Category: Borrow Money
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AYDEN Town commissioners and staff continue to work out a differences on a 2016-17 spending plan that center on the use of a $1.5 million loan to balance revenues and expenditures.

The Ayden Board of Commissioners met May 18 with interim Town Manager Leonard Barefoot, Finance Director Alicia Simpson and several other department heads to discuss the $23.3 million proposal.

The plan also included a 7.5 percent sewer rate hike to cover increased costs from the Contentnea Metropolitan Sewerage District, which is changing to a new billing formula.The board is set to meet again at noon Monday to further discuss the budget.

A 2 percent, five-year $1.5 million loan was a sticking point for board members, whoquestioned the idea of borrowing money to balance the budget and requested a breakdown of how much of the loan would be used for capital expenditures versus operational expenses.

The May 18 meeting marked the second time the board has discussed the budget. At the first meeting on May 9, a $21.4 million plan was unbalanced by approximately $2 million.

Although higher than the first proposed budget, the most recent proposal was balanced through cuts to proposed spending and the inclusion of the $1.5 million loan, according to Barefoot.

The board gave authorization to borrow $1.5 million in 2015 to cover the costs of the electric substation rehabilitation project. However, the town never took out that loan and paid for the project out of the electric fund balance instead, according to Barefoot.

While much of the proposed loan would be used within the electric department, approximately $500,000 would be transferred to the general fund as well.

The loan is a good way to pay for needed capital expenditures, according to Barefoot.

Youre taking assets that have a 20-plus year life and borrowing some money, which you said you wanted to do, Barefoot said. What weve done is what you all wanted to do, but were doing it this year rather than last year.

Major proposed capital expenditures include a computer system and software upgrades at $240,000, new equipment and vehicles for the electric department at $622,126, new vehicles and equipment for the water and sewer department at $188,928 and a variety of new equipment and vehicles for other departments at a total of $323,000.

The proposed expenditures were chosen in consultation with department heads, who said that the requested equipment and vehicles are necessities, according to Barefoot.

Board members agreed that the equipment may be helpful, but questioned the decision to borrow money to pay for it.

My intent was when we did the substation hellip; to take $800,000 from the fund balance and to borrow $1.5 million, Mayor Steve Tripp said. If the board felt we had sufficient funds to maintain (the fund balance), then we wouldnt have borrowed the money. The intent was to not get the fund balance so low that we would have to borrow money, and that did not occur.

Commissioner Mary Alice Davenport added, I cannot believe that we do not have any money and now were going to buy all of this stuff with no money to pay for it.

Barefoot maintained that borrowing the money would be a good way to pay for items the town needs.

I see it a little bit differently. The $1.5 million cash, you can say its not going into the fund balance, but its either appropriated for spending or its part of the revenue, Barefoot said. All it points to is that were spending a lot of money in the upcoming budget.

Commissioner Mike Harris questioned how much of the loan would go toward capital expenditures.

I think its easier to swallow if its capital, Harris said. Its just not good practice if its for operational spending, thats when you have to tighten the belt.

Barefoot agreed to provide a breakdown of the capital expenditures before the next budget meeting.

Tripp maintained that cuts will need to be made to the budget.

Were going to have to make some cuts, Tripp said. Its unfortunate hellip; we cant continue going into the fund balance. And, it will get better. We will get growth. If we can hang on three or four years, we will get growth and get a bigger tax base.

The Times-Leader serves southern Pitt County including Ayden, Grifton and Winterville.