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Manager's FY 2020-21 Budget Message

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Town Manager's FY 2020-21 Budget Message

May 1, 2020 

I am honored to present the Recommended Fiscal Year 2020–2021 Budget. The impact of COVID-19 will be felt by nearly all state and local governments during budget development as social restrictions are anticipated to have a significant impact on sales tax revenue. The Town of Garner is no different as sales tax makes up approximately 20 percent of revenue during a normal year. Based on anticipated shortfalls in sales tax, and other revenue categories, the Town is projecting a significant shortfall. Despite this, staff anticipates significant growth to continue over the long term and has expanded on efforts to identify future year requirements to make sure sufficient resources will be available. It is critical that we don’t lose sight of the Town’s long-term goals as we address short-term challenges. As a result, this budget focuses on meeting the significant challenges associated with COVID-19 while positioning the Town to meet future strategic needs.

Based on the many unknowns associated with COVID-19, staff has prepared a recommended budget that assumes the worst-case scenario in which North Carolina residents continue to be highly impacted by social restrictions. This scenario would have a significant impact on the Town’s operations and ability to generate revenues. As a result, a shortfall of over $3.0 million is projected. To address this, staff has utilized a variety of measures to minimize the impact. Departments identified reductions of $497,702 based on operating in a COVID-19 environment and will be required to hold non-critical positions vacant for an extended period which will generate savings of $100,000. The Town will also reduce merit pay increases which will result in savings of $99,942. The Town will also reduce resurfacing activity which will generate savings of $120,000 and utilize fund balance to cover one-time requirements totaling $1,477,634. Finally, I am recommending a tax increase of 2.5 cents above the revenue neutral rate of 46.21 cents. Although this increase will help address short term challenges, the reason I am recommending it has much more to do with positioning the Town to meet long term needs and addressing operational challenges that have been years in the making,

The decision to raise taxes was made only after performing a review of the impact on Town residents and how it affects our competitiveness in the region. Garner households are projected to still have the second lowest tax burden in Wake County after the tax increase. For the average Garner resident with a $230,559 home, the tax increase will cost $4.80 per month. I believe it’s critical that Garner remain an affordable place to live, but the effective tax rate must remain competitive to ensure future needs can be met. Even in the current economic climate, the Town continues to experience significant development activity and has several major capital projects required to address growth that will impact the operating budget. As these facilities are constructed, it will be critical that funding is set aside to ensure they can be properly maintained. In addition, continued growth will require the Town to add new positions to address increased demand for basic services. Based on all these factors, I believe a tax increase is necessary.

As noted above, staff anticipates significant growth to continue despite the impact of COVID-19. The Town is currently experiencing, and anticipates additional, growth in the residential and commercial real estate market. In the first quarter of 2020, the Inspections Department issued 392 permits (including 91 single family homes and 32 townhomes) and performed 4,723 inspections. The Town Council has also approved several additional residential developments including Georgia’s Landing, Bethel, and Oak Park West (1,608 dwelling units) and 628 multi-family apartment units. In addition, the Planning Department is currently reviewing 2,466 residential and 881 multi-family apartment developments which should be considered for approval in 2020. Even if the impact of COVID-19 on development activity lags several months behind, the Town is still likely to experience development growth over the course of the year.

To ensure the Town is positioned to meet the demands associated with growth, staff has prepared a five-year operating projection to match future expenditures to resources. The current projection, which factors in only baseline operating costs and no new positions or initiatives related to growth, indicates that the Town will have limited funding available in future years to address requirements. As a result, significant shortfalls occur when the impact of funding future needs is factored in. Based on the Town’s significant upcoming requirements, the five-year projection makes it clear that additional resources are required.

The Town’s capital improvement plan (CIP) includes projects totaling over $96.1 million. This includes a new fire station to address growth along the 401 corridor, nearly $63.0 million in transportation requirements and significant investments in parks and recreation. Several of these investments will impact the Town’s operating budget and current projections indicate that sufficient funding will not be available to operate and maintain these projects without additional revenue. In addition, a significant portion of the unfunded section in the CIP (see Unknown Funding Source in the table below) is associated with Capital Renewal which includes projects to maintain and replace things like playgrounds at existing parks and roofs on existing buildings. As the Town looks ahead to funding new capital projects it will be critical to include funding for maintenance of existing assets. While the recommended tax increase will not allow the Town to fund all these requirements, it will help to alleviate projected shortfalls identified in the five-year operating budget.

The Town will also be required to fund a variety of items to address growth in the population. Increases in population have a direct impact on the workloads of the Police and Fire Departments. Police Departments generally have one police officer for each 1,000 calls for service and staff currently anticipates that calls for service could increase by 6,000 over the next five years. As development increases so too must the staff in the Planning, Engineering and Inspection Departments. Additional staff will also be needed to oversee projects, maintain infrastructure and provide parks and recreation services. As a result, it is critical for the Town to factor in the financial impact of adding these positions to meet future requirements. 

The FY 2020-2021 budget year will be critical for the Town of Garner. We will be required to continue to address the impact of COVID-19 while preparing for the future growth that is anticipated. I believe this budget addresses both of these challenges. Staff has identified a variety of measures to address the projected impact of COVID-19. In addition, the recommended tax increase will continue efforts to ensure the Town is able to meet future requirements. We can all agree that this pandemic will end someday.  When that happens, we want to be strategically and financially positioned to get back on a path of “opportunities through wise planning and investment.” Growth is coming to Garner and I believe the actions taken in this budget will allow for Garner to remain a great place to be now and in the future.

Respectfully submitted,
Rodney Dickerson
Town Manager