City of KM proposes
total budget increase of $11.2M
By Loretta Cozart
During a city council budget work session held on Monday, May 22 at city hall, Kings Mountain City Manager Jim Palenick proposed a Fiscal Year 2023-2024 budget of $65,079,820, an increase of $11,174,987 from last year’s budget of $53,904,822.
The proposed budget includes a 5-cent property tax increase, a 10% increase in water and sewer, in addition to a solid waste fee increase of $2.49, and a stormwater fee increase of $1.50. There are no increases proposed for electric or natural gas.
How does the city’s proposed property tax rate increase of 5-cents, to a new rate of 48-cents, compare with that of other municipalities of comparable size to Kings Mountain? Cities compared include Lincolnton: 56-cents, Newton: 54- cents; Morganton: 57-cents; Albemarle: 64-cents, and Lexington: 65-cents, for an average property tax rate of .59-cents.
The budget also includes $1.8 million for paving and road improvements. “Thirty-
five streets will be paved throughout the city,” Palenick said. “And, $100,000 is included for parks and recreation capital improvements. A five percent wage increase has been set aside for city employees included in the budget as well.”
How does that translate to the average citizen’s monthly budget? For a person who owns a $100,000 house, the city estimates the increase to be $12.79 per month. For $200,000 home, it is estimated the additional cost will be $17.51 per month. And for a $400,000 house, citizens will see an increase to $26.40 per month.
“The city has been using money from the electric fund until the money has been depleted.” Jim Palenick said in an interview with the Herald. “We have, for years, kept the city's property tax artificially low, and the city took money away from its electric utilities, and its gas utility, it didn't reinvest in those utilities, and it didn't develop rate stabilization funds for those. So it didn't develop high quality appropriate fund balances for them. The time has come to pay the piper,” he explained.
“We're doing this in a fiscally responsible way, and planning for the future in a very strategic way. The key is as we are growing, and we will continue to grow a lot, so we must reinvest in a lot of these things, the infrastructure, the amenities, and the quality of life. Because we've neglected parks for a very long time, we allocated $100,000 in park improvements in this budget. But in the future, we expect to add a lot more.”
Kings Mountain is unique in that it maintains both a public library and a senior center. In many communities they are maintained instead by the county. The library’s proposed budget is $837,050, and the senior center’s is $837,500.
Palenick continued, “The city has $1.8 million in total paving and road improvements included in this budget. That compares to recent years of $200,000 to $300,000. And over $4 million was included for rolling-stock purchases, including two new fire trucks that are needed. The city is replacing the leaf pickup machines, which have been a real source of concern and controversy because we haven't been as responsive. We haven't been as good, as serviceable, as we should have been in that program, and we realized that a lot of it all came down to the poor quality of our equipment. So that's all being replaced.”
“If we can start, for instance really focusing this year on paving and road construction and some necessary rolling stock and large equipment purchases, then in future years you're going to see a whole lot more about Parks and Recreation, Streetscape, and other major infrastructure things that we'll try to focus on,” he said.
The proposed budget does not add any additional positions to the General Fund. “We have made a change where we are hiring a city engineer but eliminating a position that had been set aside for communications. But there's no net increase. It's the same, relatively flat. In Stormwater we propose adding two new positions to meet state mandated requirements.
Streetscape is not included in the budget for several reasons, he said, “Number one, one of the things that is in this budget is that we are moving away from the city being responsible for running the Main Street program, having actual city employees do that work, and it being a city function. We are proposing to have a contract with a local non-for-profit of stakeholders from the downtown and small business owners, who then we will contract with to do all those things.”
In summary, Palenick said, “We are proposing a 5-cent property tax increase. For a local government, property taxes are considered a general revenue to be used for services that are not paid for by specific user fees‐public safety, public works, streets, administration, etc. That generates about $1,000,000 a year. That is not $1,000,000 to increase the budget, it's $1,000,000 that goes toward debt service (repaying city debts). A $1,000,000 in debt service translates to over $5,000,000 in capital improvements.”
