ALLEGHANY COUNTY

County Manager’s Fiscal Year
2007-2008

Budget Message

June 4, 2007

Alleghany County Commissioners,

I
am pleased to present to you the recommended 2007-08 Annual Budget for Alleghany County in the amount of $14,545,585. This
recommendation constitutes an approximate increase of 3.1 % ($438,089) over the
FY 06-07 original budget of $14,107,496. This recommendation also constitutes
an approximate -1.9% (-$280,949) decrease under the FY 06-07 amended budget of
$14,826,534. The budget is balanced and prepared in accordance with the Local
Government Budget and Fiscal Control Act, presenting revenues by source and
appropriations by categories of expense for each department. All
recommendations within this document are based upon the County Commissioner’s
direction to me to produce a revenue neutral tax rate.

REVENUE HIGHLIGHTS

Counties
rely on many revenue sources to fund their initiatives. Alleghany County’s
main revenue categories are ad valorem taxes, grants & reimbursements,
sales & other taxes, service fees, miscellaneous and general fund balance
appropriation. The County
Commissioners have direct
control over ad valorem taxes and some service fees while economic conditions
and local/state initiatives determine the other revenues. The following pie
chart illustrates Alleghany
County’s proposed
Revenues By Source.

.

AD VALOREM TAXES

The
taxable base is projected to be $1,754,627,750. Due to revaluation, this is an
overall increase of $695,488,750 or 65.67% over the FY 06-07 estimated base of
$1,059,139,000.  It is recommended
that a 96% collection rate be applied when estimating property tax revenues.
The following graph illustrates that Alleghany
County’s collection
rates are consistently around 96%. The graph also shows Alleghany County’s
collection rates in comparison to the average collection rates throughout the
State.

Approximately
51% ($7,418,604) of the County’s budget is proposed to be funded by the property
tax. The proposed $7,418,604 is comprised of $7,243,104 from FY 07-08 property
taxes, $130,000 from prior year taxes and $45,500 from penalties/interests on
late payments.

As
instructed by the County
Commissioners, the FY
07-08 Budget has been prepared by utilizing a revenue neutral tax rate. The FY
07-08 Revenue Neutral Tax Rate is $0.43 per $100 value. Attachment A describes in detail how the revenue neutral rate was
determined.

GRANTS AND REIMBURSEMENTS

Grants and reimbursements account for approximately 18.6%
($2,707,475) of the County’s proposed revenues. Ongoing grant highlights
include $89,822 (85% of costs) for the administration of the Transportation
System, $59,994 for the Juvenile Crime Prevention Council, $44,159 for the Criminal
Justice Partnership Program and $4,415 in PARTF funds for the pool renovation.
This category also includes revenue items such as reimbursements for Social
Services, Veteran’s Administration, Emergency Management, Soil &
Water, Council on Aging, NW Library, Sparta School, bus garage, Roaring Gap
deputies, dispatch salary, pin equipment, local prisoner medical expenses, loan
proceeds from the FY 05-06 & 06-07 Capital Loans and all transfers from
other funds.

SALES & OTHER TAXES

Sales
and other taxes account for approximately 18.1% ($2,628,478) of the
County’s proposed revenues. Alleghany
County receives tax
revenues from the occupancy tax, the beer/wine tax, the ABC liquor tax, cable
franchise tax, sales tax refunds and sales taxes Article 39 (1 cent), Article
40 (1/2 cent), Article 42 (1/2 cent) and Article 44 (1/2 cent).

The
occupancy tax, beer/wine tax and ABC liquor tax will remain level. The sales
tax refund will come from refunds from the QZAB loan expenses. The cable
franchise tax will reduce to $10,000.

The
Article 39 sales tax revenue is determined by the amount of sales generated
directly in Alleghany
County. Alleghany County
will see a projected 7% increase in this tax from FY 05-06 to FY 06-07.  I recommend that $785,821 (3% increase
over FY 06-07 projections) be budgeted in Article 39 revenues for FY 07-08.
Articles 40 and 42 are distributed among the Counties according to population.
It is projected that Alleghany
County will receive an
additional 13% increase in these taxes from FY 05-06 to FY 06-07. The
recommended revenue for Articles 40 and 42 is $1,263,914 (3% increase over FY
06-07 projections). The Article 44 sales tax is ½ determined by the
amount of sales generated directly in Alleghany County
and ½ distributed among Counties according to population. It is
projected that Alleghany
County will receive an
additional 9% increase in this tax from FY 05-06 to FY 06-07. I recommend that
$445,343 (3% increase over FY 06-07 projections) be budgeted in this revenue
line item.

