When the Town of Cape Charles was prepared to vote on and accept this year’s budget, Heinz Sommer attended, and attempted to get some answers. However, since public comments are only for 3 minutes, he quickly ran out of time. That said, Libby Hume asked Mr. Sommer to submit those questions in writing, and they would get back to him. Here are Mr. Sommer’s questions, and the Town’s reply:
FY 2016 Budget Questions
Q-Are there any discretionary spending positions included in the different expense categories, except the general Fund contingency of $115,438?
Q-The auditors recognized in the 2013 statements that there were inadequate internal controls over financial statement reporting. Were these deficiencies corrected during FY 2014?
A-The finance staff is too small to address the concern about the utility clerk both billing and receiving utility payments to the extent suggested, however, all adjustments are approved by both the utility and finance departments, and anyone in the department is able to receive payments-not just the Utility Clerk. Cash payments require a receipt. The issue of journal entries being posted at year end will be completely corrected by FY15 close, and was partially corrected for FY14. The turnover in the department made this a difficult issue to address in a short period of time.
Q-Are there any plans to increase the current debt load of approximately $12M?
A-As of June 24, 2015, the long term debt (bonds/loans) balance is $9,592,948.77. There is no plan as of now to increase the bond /debt load. There is a loan/grant combination in the FY16 budget, but it is not a significant amount (loan amount is $90,747) and will fund 4 capital projects. The loan term is 5 years, but can be paid off early.
Q-Are there any plans to increase the marketing activities of Cape Charles in order to promote tourism. If yes, where, and what amount?
A-Council strives to use the Transient Occupancy Tax revenue to fund tourism initiatives. The budget this year for tourism related expenditures is $77,250 and includes support for Arts Enter, Eastern Shore Eventacular (Tall Ships and Birding Festivals,) 4th of July Fireworks, Print Marketing, Social Media Marketing, Cape Charles By the Bay Website Maintenance, Harbor for the Arts, and the Historical Society Museum/Welcome Center. Additionally the town will hire a recreation department assistant for the summer months (contractor) who will plan and conduct activities on the beach and elsewhere. The Town is also developing incentive plans for a Tourism Zone.
Q- What is the amount of non-performing assets on our balance sheet (like the $100,000 property acquired from Foster; Nonperforming in the sense that they do not provide any reasonable income, or they do not serve any needs for the community and or are not essential for future town developments.
A-No others-The acquired property protects the Town entrance from possible undesirable development at the town’s entrance, and it is hoped that it will provide an increased benefit in the future.
Q-Prior Year Tax Collection went up by 18%. Are there any deficiencies in receivable monitoring? Did we have any policy changes?
A-No-the economy is on an upturn, properties are being sold that were in delinquent status, and more people have the funds to pay their tax bills. In addition, the finance department has worked very hard
to become more effective and efficient with collections.
Q-Machine and Tools Tax went down by 18%. Reasons? We can all see and hear more machinery and equipment being used this year.
A-The only new machinery and equipment in town over the past year has been added under the Enterprise Zone tax incentive program (Bayshore.) We will not tax their new equipment until the 10 year abatement period has been completed. The remainder of the taxable property is depreciating, therefore the taxes have decreased.
Q-What does the BPOL Tax mean? What is the reason for an increase of 31%?
A-BPOL is Business, Professional and Occupational License. It has increased because the Town is more closely monitoring businesses in town that should be applying for a business license but did not in previous years, and also because the existing business’ revenue has increased, therefore increasing the tax due.
Q-Building Permits & Code Enforcement went down by 4%. Reason? It seems we have more building activity going on this year over last year
A-Total Permits & Fees Revenue is actually budgeted 21% higher in FY16 (75,675) than in FY15 ($62,500.)
Q-Recovered Costs and Miscellaneous Income went down by 21%. Reason?
A-Miscellaneous Revenue was decreased to reflect actual performance in FY15. Recovered Costs
appear in most line items to have increased with the exception of recreation department. Recreation
department recovered costs have been moved to recreation department fees collected. These are for
events such as bingo, cornhole, etc.
Q-Financing Proceeds went up by 48%. Please explain reasons.
A-The remaining 2013 loan proceeds are being used to fund several items in this year’s budget. The only new financing is a USDA Rural Development Grant/Loan, the loan portion being $91,891. The Grant portion equals $49,480. Council may elect to pay this off early with no penalty.
Q-Grants and Local/State/Fed Add went up by 25%. What are these Grants for, and what are the conditions. Are there any repayment provisions involved if they are not used timely?
A-Please see the attached Summary of Capital Projects by Fund for the items that are Grant funded. The Grants are not disbursed to the town until they are expended, therefore this will not be an issue.
Q-Financing Proceeds for Harbor went up 238%. Please explain reasons.
A-2013 Financing proceeds will be used to fund the Town’s 25% match of the $860,000 project ($215,000.)
Q-Grant Revenue went up by $640,000-what is this grant used for?
A-The new Harbor Breakwater, at 75% of the total cost.
Q-Operating Revenue went down by 3%, even after raising the fee this year.What is the reason?
A-The cost of Fuel has decreased over FY15, therefore the total Revenue for the fuel will also decrease.
Q-Connection fee totals $27,065. This seems to be extremely low, since the hook up of one dwelling is already about $10,000.
A-“Hookups” are made up of both Connection fees and Facility Fees. The Connection fees are considerably smaller than the facility fees. Facility Fee Revenue is restricted and saved for future facility expansion. Connection Fees are current year, unrestricted revenue.
Q-Financing proceeds went down 13%. Please explain reasons.
A-Current year funding rather than loan proceeds will be used to fund some of the Water/Wastewater projects in FY2016.
Q-Facility fees went up by 260%. Please explain reasons.
A-Projected/planned building projects dictate the amount of this Revenue item.
Q-Legislative went up by 40%-Please explain reasons.
A-Two new council members to be elected must attend required newly elected official training (travel & training costs,) IPADS for Council emails and Council meeting agenda packets, and cost of elections.
Q-Town Clerk went up by 11%. Please explain reasons.
A-Certification Training and associated travel for Assistant Town Clerk, new computer, wage and compensation study increases (salary.)
Q-Town Manager went up by 9%. Please explain reasons.
A-Increased salary, increase in tourism related expenditures, the addition of a pool for merit increases.;
Q-Code enforcement went up by 36%, despite the fact that Revenue decreased by 4%. Please explain reasons.
A-New position of Part-time Code Enforcement Assistant will require new salary in addition to training. A vehicle with 4WD for site inspections and with room for more than 1 passenger (other agency officials) was also requested. Revenue actually increased, not decreased.
Q-Parks and Recreations went up by 12%. Reasons
A-The wage and compensation study determined that this position was underpaid, and an increase was given. In addition, contractual payment for seasonal recreation assistant was added.
Q-Capital Expenditures went up by 15%. What are these expenditures and what is the justification?
A-Each of these capital expenditures was discussed at the council’s public budget work-sessions, and the capital request forms are available online under Council, agenda and minutes. Please see the attached schedules of capital items budgeted for details of the funding sources and title of each project.
Q-Harbor Debt Service went up by 60%. Please explain reasons.
A-The Town is following a debt service schedule that was given to us at the date of the loan/bond closing. It is not because of new debt.
Q-Capital Expenditures are $870,000. What are these expenditures?
A-Harbor will “purchase” code enforcement’s small pickup as a utility vehicle for $10,000. At this time supply bank runs are done with personal vehicles at the harbor. The remainder is for the Harbor Breakwater project, which is funded with both Grant and prior fiscal year loan proceeds.