Lincolnton residents will likely see a 12.5 percent increase in water and sewer fees if the proposed 2004-05 city budget is approved.
City Manager Jeff Emory presented the draft budget to the City Council Tuesday during the cityâ€™s first budget worksession. Heâ€™ll deliver the official budget message at the councilâ€™s May 6 meeting. Council members have the final say on the budget, which must be adopted by July 1.
The $27.43 million draft budget includes no change in the property tax rate or electric rate schedule. It gives employees a 2.5 percent cost of living increase, keeps services the same and includes matching funds for the continuation of the Marcia Cloninger Rail Trail.
The budget is $2.8 million more than last yearâ€™s, but taking into account transfers that will go toward the $4.2 million City Hall and Lincolnton Fire Station expansion, the budget is actually a couple hundred thousand dollars less than 2003-04, Emory said. Capital spending has decreased, and there is no increase in the operating budget.
In the water and sewer fund, debt is up and consumption is down, Emory said. The city will pay $2.92 million in debt service for water and wastewater projects during the 2004-05 fiscal year. Since the majority of revenues come from fees, the lower consumption is a blow to the fund.
â€œWhen water and sewer consumption goes down, it definitely has an impact,â€ Emory said.
The city must impose the 12.5 percent increase to meet its debt ratio requirement, Emory said.
Councilman Fred Houser disagreed with raising the fees by such a large number, but Emory said itâ€™s the cityâ€™s only option.
When the city sold the bonds, it made a commitment to pay them back through a series of rate increases.
Tough economic times instead led officials to come up with a tier system designed to help industries. There were also at least two years when rates were not increased for any customers, Emory said.
The rate schedule is necessary so the city can pay its debt â€” resulting from more than $40 million in capital improvements to the system.
The city has to â€œimplement a rate structure to get back in position where revenues are high enough to cover debt expenses,â€ Emory said. â€œWe have to have a rate schedule that pays the debt and provides a cushion in the water and sewer fund.â€
The 12.5 percent increase is the lowest increase possible, Emory said. Even with that hike, about $700,000 in funds will have to be used to balance the budget.
â€œThereâ€™s no margin of error to meet the requirements even with the increase,â€ he said. â€œWhen we sold the bonds we made a commitment that we would meet it and we have fallen short the last few years.â€
Lincolntonâ€™s rate schedule is in line with those of other cities, Emory said.
Other budget highlights include:
Â· Keeping the tax rate at 56 cents per $100 valuation. Broken down, 51 cents goes into the cityâ€™s general fund, and 5 cents into the recreation fund. The amount of money the city takes in through ad valorem taxes â€” $3.44 million â€” does not even cover what it costs to provide public safety services like police and fire, Emory said.
Even with an 11 percent overall increase in tax value from this yearâ€™s revaluation, itâ€™d be hard to lower the rate.
â€œAny cuts made to the tax rate makes the gap between expenditures and revenues even wider,â€ Emory said. â€œI donâ€™t see how itâ€™s financially feasible to take in any less money with taxes.â€
Â· Increased funding for the Arts Council, Theater Guild, Historical Association, LEDA, Cultural Center, Communities in Schools and the Lincolnton-Lincoln County Regional Airport. Salaries account for 55.1 percent of the cityâ€™s general fund. The rest of the $8.54 million fund goes toward health insurance (13.37 percent); contributions (4.95 percent); capital outlay (4.25 percent) insurance like workersâ€™ comp (3.3 percent); contracts (2.8 percent); training and travel (1.19 percent) and general operating expense (15 percent).by Alice Smith