Town of Franklin Proposed Budget

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Town Managers Proposed Budget Message
Fiscal Year 2025-2026

The Honorable Mayor Horton and Members of the Town Council
Town of Franklin

Dear Mayor and Council Members:

In accordance with the provisions of the North Carolina General Statutes, staff presents the proposed Municipal Operating and Capital Budget for Fiscal Year 2025-2026.

SUMMARY

This document represents the Town's financial plan for the next fiscal year, considering experience, forecasting efforts, and Town Council direction. The budget ensures the continued provision of high-quality service and identifies the anticipated revenue sources necessary to support our operations. The 2025-2026 fiscal year budget was developed based on a prioritization of needs for a well-rounded, full-service town. As with recent years, time was devoted in the preceding fiscal year towards evaluating options for increased operational efficiencies and cost savings. We also spent time evaluating existing staffing levels to identify needs based on shifting workload and recruitment and retention pressures.

Due to the conscientious decision making and fiscal responsibility of the Town Council and Town Staff, the Town of Franklin remains in a strong economic position. With the ability to utilize fund balance to complete certain one-time capital purchases and/or projects that enhance quality of life and provide economic development opportunities. While the Town has been fortunate to see many of its revenues hold steady or increase over the past year, all indications are that this will not continue.

The Leadership Team entered this budget development with the goal of keeping expenditures as close to the previous year as possible and to do so with minimal to zero use of fund balance; however, there are some increases that we will be facing in the upcoming year. In preparation of the 2025-2026 budget, we face several familiar structural cost drivers that once again compete with desired projects for funding. These structural costs are similar for municipalities across the state and country: rising healthcare costs, unfunded pension (retirement) liabilities, salary increases to assist employees combat rising inflation leading to higher employee retention, and post-employment benefit liabilities (insurance and LEO separation). High inflation rates have created cost pressure on almost every aspect of our budget. Lasting supply chain disruptions continue, uncertainty related to tariffs and increased demand for material goods are combining to create extreme price increases that have caused the cost of most goods to increase from just a year ago. These dramatic inflationary cost pressures make it necessary for the Town to more carefully consider expenditures, utility rates, and fees for service to ensure that our service provision continues at current levels.

The largest increases in expenditures comes from health and dental insurance premiums, a mandatory increase in employer retirement contributions, retiree health insurance, worker's compensation and property and liability insurance, utility increases proposed by various providers and other material costs. This budget also incorporates a 4% Cost of Living Adjustment (COLA) for all employees as this has not been requested since FY 2021. There is also a proposed Town Council stipend increase in this budget as the stipend has not been increased in 16 years.

Specific capital spending is recommended in the Water/Sewer fund as the Clearwell and High Service Pump Station is a necessary improvement at the Water Treatment Plant, as well as new water meters to replace aging infrastructure. General fund capital expenditures include completion of Phase Lof the Whitmire Inclusive Play Area and the greenway connector at,. Allman Drive.

The Town allocated all of the American Rescue Plan Act (ARPA) funds prior to the December 31, 2024 deadline and should expend all of the ARPA funds by the end of the current fiscal year, well in advance of the December 31, 2026 termination date.

Mission and Vision statements for the Town were adopted in January 2025, and the budget was developed to meet the standards set forth by those statements and working toward the established goals.

Tax Rate

This budget presented is balanced utilizing a rate of $0.33 per $100 valuation. This is the same tax rate as the previous year. The combined collection rate is predicted to be 97% which is in line with previous years. Franklin's tax base (real property and personal property) was estimated to be$ 3,275,568.37 after adjustments by Macon County.

Personnel

This budget is developed to be employee-centric. The largest General Fund expense for local governments is personnel. Due to the face-to-face nature of their work, the goal of all towns is to attract, train and retain a workforce that understands their jobs and provides service in a professional and personable manner. The budget incorporates a 4% Cost of Living Adjustment for all employees.

n the upcoming year we are faced with three items that will increase our personnel costs, employee health/dental insurance including retiree insurance and an increase in NC Local Government Retirement contributions. This proposal includes the increase in employee health insurance premiums, increase in dental premiums, and state mandated increases to the NC Local Government Retirement System (LGRS) (1.06% for LEO and 0.70% for all other employees).

There are two (2) recommended reclassifications that will impact the General Fund. The first is for Police Captain to be reclassified to Assistant Police Chief. This position will have additional administrative functions and supervisory duties allowing for a clear succession plan. The next reclassification is the Budget and Fiscal Analyst would become the Deputy Finance Director. This position has assumed additional duties related to fleet management, financial analysis and other financial functions. The individual in this position holds a NC Certified Finance Officer designation and reclassification is critical to succession planning and development.

