City Council Minutes Tuesday, May 13, 2025, at 2:00 p.m. Morehead City, North Carolina Budget Workshop Meeting #2 The Honorable Council of Morehead City met in Special Session on Tuesday, May 13, 2025, in the City Hall Council Chambers, 1100 Bridges Street, Morehead City, North Carolina to conduct Budget Workshop Meeting #2. The purpose of this meeting was to continue the discussion of the proposed FY 2025-2026 Budget. Those in attendance were: COUNCIL PRESENT: Mayor Gerald A. Jones, Jr.; Councilmembers Richard Abell, George Ballou, Lee Stiles, Bill Taylor, and Harvey Walker. STAFF PRESENT: City Manager Chris Turner, City Attorney Derek Taylor, Finance Director/Assistant City Manager Jewel Lasater, Public Services Director/Assistant City Manager Daniel Williams, Planning Director Sandi Watkins, Police Chief Bryan Dixon, Deputy Police Chief September Tuttle, Fire-EMS Chief Courtney Wade, Human Resources Director Kristen Flexer, Information Technology Director Matthew Goodwin, Parks and Recreation Director Jessica Mayo, Assistant Finance Director Leeann Vinson, Public Information Officer Anna Smith, Revenue Officer Tiffany Riggs, Purchasing Officer Sarah Currie, Economic Development Officer Kathryn Metts, Special Events Officer Victoria Veith, Grants Manager Kelli Jones, Parks and Recreation Administrative Support Manager Morgan Gilbert, Library Manager Danijela Mitchell, Deputy City Clerk Shawne Southard, and City Clerk Cathy Campbell. OTHERS PRESENT: Todd Wetherington of the Carteret County News-Times, Parks and Recreation Advisory Board Member Travis Adams, Opal Bostic, Ophelia Chambers, Vivian Collins, Paul Hamlin, Barbara Hill, Melissa Oden, William & Lela Faye Rich, Mark Suber, Garland Terry, Luther & Diana Tootle, Hannah Tootle, June Vann, James H. Walker, Sr., Paul Welser, Sarah West, and Jan Willis. CALL TO ORDER Mayor Jones opened Budget Workshop #2 at 2:01 p.m. with a quorum present. Seeing that a larger than normal crowd was present, the Council chose to allow public comments at the end of the meeting. BUDGET #1 REVIEW & JUSTIFICATION City Manager Chris Turner began with a review of the information provided during Budget Workshop #1 held on May 6, 2025. This included an overview of the budget stating that he cut the Department Head's requested budget by $2.92 million, reducing the tax rate from $0.41 to $0.39. The budget includes a 3.5% utility rate increase to maintain the enterprise fund. May 13, 2025, Morehead City Council Budget Meeting #2 1 Mr. Turner then presented information used in determining the need to add additional firefighters and policemen. A slide was displayed depicting the City's growth and the demand for service for both departments. Fire-EMS Department 427 Calls in April 2025 VS. 403 Calls in April 2024 Engine 1 Responded with less than 3 Firefighters 10 days in March 2025 Engine 1 Responded with less than 3 Firefighters 13 days in April 2025 The National Fire Protection Association (NFPA) recommends that no less than 3 firefighters respond per engine. Fire-EMS Overtime Budget is Exhausted Police Department 43,343 Calls for Service in 2024 50,844 Calls are Projected for 2025 2025 Calls to Date: January (4,051), February (3,914), March (4,847), & April (4,135) Police Overtime Budget is Exhausted Mr. Turner pointed out that the months of January March were historically considered the "shoulder season" when the City would recover and rest from the tourist season. The "shoulder season" no longer exists. The City is now busy year-round. In addition, Mr. Turner reported that in the calendar year 2024, Engine 1 responded with less than three (3) firefighters on 268 of the 365 days oft the year. Part-time PRN (as needed) staff were utilized 281 days of the year to maintain staffing levels. Station 3 was below five (5) personnel 131 days of the year, which is required to keep Medic -2 in service. Station 3 works below minimum staffing as a last resort when no other options are available to staff at the minimum of five (5) employees. As ofMay 5, 2025 (124 days), Engine 1 has responded with less than three (3) firefighters for 54 days and has utilized PRN staff on 88 days. Station 3 operated with less than five (5) personnel for 49 days to keep Medic-2 in service. NFPA Standard 1710 recommends that a minimum of 17 members respond to every fire consisting of a 2,000 square foot, single-family dwelling that does not have a basement or other exposures. The Department's analytics shows that March 2021 the Department responded on average with only 8.81 members due to EMS call volume. Staff explored other