SERVICE FEES

Service
fees account for approximately 9.3% ($1,356,345) of the County’s proposed
revenues. This category includes line items such as sod seeder, deed stamps,
ROD fees, marriage licenses, building inspections, fire inspections, Emergency
Medical Services (EMS), pistol permits, concealed weapons, Sheriff service,
boarding of prisoners, office of the courts, CSC fees and recreational related
activities.

All
service fee revenues will remain relatively constant except for Emergency
Medical Services Revenues, the Register of Deeds Fees / Deed Stamps and
Boarding of Federal Prisoners.

Due
to Medicare reimbursement issues, it is projected that EMS
revenues will have a shortfall of $42,500 in FY 06-07. Until these issues are
corrected, I recommend budgeting $300,000 for FY 07-08. This revenue could
potentially increase by $42,500.

Due
to the increase in real land value and the number of real property sales, the
Register of Deed’s revenues are projected to climb to $349,250 (Stamps,
Fees, and Marriage Licenses).

The
biggest increase to service fees is due to the boarding of Federal inmates in
the Alleghany Law Enforcement
Center. This revenue line
item has increased to $456,000.

MISCELLANEOUS

Miscellaneous revenues account for approximately 2.5% ($358,727)
of the County’s proposed revenues. These revenues include interest earned
on investments, lottery proceeds, CSC fines and forts, miscellaneous revenues,
snack revenues and the kids vote program.

GENERAL FUND BALANCE APPROPRIATION

Fund
balance appropriation accounts for approximately 0.5% ($75,956) of the proposed
revenues.

EXPENDITURES

The
FY 07-08 recommended budget is $14,545,585. This recommendation constitutes an
approximate increase of 3.1 % ($438,089) over the FY 06-07 original budget of
$14,107,496. This recommendation also constitutes an approximate -1.9%
(-$280,949) decrease under the FY 06-07 amended budget of $14,826,534.  The following pie charts illustrate Alleghany County’s “Total Expenditures
By Function” and “Property Tax, Sales Tax and Undesignated Revenues
Expended By Function”.

Total
Expenditures By Function

Property Tax,
Sales Tax, Undesignated Revenues Expended By Function

The “Property Tax, Sales Tax, Undesignated Revenues
Expended By Function” chart is derived from the “Total Expenditures
By Function” chart by removing the grants, reimbursements and other
revenues from the corresponding expenditures. This portrays an accurate example
of where the County’s property tax, sales tax and undesignated revenue
dollars are actually being expended.

CATEGORICAL
OVERVIEW

PERSONNEL

In
order to avoid County salaries from falling behind, I am recommending that the
Board give a cost of living raise of at least 2% to every County position at a
cost of approximately $63,000.

There
were several requests this year for new and/or modified positions to be added
to the budget. The requests and recommendations are as follows:

Sheriff’s Department

The
Sheriff is requesting three new deputies at a starting salary of $25,121 (Grade
62). Each position will cost the County $36,431 when adding items such as FICA,
retirement, holiday pay and health insurance. Total cost of the request equals
$109,023. I have recommended that two of these positions be filled at a cost of
$72,862.

The
Sheriff has requested that a current Investigator be promoted to Lieutenant
(Grade 64 to Grade 66), a current Deputy be promoted to Sergeant (Grade 62 to
64) and a current Deputy be promoted to Investigator (Grade 62 to 64). These
promotions will cost the County $9,997. Since these positions do exist within Alleghany County’s current pay plan and are
not filled, I am recommending that these promotions be funded.

Jail

The
Sheriff has requested that the Jailers receive a 10% raise above the 2% cost of
living adjustment at an additional cost of $31,518. I cannot recommend
additional raises for any one department without evaluating all departments.

