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The Dive: New Hanover County commissioners have two weeks to find $7.7 million. How will they do it?

Camille Mojica

Every week, WHQR News Director Ben Schachtman sits down with The Assembly's Johanna Still, to talk about our joint newsletter, The Dive. For this edition, it’s a look at philosophical differences in how commissioners want to approach this year's tricky New Hanover County budget.

The Dive is a free weekly newsletter jointly published by WHQR and The Assembly. You can find more information and subscribe here.

It’s been a rough budget season all around the region, but New Hanover County has had a particularly tough row to hoe.

At the end of a four-year property appraisal cycle, the county faces three years of rising costs while the tax base hasn’t budged much. It’s also putting an extra $9 million toward the school district’s budget shortfall (on Monday, the school board asked for even more). And the county is on the hook for roughly $18 million more for the sheriff’s office, where chronic staffing issues have led to serious overtime. An increase in the overtime pay rate, designed to help recruit and retain deputies, has compounded the situation.

Even after scrapping a proposed tax cut, the county’s still in the red by about $7.7 million.

For The Dive, Ben Schachtman looks at New Hanover County commissioners' differing philosophical approaches to balancing their budget: Nickles and Dimes

BS: All right, Johanna Still, thanks for being here.

JS: Thanks for having me.

BS: So this week, we got into a little bit of philosophical terrain with the New Hanover County budget.

JS: Yeah, it looks like we have some budgeting issues from our government. I'm sure that a lot of residents are also feeling some budgeting pressure in the region. So governments — they're just like us. Can you talk us through some of these shortfalls and where they're coming from?

BS: Sure. So governments all around the region have been struggling with their budgets. But New Hanover County is dealing with a bunch of overlapping factors. They're at the end of their property reevaluation process, which means they're still taxing people based on 2021 property values. Now, those will go up next year, that will dramatically increase the county's tax base, which means even at a lower tax rate, they'll bring in more money. But right now, they're facing costs and payroll and inflation that has gone up for three years with the same stagnant more or less tax base. Add to that, New Hanover County Schools is facing a $20 million budget shortfall that they're asking the county to help them with. And as we discussed a couple weeks ago, the New Hanover County Sheriff's Office is asking for $18 million. That's mostly to cover overtime. The sheriff's office is dramatically understaffed, which means existing deputies are getting paid overtime. And they've recently increased the overtime rate from 1.5 to double. So all of that together has really put the county in a financial pinch. And even after they scrapped a proposed half-cent tax cut, they're still about $7.7 million in the red.

JS: So they've got this, you know, flat revenue, increasing expenses, increasing needs, what are they proposing to do about it?

BS: Well, County Manager Chris Coudriet first suggestion was to dip into their revenue stabilization fund. This is $300 million that came from the sale of New Hanover Regional Medical Center to Novant Health. And it was set aside for a number of different reasons, one of which was, you know, in case of a catastrophe like a hurricane so that they could, you know, do repairs and debris removal right away without waiting for FEMA. But another reason was to prevent tax increases or to pay off debt. So this is a reason they could use that. But thanks in part to Commissioner Rob Zapple, they put some guidelines and some restrictions on this and it takes four out of five commissioners. And right now, commissioners Dane Scalise and LeAnn Pierce are saying no, we will not give you the votes you need to tap into that.

JS: Right, the Republican commissioners, Scalise and Pierce, basically think that it's inappropriate to dip into this fund, right?

BS: Yeah, that's correct. And so the next option is okay, Coudriet will put forward a number of sort of big picture cuts, you know, so $300,000 from this department, $400,000 from this department, and it's basically a bottom-up process where Coudriet would ask each department head, what do you think you could cut? He would put that all together and provide that to commissioners. And some commissioners like Jonathan Barfield, were okay with that. Barfield said, look, I trust staff, I trust Chris Coudriet. They know a lot more about the ins and outs and details of personnel than I do. So I'm going to trust them to put together the right plan.

