With questions answered and a contingency fund added, the Henderson City Council passed the 2005-06 budget on a 5-3 vote with about 30 hours to spare Wednesday evening.
After an hour-long continuation of Monday night’s meeting, when the council failed twice to enact a budget for the fiscal year that begins Friday, council member Elissa Yount did as she said she would and changed her vote to yes to push the $25.2 million budget over the top.
“We had to have a budget,” Yount said in an interview Wednesday night.
(City Attorney John Zollicoffer confirmed for the council that a simple majority was enough to pass the budget.)
The budget is a compromise that seems to contain something for everyone to dislike. Mike Rainey, Mary Emma Evans and Ranger Wilkerson found enough they didn’t like to maintain the no votes they cast Monday night. Rainey and Evans opposed any property tax increase, and Wilkerson disliked the postponement a pay raise for city staff until next June.
The budget features a 3-cent increase in the property tax rate to 67 cents per $100 valuation (4.06 cents of that, or $277,742, is earmarked for the H. Leslie Perry Memorial Library, and the rest goes to the general fund); a $2-per-month increase in the sanitation fee, making it $27; a 10 percent increase in water rates; and a 15 percent increase in sewer rates.
A $47,981 contingency fund and an additional $100,000 in drug seizure money were the only differences between the enacted budget and the budget that failed Monday when Yount voted against it and Seifert broke a 4-4 tie by doing what he promised and voting no. Seifert had warned the council that in case of a tie vote, he would vote against a budget that raised property taxes but shortchanged the Code Compliance Department.
The drug seizure money was awarded Tuesday, and the city administration simply added that money to the general fund balance for now. The city staff added that money to calculations of the fund balance as of today and as of a year from now, but the council took no action addressing how to spend or save that money.
That rest of the “found” money represents the remaining administrative funds from three Community Development Block Grant awards the city is handling: the Embassy Square streetscape project and the Embassy Square library construction project, each totaling about $1 million, and the Carey Chapel Crossings subdivision, which is getting $216,000. CDBG awards typically allow 10 percent of the grant to go toward administrative expenses.
Assistant Manager Mark Warren and acting Finance Director Peggy McFarland revealed the availability of that administrative money in answer to a question from Yount, one of 11 she posed after City Manager Eric Williams presented the budget ordinance to the council at its Monday meeting. Yount said that night that if her questions were answered, as she expected they would be, she would vote for the budget, which uses a mix of property taxes and sanitation fee increases that she first proposed.
Warren and McFarland submitted the answers in a memo Wednesday, but the budget still wasn’t a done deal when the council convened shortly after 5:30 p.m.
Warren and McFarland said the CDBG administrative money could be used as revenue to offset expenses in the Planning Department, including CDBG specialist Gwen Wright’s salary, and the resulting savings of $47,981 could be shifted within in the budget. That left the council with the decision of what to do with that money.
Yount wanted it to go to the Code Compliance Department, which Warren and McFarland reported is likely to exhaust its $25,000 appropriation for contracted services by September: $19,000 to tear down seven dilapidated houses and $6,000 to mow 50 overgrown lots. Those expenses would be charged to the property owners, but collection is uncertain.
Wilkerson made a motion to increase the budget for contracted services to $70,000, using $45,000 from the CDBG administrative money to supplement what was already allocated. Yount seconded the motion.
John Wester complained that while the Code Compliance Department was a worthy target for increased funding, it was wrong to put the extra money in that budget without careful consideration of the city’s many needs. He said the Wilkerson-Yount motion was an effort to hold the council and the budget hostage to win funding for a pet project.
Yount said the money might have wound up as part of a pet project without the council’s knowledge if she hadn’t asked about it.
Wester also said that the city shouldn’t pay to tear down private property; that should be the owners’ responsibility.
Henderson has more than 200 structures that owners have abandoned with seemingly no interest in doing anything to the property. When the city condemns and demolishes a building, it places a lien on the property, but Henderson relies on the Vance County tax office to collect those liens. Collection efforts can be time-consuming and costly, and their pace has frustrated the city.
In most cases, the city has to eat the cost. The alternative is to leave the dilapidated buildings in place, but they are health and safety threats, serve as crime magnets, are eyesores, and undercut the city’s tax base by driving down property values.
Evans was bothered by Wester’s use of the “holding hostage” terminology, and she was bothered by the fact that the Code Compliance Department, with the city’s only minority department head, wasn’t getting the council’s financial support.
Yount said code compliance affects her constituents “where they live,” directly concerning their safety, health and quality of life. She and Wester represent the same constituents in Ward 3.
Yount also was troubled by the idea of a budget that will leave a department broke by September, and she asked Williams what the Code Compliance Department was supposed to do for the rest of the fiscal year — nine months. Yount said later that the city manager couldn’t give her an answer.
Bernard Alston, who heads the council’s Finance and Intergovernmental Relations Committee, said the Wilkerson-Yount motion threatened the integrity of the budget process by inserting a last-minute addition. There’s nothing preventing the council from revisiting the Code Compliance Department budget and appropriating the CDBG money for that purpose in the coming months.
The council rejected the motion 5-3, with Lonnie Davis joining Wilkerson and Yount on the losing side.
Wester then made a motion, seconded by Harriette Butler, to approve the budget that the council rejected Monday, with the addition of the $47,000 as a contingency. The state’s Local Government Commission had urged the city to create a contingency fund to protect against unexpected expenses and provide a mechanism to build the fund balance.
The latest projections, including Tuesday’s extra $100,000 in drug seizure money, show that Henderson will end this fiscal year with $1,138,417 in its general fund balance, representing 8.13 percent of general fund expenses. That surpasses the 8 percent that the Local Government Commission considers the bare minimum. Henderson ended the last fiscal year at $788,417, or 5.36 percent.
The 2005-06 budget calls for adding $164,461 to the fund balance, spending $64,500 in drug seizure money from the fund balance, and keeping $111,953 in road-maintenance Powell Bill money in the fund balance by skipping the annual street resurfacing program next year. Those moves would boost the city’s general savings account to $1,350,331, or 9.65 percent.
Seifert asked what the fund balance would be June 30, 2006, without any property tax increase, and McFarland did some quick calculations to come up with an answer of 8.18 percent. The mayor said he therefore felt comfortable voting again against any budget with a property tax increase if the council split 4-4 a second time.
The fund balance calculations, however, rely heavily on two sources of restricted money: the Powell Bill road funds from the state and drug seizure assets from the state and federal governments. At Yount’s request, the city staff calculated the fund balance using only unrestricted money.
At the end of June 2004, the city had $390,433 in unrestricted money in its general fund balance, or 2.79 percent. As of today, with a $75,000 addition to the fund balance, the total is projected at $465,433, or 3.32 percent. The $164,461 budgeted for the coming fiscal year would raise the total to $629,894, or 4.5 percent.
Before voting on the Wester-Butler motion, the council discussed whether to consider the city-county split of the local portion of the sales tax when setting the property tax rate. The sales tax is divided based on property taxes — a way to ensure a local financial commitment to match the sales tax, which is traditionally controlled by the state — so if the county raised the property tax and the city did not, the county would be rewarded with a bigger cut of the sales tax. (The county raised its tax rate by 2 cents per $100 valuation.)
Seifert cautioned against getting caught in a “they raise it 10 cents, we need to raise it 12 cents to keep up” kind of thinking.
When it came time for a vote, Yount said she would go along with the majority because she had done all she could for her constituents. She joined Wester, Butler, Davis and Alston in approving the budget about 6:40 p.m.