Town of Hertford Regular Session (In Person/Zoom) Monday, June 13, 2022 -6:00 p.m.  Horace Reid Community Center, 305 W Grubb Street  The Council of the Town of Hertford held a Regular Session Meeting ati the Horace Reid Community Center (also by Zoom) on Monday, June 13, 2022, at 6:00 pm.  COUNCIL MEMBERS PRESENT Earnell Brown, Mayor (Zoom) Ashley Hodges, Mayor Pro Tem Sandra Anderson STAFF PRESENT  Connie Brothers Jerry Mimlitsch  Janice McKenzie Cole, Interim Town Manager Ashley Eure, Account Specialist Gina Durante, Town Clerk Johny Hallow, Attorney A quorum was present.  Mayor Pro Tem Hodges called the meeting to order. Counciwoman Brothers led the  invocation which was followed by the pledge of allegiance.  APPROVAL OF AGENDA  Amotion was made by Councilman Mimlitsch and seconded by Counciwoman Brothers to approve the agenda. The motion was approved unanimously 5-0, with the following  voice vote: Mayor Brown  aye aye  Counciwoman Brothers aye Councilman Mimlitsch Counciwoman Anderson aye Mayor Pro Tem Hodges aye CONSENT AGENDA  Mayor Pro Tem Hodges asked for a motion to approve the Consent. Agenda consisting of the minutes from Town Council Meetings on May 5, May 9, May 12, May 23, and May  31,2022.    A motion was made by Mayor Brown and seconded by Councilman Mimlitsch to accept the minutes on the Consent Agenda. The motion was approved unanimously with the  following voice vote: Mayor Brown  aye aye  Councilwoman Brothers aye Councilman Mimlitsch Councilwoman Anderson aye Mayor Pro Tem Hodges aye SCHEDULE APPOINTMENT  Kari Dunlap, Manager and CPA at Martin, Starnes & Associates, presented the Town of Hertford 2021 Audited Financial Statements. (Presentation is attached to these  minutes.)  CITIZENS CONCERNS  Marc Christian expressed his gratitude for the positive changes in Herford. He expressed concern about abandoned buildings and homes in Hertford and a need for a Tommy Jones, a lifetime resident of Hertford, asked Council for assistance with a utility Gracie Felton addressed the need for a public/portable restroom to be available on SML  Town plan to transition those to inhabitable structures.  matter. His contact information was taken and given to Manager Cole.  Flea Market events.  CONTINUED BUSINESS  APPROVAL OF THE. ANNUAL BUDGET FOR FISCAL YEAR 2022-2023 Manager Cole addressed Council stating that more than the obligatory 10 days have passed since the proposed budget was presented to Council on May 31 and a Public Hearing was held on June 8. Council can now vote on the proposed budget for FY Mayor Pro Tem Hodges made the following statement regarding the 2021 Audit and  2022-2023.  budget for FY 2022-2023: FY20-FY21 Audit Comments  First, we did well ins stabilizing/improving: our fund balance situation during our first budget cycle:    AsofJ June 30, 2020 As of. June 30, 2021  Total Unassigned General Fund Balance ($) $685,983 Unassigned General Fund Balance as a Percentage ofTotal Expenditures  $932,549 (+$246,566) 45% (+16.18%)  28.82%  But if you look at slide 8 you can. see that if wel hadn'texperienced a massive bumpi in sales tax revenue (+$230,684 over the previous year) due to COVID (people shopping here instead of EC or Virginia) we would have barely broken even (+$15,882). That should tell us we made the right decision in raising taxes 8.5 cents in 2020; had we not raised taxes and not experienced a bumpi in sales tax revenue we would have lost $95,914 in FY20-21, leaving a fund balance too depleted to cover even 4 months of Second, even with the taxi rate increase the only way we could get the FY20-21 budget to balance was by eliminating all capital improvements and capital outlay and eliminating pay increases across all departments. As you can: see on slide 9, this is primarily due to Public Safety (HPD) eating 45% of our total budget. By contracting with the Sheriff's Office lasty year, we were able to provide a 6% salary increase across all departments, assign substantial amounts ofi funding for grant matches, capital improvement, and capital outlays, as well as allocate funds for demolition of derelict buildings. All things being equal we should be able to continue making those investments year-after-year now that we' ve cut Public Safety expenses back to what we can actually afford. llook forward to seeing where we stand at this time nexty year, notj justi in the financial audit but in how much better the Town looks  government operations int the event of an emergency.  