options for funding staff including a SAFER Grant; however, these grants only provide the funding for a set number of years after which the salary and benefits burden falls upon the City, causing the City to commit future funding for staff. In 2015, the City applied for a SAFER Grant to provide three (3) officers, but it was not awarded until 2017. One ofthese was furloughed in 2020 and the City resumed the burden oft the other two (2). CITY GROWTH SNAPSHOT Mr. Turner reported that 540 additional residential units plus The Embassy at Morehead, an assisted living facility that can house up to 92 residents, will be ready for occupation within the next few months. In addition, the Spooners Cove development consisting of 82 residential units May 13, 2025, Morehead City Council Budget Meeting #2 2 and a commercial facility, and the Towns at Spooners Creek consisting of 118 residential units are in the planning stages to be realized within the next year or two (2). In addition to residents, the City provides services daily for those traveling into the city for work, shopping, and/or vacation. It was stated that Interstate 42 may be coming, but the traffic is already here, adding an increased burden upon Police, Fire-EMS, and Public Services. North Carolina Department of Transportation (NCDOT) trip-counts show that on average 33,966 vehicles travel through the Highway 70/24 intersection. This is becoming very close to the 38,931 that travel the James City corridor, the primary route from the Triangle to the coast, daily. BUDGET COSTS Mr. Turner presented a chart comparing the 2024 tax rate to the proposed 2025 tax rate upon his personal property. It showed that his property, valued at $311,000 in 2024, increased by 40.2% as a result of the revaluation to $520,234. As a result, the tax bill increased from $2,488, for both county and city taxes, to $3,797; an increase of$1,329 or $3.64 more per day. Mr. Turner advised that the increase in homeowners insurance premiums based on increased property values will have a greater impact on property owners. He stated that Morehead City is the "queen" of Carteret County, and everyone travels to the City for work, shopping, entertainment, etc. and everyone traveling into the City must be served. BUDGET QUESTIONS/DISCUSSION Mr. Turner presented the budget questions received thus far and the responses that were provided. 1. How many pennies can be removed from the tax rate if the Recreation Multi-Use renovation is not done. Removing the above could reduce the tax rate to $0.3825 2. Is the $4.9 million for the Municipal Campus Expansion not included in the budget for FY2025-2026? This construction is projected to be financed, not paidfor with City, funds in one annual cycle. The only burden is the cost offinancing. Removing the above could reduce the tax rate to $0.3875. 3. When is the last time the City added a Police Officer to their full-time employment (FTE) roster? FY22 - one (1) officer was added bringing them to 46 FTE Similarly. for Fire - In FY22, one (1), firefighter was added bringing them to 51 FTE Mayor Jones then asked the City Council if they had any additional questions. Councilmember Ballou asked for confirmation that six (6) of the 12 twelve cents requested above revenue neutral ($0.27) is to make up for the six (6) cents that were needed last year to fund the employee salary compensation adjustment but was not requested in anticipation May 13, 2025, Morehead City Council Budget Meeting #2 3 of the revaluation. At a value of $373,000 per penny, $2.25 million is needed to make up from last year's shortage, and the City starts even at $0.33. Mr. Iurner confirmed this is correct. Councilmember Ballou asked when was the last time that these departments were fully staffed. No one on staff could remember a time when these departments were fully staffed. Mr. Turner clarified that the Police and Fire are fully staffed at minimum staffing, but they are not meeting standards Councilmember Ballou then asked about how much the City has invested in the new salary and when was the salary adjustment approved. Finance Director/Assistant City Manager Jewel Lasater responded saying that it was adopted in March 2025 prior to budget adoption. $1.45 million of the General Fund was committed in the FY2024-2025 budget. Some discussion followed regarding the calculations and how they cross different budget cycles at different rates. Clarifying that Councilmember Ballou was trying to determine the true value of what had been invested in the salary adjustment, Ms. Lasater explained that the adjustment