By Richard Sullins | richard@rantnc.com

The Lee County Board of Commissioners got its first look Monday at the proposed budget for the next fiscal year, which contains a modest increase in spending and holds the line on the property tax rate for another year.

For the second year in a row, Lee County’s budget would top the $100 million mark. The spending proposal of $112,927,338 represents an increase of $8,089,265, or 7.72 percent over the current fiscal year. The tax rate for real and personal property, or ad valorem tax, would remain unchanged during Fiscal Year 2024-25 at 65 cents per $100 of property valuation.

For the second year in a row, county employees would see a “meaningful” pay increase, and Lee County Schools would get an increase of just over $2 million from what they received last year. The bump is four times larger than what they received in last year’s budget, but still leaves them 60 percent short of the $5 million they asked for.

Of the $5 million in county funding the school board had requested, almost $3.5 million would have gone to support a new pay plan for teachers and support staff. The county’s proposed $2 million increase is just over half the amount needed to implement that plan in the school year that will start in August.

Another $203,000 was requested to restore the payment of supplements to teachers possessing a master’s degree, with $981,000 asked for operational increases, and $512,500 requested for personnel requests that would include positions in Behavior Support, English as a Second Language, and the two existing positions in school health now paid from federal Elementary and Secondary School Relief funds, which are expiring.

How it all works

Last December, the commissioners agreed unanimously that keeping the property tax rate level with where it had been set the previous year was their over-arching goal. It had been a year when, despite a cut in the tax rate of 8 cents per $100 of property valuation, a quadrennial property revaluation sent residential property values soaring by as much as 50 percent, leaving most taxpayers paying much more than they had just a year earlier, despite the cut in the tax rate.

The transmittal letter from County Manager Lisa Minter to the commissioners said this upcoming budget “is focused on supporting the cost to continue current programs and services while trying to meet the strategic goals and priorities of the County Commissioners within the County’s current tax rate, slower sales tax growth, a decline in Medicaid Hold Harmless revenue, a tight labor market, and continued inflationary pressures.”

Minter explained that the county has less money to work with in the coming year than it did in FY 2023-24, when a property revaluation and a booming local economy brought in record receipts to the county’s coffers. Last year’s budget gave the commissioners $15 million in new funding to do things they had been unable to for years. The amount of growth that is projected for the 2024-25 fiscal year is roughly half that amount.

In years like the coming one when there is no revaluation, the county’s tax base grows three ways: the value of new construction activity, new personal property acquisitions, and increases in the value of motor vehicles. The recommended budget includes a $533.7 million increase (6.76 percent) in the assessed value of real and personal property, along with $50 million assessed for the increased value of motor vehicles.

Combined with the current year’s assessed values, all that brings the total assessed value of real and personal property within Lee County to $9,468,087,000. That base will produce $938,066 in revenue per penny. At the current tax rate of 65 cents per $100 of valuation, the growth generates $3,888,228 of new revenue for FY 2024-25.

Next to the property tax, the county’s second largest source of revenue is the local option sales tax. Lee County’s strong economic picture has kept sales tax receipts growing steadily for the past several years, but the rate of those increases is beginning to fall statewide, due in part to a slowdown in consumer spending and the ending of federal pandemic stimulus relief dollars. The budget plan estimates sales tax revenue for next year will grow by only 2 percent.

The budget proposal also recommends an appropriation of $6,704,208 from the county’s Fund Balance, a $3.7 million increase from the amount used from the account last year. Fund balance funds are those dollars that were appropriated to individual departments but not spent during a given fiscal year. At the end of each year, the unexpended dollars are transferred into the fund balance account and can be used for emergencies, for pressing county needs, for county construction projects – with all those dollars being treated like a savings account until needed. The estimated value of the county’s fund balance at the end of June in 2024, about six weeks from now, will be just over $32 million.

Following the money

The school board will have a particularly hard time swallowing a county budget plan that includes another 3.7 percent salary increase for all county employees, while providing none for school classified staff (those positions that do not require an instructional or administrative license, such as a teacher assistants, office staff, cafeteria workers, or bus drivers). The county has declined to provide increases in the supplements for those school employees, as well as for teachers, for the past three years. That forced the school board to step up and provide increases out of federal COVID relief dollars, but those funds will be ending on September 30 of this year.

The county’s ability to fund raises for its own employees has been limited in recent years, so it has been trying to make up for lost time by providing competitive salary bumps that make working for the county an attractive option for both new and continuing workers. In FY 2022-23, the county was able to give a 6 percent increase for employees and that was followed by another 7 percent pay hike that was granted one year ago when the county implemented a pay plan for its entire staff.