Cooperative Extension

Cooperative
Extension has requested that Alleghany
County fund 12.5%
($4,804) of an Agricultural Technician. This is an existing position funded by
grants that expire June 30,
2007. The position’s primary focus is to assist Christmas
tree growers in Alleghany, Ashe and Watauga
Counties. I am
recommending that this position be funded.

Soil & Water
Conservation

The
Soil & Water Department is requesting a new “District
Technician” position to be funded at a Grade 63 with a starting salary of
$26,376. Total cost for this new position is $37,049 when adding items such as
FICA, retirement and health insurance. I am not recommending that this position
be funded at this time.

Board of Elections

The
Board of Elections is requesting that their 75% Administrative Assistant
position become 100% and to be reclassified from Grade 57 ($14,762 – 75%)
to a Grade 59 ($21,700 – 100%). This re-classification will cost the
County an additional $9,278 when adding items such as FICA, retirement and
health insurance. The Board of Elections is also requesting an additional 4%
raise for the Director at a cost of $1,349. I am not recommending these
requests to be funded at this time.

Tax Office

In
2004, the Alleghany Board of Commissioners allowed the Tax Office to hire a 30
month temporary full-time Administrative Assistant at Grade 57 to assist with
the revaluation process. The 30 month term expires June 30, 2007. The Tax Office is
requesting that this position remain as permanent. The permanent salary of an
Administrative Assistant at Grade 57 is $19,682.

The
total cost for this position is $28,029 when adding items such as FICA,
retirement and health insurance. I am recommending that this position remain
permanent. This recommendation is mainly due to the residential growth that is
occurring. This growth has created a greater demand on the County’s
appraisal department.

Building Inspections

The
Building Inspections Department has requested that the Administrative Assistant
position be re-classified from a Grade 57 ($19,682) to a Grade 61 ($23,924).
This re-classification will cost the County an additional $4,776 (includes
retirement and FICA). I am not recommending that this position be re-classified
at this time.

This
Department is also requesting a new inspector’s position to be funded at
a Grade 64 with a starting salary of $27,695. Total cost for this new position
is $37,048 when adding items such as FICA, retirement and health insurance. Due
to the increase in development, the fact that the Chief Building Inspector will
retire in 8 years and that it takes several years to train a new inspector, I
believe that this position is warranted in the near future. Although I am not
recommending this position at this time, I believe the County will need to hire
an additional inspector in the next couple of years.

If
the Board is going to consider funding these requests, the Inspections
Department has recommended an increase in inspection fees to offset some of the
additional expenses. The fee increases would create an additional $17,311 in
revenues. These proposed increases will be discussed during the budget
hearings.

Planning / Recreation
Department

The
Planning / Recreation Department has requested a new “Code Enforcement
Officer/Asst. Recreation Director” position to be funded at Grade 64 with
a starting salary of $27,695. Total cost for this new position is $37,048 when
adding items such as FICA, retirement and health insurance. This Department
definitely has a need for additional help.

In
2004, the Recreation Commission requested that Alleghany County
take over their recreational programs due to dwindling volunteer labor. Alleghany County began running recreation programs
in FY 04-05. The County’s recreation responsibilities have grown since FY
04-05. The County began a large soccer program and has taken over the little
league basketball program. County recreation also handles registration for the
Seratoma Football league.

Planning
responsibilities have also grown since FY 04-05.  These new responsibilities include the
enforcement of two new zoning ordinances and working with a new Planning Board.
The new Planning Board has been charged with reviewing and recommending any
changes to all of Alleghany
County’s land use
ordinances. The Planning Board will need staff support to accomplish these goals.

Two
employees can no longer handle the above responsibilities. I am recommending
that Alleghany County fund the new “Code
Enforcement Officer / Asst. Recreation Director” position.

INSURANCE / RETIREMENT

Alleghany
County participates in
the NC Association of County Commissioners’ Liability and Property,
Workers’ Compensation and Group Benefits insurance pools. The County is
receiving an 11% ($48.22 per employee) increase in health insurance rates for
FY 07-08. The County is receiving a -3.7% (-$4,342) decrease in worker’s
compensation insurance. The County’s property/liability insurance has
decreased by -9.1% (-$8,928). The County will receive an additional discount of
$4,896 for participating in all three insurance pools. The County will match general
employee retirement at 4.93% and law enforcement retirement at 4.86%.

