Town of Franklin Proposed Budget

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Town Managers Proposed Budget Summary
Fiscal Year 2022-2023

The Town of Franklin successfully navigated uncertain economic times in FY 2021/2022. Due to the diligence and fiscal responsibility of the Town Council and Town Staff, the Town of Franklin remains in a strong economic position. For Fiscal Year 2022-2023 the budget team has had to look carefully at the financial plan for each department and consider the goals and objectives that the Town Council set for the year. Due to circumstances that are beyond the control of staff including supply chain and material cost issues, we are projecting revenues will not equally offset expenditures in the coming year. Therefore, it is necessary for Town Council consider a recommendation to increase the ad valorem tax from $0.32 to $0.35 to properly adjust.

Some of the largest increases in expenditures comes from a 5.4% increase in health insurance premiums, a mandatory 1.2% increase in employer retirement contributions, increased law enforcement separation payments, retiree health insurance, and material and fuel costs. Due to the increase in these costs, if a tax increase is not factored in, a higher amount of General Fund Balance will need to be appropriated in order to balance the budget. This budget does not recommend any salary adjustments such as cost-of-living adjustments (COLA), but does recommend continuation of the performance-based and career track increases as the requirements are met.

Specific capital spending is recommended in the Water/Sewer fund; some of which will be offset by the use of $572,000 in American Rescue Plan Act (ARPA) funds to improve lines on Wilkie Street and the East Franklin Pump Station. Other collection and distribution line improvements are included as budgeted items utilizing water/sewer revenues. Additional ARPA funds in the amount of $350,000 are proposed for the General Fund for use with sidewalk repair and construction.

Tax Rate
This budget presented is balanced with a tax rate of $0.35 per $100 valuation. The combined collection rate is predicted to be 96.89%. One penny on the tax rate is estimated to yield $71,667. Franklin's tax base (real property and personal property) is estimated to be $702,932,478. Macon County is in a revaluation cycle and the tax base amount will change in 2023.

Personnel
The largest General Fund expense for local governments is personnel. Due to the face-to-face nature of their work, Town's must attract, train and retain a workforce that understands their jobs and provides service in a professional and personable manner. This is especially difficult to carry out in our area due to the high cost of living and low unemployment rate. The Town Council wisely supports an employee benefit program that rivals any local government in North Carolina. The challenge for the Town is to continue funding competitive salaries and benefits when the cost of living is rising faster than the Town's tax base.

In the upcoming year we are faced with two mandated costs that increase our personnel costs considerably, employee health insurance including retiree insurance and an increase in NC Local Government Retirement contributions. The proposal that is before you includes a 5.4% increase in employee health insurance premiums and a 1.2% increase in NC Local Government Retirement System (LGRS). The cost of retirement and health care adds an additional $52,150 over last year's rates.

There are two (2) new positions recommended under the Water/Sewer fund - Water Treatment Plant Operator (WTPO) and Meter Reader. The WTPO would be added in advance of the phase 11 improvements at the Water Treatment Plant in order to adequately staff the facility. The meter reader would be accountable for all readings and submissions to ensure proper billing to citizens and handle service calls related to meter issues.

There are three (3) new positions recommended under the Fire Department Fund. This would allow for an additional position on each shift and would be funded from a proposed fire district tax increase. Macon County Board of County Commissioners approves the fire district tax rates for all fire departments and this budget considers an increase in that tax.

General Fund
This budget reflects a General Fund Budget of $4,275,542; a 2.2% decrease overall from the previous year. It is of note that in FY 2021/2022 there was $640,000 utilized from fund balance to achieve a balanced budget. In this budget, the use of ARPA funds for sidewalks ($350,000) and proposed tax increase dollars generated ($215,000) accounted for the majority of the difference in fund balance utilization.

In order to reduce the budget to the full extent possible we have reduced the General Fund operating budget to minimal levels. However, a fund balance appropriation of $175,633 will still be required to ensure a balanced budget.

Water/Sewer Fund
The proposed budget for the Water/Sewer Fund is $4,845,978. Capital projects equal $1,172,000 for distribution and collection line replacements and improvements to pump stations; of that amount $572,000 would be covered with ARPA funds.

In order to fund the repairs and improvements to the Water Treatment Plant, Phase II and to ensure stability for the revenue stream to finance the $12,400,000 grant/loan offered by the State, a recommended 3% increase in water and sewer fees is proposed. The Town had to demonstrate that it had a rate structure that will pay the first year of debt service to qualify to the State Revolving Loan that has been awarded the Town. The 10-year capital improvement plan was approved in 2020 and allotted for minimal annual increases as the Town moves into the full debt service cycle.

As with the General Fund, there is a need to appropriate from the fund balance in order to ensure that we meet the requirements of a balanced budget. The amount required is $1,026,478. Based on current estimate fire tax revenues are projected at $1,169,196 for fiscal year 2022-2023. The Fire Department's proposed fire district tax rate is seven ($0.070) cents per one hundred dollars ($100) of valuation. The previous rate was $0.0545.

If the fire district tax increase is granted by Macon County*, there will be no appropriation from fund balance required for fiscal year 2022-2023. Fire call pay for volunteers is expected to remain at current rates.

The Fire Department continues to look for grant funding opportunities for various apparatus and gear and will be developing a plan for capital expenditures for needed large vehicles such as tankers and other fire trucks to remain in compliance with NFPA standards.

*In the event that Macon County does not approve the proposed increase, the fire department will provide updated revenue projections prior to the June 6 budget presentation to the Town Council and any requisite adjustments made.

Conclusion
This budget for the Fiscal Year 2022-2023 is balanced as required by law and continues to provide existing services while meeting the governing body's priorities and policies. The proposal that is before you is a "maintenance of service" budget meant to carry the Town through its first full year of a recovering and changing economy. The costs of services, materials and supplies, as well as fuel increases, has impacted operational expenditures. However, every effort has been made to keep expenditures low. The budget reflects a proposed tax rate increase to $0.35 cents per $100 valuation in order to offset these and other costs that are beyond the Town's control.
The total proposed budget for Fiscal Year 2022-2023 is $10,430,716. The proposed budget for Fiscal Year 2022-2023 addresses critical infrastructure needs, beautification and improvements, and looks toward future capital projects, while maintaining a healthy fund balance and providing quality services in a cost-effective manner.

I wish to thank the all of the Department Directors and staff for submitting operating budgets that were fiscally responsible and weighed carefully "the wants versus the needs" in their requests. The staff of the Town Franklin is committed to providing a high level of service at a reasonable cost to its citizens.

I appreciate the time and consideration of the Town Council as they review the budget and look forward to receiving your further instruction and input.

Respectfully submitted,
Amanda W. Owens
Town Manager