General Fund

This budget reflects a General Fund Budget of $ 5,573,500.00. In this budget, we are proposing to use zero dollars ($0.00) from fund balance. In order to reduce the budget to the full extent possible we have reduced the General Fund operating budget to minimal levels while still including Town Council requests for beautification, economic development and projects for recreational opportunities. All of the General Fund departments have held their operational budgets as steady as possible while addressing material cost increases.

There is a municipal election in Fiscal Year 2025/2026 and costs associated have been included in the budget. This expenditure only occurs every two years and did not appear in the prior year budget.

Water/Sewer Fund

The proposed budget for the Water/Sewer Fund is$ 5,390,821.79. The Clearwell and High Service pump station is noted in the Capital Improvement Plan, the estimated cost of this improvement is $5,400,000. Replacement of 800 water meters that have reached the end of life are included in the budget and will be budgeted for each year until all 3,200+ meters have been replaced.

In order to fund the repairs and improvements to the Water Treatment Plant Phase 11, purchase and install water meters and to ensure stability for the revenue stream to finance such, a recommended 10% increase in water and sewer fees is proposed. The 10-year capital improvement plan was approved in 2020 and allotted for minimal annual increases as the Town was moving toward a debt service cycle under a State Revolving Fund Loan.

The rationale for having a 10% increase is this, when the 10-year CIP was developed by engineers in 2019 and adopted by Town Council in 2020, it was at the beginning of the pandemic, and the study did not take into account the dramatic increase in the cost of materials such as pipe, meters and chemicals used to treat water that we have seen since then due to supply chain issues, post-natural disaster demand and now tariffs. Municipalities across the state were handed an unfunded mandate related to lead and copper regulations which required an inventory of all lines and a requirement to replace any lines that meet specific criteria. There are continuing monitoring requirements as well. This increase was not undertaken lightly. The cost to treat wastewater and produce drinking water have continued to escalate and with necessary improvements required to both water and wastewater systems, the rates for these services have to be adjusted to cover those costs.

There is a need to appropriate from the retained earnings in order to ensure that we meet the requirements of a balanced budget. The amount required is $729,071.79.

Fire Department Fund

Based on current estimates fire tax revenues are projected at$ 1,665,257.00 for fiscal year 2025-2026. The Fire Department's proposed fire district tax rate is $0.07 cents per one hundred dollars ($100) of valuation. This is the same rate as in FY 2024/2025. This amount is contingent upon approval by the Macon County Board of County Commissioners.

The Fire Department continues to look for grant funding opportunities for various apparatus and gear and has done a capital improvement plan for expenditures needed to remain in compliance with NFPA standards.

The Fire Department substation located on NP&L Loop should be completed by the end of the Fiscal Year 2024/2025 utilizing a directed grant from the State of North Carolina.

Conclusion

This budget for the Fiscal Year 2025-2026 is balanced as required by law and continues to provide existing services while meeting the governing body's priorities and policy goals.

The budget presented is one that continues to carry the Town into the future while being cognizant of the changing economic climate and maintains a competitive salary structure within the region for employees. The costs of services, materials and supplies and salary adjustments have impacted overall operational expenditures. However, every effort has been made to closely monitor expenditures, find efficiencies and plan for the future. The budget reflects a stable tax rate of $0.33 cents per $100 valuation in order to continue to operate effectively.

Included in this budget is a copy of the five-year capital improvement plan (GIP) for all departments as well as the updated fee schedule.

The total proposed budget for Fiscal Year 2025-2026 is $12,629,578.79; this is a 5.76% increase from last FY. The proposed budget for Fiscal Year 2025-2026 continues to address critical infrastructure needs including sidewalk improvements, recreational opportunities, water and sewer infrastructure and continued quality service provision all while maintaining a healthy fund balance and doing so in a cost-effective manner.

The development of this budget was made possible through the knowledge and contributions of the staff of the Town Franklin and the Town Council. The Leadership Team is committed to providing a high level of service at a reasonable cost to its citizens. As stewards of public resources, staff believes our primary role is to concentrate budgeting efforts on ensuring the safety of our community by investing in public safety and infrastructure, and maintaining current service levels. This budget reflects the Town's commitment to improving our community while positioning Franklin to be financially stable well into the future.

I appreciate the time and consideration of the Town Council as they have reviewed and discussed the budget and provided input, direction and guidance.

Respectfully submitted,

Amanda W. Owens, Town Manager