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$1.2B Budget Recommended
Mecklenburg County Manager Harry L. Jones, Sr. is proposing a total budget of $1.22 billion for FY2005 - 2006, which requires a countywide property tax rate of 83.88 cents. This is a 10.9 percent increase in the tax rate from the current rate of 75.67 cents per $100 valuation. The fiscal year begins on July 1.

May 17, 2005

CHOICES & CONSEQUENCES: COUNTY MANAGER RECOMMENDS $1.22 BILLION BUDGET; TAX RATE OF 83.88 CENTS

Charlotte, NC - Mecklenburg County Manager Harry L. Jones, Sr. is proposing a total budget of $1.22 billion for FY2005 - 2006, which requires a countywide property tax rate of 83.88 cents. The County Manager says increases in debt, Medicaid and other mandated and core services is the reason he is proposing a property tax rate increase of 8.21 cents. This is a 10.9 percent increase in the tax rate from the current rate of 75.67 cents per $100 valuation. The fiscal year begins on July 1.

At the current property tax rate of 75.67 cents, new revenue from growth in the tax base will not cover increases in debt service, Medicaid, other mandated costs, and core services. The current rate of 75.67 cents per $100 of valuation would only generate about $35.9 million more than last year. This is not enough to cover these increased expenses. As a result, the County cannot continue to provide the current level of services without additional money. Without more money, it is also not feasible to consider expanding services or adding new services.

The recommended budget allocates 90% of county funds to the Board’s top three priority levels, with 67.6% going to the top priority services.

"If the Board is committed to its vision and goals for this community, the most responsible approach at this time is to increase the County’s property tax rate," said Jones. "Without this increase, Mecklenburg residents would be without services they expect from their county government."

The proposed increase would result in a $144 total tax increase for the owner of a home with the assessed value of $175,000, an increase of $12 a month. Nearly half of the proposed 8.21 cents tax rate increase (3.88 cents) will go to education services, most of which (3.63 cents) will go to fund the increase in CMS operations and debt service costs. Another 16.7% of the tax rate increase will go to pay the increase in debt service (1.37 cents). As a result, 63.9% of the 8.21 cent increase will be used to fund increases to debt service and to education services.

Of the $1.22 billion budget proposed, about $880 million is County funding - primarily from property and sales taxes. The remainder is generated through charges for services, fees, transit sales tax and other sources. The increases in County expenditures are driven by several factors:

• $31.7 million for Paygo ("pay as you go") capital funding

• $25.2 million increase for debt service

• $18.4 million increase for CMS operations, not including the High School Challenge

• $9.1 million for Business Imperative Reserve Funds

• $8.9 million for market-based employee compensation

• $4.1 million increase for service enhancements, including $1.5 million for ImaginOn

• $4.0 million increase for CPCC, and

• $2.2 million increase to fund current services, including mandated cost increases

As part of his recommendation, Jones is proposing a new strategy to control the County’s debt costs. Jones is asking the Board to dedicate $31.7 million in sales tax revenue to establish a pay-as-you-go reserve fund. This fund would allow the County to pay for the construction and renovation of some County facilities without borrowing money, which would eliminate millions of dollars in interest costs.

"This approach requires a meaningful up-front investment," said Jones. "But it provides a long-term payoff for taxpayers."

Jones’s paygo proposal is in response to one of the fastest growing County expenses, debt service. Debt service is the cost of borrowing money - principal and interest - to build public facilities such as schools, parks, libraries, jails, courthouses and more. For FY2006, the County’s total debt service accounts for $173.5 million in County costs, an increase of $25.2 million from FY2005.

Debt service is composed of three components: General, Charlotte-Mecklenburg Schools (CMS), and Central Piedmont Community College (CPCC). Following is a breakdown of the FY2006 cost and increase from FY2005, as well as the portion of the property tax rate needed to fund these components of debt service.

FY05 Adopted FY06 Recommended Increase Cents on the Tax Rate

General Debt Service $60,495,329 $71,913,469 $11,418,140 1.37

CMS Debt Service 76,167,387 88,088,519 11,921,132 1.43

CPCC Debt Service 11,600,840 13,486,854 1,886,014 .23

Total 148,263,556 173,488,842 25,225,286 3.03

Education Services

By law, the County must fund the construction and major renovation costs for CMS and CPCC. These costs are provided above. The County also has some limited funding obligations to pay for CMS and CPCC operations costs associated with facility maintenance and other related costs. However, the Mecklenburg Board of County Commissioners has chosen over the years to provide operations funding to CMS and CPCC as a supplement to state funding.