would have required six (6) cents in FY2024-25, therefore she went back and calculated three (3) cents at the current year's rate to determine the true revenue neutral rate, and it is almost $0.32. She then added in the proposed salary additions at the proposed rate which came to $0.027 plus the benefits at $0.015 and the reserve for debt service which is a little over one (1) cent which results in a total of almost $0.355. Then she added another half cent for other operating costs, reducing that by all the other changes that do not include ad valorum taxes for a final result of $0.389. Ms. Lasater stated that the total cost of the salary adjustment was nine (9) cents; $1.45 million was paid in FY2024-2025 and $1.8 million is due to be paid FY2025-2026. Councilmember Taylor stated that the six (6) cents was payroll; however, the benefit pay must be considered as well. One of the benefits is the City's Wellness Plan, which provides a discount on insurance rates when employees participate. The cost of the employee insurance to the City is $240,000. This is both a recruitment and retention tool. He likened the revenue neutral rate to a ship which would allow the ship to float with some routine services, but it does not allow the ship to move forward and will cause it to begin drifting backwards. The proposed tax rate will allow the City to address growth and meet the commitments that were made in past years. He pointed out that the Council makes decisions years in advance. Mayor Jones reiterated that the funds committed to the salary adjustment bring the true revenue neutral rate to $0.33, and asked Mr. Turner to share what the additional six (6) cents is proposed to provide. Mr. Turner listed the following 3% COLA (cost ofliving adjustment) - valued at $540,000 or $0.125 Up to a 5% longevity payout for qualified full-time employees (replacing Merit Pay = pay for performance) = valued at $466,000 or $0.075. The combined cost ofCOLA and Longevity is about two (2) cents. Continuation of current employee benefits Addition ofthe following positions: O Reclassification of a part-time Human Resources Technician to full-time O Reclassification of 2 part-time Police positions to 1 full-time Police Records Specialist O 3 Police Officers (requested 6) May 13, 2025, Morehead City Council Budget Meeting #2 4 Building Inspector II 3 Firefighter/Paramedics (requested 11) ) IT System & Security Analyst ) Part-time IT Support Technician Water Plant Operator Mr. Turner stated that both the Police Department and Fire-EMS Department have been asked to wait on new employees for the last three (3) years. He also pointed out that any reduction to the proposed budget must be taken from operational costs. In an attempt to show that the costs would offset each other or possibly reduce expenses, Councilmember Taylor asked how much was budgeted in overtime for FY2024-2025 and how much is proposed for FY2025-2026. Mr. Turner explained that overtime is calculated at time and a half. Ms. Lasater stated that Fire - EMS is projected to end FY24-25 with $380,000 in overtime; $382,000 is budgeted for FY25-26. Hearing that Councilmember Taylor would expect the overtime to decrease with the addition of three (3) firefighters, Ms. Lasater explained that this will only provide one additional tirefighter per shift. It will not eliminate all the other overtime requirements. Mr. Turner said that he could begin to cover this expenditure by eliminating the $83,334.47 spent on salaries and services in support ofthe Seafood Festival. The overtime for the Seafood Festival alone is 1,148 hours. Another $65,000 is spent annually in support of Downtown Morehead City plus the cost of all other special events that are held in the City each year. Councilmember Taylor asked how much of an insurance reduction would be realized from an ISO 1 Rating. Mr. Turner stated that the reduction is not solely dependent upon the ISO rating but that other factors are considered as well such as your home's proximity to a fire hydrant and/or fire station. Each insurance underwriter determines the deduction for its customers; therefore, a dollar-for-dollar savings will not be realized. Councimember Taylor stated that the decision to add additional firemen and policemen will be based solely on public safety. Councilmember Stiles asked when SAFER Grants apply. Mr. Turner said the application period is typically at the beginning of the calendar year, but there is no guarantee of when it will be awarded. The City applied for a SAFER Grant in 2015, but it was not awarded until 2017. It was explained