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ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: February 24, 2003 Action Agenda Item No. 1 SUBJECT: Fiscal Outlook DEPARTMENT: Budget PUBLIC HEARING: (Y/N) No ATTACHMENT(S): Chart -Potential Phased Implementation For Allocating Additional Sales Tax PowerPoint Slides (to be provided at work session) INFORMATION CONTACT: Donna Dean. ext 2151 TELEPHONE NUMBERS: Hillsborough 732-8181 Chapel Hill 968501 Durham 688-7331 Mebane 336-227-2031 PURPOSE: To provide the Board of Commissioners with an update on the budgetary outlook for the remainder of FY 2002-03, with emphasis on implementation of additional half cent sales tax authority under Article 44. BACKGROUND: At the Board's annual planning retreat on January 25, 2003, the Budget Director made a brief presentation regarding the County's overall financial picture, current revenue trends, and anticipated "budget drivers" for FY 2003-04. She indicated staffs intention to provide an additional update at the Board's February 2003 work session. The principal focus of the presentation is to provide the Board with an update of the second quarter sales tax reimbursements that the County received mid-February which included the recently implemented Article 44 half-cent sales tax. Pursuant to the levying resolution adopted by the BOCC in October 2002, this tax took effect on December 1, 2002. The additional sales tax authority was granted during the 2002 General Assembly legislative session to address substantial revenue shortfalls created for North Carolina local governments in FY 2001-02 and FY 2002-03 from the withholding of reimbursements due from the State to those local governments. The impact of those losses exceeded $700,000 for Orange County in FY 2001- 02, and more than $3.1 million for FY 2002-03. As a result, the Manager recommended, and the BOCC acted on, 2002-03 budget reductions during the June 2002 budget work sessions to accommodate the loss of reimbursements. BOCC actions included postponing capital project expenditures and freezing vacant positions.