and operates. FY22-23 Budget Comments  At the beginning of budget deliberations Council directed Manager Cole to "build the budget you need to run the Town the right way." We further directed her to develop "bottom-up estimates" based on actual revenue and expense data sO we would have al hard number for what our expenditures should Manager Cole presented an initial version oft the budget in our May 23rd Work Session, and Ispent an entire day with she and Ms. Eure that week challenging every single revenue and expenditure line item int the entire budget. lam confident that all revenues were accurately projected and that every expenditure planned was reasonable and responsible, and as a result I believe we can expect to need approximately $2M each year for General Fund activities (administration, fire, street maintenance, trash, planning, code enforcement, and SO on). At the end of that process, we were able to balance our budget across all funds without increasing tax or utility rates for our residents or businesses beyond the At my request we then took al look at what it would take to eliminate the longstanding practice of moving excess Electrical Fund profits to the General Fund to offset inadequate tax revenue. Thisi isan issue Ihave raised in every budget season during my term in office. The Town has moved at more than $100K from the Electric Fund to the General Fund to balance the budget each year since at least 2016, SO we did the math on how much the tax rate would have to increase to generate this number and how much the residential electric rate could be decreased by eliminating this transfer. We are not proposing tor raise taxes in order to spend more money, but rather to modify the rates sO that each fund (or' "pot"  look like year-over-year.  increases put into place last year.    as Manager Cole called it) can stand on its own. Our plan is to take ini no more money than we did last In her budget narrative Manager Cole emphasized thati fairness, equity, and transparency were the driving factors behind eliminating this practice. Its should surprise no one that ai former police officer, prosecutor, and judge would lean hardest into this part of the argument. lagree with her reasoning, as does the School of Government, Local Government Commission, League of Municipalities, and General Assembly based on various articles, reports, and legislation that have been published or passed overa at least the last 10y years. But lalso want to make the case from an equally important perspective: the need to ensure our finances are stable, sustainable, and managed according to good governance According to the General Statues, at town's General Government Operations should be funded by sales tax, property taxes, and all other non-utility fees. A1 town's Enterprise Operations (in our case electrical, water, and wastewater utility operations) should be treated like a separate business, with billing rates just high enough to cover the cost ofoperations, maintenance, debt payments, and depreciation. This isn'tj just "one way" to make your government work; it's THE wayit'ss supposed to work, and for good As Manager Cole noted in her budget message, there are a few exceptions to these rules that are specifically spelled out in the statutes. The one the Town has used for some time allows a government toi intentionally overcharge for electricity so the profits can be used to subsidize General Government There are valid reasons for this exception. Imagine a mill or manufacturing town where a business owns al large percentage oft the town's property. Ifthat business goes bankrupt and is unable to pay its taxes, the government has to: find the revenue somewhere to coveri its expenses. This exception allows them to raise electrical rates to make up the gap. However, this exception was not intended, nor should itt be used, as a way to permanently avoid raising property taxes to the actual rate needed to cover expenses.  year when looking across alli funds.  practices.  reason.  Operations and avoid raising property taxes.  There are two important reasons why:  First, property tax revenue is a much more. stable source of revenue. Electrical demand literally fluctuates with the weather outside, whereas property values are fixed by a county assessment  that generally occurs only once every 7 years.  