The Avery County Board of Commissioners met in a Budget Meeting on Wednesday, May 24, 2006 at 2:00 p.m. in their offices, Avery County Administrative Complex, Newland, NC.

Members Present: Kenny Poteat, Chairman; Susan Pittman, Vice-Chairman; Bill Beuttell; Phyllis Forbes and Joe Strickland

Members Absent: None

Call to Order
Chairman Poteat called the meeting to order at 2:15 p.m.
He advised that today is the final in a series of budget meetings and that the Board is going to have to make some hard decisions.

Budget Address – Robert Wiseman, County Manager
The Manager read aloud a Budget Address regarding the FY 2006-07 Budget for Avery County.
In order to maintain the tax rate as close as possible to the revenue neutral tax rate, I have put together a tentative budget message, Robert said. Tim Greene and I have balanced the budget at the revenue neutral tax rate of 37.5 cents. The Board can go up or down with that rate, depending on what they feel is best.

Robert then read aloud the Budget Message. The General Tax Rate is established at 34.7 cents per $100 valuation. This represents a 14.3 cent decrease from the previous FY. The countywide fire tax rate of 2.8 cents represents a decrease of 1.2 cents from the previous fiscal year. The combination of these two results in a tax rate of 37.5 cents for the fiscal year 2006-07. This rate reflects an overall tax decrease of 15.5 cents from the previous years’ rate of 53 cents per $100 valuation. The Manager explained that the revenue neutral property tax rate is the rate that is estimated to produce revenue for the next fiscal year equal to the revenue that would have been produced for the next fiscal year by the current rate if no reappraisal had occurred. For comparative purposes, the revenue neutral tax rate for 2006-2007 is 37.5 cents per $100 valuation. The growth rate of about 3.86% is factored into the revenue neutral tax rate, Tim Greene said.

We have included an IT position in the budget for 2006-07 at a cost of $46,000.
Under Capital Projects, renovation of the Court House Annex will start July 2006 and is expected to finish March 2007 – est. cost of $950,000. The Avery County Jail Expansion will start April 2007 with an expected completion date of August 2008 at a cost of $2,500,000.00. The conclusion of the E911 Tower Upgrade is to start July 2006 with completion date of May 2007, at an estimated cost of $155,000.
Avery County is also scheduled to receive several state and federal grants, some of which are Avery Transportation Authority Construction Grant, Senior Citizens, CDBG Scattered Site Grant, Disaster Relief/Redevelopment and Avery Transportation Authority.

Phyllis Forbes came into the meeting at 2:30 p.m.

The Chairman stated that we have a balanced budget at 37.5 cents revenue neutral tax rate. I would like for the Board to make a punch list of those things we have heard from others that we feel need to be addressed beyond a balanced budget. I think the Fire Commission should be on everyone’s budget, then the Board of Education. Currently the Fire Commission would receive $1,016,000.00. The Board of Education is currently at $3.685 million, including capital outlay. The Bd. of Ed will receive $85,000 more than the previous year if we leave it as is. Also, we have discussed the Rock Project for a long time. The estimated figure on it is $55,000. No speck figures available yet, only that we have been told orally that the rock would be taken down to ground level and ready to build upon or put grass on for a building or field.

Supplemental Insurance for Retirees
Joe Strickland advised that this supplemental insurance would cost a maximum of $19,000. There are currently 9 people who would be eligible for threshold in this policy. If all 9 retired next year, the liability would be $19,000. It is reasonable to conclude that 5 or less would retire; $10,000 with a maximum liability of $19,000 over the next 5 years. It would be 5 years before anyone else reaches the threshold set by the proposed policy to receive this benefit if adopted, Joe said – on an annual basis. We are spending $3.6 million for education, $1 million for the Fire Commission and $19,000 for employees would be a pittance compared to the total budget. This is a supplemental insurance for retirees with a $2,000 cap, Joe said. If approved, the Manager would need to bring a non-binding policy to the Board which does not acknowledge an entitlement because the Board can change that because circumstances will change. Insurance will continue to go up, even health insurance for employees. Sooner or later, we will have to look at that because costs will become prohibitive as with other employers out there, Joe said.
Joe recommended that the Board approve this benefit since the liability is not very great and the benefits the County receives from employee relations cannot be measured.

Astroturf
Bill Beuttell asked that the Board consider putting in new turf on the football stadium or Auxiliary Gym at the site where the rock would be demolished. Discussion on the cost of the Astroturf. Grace Calhoun stated that part of the cost could be paid for in donations if they come in. The original figures were in excess of $500,000 Bill said, which does not include the track cost of $60,000-$70,000. Grace Calhoun said that the gym figures were $450,000; $480,000 for Astroturf for the field, and $60,000-$75,000 for a new track. Bill said he didn’t think the gym figures included finishing the facility on the inside. Bill said the total estimated cost for Astroturf, Auxiliary Gym and track would be around $1.25 million.

