Highlands passes $27.4 million budget for FY ‘22-’23

No tax increase nor increase for town services

The FY 2022-’23 budget was finalized and passed 4-1 with very little fanfare at the June Town Board meeting.

Commissioner Marc Hehn voted against it because he had issues with the Treasurer’s report.

Interestingly, the budget that passed following the required public hearing that same night, was less than the budget presented at the May Town Board meeting.

May’s proposed budget of revenues and expenditures was $28,282,743; the budget that passed last week was $27,392,428.

“Since the budget presentation on May 19, the Morewood Road Waterline Improvement Project was completed removing $550,000 from the Capital Projects Fund expenditures. Also, the majority of the walkway access to the clear-well at the water treatment plant has been completed reducing the expenditure within the Water Treatment Plant capital by $135,000,” said Town Manager Josh Ward. “In addition, the upcoming fiber lease payments of $212,500 were added as revenue within the general fund for the last two quarters of FY 2022-’23.”

Capital Expenditures included in the budget total $6,328,304, some of which are carryover from FY 2021-‘22 due to supply chain shortages, said Ward.

Hotwire payments

At the Town Board meeting, Commissioner Hehn said he had seen the red-line Hotwire contract documents that the lawyer in Washington, DC sent and suggested he had found something that enabled the town to get paid more than it had expected. 

However, Ward and Treasurer Rebecca Shuler said the projected fiber revenue amount that affected the 2022-’23 budget had nothing to do with the red-line documents Hehn was referring to.

“I wanted to clarify something that was said at the board meeting,” said Shuler. “The red-line fiber draft versions had nothing to do with my calculations regarding revenue in the FY 2022-’23 budget as I haven’t seen or read them. In addition, I have not had any discussions with anyone other than Josh about these numbers.”

She said the way to calculate the expected fiber revenue for FY 2022-’23 budget purposes was “pretty straight forward in the contract after the first year had past. I just wanted to set the record straight.”

According to the Hotwire lease: For the use and occupancy of the Highlands system assets, beginning on the first full quarter of the second year of the lease and throughout the lease term, Hotwire will pay to the town the rent in consecutive equal quarterly installments of $106,250 on the 45th day after the end of each calendar quarter with respect to the preceding calendar quarter. 

The contract was signed in November 2021.

As per the contract, the end of the first full quarter will be March 2023 and Hotwire has until May 15, 2023 to pay. The next payment is due June 2023 which can be paid by Aug. 15, 2023 and will be accrued to be correctly reflected within the FY 2022-’23 budget at the end of the fiscal year – June 30, if it’s not paid by then. The next payment is due Sept. 23 but can be paid by Nov. 15. 

To present a balanced budget, it was necessary to appropriate $2,236,219.86 from undesignated General Fund Balance, $2,647,041.89 from Water Fund Balance, $1,358,962.00 Sewer Fund Balance and $213,750 from the Sanitation Fund Balance.

These fund balance appropriations were used to offset capital project deficits and debt service within several departments.

Ward said all funds are self-supporting and with the exception of the Sanitation Department where there is a $78,750 shortfall, they don’t require a fund balance appropriation to operate.

The first thing citizens want to know is “Are taxes or fees going to increase?” 

The ad valorem property tax rate remains at $0.1565 per $100 valuation. The tax rate does include .015 earmarked for street paving projects, which is scheduled to sunset June 30 of 2023. 

The valuations are determined by the Macon and Jackson counties tax departments and the approximate property valuation of $1,856,000,000 with an estimated collection rate of 98%.

The Highlands Volunteer Fire Department tax rate remains at 3 cents per $100 valuation which took effect FY 2019-’20.

The current Town of Highlands charges for water, sewer, electric and sanitation services remains unchanged.

Ward said the financial outlook for Highlands is strong.

“Highlands is a unique popular mountain getaway in close proximity to several large cities and many visitors are deciding to relocate to Highlands as permanent or part-time residents. I feel this trend will continue well into the future,” he said.

The Town’s undesignated General Fund Balance remains strong at $4,400,000, and with the exception of the Sanitation Department, all enterprise funds are stable and covering their operating costs.

“The Electric Fund continues to provide funding when necessary to offset capital project costs in other departments. Due to the ability to transfer funds from the Electric Fund Balance, the town has been fortunate to keep its long-term debt extremely low,” said Ward.

The current Electric Reserve Fund is approximately $5,500,000.

The Local Option Sales Tax distribution is projected to remain strong, however, Kaye McHan, Director of the Chamber of Commerce said it has already seen a decrease in room tax proceeds which could mean a decrease in sales tax proceeds if less people seek short-term accommodations in area hotels, motels and rentals. 

However, a decrease in room tax fees may also be due to the fact that Mitchell’s Lodge has been taken out of the mix; it is now employee housing for the Old Edwards Hospitality Group.

Fees for the recreational uses at the Rec Park including the fitness center, swimming pool and pickleball are being increased. For instance, single and family memberships for one year at the fitness center was increased $50; 6-mth. membership by $25, etc. Annual pool memberships have increased by $65; summer memberships by $20, monthly by $10, etc. The daily price at the pool went up a dollar from $3 per person to $4. These fees go into effect July 1, 2022.

The FY 2022-’23 budget includes a 6% cost-of-living adjustment for employees and a 4% increase in the employee health insurance premiums with BlueCross BlueShield NC.

Legal Fees

After the FY 2022-’23 budget was accepted, budget amendments were made to close out the FY 2021-’22 budget.

Since revenues and expenditures must match, this is an annual procedure. One of the several budget amendments made were for legal fees in the amount of $95,000.

“We made the $95,000 year-end budget amendment because we had only budgeted $70,000 for legal fees and we are already about $67,000 over budget between our regular legal invoices and the STR legal invoices,” said Shuler. “Therefore, I made a budget amendment of $95,000 to add to the $70,000 originally budgeted to cover the $136,106.92 already spent and to estimate what may still be charged for this fiscal year.” 

She said it’s hard to estimate exact costs because no one knows how much attorneys will bill for services before the end of FY 2021-’22 which is June 30.  

As of June 9, 2022, the STR attorneys billed and the town has paid $54,487.28. 

“That doesn’t include the extra amounts for our regular lawyer fees [to Jay Coward] that we have paid – $65,261.88 – for a total of $119,749.16,” said Shuler.  

According to Shuler, as of Thursday, June 16, the total in STR related legal fees is $64,184.71 between Coward, Justus, Essick and Hagemann, with another $71,861.88 for normal legal fees to Coward for a total of $136,106.92.

By Kim Lewicki, Highlands Newspaper

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