Right now, if we have an unusually mild year (meaning cooler than average summer or warmer than average winter) the Electric Fund won'ts sell enough electricity to generate the profit needed to cover the General Fund loss, meaning we have to eat further into Ont the other hand, if we have an unusually hot or cold year "light bills" go through the roofa and our poorest residents struggle to pay them, resulting in a higher number of unpaid bills than usual. Although these debts are: sent to the State for collection, we only get a part ofa anything they actually recover, meaning the revenue is largely gone for good. So again, we end up taking al loss and eating into our emergency fund. However, if we do want the Statutes want us to do, meaning charge the correct tax rate toi fully fund operations, we know with a very high degree of accuracy what amount of funding we'llr receive each year. Ifsomeone doesn't pay their taxes the Town can place al lien against the property and eventually auction iti to a new owner who wants to  our Fund Balance (aka "emergency fund" or' "savings account").    renovate or build a house, start al business, etc. In this process we receive 100% of the back taxes while achieving the side benefit ofe ensuring all our property is actively used. Second, the UNC School of Government advises the practice oft transferring across funds can have negative financial consequences fort the Town, particularly as it relates to borrowing money. They advise that credit agencies are likely to look unfavorably on any practice that, and these are their words, "destabilizes at fund" or "masks a problem with the [Town's] financial condition." Imagine needing to borrow funds to make a major system repair, particularly aftera catastrophic event like a hurricane, and being told you can't because your utility "business" Third, there are grant implications to consider. The General Assembly passed legislation some years ago that automatically disqualifies towns from receiving water or wastewater grants if they transfer profits from those funds to their General Fund. While this rule does not yet apply to Electrical Fund transfers, you can imagine how al high profit margin would be a major negative  should already have enough money based on its profit margin.  when competing against other struggling towns for grant funding.  Hopefully these reasons make it clear why we need to make the change beyond just the equity argument. Ibelieve iti is essential to ensuring our government is stable, SUS-stainable, and governed lalso want to briefly share some things we learned as we researched property tax rate strategies during Property Tax Revenue is equal to Total Property" Value x1 the Tax Rate, soi if you know the amount you need to generate (in our case $2M fori the whole General Fund, of which $740K needs to come from property taxes) then you divide that by your Total Property' Value to get your rate. What this means is thei tax rate is directly determined by property values. Ifvalues go up, thei tax rate can go down. If As part of all our research we decided to pull the County's tax rates going all the way back to 1986. We found that over that time their rate has been as low as 41 cents and as high as 78 cents. Not surprisingly it was highest before Albemarle Plantation was built and it continued to fall as more high value houses and the wind farm were built over the last 20 years. However, it has increased twice since 2016. Conversely, according to Sperling's Best Places, which aggregates US Census data and hundreds of other public and private economic and demographic data sources, the median home value in Hertford has depreciated by 38.3% over the last 10 years while inflation over the same period is 26%. Assuming the budget is passed with the new proposed taxi rate we will have increased taxes by 38.3% (from 47 cents to 65 cents) since we took office in 2020. These increases are not indicative ofa a wasteful government, but rather a government fighting highi inflation and declining property values while still trying to keep So, what's the bottom line? We've made some difficult decisions during the last few budget cycles to put our house in order and position ourselves to recover from some hard times. Now we need to focus on growing our population and property tax base SO we can look ati freezing or perhaps even reducing taxes and utility rates in the years to come. This means taking tax and code enforcement seriously, increasing our housing stock, attracting new businesses and residents, and growing our tourism revenue  responsibly. this budget season.  values go down, tax rates HAVE to go up. To demonstrate this principle...  rates as low as possible.    tor reduce the burden on our full-time residents. llook forward to turning our attention more fully to Councilman Mimlitsch made a motion to approve the. Annual Budget for FY 2022-2023 as presented. Counciwoman Anderson seconded the motion and it passed  those items now that we have our financial house in order.  