Agenda - 02-24-2003-ws1 - Laserfiche WebLink

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2 The Budget Director will present information indicating that the County's revenues and expenditures for FY 2002-03 are on track with the County's budget, and that the first receipt of Article 44 sales tax proceeds in mid-February suggest that revenue of $1.7 million to $1.8 million projected (by the North Carolina Association of County Commissioners) for FY 2002-03 also appears to be on track. During the FY 2002-03 budget process and in several work session settings since, the Board has reviewed broad options for allocating additional half-cent sales tax revenue that include implementing postponed employee pay and benefit initiatives, reinstatement of some capital project funding that was delayed, replenishment of fund balance, and other related options. With Article 44 sales tax receipts appearing to be on track with projections, staff believes the Board can comfortably make allocation decisions now or in the coming weeks that could provide up to $1.2 million for employee pay and benefit initiatives and capital project restoration. The remainder of FY 2002-03 Article 44 collections (some of which will not actually be received until August 2003) could reasonably be allowed to accumulate without being appropriated, resulting in an increase in fund balance in the General Fund in FY 2003-04. FINANCIAL IMPACT: As noted above, Article 44 collection estimates for Orange County total $1.8 million for the period December 1, 2002 -June 30, 2003. Beginning with FY 2003-04, there is a provision in the new law which will ensure that local governments are "held harmless", and do not receive less funding from the new sales tax than they would have received from the series of reimbursements being terminated by the State. Orange County does not expect to need "hold harmless" funding, as preliminary forecasts anticipate that FY 2003-04 receipts from Article 44 sales tax will approach $3.8 million, compared to the approximately $3.2 million that Orange County might otherwise have received from reimbursements. Because of the tendency of sales tax revenues to grow annually, it is anticipated that Orange County will benefit in subsequent years from the exchange of reimbursements for Article 44 sales tax proceeds to an even greater extent than in FY 2003-04. RECOMMENDATION(S): The Manager recommends that the Board receive the update and provide guidance to the Manager and staff regarding how the additional sales tax revenue should be allocated among the purposes outlined above.