As Havelock city staff begins preparations for the 2013-14 budget, uncertainty about the area economy in light of sequestration and federal budget cuts has prompted major concerns.
"I cannot remember a time in my career with the city that I was as worried that the local economy would suffer substantially more than the state economy," said Lee Tillman, city finance director. "I just feel like with the large population inside the gate that’s going to have a reduction in their income that we’re going to suffer worse. In some ways, we’re going to be double impacted because of Camp Lejeune and New River. There’s a large military presence right here and how that’s going to impact us, I’m very concerned."
Tillman said the staff is too early in budget preparations to say if a property tax rate increase is in store for resident or exactly what the total budget will be. City departments turned in budget requests last week, but the Board of Commissioners doesn’t begin budget talks with city staff until May 6. The budget must be passed by June 30.
Tillman said the impact of sequestration will be felt in the months ahead, but the Havelock Tourist and Event Center has already been affected.
"We know we had some clients who had to cancel because the training budgets had been reduced," Tillman said.
She said she is concerned that revenue from water and sewer fees could decrease as residents with less income make hard choices about their bills.
She also expects less in sales tax revenue, collected by the state and distributed to cities, with that impact hitting within about two months.
"People have less discretionary income so they’re not buying the DVD at Walmart. They’re watching the one they already have," Tillman said. "It may be that they are not eating out as much, and they’re cooking more at home."
Tillman said the expected furloughs to Cherry Point civilian workers are expected to continue through September, when city property taxes are due. Property taxes account for 42 percent of the city’s budget revenue.
Residents are not considered delinquent on their taxes until January, so the impact may not be felt until 2014.
It depends on how long sequestration lasts, she said.
"If it lasts the 22 weeks they are talking, then all of the effects are much more magnified. I’m really concerned," Tillman said.
Revenue from franchise taxes, such as those attached to cable and phone bills, could decline as residents decrease or drop services, Tillman said. The city could also see less Powell Bill money generated by the state gasoline tax as residents drive less. That money from the state is used for street, sidewalk or drainage projects in the city.
Tillman said low interest rates on money the city keeps in the bank means less revenue as well.
"Today, we are getting between .1 and .25 of a percent on our investment. Horrible," she said.
Havelock has a policy of keeping in the bank enough money to operate for four months, which comes out to 32 percent of the annual budget.
"Today, that’s comforting to me when we talk about all those revenue streams that could be impacted by the federal decisions," Tillman said. "That’s why it’s prudent to have a fund balance, because the city will continue to be able to pay its bills and to offer the essential services to the public that they need."
The price of gasoline, as always, concerns Tillman as well. Last year the city set aside $25,000 as a contingency to account for fuel price increases.
"Every time it goes up for the public, it goes up for us as well and so it’s difficult for us to reduce our mileage because EMS needs to still run the calls, law enforcement needs to still be out patrolling and responding," she said. "Law enforcement does place in as many controls as they can, as does the fire and EMS department, but it’s difficult. We’ve still got to go out and do the limb pickup. We’ve still got to go out and fix the potholes. We still have to read the meters. We still have to do the service orders. Moving the jail to Tuscarora cost us an increase in time and in the gas fee."
Once completed, the proposed budget will be available at Havelock City Hall for viewing, and commissioners will schedule a hearing to receive feedback from residents.