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Macon leaders begin annual budget process by debating policy, procedure changes

Macon County’s new Board of County Commissioners are working to forge their own path as it relates to local government by continuously challenging the ways things have been done and asking questions to determine if those ways are the best options or if different avenues should be explored. 

Macon County Commissioners are in the midst of the 2023-24 fiscal year budget planning process and as statutorily required benchmarks of that process are being carried out, commissioners are looking at some new policies and entirely different methods to direct the way things are done.

During a presentation by Mitch Brigulio of Davenport Public Finance, the county’s financial advisor earlier this month, the board begins discussing the need for a formal policy regarding the county’s ever-growing fund balance. Historically, Macon County has referenced an informal policy of maintaining an unassigned fund balance of 25 percent of the county’s overall budget, something prior boards said was decided decades ago. While there is actually no state requirement for the amount of fund balance a county should maintain, the recommendation is for county’s to have a month’s operational expenses in the fund balance at all times in case of an emergency, which is estimated to by about 8 percent. Macon County’s fund balance is currently at 40 percent, while the average amongst North Carolina counties is between 30-35%. 

“If you were to set a policy target minimum at 40%, you would still be above the median within that group,” said Brigulio. “You would still be in very good shape compared to your rating category and you would have the ability to spend $15 million on other projects as opposed to just holding it in fund balance.”

Over the last three years, the county’s fund balance had grown in large part due to county revenues consistently exceeding expenditures. With the uncertainties surrounding COVID19, the county’s budgets have been considerably more conservative, however, rather than experiencing a decline in revenues generated, Macon County, as well as most counties across the state, actually saw an increase in revenues, leading to a growth in the fund balance. 

Brigulio recommended the county adopt a formal policy regarding the fund balance and the target amount. His recommendation said adopting a formal policy now, with the county’s 40% threshold, would set the county up to be fiscally secure. 

According to Brigulio, the county is currently reporting an excess of $11.2 million collected in sales tax over what the county has budgeted for this fiscal year — which means the county could have an additional $15 million by the end of the fiscal year, that could potentially just end up in the fund balance.  A formal policy would mean that $15 million could be spent rather than sitting in the fund balance. 

One possible scenario in how that money could be spent, without applying it to recurring budget items — as that money is not guaranteed year-to-year, is to apply it to the pending new Franklin High School Construction Project. 

Macon County is in the process of applying for grant funding that could mean up to $50 million for the new high school. Brigulio presented two possible funding options for the county to consider without negatively affecting the county’s financial position and while the new Franklin High School Project will require an ad valorem tax increase of some sort, just how much of an increase is dependent on the grant and fund balance policy. 

If Macon County is awarded the $50 million state grant, Brigulio noted that the county would need to issue $14 million in debt in 2024 and $54 million in debt in 2025 which would require an additional 1.17 cents on the current property tax rate to cover the debt service. 

The other option, if Macon County is not issued the state grant,  the county will need to take on $14 million in debt in 2024, and another $102 million in debt in 2025 to build the new high school, which would require an additional 4.5 cents on the current property tax rate to cover the debt service.

A third option, if the county were to once again put the article 46 sales tax referendum on the ballot, the measure was voted down by voters in November, the next time the referendum is eligible to be placed on the ballot, Macon County would only need to raise taxes by 2.8 cents  for the no-grant scenario and no increase whatsoever would be needed if the county were to be awarded the $50 million grant. 

In addition to implementing formal policies this budget cycle, Macon County Commissioner John Shearl said he wants to see a completely different budget process entirely. 

“I would like to be a part of meeting the department heads and having them present their budget in front of us as commissioners and the county attorney, county manager, finance officer and the general public to build this budget,” said Shearl. “It would be nice if we participated, and it would be great for the taxpayers if this board sat through this entire budget process. I’d like to help build this $59 million budget.”

Commissioner Shearl’s suggestion is counterintuitive to Macon County’s current form of government. In North Carolina, local governments may operate under two main forms of government:)a county–manager or council–manager form or a mayor–council or county commissioner form. Macon County operates under a county-manager form of government. 

The powers and duties of the county manager specified in G.S. 153A-82 are fairly typical of those found in most state statutes. Under this form of government, the manager is the chief administrator of county government. He [or she] is responsible to the board of commissioners for the administration of all departments of county government under the board’s general control.

As the county’s Administrative Authority, the county manager’s financial duties are addressed in G.S. 153A-82(5) and (6):

(5) He [or she] shall prepare and submit the annual budget and capital program to the board of commissioners.

(6) He [or she] shall annually submit to the board of commissioners and make available to the public a complete report on the finances and administrative activities of the county as of the end of the fiscal year.

In a county that adopts the county–manager form of government, the manager is also the budget officer (G.S. 159-9) and is required by G.S. 159-11 to prepare a budget for consideration by the commissioners in whatever form and detail the board might specify. 

This means, Macon County’s Manager is responsible for developing the county’s budget, which is approved by commissioners, which is why the county’s manager role has been to work with various department heads to develop the budget and the commissioners are then presented with the budget once it is finalized for approval. 

After an explanation was given to Commissioner Shearl and the rest of the board regarding why the county manager oversees the budget and the process in which the county develops the budget, Shearl continued with his efforts to have commissioners involved on the development level and made a motion that the board sit through all meetings between department heads and the county manager that create preliminary budget requests, in public meetings. Commissioner Shearl’s motion died due to lack of ability to garner a second and support from his fellow board members. 

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