that the officers cannot be hired in advance of the award hoping for reimbursement, because the award cannot be applied to current staff. Therefore, the City would have to hold off on the hiring or hire additional staff when the grant is awarded. Fire-EMS Chief Courtney Wade confirmed that the SAFER Grants are similar as they pay 75% of the salary for the first two (2) years and 35% in the third year, and the City had to commit to take responsibility for the officer's salary after the third year. Police Chief Bryan Dixon confirmed that the Community Oriented Policing Services (COPS) grants are similar offering 75% the first two years and 25% the third year. Mayor Jones asked for confirmation ofthe value of one penny. Mr. Turner confirmed that it is $373,000 for FY2025-2026. Councilmember Walker stated that the City is doing a good job of carrying out its duties and the Council is committed to the employees, but given the revaluation, the City needs to consider the impact it has on the citizens. Staff need to work smarter, not harder and to think ofa May 13, 2025, Morehead City Council Budget Meeting #2 5 way to save money rather than spending money to provide relief to the citizens. The City does not need to purchase vehicles it may need in the future. He suggested cutting programs that do not benefit the citizens, and that employees should pay the City back by working longer and driving older cars. Mr. Turner responded by pointing out that Staff is proposing to surplus 23 vehicles with the oldest being 2005 and the newest being 2017. He noted that replacing older vehicles also saves on maintenance costs. Regarding programs, he reiterated again that the City has been tracking and alerting the Council to the cost of supporting the Seafood Festival for the last five (5) years. This is the last special event that is not self-funding. Ms. Lasater advised that a tax rate of $0.33 would allow the City to operate the same as today but it would not be able to meet increased vendor fees or increased costs for supplies such as the salt for water treatment. Mr. Turner noted that the City has no control over vendor costs, and the City revenues have not kept up with the Consumer Price Index (CPI)inflation over the years. Councilmember Taylor noted that ofthe $30 million budget, two-thirds (2/3) are obligated to salaries and benefits, and one-third (1/3) is for operational costs, and he advised that this is where savings must come from. Such funds are not used to fund capital improvements but rather any savings realized during the year are added back to the general fund for investing. Considering a new capital improvement project such as a new building, only the engineering and planning expenses are paid from operating costs. PUBLIC COMMENTS Paul Hamlin, 5011 Bogue Avenue: Mr. Hamlin advised that he is a certified public accountant who worked as the Assistant Finance Director for the City of Charlotte and as a government auditor who previously audited Carteret County and Morehead City's financial records. He stated that he has reviewed the budget document and stated that a 44% increase is a difficult pill for the citizens to swallow. He asked two (2) questions that he asked the Manager to address with the Council: 1) What is the 6% number that keeps being mentioned?, and 2) How does the City suddenly have a 6% increase in revenue when there is enough revenue to fund the $1.4 million salary balance? Addressing Councilmember Taylor's previous comment, he stated that the example is a budgeted capital outlay item supported by overall revenue sources; it is not earmarked for property tax or sales tax. Part of the budget includes spending almost $2 million of the Fund Balance, which reduces the Fund Balance by 10% from the previous year, which should raise concern for the Finance Officer. Luther Tootle, 2532 Mayberry Loop Road: Mr. Tootle expressed concern over the revaluation, which caused his property value to double, and raises the question of what has changed that would cause the property value to double in one (1): year. It was his opinion that the tax rate should be set on the old evaluation because the proposed tax rate is too high for the current evaluation. Dale Rich, 5103 Holly Lane: Mr. Rich stated that he has lived in Morehead City since 1939, and the revaluation increased his property value by 125%. This increase is terrible for citizens on fixed incomes. He is concerned about the economic future of the city, Carteret County, and the eastern region of the country. No one knows the future and that is why fixed numbers raise