient and cost-effective. This can be realized using ARPA funds to pay for the significant initial development costs.”