Phyllis Forbes asked if there was any interest in adding to the technology fund for schools to get them up to par with technology and to bridge the gap between elementary school and high school. Also, we agreed to hold off on Animal Control until we talked to the Sheriff about his position on that matter as far as an employee/deputy to serve as an enforcement officer, Phyllis said.

Joe Strickland discussed setting up a technology fund for the schools. Ms. Calhoun said the Lt. Governor is currently studying how to get more money in the state budget for technology. Ms. Calhoun advised that the projected revenue from the Lottery of $171,000 would go into the Capital Fund. Those revenues cannot go into a technology line item, Tim advised, they have to be used for construction/renovation.
Discussion continued on what to do about a technology fund. It was decided to continue working on it in the future.

The Board then discussed Special Appropriations for the FY 2006-07 budget year.

The Board discussed what to do in the event there are increases over today’s proposed budget. Tim Greene advised that each 1/0 of 1 cent equates to about $35,000 at a 96% collection rate. Kenny Poteat said we could dip into the Courthouse Capital Fund if we see fit or we could borrow from one place to pay for another. Or, we could accrue additional debt. Robert Wiseman advised that we need to avoid dipping into money that has been building up over the years in order to fund things that are coming back year after year.

The Chairman advised that Tim and Robert have worked long and hard and have put before us a budget they feel is correct and appropriate for the coming fiscal year given the parameters of the revenue neutral rate. Robert said that we are on a half cent (37.5 cents) – a tax increase of one-half of 1 penny is not going to place an undue burden on anybody when it comes time to pay their taxes, but it would generate a little more that could make life a little easier for some of these folks. One-half of 1 cent generates $150,000 - $175,000, Tim said.

The Board took a Break at this time.

The Chairman asked that each board member state his/her feelings on what should be done on these main issues.

Fire Commission
Chairman Poteat said the Board needs to decide what it wants to do about the Fire Commission budget. He suggested giving them $1.2 million which is an $184,000 increase over what is before us at present. That equates to a 21.2% increase over last year. That has rarely been done over the years, he said. Discussion.

Board of Education
The Chairman advised that the Bd. of Education budget stands at $3,685,000 and he proposes that it go to $3.8 million, which is an $115,000 increase. At the request of the Superintendent, the entire $115,000 would go to Current Operating Expense rather than Capital, Poteat said.
Discussion on the Rock Project suggested by Bill Beuttell.

Supplemental Insurance
The Chairman discussed the request for Supplemental Insurance for retired employees. He said we have already approved a longevity program for the employees and a vacation pay out. Discussion.
The Chairman was not in favor of the $19,000 for Supplemental Insurance.

Artificial Turf and New Track
The Chairman said the only way this project could be considered would be under a long term debt or payment. Discussion on the possible costs. Tim Greene gave some projected figures for an annual payment based on a 15-year plan and a 6% interest rate. The Chair said he would not propose to incur the debt to enable us to do this project even though it is a worthy project.

Joe Strickland advised that he is in agreement with the Chairman until he reached items 4 & 5. He said the Chair seems to be holding the employees ransom for $19,000 when we are dealing with millions of dollars for other proposed outside programs. Joe said he is also in favor of some kind of commitment to the turf and gym project. I don’t know if it would be the $1.25 million though. I think it will have to be done over time, Joe said. I would be more in favor of $500,000 this year and another $500,000 for the new board to deal with in the coming year.

Susan Pittman said she is concerned with the debt that the Fire Commission has incurred. The annual payment is almost $400,000 on that money. She discussed the proposed Rock Project and agreed to the $55,000.

The Chairman asked how much Susan is saying to allocate for the Fire Commission. Susan said they should get the $1,016,000 plus assuming their debt retirement, which would put it up to approximately $1.4 million.
Susan said she felt the track project needs to be done as well. The young people are our future and they need something. She said she felt we need to expend monies to build this track. She said she feels that $500,000 would be a good start for the artificial turf, track and Auxiliary Gym project. She added that she is in favor of the Supplemental Insurance amount of $19,000 and also in favor of increasing the funds to the Bd. of Education to $3.8 million as suggested by the Chairman. She felt the additional monies to the schools should be placed in Capital Outlay.

Phyllis Forbes was in favor of allocating $1.2 million for the Fire Commission and $3.8 million for the school system. She was also in favor of $55,000 for the Rock Project and $19,000 for Supplemental Insurance. She said she would like to appropriate funds for the artificial turf, Auxiliary Gym and track, but not a lump sum. She felt it should be placed under Debt Service and make payments on it.
Joe asked if Phyllis would like to give consideration, without any funding, to a Technology Service fund for the schools. Phyllis agreed, stating that this issue can be discussed at a future meeting with the Board of Education.