CAPITAL

The
following table exhibits the recommended General Fund capital items:

Department

Description

Amount

Finance

Solid
Waste Program
$500

$     500

Tax
Office

2 Printers
$1,000

$  1,000

Public
Buildings

15% of Sewer Camera
$1,000

$  1,000

Sheriff

New
Vehicle:                                $29,000

Sheriff Pak
Software
$  1,000

$30,000

Dispatch

10
Radios
$7,815

$  7,815

Jail

4
Security Cameras
$5,000

$  5,000

EMS

Ambulance:
$68,830

2 Hydraulic
Stretchers
$19,885

Impact Suction Unit
$    600

$89,315

Cooperative
Extension

Projector
$    899

$     899

Social
Services

2
Computers:
$2,600

$  2,600

TOTAL

$138,129

Alleghany County has $2,496 leftover from the FY 05-06 capital loan and
$11,208 leftover from the FY 06/07 capital loan for a total of $13,704
available to be used for capital. I recommend that these loans be used to
partially offset the proposed $138,129 in capital expenses.

CAPITAL IMPROVEMENTS

Alleghany
County has many necessary
capital improvements recommended to be addressed in FY 07-08. The following
table exhibits the recommended General Fund capital improvements.

Location

Description

Amount

Duncan
Recreation Center

Pool Renovation Completion

$8,830

Cooperative Extension

Carpet Offices
(155 sq. ft.)

$1,923

Law
Enforcement Center

Finish old magistrate office

$2,500

Council on Aging

Paint Exterior Doors, Windows

&
Railings:
$  3,250

Gutter Repair :
$    380

Paint Interior (supplies only) :      $    500

Floor Tile (1,528 sq. ft.) :
$4,524

Drop Ceiling:
$5,500

Lighting for Drop Ceiling:           $   889

Furnace:
$2,700

$17,743

TOTAL

$30,996

DEBT SERVICE

The proposed FY 07-08 Debt Service Budget is $1,539,842. A
$100,000 debt payment has been moved to this budget for the Hospital physician
recruitment loan. A $146,000 debt payment has been added to this budget in
anticipation that the Alleghany County Board of Education will qualify for the
$2,000,000 no interest QZAB loan.

ALLEGHANY COUNTY
BOARD OF EDUCATION

Current Expense

The
Alleghany Board of Education’s funding is recommended to increase by
$210,506 or 9.94%. This increase is enough to fund the Board of
Education’s uncontrollable costs such as insurance, utilities, fuel and
maintenance increases.

The
9.94% increase will also enable the Board of Education to give a 5% pay
increase to instructional personnel that are paid for by County funds and
Federal funds (this is to match anticipated increases to State supported
instructional personnel). The 5% pay increase to instructional personnel that
are paid for by County funds and Federal funds totals approximately $41,093.
The 9.94% increase enables the Board of Education to give a 3% pay increase to
all other support personnel (clerical, maintenance, bus drivers). The 3% pay
increase to support personnel totals approximately $4,268. If pay increases are
held at 2% to match other County pay increases, then an additional $45,361
could be removed from this recommendation. The Board of Education does not give
varying raises to instructional personnel, irregardless of their funding
source. If the State gives a 5% raise to State supported instructional
personnel, then the Board of Education must find the additional $41,093 from
somewhere.

Capital – School
Capital Reserve Fund

State
law requires that 30% of the Article 40 ½ cent sales tax and 60% of the
Article 42 ½ cent sales tax go to schools for capital. In FY 06-07, it was
estimated that the schools mandated portion would be $502,001. Due to unmet
needs, the County
Commissioners decided to
give the schools an additional $60,000 above their mandated amount. $562,001 is
budgeted to be transferred into the School Capital Reserve fund this year. It
has been estimated that the mandated amount to the schools will actually be
$551,717 instead of $502,001. Since $562,001 is currently budgeted, then the
revised revenue projections mean that there will be only a $10,284 impact to the
general fund versus the planned $60,000. This will result is a $49,716 savings
to the general fund. It is my understanding that the Board of Education plans
on asking for these funds.