concern. May 13, 2025, Morehead City Council Budget Meeting #2 6 James Walker, 1503 Bay Street: Mr. Walker asked the City Council to find out what company conducted the revaluation and who authorized the selection of the company, because it appears that the same algorithm was used from the coast to the mountains. Mayor Jones advised that Carteret County selects the firm. Sarah West 601 Bridges Street: Ms. West stated that the revaluation performed by the county is a bell that cannot be unrung. She thanked the Council for carefully considering the City's tax rate and for allowing the public to provide comment, and thanked Councilmember Walker for encouraging cuts and Councilmember Ballou for insisting on an explanation of what the City is gaining from the additional six (6) cents. She encouraged everyone to review the budget document which she said was very informative and well organized. Paul Welser, 1806 Fisher Street: Mr. Welser stated that he understands how evaluations work and he wants the City to improve; however, he originally purchased his home on the wrong side of the tracks, which is no longer the case. His property value increased by 229%. A tax rate of $0.41 will cause his taxes to increase by 120%. His primary concern is that with the revaluation, insurance rates will also increase during a questionable economy. It was his opinion that this may not be the right year to raise taxes and asked the Council to practice a little austerity for one (1) year, giving citizens an opportunity to absorb the shock. Ophelia Chambers, 1310 Bridges Street: Ms. Chambers also asked about who performed the revaluation. She noted that she also owns the property at 1312 Bridges Street. She purchased that property in 1989 for $12,000. It is now valued at $212,00 with no mprovements and without occupation. At the same time, her home increased from $150,000 to $300,000. She asked who she could contact for another reassessment. Mr. Turner stated that Vincent Valuations conducted the assessment. NC Law requires that revaluations be done at least every eight (8) years, and Carteret County has chosen to conduct them every four (4) years. The counties choose the term and the firm. The period for equalization and review (appeals) has closed for this year, but she will have the opportunity again next year to file an appeal. He advised that the term was advertised, and information was mailed to each property owner. He also shared that information was released offering opportunities for citizen relief and he would make sure she received a copy tonight. Lela Faye Rich, 5103 Holly Lane: Ms. Rich shared that she had spoken with the County regarding relief, but she did not qualify because the income threshold is very low. She said it is becoming very difficult for long-term residents to keep homes since outsiders are moving in who are willing and able to pay outrageous prices. Jan Willis, 4915 Holly Lane: Ms. Willis stated that her property value increased 118%. At this value, the tax rate would have to be set at $0.19 for her taxes to remain the same. She asked the two (2) councilmembers who oWn property in the city and pay taxes, how much their taxes would increase, and asked the three (3) members that she did not believe owned property in the city, if their taxes would be zero. Councilmember Taylor stated that his property value increased from $447,000 to $973,000, and his taxes will double from about $2,500 to $5,000. He suggested that the best measure of whether they might win an appeal would be to look at the County's Geographic Information System GIS map to see if your neighbors' property is similar in value. May 13, 2025, Morehead City Council Budget Meeting #2 7 The City Council took afve (5) minute recess at 3:39 p.m. and reconvened 3:48 p.m. COUNCIL DIRECTION Mayor Jones asked the Council to provide the City Manager with directions of how they would like him to move forward. Councilmember Ballou recommended that all new positions be delayed one (1) year as well as the COLA and Longevity pay. Councilmember Taylor was not in favor of eliminating the COLA or merit/longevity. Suspensions have a way of getting extended; the last time the water and sewer rates were suspended during COVID, it lasted four (4) years which set the City further behind. He recommended that Staff debate the merit and longevity before making a change. Councilmember Ballou asked for clarification of the Municipal Campus project and Grander project. Mr. Turner stated that he is not free to discuss the Grander project at this time. The Municipal Campus has been discussed