Education Services are recommended to receive $435,321,000 for operating, capital, and debt obligations. Net county revenues used for Education Services are $404,871,336. This represents 46% of available county revenue. This is an increase of $31,837,256 (8.53%) from FY2005.

Education Services (County Funds)

FY 05-06

Recommended Budget FY 04-05

Amended Budget Dollar Change %

Change

CMS Operating Expense $ *279,810,000 $ *261,500,000 $ 18,310,000 7.0

CMS Debt Service 88,088,519 76,167,387 11,921,132 15.7

CMS Challenge Grant 3,600,000 6,000,000 (2,400,000) (40.0)

CPCC Operating Expense 19,885,963 17,765,853 2,120,110 11.9

CPCC Debt Service 13,486,854 11,600,840 1,886,014 16.3

Total Education Services $ 404,871,336 $ 373,034,080 $ 31,837,256 8.53

*Does not include $3.59 million in fines & forfeitures

CMS Funding

The FY2006 Recommended Budget proposes $279.8 million in operational funding for CMS, an increase of $18.3 million from FY 2005. This funding level is consistent with the funding request of the Board of Education to maintain the current service level while accommodating the growth in student population. See table below:

2004-2005 Base Operating Budget $261,500,000

Funding Framework Allocation for Growth 13,900,000

Salary Increases (based on an average 2% increase) 4,410,000

Total Recommended Allocation $279,810,000

In addition, $3.6 million in funding for the High School Challenge also is recommended for CMS. Since CMS received the full $6 million for the High School Challenge in November 2004, it should not have needed the full amount for this fiscal year. As a result, the $3.6 million is prorated for FY2006. When combined with $88,088,519 in CMS debt service, the total recommended County appropriation to CMS for FY 2006 is $371,498,519, a $27,831,132 increase from FY 2005. Note: this excludes $3.59 million in fines & forfeitures, $5.2 million for Capital Replacement and $21.7 million for Total Debt Service; these additional revenues are provided by the State.

§ CMS operating = $279,810,000 an $18,310,000 (7.0 %) increase from FY 2005.

§ CMS challenge grant = $3,600,000 a $2,400,000 (40.0%) decrease from FY 2005.

§ CMS debt service = $88,088,519 an $11,921,132 (15.7%) increase from FY 2005.

Funding at the recommended level would increase the County’s total per pupil funding from $2,898 to $3,011 for CMS. Per pupil funding for CMS operations would increase from $2,255 to $2,297.

Mecklenburg County calculates CPCC operations funding based on the increase in CPCC’s facility square footage. This is intended to pay the incremental cost of maintaining new or expanded facilities. The County also provides a 2% supplement to the pay received by CPCC instructors. CPCC is recommended for funding at $33.3 million, an increase of $4.0 million from the FY2005 Amended Budget of $29.3 million.

County Services

County services are those that don’t include debt service, CMS operations funding or CPCC operations funding. The recommended budget calls for $371.2 million to pay for County services. This is a $25.4 million (7.3 percent) increase from the FY2005 Amended Budget. Of the $25.4 million increase for County Services, $2.2 million (a 0.6 percent increase from FY 2005) is needed to maintain the same service level currently being provided. This is a net increase in current service level cost after redirecting approximately $8 million in efficiency savings. Key drivers of the net increase in current service level costs include:

• $1.9 million for annualized cost of employee merit increases in FY2005

• $3.8 million for FY2006 employee merit increases (2.7 percent increase to payroll)

• $2.0 million in medical plan increases

• $1.1 million increase in Medicaid match

• $1.4 million increase in the Health Department contract with Carolinas Healthcare System

(Service Level Enhancements

Approximately $4.1 million is for service enhancements. Service enhancements are recommended to improve or increase results desired by the Board as articulated by the Focus Area Impact Issues. Some of the key increases include:

• $1,500,000 to open ImaginOn, the new children’s library and theater.

• $800,000 for phase one of decentralized, community-based and family-centered child protective services.

• $614,700 to hire 10 additional school nurses and 1 contract supervisor.

• $500,000 for an air quality initiative leveraging public and private funds to achieve ozone attainment.

• $474,000 to fund the final step in employee deferred compensation match to 5%.

• $200,000 for sponsorship of the CIAA tournament.

• $186,395 to add 60 seniors to In-Home Aid caseload.

• $161,000 for 4 additional positions in HIV case management.

• $126,683 to enhance support for agencies providing homeless substance abuse treatment.

• $91,500 to fund a 10-episode season of The Mecklenburgers.

• $75,000 for an additional public defender to support the court set.

