State withholds local funding; future funding concerns abound

Alleghany County's fledgling budget process took a $117,000 hit on the revenue side last week, and the town lost about $102,000 when the state announced that it again would withhold certain funding from all of North Carolina's counties.

While the funding is deemed important by County Manager Don Adams and Town Manager Tom Douglas, the county did have an inkling that this might happen. But that doesn't make local officials any more pleased about it. "We had an inkling that the manufacturer's inventory tax reimbursement wouldn't come, so we didn't budget for that," Douglas said. Then the state decided to withhold franchise tax funding, which is the town's portion of a tax on electric bills. About 95 percent of that tax paid by the people who live within the town limits returns to town coffers — at least until this year.

"We budgeted $150,000 for the franchise tax," Douglas said. "Based on our tax rate and our tax base, we collect about $200,000 in ad valorum (property tax). That's almost as much as the total we collect on taxes."

So what does it mean for the town budget? "Fortunately, we have enough of a fund balance to weather this storm, provided that the money is released in the future. We don't foresee any loss of services or a tax increase at this point."

The town had projected revenues of $968,000 at this point, but the loss of the state tax income means the revenues will actually be $877,033. The town's overall projected budget, including water and sewer funds, is $1,659,942. The town's current fiscal year fund balance was $659,000, prior to the loss in revenue.

In order to make up the state withholding using only property tax revenue, the tax rate would go up about 10 cents — from 20 cents to 30 cents per $100 value.

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