CAROLINA BEACH — The Town of Carolina Beach has responded to the state’s inquiry into town finances, more specifically, its declining general fund balance that has continued to slide for the past three years.
During last week’s council meeting, interim Town Manager Ed Parvin addressed some of the financial issues the state requested more information on.
Over the past several years the town has entered into several different capital projects that utilized its general fund including the Island Greenway, Cape Fear Multiuse Path, parking meters, the purchase of a new parking lot, and more.
Reimbursements and increased revenue
While a lot of the projects might seem expensive at first, a lot of the projects are funded through grants and Parvin expects to see some grant reimbursement money coming back to the town soon.
Hurricane Florence also took its toll on the Town of Carolina Beach’s general fund, but it is expected that FEMA will repay up to 75 percent of expenses from the storm.
According to the town’s response to the LGC, “Reimbursement of the year to date expenditures for the Island Greenway and Cape Fear Multi-use Path will increase the fund balance by $554,300 or 4-percent in Fiscal Year 2018-19.”
Another place the town is planning on making up some of its fund balance is the increase in fees for things like parking, Freeman Park access, and marina dockage rates.
If calculations are correct, these fee increases should raise the fund balance by roughly $832,000.
The town’s response to the LGC
The text below in italics is the response sent from the town to the LGC — it has not been edited or changed except for formatting.
Dear Ms. McCullen,
The Town of Carolina Beach is in receipt of your letter dated November 14, 2018, with regard to the audited financial statements of the fiscal year ended June 30, 2018, and the fund balance available for appropriation relative to expenditures in the General Fund. As you are aware, the Town’s audit for the fiscal year ending June 30, 2018, revealed no material weaknesses or significant deficiencies and the auditor issued an unmodified opinion. Further, the Town’s General Fund Balance exceeds the 8% required by law. It is our understanding that the letter the Town received is a standard letter issued by the Local Government Commission (“LGC”) when a unit of local government’s general fund balance available for appropriations relative to expenditures is 50% below the average fund balance available for other units of local government within the Town’s population group.
The Town appreciates the role of the LGC, its issuance of the November 14, 2018 letter and its request for an explanation for the decrease in the Town’s fund balance over the past three years. The General Fund Balance was discussed during the most recent budget process and Council receives the General Fund Balance monthly from the Finance Director. The need to increase the General Fund Balance will be discussed during the upcoming budget workshops. Please allow this letter to provide explanation as to 1) why there has been a decrease in the general fund balance over the past three years and 2) how the general fund balance will increase over the next three years.
The Town of Carolina Beach has approximately 5 miles of municipal beach strand, an oceanfront boardwalk, and a marina owned and operated by the Town. According to the League of Municipalities, the Town of Carolina Beach has a population of approximately 6,000; however, the Town’s population exceeds 20,000 during the months of April to September.
The Town must be in a position to meet the demands that come with this seasonal increase in population. In the past three years, the Town has undertaken numerous capital improvement projects to replace failing infrastructure, accommodate increased demands on the Town’s infrastructure, and increase the opportunities for access to the municipal beach strand and public trust waters for citizens and visitors. The Town routinely seeks grants opportunities for projects it undertakes which often require the Town to contribute a percentage of matching funds.
Fiscal Year ending 2015
In fiscal year ending June 30, 2015, the Town undertook two projects, the Oceanfront Boardwalk, and the Island Greenway. Each of these grants required the Town provide a percentage of matching funds. The Town expended nearly $300,000 of its General Fund but received grant funds in excess of $800,000. The Town also concluded construction of a new fire station during this fiscal year. While a loan was obtained for the construction, the General Fund was used to pay for unanticipated expenses during the construction. In addition to the above-mentioned expenditures, the Town purchased land to accommodate the need for public parking.
Fiscal Year ending 2016
In fiscal year ending June 30, 2016, the Town received 1.5 Million Dollars in Grant funds for two projects, Northern Extension of the Oceanfront Boardwalk and a Multi-Use Path. As a condition of these Grants, the Town was required to expend in excess of $300,000 of its General Fund towards the projects. The Town purchased $140,000 of parking meters to replace existing meters and add additional parking spaces.
Fiscal Year ending 2017
In fiscal year ending June 30, 2017, the Town expended an additional $102,217 from the General Fund for additional expenses for the Northern Extension of the Oceanfront Boardwalk.
Fiscal Year ending 2018
In fiscal year ending June 30, 2018, the Town obtained a loan for some of the funds necessary to construct a bulkhead at the Town Marina and relocate the existing boat slips. The Town expended approximately $600,000 from its General Fund toward the necessary marina repairs.
Attached please find Exhibit A which identifies the funding sources for projects undertaken in Fiscal Years 2015-2018.
Anticipated Increases to the General Fund
For several years the Town maintained the general fund balance available for appropriations relative to expenditures at 50%. As discussed above, in recent years the Town’s General Fund balance has been used for significant capital improvements. The Town is actively identifying ways to increase the Town’s General Fund while providing the service and infrastructure needs of the Town’s citizens and visitors.
In an effort to increase revenue, the adopted budget for Fiscal Year ending June 30, 2019, increased many fees charged by the Town. Specifically, the Town increased the fees paid for Solid Waste and parking rates. The projected increase in revenue from these increased fees is approximately $800,000 or an increase of approximately 5%. Attached please find Exhibit B that shows anticipated increases to the General Fund based on the increased fees.
Since the adoption of the most recent budget the Town has reviewed existing contracts and issued requests for proposals to seek more competitive contract terms for waste management, landscaping, and parking enforcement. All expenses are being scrutinized and redundancies eliminated.
The Town will begin holding budget workshops in January to further review Town expenses and identify means of increasing revenue.
The General Fund balance will increase when the Town receives in Fiscal Year ending June 30, 2019 reimbursements for funds expended on the Island Greenway and Cape Fear Multi-Use Path. These reimbursements should increase the general fund balance by $554,300 or 4%.
In addition, the Town has two general fund loans maturing in 2019 which will reduce the annual debt service by $77,800 in fiscal year 19/20 and $170,500 in fiscal year 20/21.
The Town appreciates the oversight provided by the LGC and looks forward to receiving feedback on the Town’s financial plan to rebuild the General Fund Fund Balance.