At the January board of commissioners meeting, Travis Keever with Gould Killian CPA presented findings with the town’s 2022-2023 fiscal year audit.
Findings were overall fine and are currently being resolved where possible, but Highlanders may have been surprised to see a deficit in the town’s budget. Town revenue was just barely over $8 million and expenses were nearly $9.56 million.
Highlands is still in good financial standing, though Finance Director Rebecca Shuler cautioned that the town may need to slow down on large capital projects.
Like a normal municipality, the majority of Highlands revenue comes in the form of taxes. Keever showed the numbers making up Highlands’ government fund.
Revenue measured nearly $3.02 million (38 percent) in ad valorem taxes from property transactions, nearly $1.63 million (20 percent) in local option sales tax, over $1.38 million (17 percent) in intergovernmental revenues, about $1.19 million (15 percent) in fire taxes, and $787,000 (10 percent) in other revenues.
Expenses
Schuler said a contributing factor for the added expenses was the pandemic.
“So many of the Town’s projects got delayed through the pandemic due to supply shortages, so some of the expenditures have rolled forward from the last couple of fiscal years due to that issue,” Shuler wrote in an email.
The town made 23 budget amendments during the last fiscal year. Budget amendments come throughout the year, primarily for capital improvements or equipment as needed.
Highlands had some big, but necessary, projects to wrap up during the fiscal year. Highlands finished the new fire station, purchased a sanitation truck, completed many road and sidewalk repairs, and tackled water and sewer infrastructure.
During the presentation, Keever said town spending was fairly consistent. Highlands spent almost $3.85 million (40 percent) on public safety, $1.84 million (19 percent) for transportation, under 1.75 million (18 percent) for general government expenses, almost $1.15 million (12 percent) on debt service, and over $991,000 (11 percent) on culture and recreation.
In public safety, Keever broke it down further, saying $1.5 million was spent on the police force, which was down about three percent last year. The town also spent $1.1 million on the fire department’s truck downpayment and the rest was spent on the fire station itself.
Keever said transportation expenses were up significantly due to road paving and equipment purchases.
One area of concern Keever noted with the audit was the water and sewer expenses. Water and sewer reserve funds were under two months’ worth of expenses due to capital projects. However, Keever noted the electric fund was fine.
Shuler said the town’s reserves are vested in the North Carolina Capital Management Trust, which has fared well in terms of interest. The town has financed many projects through its reserves.
“The Town has been very fortunate to not really have a lot of debt and has been funding a majority of the capital projects out of reserve accounts,” Shuler said, though she cautioned, Highlands “is going to have to slow down on some projects in the next couple years or take out debt to allow our funds to replenish.”
Shuler said there is no current concern for the town’s budget and operations, though future spending will likely need to be reeled in.
In the works
The 2023-2024 fiscal year runs until June 30. Town Manager Josh Ward said capital projects budgeted for this year include drainage improvements, more water and electric infrastructure work, community building renovations and ADA accessibility, replacement of a rear-loader sanitation truck, an electric service truck, and two police patrol vehicles.
A culvert replacement will happen at the south end of 2nd Street to address flooding in the area.
For water infrastructure, Ward listed three smaller waterline improvement projects, the first two phases of a water meter replacement project, installing generators at six water booster pump sites to provide water if power goes out, and replacing aging caustic tanks at the water treatment plant.
Highlands must also conduct a utility pole replacement project and electrical grid study.
Future capital requests will be announced at the FY 2024-2025 Town retreat in March.
Work on Dog Mountain Road’s water infrastructure is being funded by a state grant. Construction is planned to start late in 2024. The town will finance this work as it moves through requirements and they will be reimbursed periodically.
Beginning steps are being taken on a project that, among other factors, will address replacement of a pre-clarifier storage tank and pump station at the water treatment plant and installation of a third filter train. This is also being financed by the state’s new budget. The third filter train will need financing, but Ward said this is a critical process in water treatment to ensure redundancy.
Finally, Highlanders may rest easier knowing Highlands is continuing to address necessities.
“Many capital projects have been accomplished over the past several years. These upgrades are essential to ensuring our utilities are in the best operating condition possible, in order to provide quality services to the community,” Ward said.