Town Manager Paul Sabiston has some extra work to do on Smithfield’s next budget.
The Town Council on Tuesday made several major changes to Sabiston’s proposed budget for 2015-16. That means the manager needs to re-balance the spending plan before 6 p.m. June 22, when the council will vote on the budget. State law requires all cities and towns to adopt balanced budgets no later than June 30.
Most of the changes on Tuesday originated with Councilman Perry Harris, who pushed through a total of eight changes to the spending plan.
The biggest modifications were in the rates Smithfield will charge its electric, water and sewer customers.
In electricity, the council cut rates for all customers by 5 percent based on expected savings from selling the town’s share of power-plant assets. Smithfield is one of the 32 members of N.C. Eastern Municipal Power Agency, which recently agreed to sells its assets to Duke Energy for $1.2 billion. The rate reduction will go into effect when the deal closes, scheduled for July 1.
The town expects to save up to 15 percent on its wholesale electricity costs when the deal is done, and the council has funded a rate study to determine how much of those savings it can pass onto its customers. That report should be ready around the end of 2015, at which point electric customers could see their rates fall even more.
Harris said he felt confident the eventual savings would exceed 5 percent, and he wanted to cut customers’ rates sooner rather than later.
The idea met heavy resistance from staff, and Sabiston estimated it would cost the town about $400,000.
“That is going to be extremely difficult, and the budget will be completely out of balance,” Sabiston said.
Sabiston had budgeted $1.7 million in capital improvements for the electrical department next year, including $1.3 million to add a second transformer at the Brogden Road substation. With the 5 percent cut, Sabiston said, Smithfield might have to put off some equipment needs. The town might also have to spend more of its savings or take on more debt to make up the lost revenue, he said.
Water, sewer rates
Harris also pushed for more modest hikes than Sabiston had proposed to the base rates the town charges water and sewer customers each month.
Based on his suggestions, the council raised the base fee to $6.02 from $5.47 for in-town residents and to $12 from $10.91 for out-of-town customers. For sewer, the fee will rise to $7.98 from $6.98 for in-town users and to $15 from $13.98 for those outside town limits.
Sabiston had proposed much steeper hikes — to $9 and $15, respectively, for in-town and out-of-town water customers and to $10 and $15 for sewer.
The changes create a $233,305 shortfall in the proposed water department budget and a gap of nearly $123,000 in the sewer budget.
That means the town will have to dip further into its savings and also put off some of the capital improvements it planned in those departments. In the proposed budget, Sabiston had called for more than $1 million of improvements at the water plant and $1.65 million of fixes to the water and sewer systems.
Councilman Emery Ashley cast the only vote against Harris’ rate plan. In doing so, he emphasized how desperately the town’s infrastructure needs repairs.
“One of the greatest things we provide for the citizens of Smithfield is a quality water supply and a quality sewer system,” he said. “The piper has got to be paid sometime. It’s got to be fixed.”
Harris acknowledged those needs, he said, but thought the proposed hikes were simply too steep. Hiking the base in-town water rate to $9 would have represented a 65 percent increase and cost customers an extra $42 per year. In comparison, Harris’ $6.02 plan raises bills by 10 percent and will cost users $6.60 more per year.
To make up for some of the lost revenue in the water and sewer fund, Councilman Travis Scott made a motion to eliminate a $85,404 transfer from that department into the general fund. The council passed the motion with a dissenting vote from Councilman Andy Moore, who said he worried the town would have to eat even further into its savings to cover the shortfall.
To help offset some of the revenue reductions, Harris also suggested spending cuts and fee increases that the council passed. The council:
▪ Cut the maximum merit-based raises for town employees to 2 percent from 2.5 percent.
▪ Hiked by 10 percent the fees out-of-town residents pay for parks and recreation services, including those at the Smithfield Recreation and Aquatics Center.
▪ Slashed the budget for a backhoe for the water and sewer department in half, to $70,000.
▪ Set the maximum cellphone allowance for employees at $600 a year, excluding Sabiston, whose rate is agreed to by contract.
▪ Eliminated an $11,000 line item for economic development in the electric department budget.
If those departments end up needing those funds, the council made clear it could make budget amendments throughout the year.
Harris also pointed out several places in the budget where descriptions of spending seemed out of date or incorrect. He asked staff to clean those up in the final budget.