Facing uncertain financial impacts as a result of the ongoing COVID-19 coronavirus outbreak, the Town of Highlands tightened its collective purse strings on Thursday afternoon.
After proposing more than $3 million in capital improvements in the 2020-21 fiscal year during the preliminary budget workshop in March, town manager Josh Ward informed the board during Thursday’s work session that he and the town department heads had trimmed that list to $1,625,000 of pressing needs.
“I feel confident with our current budget because this shutdown is happening at the end of the fiscal year and our capital in the current budget is already bought and paid for,” Ward said. “We budgeted $1 million in sales tax revenue in our current budget. Thus far we have brought in $835,000, so I think we will meet that $1 million revenue projection, but going into next year we just don’t know what kind of economic impact we are going to see.”
Capital needs requests were cut from multiple departments, led by several big ticket items in the public works department.
“Looking at the upcoming budget capital needs list, I sat down with Lamar (Nix) and looked at what we can do without in the 2020-21 fiscal year,” Ward said. “As you go down the list you will see things like paving Spring Street, putting in a sidewalk at Chandler Inn, the new bucket truck for the electric department, the Moorewood Road water line replacement, and the tennis court replacement.”
Ward advised the board that budgeting extremely conservatively was the right approach due to cloudy revenue projections. Ward noted that the current COVID-19 response, which is already impacting sales tax revenue, could remain a drain on the town coffers through May, June, or even longer.
Mayor Patrick Taylor agreed and noted that when economic conditions improve the town could complete some of the cut projects by adding them to the budget via amendment.
“We need to develop a lean budget right now, and that means cutting some of this capital out,” Taylor said. “As things improve and we hopefully see revenue come back to more normal levels we may be able to add some discretionary projects later down the road.”
The board gave consensus for Ward to continue crafting the 2020-21 budget with the capital cuts in place.
Aside from capital requests, Ward informed the board that the town employee health insurance plan is up for an adjustment as of July 1. The cost of providing health insurance via Medcost, the town’s current provider, could increase by as much as 10 percent.
“We did not have a cost adjustment last year, so we knew this would be coming, and the number we were given was 10 percent,” Ward said. “That would amount to a $62,000 increase to the town’s contribution.”
Ward informed the board that Wayah Insurance is negotiating the cost adjustment on the town’s behalf and is also accepting bids from other insurance providers to compare to the town’s current insurance plan.
“We did not have a good claims year as a town, so I expected we would see a price increase with Medcost,” Ward said. “I would like to see that maybe at seven or eight percent, but we don’t know yet what kind of offer they will come back with or what other providers may submit.”
During the budget work session the board approved a $35,000 one-time payment to D.R. Reynolds to provide construction management services at the new fire station site on Franklin Road.
Representatives from D.R. Reynolds will now put together a preliminary plan and a not-to-exceed cost estimate for the construction project. Ward noted that the entire cost, including the $1.5 million land purchase, is likely to be $6-8 million.
Commissioner Marc Hein requested that the town breakup the project in to two parts and pay for the land up front.
“The reason we don’t want to do that is because we don’t want to go before the NC Local Government Commission and take out a loan say next month and then come back two or three months later and take out another, larger loan,” Ward said. “D.R. Reynolds is going to get the not-to-exceed cost back to us in the next six weeks and we should be able to go before the LGC to get approval for one loan to cover the entire project.”
Commissioner Donnie Callaway asked Ward how long the town had to execute its purchase contract for the land. Ward replied that the town’s due diligence is “open ended” and the purchase of the land is contingent on a fire station being built on the tract.