multiple times in the Finance & Administration Committee meetings. The Municipal Campus will expand the City Hall building westward to house the Library on the first floor and Water & Sewer on the second floor with $4.9 million is the projected cost for future financing. Public Services Director/Assistant City Manager Daniel Williams stated that the potential for this growth has been discussed since the City Hall building project began and the property was prepared for the expansion as the current building was built. It was explained that the projects that have amounts printed in blue text are either unfunded or only partially funded as noted in the budget document. Amounts in black print are funded, and some of these have offsetting funding which can be found on Schedule 8. Looking at the Municipal Campus project, Schedule 8 shows that 50% will be financed and 50% is projected to come from the Water & Sewer Fund. Councilmember Stiles was favorable for including the new positions and the W.S. King Recreation Center Renovation project at $6.5 million stating that too much time and expense has been put into the project to stop now. It was noted that the price could rise as high as $7.2 million by the time the job is bid due to resent tariffs on supplies. Councilmember Taylor recommended strongly, the Parks and Recreation Master Plan be updated and the citizens be asked about what they want before moving forward with the W.S. King Recreation Center Renovation project. Councilmember Taylor also suggested that the Mansfield Park property be sold since the surrounding neighborhood does not want new amenities or bathrooms added. Mayor Jones pointed out that it will take years to bring the W.S. King project to fruition because the job still must be bid and financing must be approved by the Local Government Commission. Councilmember Taylor then pointed out how some of the positions being recommended have offsetting funding, such as the two (2) IT positions that will be offset by a reduction in VC3 contracted service costs. The Building Inspector position is also offset by permitting fees and the Water Plant Operator is offset by Water and Sewer Enterprise Fund. Mr. l'urner reviewed the Council directions as he understood them. May 13, 2025, Morehead City Council Budget Meeting #2 8 Councilmember Ballou wants a tax rate of $0.35, continuing the salary adjustment but forgoing all new positions for one year. He did not have a recommendation at this time regarding COLA or merit/longevity. Councilmember Walker wants a tax rate of $0.33 to include the W.S. King Recreation Center Renovation project and forgoing all new positions, COLA, and merit/longevity for one (1) year. Councilmember Stiles wants the tax rate of $0.375 to include all new positions and the W.S. King Recreation Center Renovation project at $6.5 million but forgoing the COLA and Longevity. Councilmember Taylor was in favor of funding the salary adjustment, COLA and merit VS. longevity, but forgoing all new full-times positions for one (1) year that are not funded through other sources such as the IT, Water Plant Operator, and Building Inspector positions. Councilmember Abell was in favor of funding all new positions, COLA, and merit or longevity. Further discussion about the proposed positions, focused on the Police and Fire-EMS positions balanced against the need to control overtime costs. Mr. Turner explained that Staff will do their best to minimize overtime costs; however, the demand for special events such as the Seafood Festival cannot be controlled. Councilmember Ballou stated that if the City starts charging the Seafood Festival for the services provided, the Festival will cease to exist. Councilmember Taylor stated that supporting these special events provides additional support for adding the Police and Fire-EMS full-time positions. Mayor Jones was pleased with the discussion, offering another point for consideration; adding new capital assets such as the W. S. King Renovation project and the City Hall Annex project will increase operating expenses today and in the future to include insurance, overhead, and more employees. Mr. Turner thought that $0.37 was achievable at first glance. Responding to a question, he stated that revenue neutral is $0.2719; the difference between $0.37 and revenue neutral is $0.0989. ADJOURNMENT There being no other business to discuss, Mayor Jones adjournedthe meeting at 4:30 p.m. EAD CITY GeraldA A, Jones, Jf., Mayor Attest: lduy Campat Cathy Campbell, City Clerk NC. 1858 May 13, 2025, Morehead City Council Budget Meeting #2 9