Additionally, if approved, the cost for a typical new single-family house building permit will increase from $800 to $1,647, which is in line with what both Gaston County and the City of Shelby charge. Palenick said, “On the building permits, we certainly comply with the law, we provide the minimum basic level of service, and we're working on fully covering the cost for moderate level of service, but again, not quite,” he said.
So, while we've made various changes to get us closer to industry standards and we're getting more competitively surrounding units, we're not adding any additional fees, we are adjusting them. And don't forget, this only affects construction and new growth, so most people do not pay these fees. You pay it because you're building something, adding something, developing something, and most people who do that are used to this within the environment of what they do, and the city would remain very competitive.”
He continued, “And the primary reasoning for this budget is that we are trying to get these utilities, solid waste electric, gas, water, sewer, etc., to truly be closed loop enterprise funds to pay for themselves. They should not subsidize each other, and they should also pay for themselves. So, when we see solid waste doesn't pay for itself, we're trying to get it closer. We have increased building permits, mostly on the larger commercial and industrial side, trying simply to get that program to pay for itself. It still doesn't, but it's getting closer.”
“Stormwater increased simply because the city was in violation. We weren't doing enough. Our program isn't robust enough. The state has said, ‘If you don't start doing it, you're going to be in trouble.’ We will do it better, we'll be hiring two people, and we'll start to be much more active.” The alternative would be to pay a $25,000 fine.
“We've increased this budget by over $5 million worth of capital improvements. And we're setting the stage to say if we have this amount of property tax dedicated to debt service for capital reinvestment in the future, we will continue to reinvest in the city the way we should have been doing for years and years but haven't. The time has come to start doing that. So, that's why I say the future will be streetscape, parks and rec, and other things like that. Because there must be a way to pay for them in the most appropriate way,” he said.
“We are at a critical point,” Palenick concluded. “What we do in the next couple of years, the decisions we make, the tools we have, and the sources available to us will have a profound impact on our ability to do this work.”
Friday afternoon, the city manager updated city council on some positive information regarding current energy trends that suggest, absent unexpected changes to demand or supply which might otherwise result from climactic events; geopolitical upheaval; or natural disasters, we can expect Natural Gas prices to remain fairly flat, or trend lower.
Since the greatest single economic impact/burden to individual citizens comes as a result of their electric and gas bills, there exists a distinct possibility that in FY23-24, actual decreases to electric and gas bills could yet occur could result, affecting or making up for, or surpassing, the possible increase(s) posed by the 5-cent property tax and the solid waste and water/sewer fee adjustments.
In the Summer and Fall of 2022, (between July and November) the City of Kings Mountain increased the P.P.A. (Purchase Power Adjustment) component of Electric rates by 2.75-cents per kilowatt-hour (KWH) due to rapidly rising Natural Gas rates, resulting in electric rate increases to residents of approximately 25% on their electric bills.
And, because the city also maintains a rate structure which automatically adjusts Natural Gas bills to fluctuate with the commodity cost of Natural Gas, our residents were also experiencing significant increases in their monthly gas bills.
If such trends hold, the city could look to lessen or decrease its PPA (Purchase Power Adjustment) rate charge to electric customers; and its gas customers would automatically see their rates decrease.
According to Moody’s, “Expected 2023 natural gas prices are around 44% lower than forward market expectations in December,”. That has resulted in 2023 expected power prices more than 40% lower than 2022 in some regions, according to the research note which cited S&P Global Market Intelligence data.”
What does the possible gas rate decreases mean for citizens? The data indicate that a rate reduction of just 2.5% for an average residential electric and gas bill would nearly offset the proposed 5-cent property tax rate increase for valuations up to $100,000.
A rate reduction of 5% for an average residential electric and gas bill will closely offset our proposed property tax rate increase for valuations up to $200,000.
For those owning little property ($50k or less), the 5% reduction noted above would virtually offset all proposed 23-24 tax and fee increases combined -- the net increase would be less than $1 per month, total, assuming the customer pays/utilizes all City services – water, sewer, solid waste, and stormwater.