Now Coudriet made it clear that his preference was to use the revenue stabilization fund but he said look, I want to work with the commissioners. So if we can't do that we got to cut and a large chunk of his cuts did come from the Sheriff's Office — over $1 million came from reducing that overtime rate. And Commissioner Scalise was not going for that. So he said he wanted to take a different philosophical approach. Basically, he wanted to go through line by line in the budget.

JS: And that's the "binder" that you referenced in your piece.

BS: That's the binder and this is, as Chris Coudriet said, kind of uncharted territory. The last time a commissioner went through the binder before the proposed budget was put together was last year — it was Scalise — but before that, it hadn't happened in like six, seven years. In fact, I've talked to a lot of people on county staff who don't remember this ever happening before.

JS: So the options they're looking at is one, dip into the fund, save the day temporarily, two, raise taxes, which is always unpopular, or three, don't raise taxes, but make big cuts

BS: Well, yeah, traditionally those would be the options. Although Scalise is saying maybe they don't have to be big cuts. Maybe we can find enough small things to pluck out of the budget to get there. Although Coudriet said there's no way we're getting to $7.7 million dollars with nickels and dimes. So there was some disagreement there. And then commissioners Zapple said, hey, maybe we take some from all of these ideas. You know, we accept some of Chris Coudray is pre-formatted cuts. We go through the binder and see what we can find there and then take a little bit from the revenue stabilization fund.

JS: Now, do we know if the county has ever dipped into that fund? Has it ever been touched since they created it?

BS: It's possible I missed it but I'm almost positive they have not touched that fund yet. I mean, it's only been around since you know 2021, I believe, but so far all they have done is spend the interest for it. And of course, they could be using the interest to grow the fund, but that interest appears to already have become a pretty regular recurring part of the county's budget.

JS: And do we see a scenario where the county gives the schools 100% of what they're asking for, or pretty much no matter what we're going to be looking at some cuts across the board, once this month ends?

BS: This just my speculation. But in a different year, where the county wasn't being squeezed by a number of other financial factors, I can definitely see a situation where they would at least fund the school shortfall for a year and give them kind of an off-ramp. But given the way the budget looks, I just don't see a scenario where they give the schools the whole $20 million, because that's recurring funding that the schools would then kind of be looking for each year going forward.

JS: And you bring up in your piece that there's pretty much only one more public meeting for the county commissioners to work this out.

BS: Yeah, that's right, with Barfield out for Monday's regular meeting, there's really just one chance the agenda review meeting on Thursday, May 30, which is getting pretty close because Coudriet legally has to have that budget proposed by June 1. So I know there will probably be a number of one-on-one conversations behind closed doors between now and then as commissioners try to feel each other out and see what they can agree on. I think just reading the room, I think there are probably the votes to make some significant cuts from Port City United. That's, of course, the county's violence prevention program, which has been in the news quite a bit over the last two months with the high-profile arrest of two different employees. That's brought a ton of scrutiny, both from the public and from the county on that department. That's not enough to get them all the way to $7.7 million, though. So there's going to be a lot of other things that they need to hash out. And as far as discussing that publicly, yeah. The last meeting in May is their last chance to do that.

JS: Well, we will stay tuned. Thank you, Ben.

BS: All right, Johanna, thanks for being here.

JS: Thank you

Ben Schachtman is a journalist and editor with a focus on local government accountability. He began reporting for Port City Daily in the Wilmington area in 2016 and took over as managing editor there in 2018. He’s a graduate of Rutgers College and later received his MA from NYU and his PhD from SUNY-Stony Brook, both in English Literature. He loves spending time with his wife and playing rock'n'roll very loudly. You can reach him at BSchachtman@whqr.org and find him on Twitter @Ben_Schachtman.
Johanna Still is The Assembly‘s Wilmington editor. She previously covered economic development for Greater Wilmington Business Journal and was the assistant editor at Port City Daily.