Debt is rolling off the books and sales tax receipts are still through the roof, but with Haywood County likely going to the bond market later this year to pay for the prison expansion, Haywood County’s fiscal year 2022-23 budget will come in special being critical.
“We have a strong existing debt profile,” county manager Bryant Morehead said during a Feb. 21 budget workshop held to update commissioners on the county’s overall financial health, which Morehead described as very good.
Annual debt payments for fiscal 2022 are about $5.7 million against general fund income of about $100 million, but will decrease to just over $4 million through 2026. In 2027, a sharp drop takes them to $1.2 million, where they will stay until 2036, eventually tapering to about $140,000 by 2058.
Much of this debt is education related. Taking that out of the equation, Haywood County’s annual debt payments for 2023 total about $1.9 million, broadly matching the precipitous decline in total debt over the following decade to $832,000 from 2027 to 2043.
But that’s only if the county doesn’t incur any more debt for the next three decades, which it likely won’t.
A planned prison expansion, expected to cost $16 million in early 2021, would severely impact the county’s debt burden, and Commissioner Tommy Long warned the project could see a much, much higher price tag, similar to that, due to inflation and supply chain issues the $20 million Waynesville sewer project is now likely to be closer to $27 million.
Even if the prison comes up to the original estimate of $16 million, the no-education county’s annual debt payments would increase from $1.9 million in 2023 to $3.2 million and remain over $1 million through 2043.
Fortunately, almost every other aspect of the county’s finances is on solid ground.
The fund balance has grown steadily over the past 15 years, from a low of 11.58% of annual spending in 2006 to 40.13% today. The unallocated portion of that fund balance — which can be used for almost anything — is near an all-time high at 25.11%.
Property tax receipts continue to rise, and the bizarre phenomenon that is fueling skyrocketing sales tax receipts across the region – first seen in the early stages of the coronavirus pandemic – continues.
“Sales tax continues to amaze everyone,” Morehead said. “I’ve been in North Carolina for 19 years and I’ve never seen anything like it.”
Sales tax receipts showed an upward trend around April 2020. For the remainder of the year and throughout 2021, revenue increased year-over-year in every single month. For the first five months of fiscal 2021-22 (not even counting the holiday season), they hit an all-time high of over $1.92 million in November.
The county’s bond rating, last adjusted by Moody’s Investors Service in 2018, is currently Aa3. In general, the stronger a company’s financial position, the higher the rating and the lower the interest rate.
However, there are three more steps the county could take in a positive direction regarding its bond rating — Aa2, Aa1, and Aaa.
Morehead said the Local Government Commission, charged with overseeing the financial health of local government entities, is likely to require a reassessment of the county’s finances, and it is hoped the county can once again secure another raise, which will save money in the long run would.
Commissioners are likely to opt for limited commitment bonds that would not require voter approval.
However, jail isn’t the only thing the commissioners will be concerned about on the spending side of the equation, and over the next few weeks the commissioners will have to make some difficult decisions.
The consumer price index increased by 7.8% from January 2021 to January 2022. That hits the employees of the district directly in the wallet. For every 1% increase in COLA or earnings, the county would have to spend an additional $360,000. Bringing staff salaries to anti-inflation levels would cost $2.8 million.
Health insurance costs have risen even faster than inflation. The county spent more than $11.7 million in FY22 and forecast a 5.7% increase for the next year.
Each department has made requests for additional jobs, led by Health and Human Services with 6 and the Sheriff’s Office and EMS with 4. Granting all 28 job requests would cost $1.77 million.
A seven-figure IT infrastructure upgrade is also badly needed, according to Morehead, as are four new ambulances at $325,000 each.
Renovating or expanding the library has been debated for years, but the project will quickly balloon into a major expense if officials pursue it further. Replacing outdated HVAC systems would require removing the roof, which is expected to cost around $2 million.
If that’s the case, it would make sense to have a full renovation at this point, but that’s expected to total over $6 million.
The county has $12 million in state recovery funds available, and a slide in Morehead’s presentation suggests spending $10 million on some or all of the various projects he mentions and the remaining $2 million on the Expansion of public security and public health facilities to use.
Commission chairman Kevin Ensley said he would prefer to prioritize matching funds for broadband access grants.
Morehead said he has not yet formally sat down with representatives from Haywood County Schools or Haywood Community College to evaluate their applications, but that will likely happen soon as the budget process moves forward.
Tentative dates for the process include working sessions on April 18 and May 2, the presentation of the manager’s recommended budget on May 16, a public hearing on May 31, and a vote on acceptance on June 6.
According to the law, the budgets must be approved by June 30 at the latest. So if more work is needed, the county has leeway to make adjustments in the coming weeks.