I
recommend that the Board of Education receive an additional $568,269 out of the
General Fund for capital needs. The $568,269 is the mandated amount required to
be given to the school that is derived from Articles 40 (30%) and 42 (60%)
sales taxes. The $568,269 is transferred to the School Capital Reserve Fund.
This is a separately maintained fund. It is estimated that this fund will
accumulate an additional $8,000 in interest for a total of $576,269 in new
funds. If the application is approved by the granting agency, the Board of
Education will also receive an additional $2,000,000 for capital needs through
a QZAB loan.

SPECIAL
APPROPRIATIONS

There
are several agencies that operate under the special appropriations category
that have requested and need additional revenues. Some of these agencies are
NorthWestern Regional Library, Appalachian District Health, New River
Behavioral Health, Alleghany County Council on Aging, Alleghany County Chamber
of Commerce, all Fire Departments, North Carolina Forestry Service and the
Alleghany County Rescue Squad. Although this does not meet the needs of all of
these agencies, I have recommended a 3% across the board increase to these
agencies to help cover cost of living raises, insurance increases, utility
increases and fuel increases.

I
am recommending that two agencies receive more that a 3% increase. These
agencies are Alleghany Connections and Wilkes Community College.
It is proposed that Alleghany Connections receive an additional $409 (33%) to
cover costs associated with general and professional liability insurance. It is
proposed that Wilkes
Community College receive
an additional $7,119 (9.2%) mainly due to increased maintenance, janitorial and
utility costs.

There
is $5,000 budgeted to be transferred to the Wilkes
Community College / BDC Building
fund. These funds were received from the Blue Ridge Resource Conservation &
Development Council to build a trail between Wilkes
Community College and Alleghany High School.

The
following funded agencies/categories under special appropriations either did
not ask for an increase or their amounts are pre-determined. These
agencies/categories include Capital Loan 05-06, Capital Loan 06-07, BROC, Arts
Council, Re-Evaluation Fund, Fire Commission, Planning Committee, CJPP,
Fireworks, Pesticide Recycling, JCPC, Occupancy Tax, CSC Fines and Forts,
Wellness Center, Deed Stamps, ROD Enhancement Fund, Wilkes Center for the Deaf,
Senior Services and Alleghany County Group Homes.

The
proposed budget maintains the Health Advisory Council and Red Cross at FY 06-07
funding levels.

SPECIAL FUND HIGHLIGHTS

NOTE:            These funds are separate operating entities
from the general fund budget. There are additional personnel and capital
recommendations in the following summaries.

TRANSFER FACILITY ENTERPRISE FUND

The Alleghany County Transfer Facility FY 07-08
recommended operating budget is $722,960. This recommendation constitutes an
approximate increase of 6.4 % ($43,362) over the FY 06-07 original budget of
$679,598. This recommendation also constitutes an approximate -2.4% (-$17,888)
decrease under the FY 06-07 amended budget of $740,848. As you may recall from
the necessary budget amendment this year, the majority of the proposed increase
over FY 06-07’s originally adopted budget is due to increased disposal
costs. The proposed budget includes a 2% cost of living pay increase to all
employees. No other major operational changes are planned in FY 07-08.

The proposed budget anticipates using $37,260 from the
fund balance in order to balance the budget. Unfortunately current projections
show that only $21,000 will remain in the fund balance. I am recommending that
the Board raise rates in order to offset this projected shortfall. Since the
main reason for increased costs are due to increased tonnage coming into the
Transfer Facility, I would recommend that rates directly associated with weight
accounts and dumpsters be examined first before seriously considering raising
availability fees.  More details
will be presented during the budget hearings.

EMERGENCY 911 FUND

The FY 07-08 E911 recommended budget is $301,777. This is
an $82,542 (37.65%) increase over FY 06-07. The proposed budget includes a 2%
cost of living pay increase to all employees. The proposed budget also includes
a recommendation to increase the Fire Departments’ reimbursement for
street sign placement from $15 to $25 per sign. The following portrays the
recommended capital purchases.