unanimously with the following voice vote: Councilwoman Brothers aye Councilman Mimlitsch Councilwoman Anderson aye Mayor Pro Tem Hodges aye  Mayor Brown  aye aye  NEW BUSINESS BUDGET AMENDMENTS  Manager Cole presented Budget Amendments 5 &6t to Council with the recommendation of transferring funds from the ElectriCities grant into Capital Improvements and miscellaneous police revenue into police operations. Mayor Brown made a motion to accept the amendments as presented and Councilwoman Brothers seconded the motion. The motion passed unanimously 5-0 with  the following voice vote: Mayor Brown  aye aye  Councilwoman Brothers aye Councilman Mimlitsch Councilwoman Anderson aye Mayor Pro Tem Hodges aye COUNCIL REPORTS/CONCERNS  Mayor Brown first thanked Mayor Pro Tem Hodges for the time he has put into getting our audio system hardwired at the community center. Ity was an extensive project to improve the sound system. She thanked Mayor Pro Tem Hodges for assisting with the budget. He participated in the analysis, research, and made recommendations to stabilize the town's financials and build the General Fund. Mayor Brown thanked all those involved in the budget process and commended them for having it completed and approved before June 30, 2022. She attended the Perquimans High School Commencement Ceremony on Friday, June 10, 2022. The graduating class has approximately $750,000 in accepted scholarships, and approximately $1.2 million in    scholarships have been offered. Mayor Brown addressed the potholes on the roads. Although the Streets Department is currently short staffed, they are working on the issue. Seeds of Success fundraiser held June 11 was a success. A schedule of Hertford events for July through December has been distributed to downtown businesses to post Councilwoman Brothers thanked all those who volunteered and participated in the successfui June 4, Community Cleanup Day. She also noted that Saturday, June 18th, is Hertford's Juneteenth Celebration. A Freedom March will start at the Colored Union Soldiers Monument at the corner of Hyde Park and King Street and will end at Central Park where there will be music, food trucks, vendors, and many activities. Councilwoman Brothers thanked Susan Cox of HHI for all her assistance. Councilwoman Anderson announced the success of the first Saturday Morning Live Flea Market. Sixteen vendors participated. She did acknowledge that public restrooms are a concern, and she will be looking into options. The next SML event will be June 25. Vendor applications are available online, at the Municipal Building, and Carolina Trophy. Councilman Mimlitsch stated that the first Friday Night Stroll was also a success. Many people attended and there were plenty of activities and some vendors. The kids could participate in face painting, street chalk, and the painting of the mural on Barrow Alley. Councilman Mimlitsch mentioned that public/temporary restrooms are an issue for this event as well. He congratulated Perquimans High School on their second consecutive State Championship for Varsity Boys Baseball. On a final note, Councilman Mimlitsch thanked the citizens of Hertford for their support during budget season, and recognized Manager Cole, Mayor Pro Tem Hodges, and Account Specialist Ashly Eure for their Mayor Pro Tem Hodges thanked Council members for the efforts they have put into the activities/events happening in Hertford. He has been working with Manager Cole on the budget and is now working with Manager Cole and Sharon Smith on an EDA grant. He Manager Cole announced that Municipal Offices will be closed Monday, June 20th, in  efforts in producing a financially sound budget.  congratulated the baseball team on their state championship.  observance of Juneteenth. ANNOUNCEMENTS None  Amotion was made by Councilwoman Brothers to adjourn the meeting and was seconded by Mayor Brown. The motion passed unanimously, 5-0, with the following  voice vote: Mayor Brown  aye  Councilwoman Brothers aye    Councilman Mimlitsch Councilwoman Anderson aye Mayor Pro Tem Hodges aye The meeting adjourned at 7:08 p.m.  aye    a 5  /  E  6  3  I  5  S 2  -  - 8  €    D  D  a  a  3 - E  3  -    @ S2 3  E  e a I  3 > o e b t 5 6  a  E  C  8 DE 0 la  E  E 3 S 8 a ) C  I  E  8 of B A  E  - e E  E  A 6 1  0 8 3  3 A 5 u =  0 C  C -     e  > 0 a  € D 0 C - €  e U B a la  S de 3  -  3  o L J E 5 0 E   - E a V LE E A  e B 6 U  a E L  B -  d0  S  la 3 S S S     3   o 00 ?  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