Business Imperative Reserve Funds

The remaining $18.8 million in increased funding for County Services is to provide $9.7 million for three reserve funds to address business imperatives, as well as $8.9 million to adjust employee salaries to the market rate for each job. The reserve fund strategy is similar to paygo because it provides a consistent level of ongoing funding for regular business expenses to avoid significant cost increases in the future. Funding the reserve funds would be as follows:

• $4.1 million for facility capital reserve

• $4.1 million for vehicle replacement reserve

• $1.5 million to fully fund technology reserve

Value to Taxpayer

Using a home with a tax value of $175,000, the recommended property tax increase will cost the owner $144 in additional taxes next year. Assuming that establishing the paygo reserve consumes virtually all of the "growth" revenue (by dedicating the half-cent sales tax revenue), the $144 dollars in new tax revenue will be used to fund the following services and initiatives:

• $63.60 for CMS increased operations and capital funding

• $24.05 for debt service excluding education

• $18.74 to pay county employees at the market rate for their job.

• $16.72 to repair and maintain buildings and replace vehicles so old that parts are not available

• $4.63 for normal cost increases for current services, including contractual and legal obligations, employee pay and health care costs, increases in gas prices and other commodities, and other inflationary increases

• $8.63 for new and enhanced services including opening ImaginOn

• $4.46 for increased CPCC funding

• $3.16 to replace outdated technology and to invest in new systems

Jones said additional funding will produce the following results:

• Maintaining current services that people are using right now such as educating children and adults, operating the jails and court system, protecting children from abuse and neglect, treating people for mental illness and substance abuse, keeping people healthy from diseases, caring for the homeless, moving people from welfare to work, providing recreation and leisure services, and more.

• Reduced HIV/AIDs

• Improved air quality

• More health care for children in schools

• More and higher paying jobs

• Enhanced fiscal discipline to reduce the rate of growth in debt costs and other capital spending.

Restricted Contingency

About $2.26 million of expenditures would be placed in restricted contingency for FY2006. Funds for the following initiatives would be appropriated by the Board during the year after additional review: $800,000 for Permanency Planning & Child Protective Services, $734,225 for Domestic Violence Prevention and Protection Services, $500,000 for Air Quality awareness campaign, $13,816 for House of Grace, and $215,674 for Fighting Back.

Reductions and Unfunded Service Requests

The FY2006 recommended budget document also includes information regarding $3 million in reductions from the current service level as well as $79.9 million in requests for funding that are not recommended by the County Manager. This information is provided to ensure full transparency and enable the Board to evaluate choices in context.

Capital Improvement Program (CIP)

The FY2006 recommended budget includes a recommended capital improvement program (CIP) for FY 2006 - 2008 totaling $562,844,000. The CIP is a schedule of capital improvement projects for Mecklenburg County. This recommendation includes placing up to $534,216,000 in bond referendums on the November 2005 ballot, and approving an additional $28,628,000 in certificates of participation (COPs) and/or Paygo. If the Board approves the recommended CIP and if voters approve the bond referenda, an additional $53 million would be added to the amount of bonds and/or COPs the Board would consider selling in January 2006. This would bring the preliminary proposed sale amount to $286.9 million. The debt service impact of this sale would begin in FY2007.

However, if the Board establishes and maintains Paygo at the level recommended for FY2006, it would be possible to reduce the recommended referenda by approximately $60 million. This reduction demonstrates the value of investing in Paygo and maintaining the discipline for ongoing investment.

Law Enforcement Service District

Police services provided by the Charlotte-Mecklenburg Police in the unincorporated areas of the County are funded by a Law Enforcement Service District (LESD) property tax. The agreement with the City of Charlotte calls for the payment to the City of $12.5 million in revenue for police services in FY2006. Based on a decrease in the tax base of the unincorporated area due to annexation, a property tax rate of 17.68 cents is required to generate $12.5 million. This is an increase of 1.42 cents above the FY2005 rate of 16.26 cents for the LESD tax rate.

My County Budget

Full details of the FY2006 Recommended Budget are available on the web at  http://countybudget.charmeck.org. Residents can also access " My County Budget," an interactive tool that allows them to create their own version of the County budget by adding or subtracting funding from various County programs and services. This online tool also lets people see instantly how the changes would affect their tax bill.

Public Comment

Residents who wish to comment on the recommended budget may sign up for two public hearings, May 19 (County services) and May 26 (education services). The public hearings will be held at 6 p.m. in the meeting chamber of the Charlotte-Mecklenburg Government Center, 600 East Fourth Street, and televised live on the Government Channel (Time-Warner Cable Channel 16). Residents can sign up to speak by calling 704-432-0645 or register online .




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