New Hanover County Proposes New Budget With No Tax Increase, Grant Fund For Small Businesses

May 18, 2020

New Hanover County officials presented the proposed budget for the fiscal year beginning July 1st at a meeting Monday morning.   With the unprecedented impact of the coronavirus pandemic, and the beginning of what could be an above-average hurricane season, there is no proposed tax increase.  

RLH:  As local governments – counties and municipalities – struggle to understand the impact of Covid-19 on their budgets, they not only have to account for what’s happened so far; they’re having to make projections without past precedents and only limited data.

BS:  Their biggest source of revenue:  ad valorem taxes –- which are  property taxes.  Room occupancy tax is also a revenue source.  It’s what tourists pay when they come to stay in hotels, motels, or short-term rentals -- and while it’s expected to drop, it won’t affect the county budget very much this year.

RLH:  Sales tax is also an important revenue stream -- about 20% of the overall county budget.  And this one’s a little trickier because while people pay sales tax on what they buy in the county, all that money goes to Raleigh first.  Then the state cuts the county a check.  The amount of that check can vary month over month for a few reasons.

BS:  Tourism has a lot to do with sales tax fluctuations – as well as any tax refunds due back to nonprofits and governmental entities within the county – such as the hospital.

Lisa Wurtzbacher is Chief Financial Officer for New Hanover County.  She says it’s those sales tax distributions that worry her the most.  And the unpredictability comes with a lag time which makes planning even harder. 

LW:   April -- which will have the most significant impact -- we won't know those results for sales tax until July… and so certainly that's what we're most worried about.

BS: She says they have to guess at the extent of the drop in sales tax. 

LW:  We are estimating about 9 million dollars in shortfall for sales tax. And that's about two and a half percent of our overall general fund budget.

RLH:  But here’s the thing:  that shortfall only accounts for about three months – April, May, and June.  July 1st we’re into a whole new fiscal year, new budget.  The good news is that they’re pretty optimistic about the biggest revenue source -- property tax.

BS:  That’s because they collect that property tax by January.  But they’ve already had to dip into their fund balance to cover that missing $9 million in sales tax for this year.   They’ve also to use their fund balance – essentially their reserve – for about $30 million in recovery funding for Hurricane Florence.  The Federal Government will reimburse much of that through FEMA, but to date, $13 million has yet to be received.  And that means a $13 million hole in this year’s budget -- on top of $9 million in missing sales tax.   

RLH: With all these uncertainties, Commissioner Woody White says the best thing about the new budget is that it doesn’t raise taxes. 

WW:  I do think that had Covid not hit, you would have seen a tax cut -- the third in five years and it's disappointing that now I don't think that's attainable.

BS:  But fellow Commissioner Rob Zapple tells us he worries about the unknowns.

RZ:  I guess my concern is until we can put some facts around those numbers, my concern is it's going to be greater than that.  And because of the uniqueness of our revenue streams in New Hanover County, a lot of it relying on tourism, what we do know is that the tourism industry, attracting people from out of town is going to be one of the last sectors to really come back as strong as it was before.

RLH:  The planners and budget writers are taking a conservative approach for the next fiscal year, says CFO Lisa Wurtzbacher, with no cuts yet on services.

LW:   We've had to forgo things that we would have otherwise liked to do, you know, a number of capital outlay items, a number of capital projects that we have on the list to do.

BS:  They’re cutting that part of the budget by around 56%. 

RLH:  County Commissioner Patricia Kusek agrees that limiting projects and any expansion of services is a sound idea.

PK:  Any new projects that we can put off reduces the amount of new debt we would have to issue and the new debt service that we would have to pay. So again, that is another very good, strong argument for us pushing things out into the future.

RLH:  And while so much of the shortfall is directly attributable to the impact of the pandemic on the economy – the drop-off in tourism, the temporary shuttering of many businesses, relief money from the federal government, at least so far, might not help.   That’s because the money from the CARES Act for county governments is restricted.  New Hanover County Manager Chris Coudriet explains it this way.

CC:  None of that money will be used to offset lost revenue. It will at this point all need to go to prior and, looking forward, future expenses for Covid-19… The gap in the local bucket won't be filled up at all with CARES Act funding.

RLH:  There is at least one commissioner – Rob Zapple – who’s pretty frustrated by the fact that this whole budget process does not include a public work session before it’s presented as a recommendation.

RZ:  Well, if you put all five commissioners in a room, in a work session, just by the physical fact that you have five commissioners together, that becomes an open meeting. So there’s an opportunity for the media as well as individual citizens to certainly witness and to see firsthand how that discussion goes.

BS:  Woody White doesn’t agree that a budget work session contributes to transparency.  He says it’s just an opportunity for grand-standing and pitting one commissioner against another. 

WW:  I think most of us see very little, if any value in that process, but that is not to suggest that the public is shut out. This is the most transparent, in my view, local government in this country. I respond to everyone, the commissioner, other commissioners I serve with email, call people, meet with anyone that asks. We're on television at all of our meetings. Our offices are in a public building. We are in this community all the time.

RLH:  Commissioner Kusek says that nothing happens behind closed doors and those budget work sessions are not in demand by members of the public. 

PK:  Most of the time when we do those kinds of workshops, we have a handful of people that come.  There's not nearly the interest that some of the commissioners would lead you to believe that there is.

RLH:  But for Rob Zapple, there’s value in bringing strengths and weaknesses, agendas and priorities, into one room together.  When that doesn’t happen...

RZ:  Three votes are essentially setting New Hanover County’s budget.

BS:  One other major unknown that’s on everybody’s mind:  hurricane season.  

RZ:  God forbid that we have to use the H word -- hurricane -- this year at all.

RLH:  While no one wants to see a storm, Woody White says the county is well-positioned because of the high fund balance – despite having already dipped in for Florence, Dorian, and Covid-19.  

BS:  And he cites the high property tax collection rate and a budget that’s growing less than 1%.  But he acknowledges…

WW:  If a hurricane hits it, it's gonna, it's gonna impact us and there’s no question there will need to be a review of where we sit at that moment in time. 

BS:  I’m Port City Daily’s Ben Schachtman.

RLH:  And I’m WHQR’s Rachel Lewis Hilburn. 

A public hearing on the proposed budget is planned for June 1st. 

Find Ben Schachtman at portcitydaily.com

Rob Zapple is a member of WHQR’s Board of Directors.

----------------------

New Hanover County is proposing a new plan for local businesses hurt by the pandemic.

$4 million is coming to New Hanover County from the federal government through the $2 trillion Coronavirus Aid, Relief, and Economic Security – or CARES Act.  But that money may only go toward expenses for the pandemic response – such as personal protective equipment, the in-house testing program, or the costs of having employees work remotely.  Funds will also go to reimburse municipalities for their Covid-related expenses.  

But Chief Financial Officer Lisa Wurtzbacher says the county is also planning to offer support for local businesses that are struggling. 

"We are recommending $1.3 million in grants of $10,000 each for small businesses in New Hanover County that have been impacted by Covid-19…  We’re recommending targeting the program to businesses with fewer than 25 employees with awards being granted through a random lottery system following an application process."

Wurtzbacher says they’re still working on the details of the program – but they expect to present those at the June 1st meeting – where there will also be a public hearing on the proposed budget for the next fiscal year.