The school board’s request this year had likewise included funds for the implementation of its own pay plan, but the proposed county budget doesn’t authorize any funding for it in the coming year’s spending plan.

By giving Lee County Schools $2 million of the $5 million in expansion funding that it requested, the county’s budget for next year would leave $3,779,667 still unfunded in the school board’s request, and the 102-page budget document estimates a tax increase of 4.03 cents would be necessary in the new budget year if the county were to be able to fund everything the school board is asking for.

The document includes a note of caution to commissioners who might wish to consider proposing that kind of an increase. Once the county implements an increase in its current expense (non-construction) funding account, it is required by law to maintain that same level of funding in future budget years.

The Lee County Campus of Central Carolina Community College would receive an increase of $86,440, or 1.95 percent, to continue funding for the Lee College Promise program and non-instructional needs that include utilities, insurance, and legal services. Another $64,930 is included for operations of the Dennis Wicker Civic Center. The budget would include $151,000 for capital expenditures, a $40,000 (36 percent) increase over last year.

Sheriff Brian Estes’ Office would receive an increase of just under $850,000, or 4.53 percent, and that compares to a requested increase of $1.6 million. The budget would fund two new positions – a new animal control officer and an administrative associate position. Also included would be 12 of the 20 new vehicles the sheriff requested for the new year, in addition to an increase of $164,228 (or 4.36 percent) for operations of the jail, bringing the total annual budget for those costs to $3,926,899.

The document contains proposed changes in county fees as it typically does each year, but there is a significant increase in one fee that is worthy of attention. The document proposes that commissioners review the increasing costs associated with the county’s Solid Waste fund. Operating expenses have been going up because the volume of solid waste being produced by the increasing number of households and transported to manned convenience centers has skyrocketed during the past year, and the budget proposal includes as additional $7.50 rate adjustment next year, taking the rate up to an even $150 per household.

Caution Ahead

Minter sought to make clear on Monday a point that the budget document makes near the end of her summary letter. When the tax rate was cut by 8 cents last year, Minter and members of the county’s Finance Office had no way of anticipating the school board would ask for an increase of nearly $6 million in the following year.

“I will caution you that, as you move forward into the opening of the athletic park and the library, it may make it very difficult for us to maintain the 65 cents tax rate for the full four years until the next reval(uation),” she said. “I’m not telling you that it will, but I’m just cautioning you that it may, and you do need to keep that in mind.”

The commissioners asked few questions and took only sparing notes, knowing they’ll get a chance for that level of detailed work when a budget workshop with some of the larger departments they fund annually is held on May 31, including the school board and the sheriff’s office. A second opportunity for questions – and potentially for changes – will occur during a public hearing for the budget on June 3. Final adoption of the budget is on the commission’s calendar on June 17.

The economic picture still looks good

Despite some signs that the rate of economic growth may be slowing a bit, county and city leaders continue to exude confidence that Lee County’s financial state will remain strong in the coming years.

Almost every indicator suggests the county continues its solid economic growth that began just before the start of the COVID-19 pandemic in 2020. The industrial expansion story that remains the envy of the state began when the first tenants were signed for Central Carolina Enterprise Park in the late 2010s, and the jobs associated with those new industries, along with expansions of others previously existing, brought waves of new residents to fill up housing developments almost as fast as they were being built.

Adding to all that is another large group, this one being the exodus of large numbers of persons from the Raleigh-Durham Metropolitan Statistical Area, all looking for less expensive housing and a slower pace of life that was still within easy commuting distance of the Triangle. These factors combined to shift Sanford’s already high-performing economy into overdrive, and the economic assumptions contained within Minter’s budget projections support the belief among economists that Lee County will continue to be among the state’s fastest growing counties for the next decade.

Two years ago, CCEP was the only available industrial park within the county, and it was almost full. Since then, several new industrial campuses have been approved, and in February of this year, Japanese specialty pharmaceutical corporation Kyowa Kirin announced it will locate a $200 million facility, its first in North America, at a new park off U.S. 15-501 to be called Helix Innovation Park at the Brickyard.

Chief Executive Officer of the Sanford Area Growth Alliance Jimmy Randolph has told the commissioners, along with the Sanford City Council and the Broadway Town Commissioners, that while the torrid pace of economic successes of the past several years is beginning to slow, “the hits just keep coming.”

With new industrial campuses now waiting to be filled, and with the support network that helped make those early successes possible still in place, Randolph believes Lee County’s winning formula will continue to create success in the immediate future.

Minter’s letter to the commissioners in the budget document closed with a summary that, if followed, should guide the county through the tricky waters that lie ahead.

“Managing expectations will be important in addressing the goals of the Commissioners,” she wrote, “but the future for Lee County is very bright.”