Bill Beuttell was in favor of giving the Fire Commission the amount of money that equates to a 2.8 cent Fire Tax and also paying their debt of about $1.4 million, he said. Bill said he is talking about assuming one year’s debt for the Fire Commission only, that he didn’t think it would be fair to assume all of their debt and commit other Boards to this expense. He said he has no problem with giving the Bd. of Education the $3.8 million but wasn’t sure about dividing it up into capital and current expense.
In regard to funding the schools, Bill said he has had a lot of questions from the public and parents as to why parents have to continue to pay for all kinds of things like field trips, crayons, toilet paper, etc. given the amount of monies we appropriate to the school system. Jeff Jaynes, School Finance Officer, stated that their biggest expense is for school facilities and operation of the plant, about $1.1 million. A lot of the additional money is going for fuel costs, etc. he said. $200,000 of it is going toward athletics (Coaches Supplements). The State is bumping the raise up to 8% this year for certified personnel and 3% for non-certified personnel, Jaynes said. Bill Beuttell said that more and more money each year is going to the school system but parents say the school is asking for more and more money from them. I just want to make sure the money is going to the children, Bill said. Bill said he has no problem with the amount but rather how it would be spent. Bill said he is approving a $115,000 increase to the schools, but not where it goes to in their budget. Bill said he is in favor of the $55,000 for the Rock Project and in favor of Supplemental Insurance.

Turf/Auxiliary Gym & Track
Bill Beuttell discussed the Turf/Auxiliary Gym and track project and is in favor of building an Auxiliary Gym. If we decide to do this, I would not mind a tax rate of 39 cents to help this Board and future boards to pay for these obligations, Bill said. Discussion was then held on various ways to pay for such a project. Bill said he would like to finance the project and make long term payments. The cost to do the track and turf in the coming year would be about $550,000, the Finance Officer advised. If we financed the Astroturf for 5 years it would cost about $139,000 per year, Tim said.
Discussion held on whether or not the Old Rock Gym is being adequately used.
Joe Strickland said if we decide to do this Turf/Gym/Track project, I want to make sure that the money remains with the County so it can be drawn down by the Bd. of Ed so that some future board cannot change horses in mid stream on this project.

Robert Wiseman said that from attending meetings and listening to the dialog, there has been a lot of concern about the availability of the school facilities for recreation. The Recreation Advisory Commission would recommend that this multi-purpose gym be County owned so the Recreation Dept. can use it and schedule it in cooperation with the School Board. We don’t want to build a facility of that type and not be prepared to maximize the utilization of it for all concerned, Robert said.

The Chairman then gave a recap of the budget issues discussed thus far.
Fire Commission - $1,016,000 plus $341,000 if we assume their debt for one year.
Schools – Budget amount has an $85,500 increase already built into it. If we go to $3.8 million, that means an extra $114,500 for the schools.

Rock Project - $55,000 agreed upon.
Supplemental Insurance - $19,000 agreed upon.
Artificial Turf/Track/Auxiliary Gym – Debt service of 5 years in amt. of $139,200
Fire Commission – Two different options considered. One is $511,000 beyond the budget already recommended by the Manager, or award the Fire Commission with an additional $341,000 which takes care of the current level of funding, plus Debt Service for the coming year, Chairman Poteat said. It would cost the County an additional $668,700 to do that. Robert Wiseman commented that that amount won’t be enough to offset the Debt payment because there is equipment anticipated to be purchased during the coming year that will be added to that Debt Service. Robert Wiseman added that the Commissioners and the Fire Commission need to work together to find a way to accelerate the retirement of that debt because this is a revolving door. Joe Strickland felt that a proviso should be attached to the additional funding for the Fire Commission; namely, that the Fire Commission bring back to this Board a Vehicle Replacement Plan within reason that they adopt and that we can be comfortable with, plus being somewhat similar to what the County has done. Second, that there be a moratorium on the purchase of new equipment until we see the policy, which should address emergency situations. He added that he would encourage the Fire Commission to save a little money by not going to 9 full-time employees at this time at the cost of $200,000, and that they could modify that in a manner they feel appropriate to determine the amount of money they think necessary to accommodate the unforeseeable. Robert agreed, stating that he felt it was more important at this point to reduce their debt than to have 9 full-time paid firemen. Bill Beuttell commented that this Board is concerned that the Fire Commission’s debt is outgrowing their revenue stream. We realize that the Commission needs more money, but if they accumulate more debt than their income stream can accommodate, you are putting yourself in a downward cycle, Bill said.

