Official: Good, positive budgetPublished 11:59am Saturday, May 4, 2013
FRANKLIN—The City of Franklin is working toward a solid financial future and City Manager Randy Martin is leading the way.
In preparing the 2013-2014 fiscal year budget, Martin said he and the council began strategizing about long-term needs and goals this past summer.
One of the things they focused on, said Martin, was debt restructuring. He explained yesterday in an interview with the Tidewater News, that revenue received from Isle of Wight County in regard to International Paper created a $1.1 million loss to the city when the mill closed down.
In preparation, the former city manager and city council restructured the debt and used part of the city’s debt reserve to help absorb that loss of revenue, which pushed the debt into the future. The current fiscal year of 2012-2013 will be the first year to reflect 100 percent of that loss of revenue from the shared revenue zone with Isle of Wight.
He went on to explain that the city has several different pots of money and expenses to deal with. The General Fund consists of the main operations of the city such as administration, fire, police and streets. This area operates off of taxes as its primary funding source. Next there are separate enterprise funds for water and sewer (funded by user fees); electric (also funded by user fees); the airport; and schools (which receives funding from state and federal sources as well as the city).
The budget he’s currently working on consists of $52.3 million in total spending with roughly 40 percent of that figure, or $22 million, going for general government activities.
He said his approach has been to work with council and collectively develop an approach of a multi-year plan. Factors they looked at included the lack of private investment causing a stagnant tax base and reduced home values, which caused the tax base to shrink.
Because of these factors, last year the city had to increase taxes but it wasn’t enough to sustain them over the long term.
The current tax rate is $0.90 per $100 valuation and Martin says that rate will hold steady with this budget. “I am recommending to council no property tax increase or any other tax,” he said.
Because he was concerned about the debt position, he and the council took advantage of low interest rates and refinanced a portion of the debt, which will be used in the general fund, schools and water and sewer.
“The good news is that it significantly lowered our debt and flattened it out,” he stressed. “The beauty of what we did is that it cut our debt by about $600,000 and gave us new funds.”
Similarly, he said the school board addressed their capital needs for the long term and also refinanced debt to have funds to address priorities.
He further explained that the revenue sharing is starting to go up, citing $530,000 from the repurposing of IP, which has helped balance the budget.
Other needs he has addressed include the addition of fire and rescue staff to help meet the city’s aging population. With help from a federal grant, the city has been able to hire nine additional staff members but the grant money expires after 2015, so future funding for those positions has to be established.
He is also working on getting the reserves back in place for solid waste and has lowered the rates while doing it. By taking revenue and putting it into reserves for capital needs, eventually the city will be able to pay cash for truck purchases. By instituting efficiency programs such as separating yard waste and solid waste, money has been saved to put into that reserve. He expects another decrease in solid waste fees this year.
In regards to water and sewer Martin says a needed analysis has been completed and he will soon present it to council. He said some changes would be made but there would be no rate increase.
For the electric fund, Martin explained the major concern was too little cash reserve, which is mandated by city policy. Dominion Virginia Power had increased wholesale rates several times. In January 2011, there was a 14 percent wholesale power increase. But Martin said the city didn’t address it for nine months. Then in July of the same year, another increase of 3.5 percent was levied with no change in rates for consumers. The electric fund cash reserves were used to offset the increases. In September of 2011 the council implemented a rate adjustment of 7 percent, and when Martin presented his first budget last year, another increase was passed along. “We’re playing catch up,” he stressed. The recent increase from Dominion Virginia Power of 3.6 percent is being passed through to the customer. In other words, in 30 months there has been a 26.1 percent increase in wholesale power costs and the customers have only been assessed 20.6 percent of those increases. Martin said that last July, the electric fund reserves had dropped to $400,000 and he had to reverse the trend, as he is required to have a certain amount in reserves. “It has had to be fixed over time.”
Combining the inspections department with Southampton County has lessened the budget there, creating savings.
Overall he said the budget is going to be pretty flat, but he has factored in a two percent or less pay raise for city employees although he has not finalized the exact amount. “I’m more hopeful than I’ve been — to be able to recommend a raise.”
His preliminary recommended budget will be presented to council this month and will go through the public hearing process in June, before being adopted.
“It is a good, positive budget,” he concluded.