Description

Amount

Dispatch Console

$84,000

Arc Editor Software

$ 5,000

TOTAL

$89,000

The current lease for the E911 CAD system is going to
expire May 2008. The new console should be purchased to coincide with the new
E911 CAD system. It is my understanding that as long as the E911 CAD system and
the radio console are fully integrated, then the radio console is an allowable
E911 expense. (i.e. Watauga
County)

TRANSPORTATION OPERATIONAL FUND

The FY 07-08 Transportation Operational Fund Budget is
recommended to be $308,215. This is a -$113,543 (-26.9%) decrease under the FY
06-07 budget. The Fund will be operated as a revenue based fund relying on its
own revenues to pay for expenses. It is projected that the fund may possibly
gain approximately $3,531 in FY 06-07. This Fund began the FY 06-07 budget year
with a -$16,424 deficit. This deficit will be reduced down to -$12,893. As long
as there are not unforeseen emergencies, this deficit should continue to be
reduced.

Highlights of this fund include a $35,500 Elderly and
Disabled Transportation Program grant, $31,000 Rural General Public grant,
$2,200 Work First Transportation grant and $46,635 in a capital grant.

The proposed budget includes a 2% cost of living raise to
all employees.

The recommended capital budget for the Operational Fund is
as follows:

Description

Amount

One Mini-Van

$ 25,000

One Standard Van

$ 26,816

TOTAL

$51,816

Total cost to the Fund for capital items after grants will
be $5,181 (10%). The 10% match will be funded through operational revenues.

OTHER FUNDS

This category includes other funds such as the Fairgrounds
Fund, Economic Development Fund, Drug Agency Fund, Library Fund, Register of
Deeds Enhancement Fund, Re-Evaluation Fund, Scattered Site Housing Fund, School
Capital Reserve Fund and all active building funds. These Funds will be
discussed during the budget process.

CLOSING

In closing, I would like to extend my appreciation to all
County employees who work extremely hard to provide the necessary services that
makes Alleghany County a great place to live. I also
extend my thanks to the Department Heads, Elected Officials and Special
Appropriation representatives for their cooperation in fashioning their budget
requests to the required specifications and timelines. And last – but by
no means least –   I would like to thank Finance and
Administration employees for their tireless effort and attention to detail over
the budget development process.

Respectfully submitted,

Don Adams

Alleghany
County Manager

ATTACHMENT A

REVENUE NEUTRAL TAX RATE

How to Calculate and Actual Calculation

North Carolina General
Statute 159-11(e) instructs that the revenue neutral rate is calculated as
follows:

Determine a rate that would produce a tax levy
equal to the tax levy produced for the current 2006-2007 Fiscal Year.

A)
$7,110,000
(estimated tax receivable) / 95.9% (estimated collection rate) = $7,413, 973 FY
06-07 Estimated Tax Levy.

B)
FY 06/07 Levy
$7,413,973 / Estimated New Tax Base $1,754,627,750= .004225 or $.4225 per $100
value.

Increase the rate by a growth factor equal to the
average annual percentage increase in the tax base due to improvements
since the last general reappraisal.

Fiscal Year

Audited Tax Base

Amount of Increase/  Decrease

% of Increase/Decrease

1999-2000

$      895,016,801

2000-2001

$      935,156,509

$    40,139,708

4.48%

2001-2002

$      978,521,938

$    43,365,429

4.64%

2002-2003

$   1,019,750,614

$    41,228,676

4.21%

2003-2004

$      996,019,586

$   (23,731,028)

-2.33%

2004-2005

$   1,018,649,340

$    22,629,754

2.27%

2005-2006

$   1,038,957,077

$    20,307,737

1.99%

2006-

2007

$    1,059,139,000

$     20,181,923

1.94%

Estimated
↑

Estimated
↑

Average
% Increase

2.46%

$.4225 per $100 value x 1.0246 = $.4329 per $100
value

A
$0.43 tax rate will produce $7,243,105 in revenues for FY 07-08. This is a
$133,104 or 1.87% increase over FY 06-07 revenues ($7,110,000).