The Chairman advised that the Board now needs to address where, and if, this additional money is going to come from. This is over $500,000 in excess of what the Manager has recommended to this Board, he said. With this scenario, the tax rate would be set at the revenue neutral rate of 37.5 cents and the Fire Commission would receive 2.8 cents. Beyond that, either the $511,700 or $668,700 would come at the discretion of the Manager and the Finance Officer from a combination of the Capital Projects set aside for the Courthouse with the rest from Fund Balance, or wherever these men feel it should come from. Robert Wiseman commented that he realizes the Fire Commission has cut a great deal from these budget requests from the fire departments this year, but as long as our debt is accumulating faster than the revenue, there is a problem.

Each member stated his/her preference as to the additional funding and the tax rate.
Tim Greene expressed concern that none of these items are one time items, so to take the money out of Courthouse Projects or Fund Balance only solves the problem for one year. We would be right back in this same boat again next year if we did that. As Finance Officer, I feel that would be the worst route to take. If we are going to raise taxes, then raise them; but if you’re not going to raise them, then let’s make the hard choices on cuts, Tim said. Tim added that the Revaluation is not a windfall if we drop the tax rate to the revenue neutral rate. If we leave the tax rate the same as it was, then the Revaluation would be a windfall. Discussion on growth factor and whether it is enough to meet the needs of the County. Robert advised that we are looking at a General Fund growth rate of approximately 7.58% this year. It is just a matter of time until taxes have to be raised if we maintain the same expense we are going at now, considering we also have to do all these other projects such as the Jail, Banner Elk School, Courthouse Annex, etc. Phyllis Forbes commented that 1 ½ cents would generate around $500,000 if we decided to raise the tax rate by 1 ½ cents. Lengthy discussion held on amount of Fund Balance and amount the County is required to keep.

Kenny Poteat again read his Press Release in which he stated that we would make every effort to keep the tax rate at 37.4 cents (revenue neutral rate). However, due to the Board of Equalization and Review this year, the revenue neutral rate has increased to 37.5 cents.

Motion by Bill Beuttell to approve the County Manager and Finance Officer’s budget with the following changes: 1)School appropriation be raised to $3.8 million dollars, 2)The Fire Commission be raised to $1.357 million, including their $144,000 debt; 3)Rock appropriation of $455,000; 4) Addition of Supplemental Insurance for County employees in amount not to exceed $19,000; 5)The assumption of projects on Astroturfing the football stadium, reinstalling a regulation size track around the football stadium and committing to the construction of an Auxiliary Gym on the site where the rock is currently located, at an annual Debt Service of $139,200 for a period of 5 years. All of these additions to the budget come to a total of $668,700 – with the conditions that the County Manager and the Finance Officer have the latitude to decide which are the best methods to pay for these additions, whether it be Capital Projects or Fund Balance, and for the tax rate to remain at the revenue neutral rate of 37.5 cents per $100 valuation. Motion seconded by Joe Strickland.
Discussion on whether or not it would benefit us to go from a 37.5 cent tax rate to 38 cents. Kenny Poteat said he felt that due to some of the dire needs in the County we are entertaining going beyond what the Manager has recommended. He added that he has no problem in going to a 38 cent tax rate. A 38 cent rate would help reduce our commitment by $175,000 and would bring our shortfall well below $500,000. Discussion continued on whether to increase the tax rate by ½ cent, up to 38 cents.
Vote: Joe Strickland and Bill Beuttell – in favor. Opposed: Phyllis Forbes, Susan Pittman and Kenny Poteat. Motion failed to carry.

Bill Beuttell then restated his Motion to apply to a tax rate of 38 cent per $100 valuation.

Motion by Bill Beuttell to reiterate everything that was said in his previous Motion at a 37.5 cent tax rate to be applicable to a 38 cent tax rate, with the realization that the $500,000 is still coming from either Fund Balance or Capital Outlay. My motion will mean that we increase the budget by $668,700.00. The extra one-half cent we are using for revenue with the Advalorem tax rate still leaves a shortfall of approximately $500,000. That money will come out of Capital Projects, the Courthouse Fund or Fund Balance, at the discretion of the County Manager and the Finance Officer. Motion seconded by Susan Pittman. Vote: Kenny Poteat, Phyllis Forbes, Susan Pittman and Bill Beuttell – in favor. Opposed: Joe Strickland. Motion carried by majority vote.

Adjourn
Motion by Joe Strickland to adjourn this meeting at 4:50 p.m. Second by Bill Beuttell and unanimously approved.

_______________________________________
Kenny Poteat, Chairman
Avery County Board of Commissioners

ATTEST: ______________________________
Nancy H. Cook, Clerk to the Board