SALISBURY — City council members met Wednesday for a called meeting to discuss expense changes and options for funding additional items.

To equalize revenues and expenses, City Manager Lane Bailey has proposed the city use more than $1 million from the general fund’s fund balance, which acts partially as a savings account, particularly since the city saw a nearly $1.5 million surplus in the current fiscal year.

After a request from council members, Bailey has been meeting with the city’s financial advisers and Local Government Commission staff to discuss the possibility of refinancing its fiber-optic network debt, which is managed by Fibrant. About $19.5 million in debt remains, and the city is set to pay off that debt in 2029. Refinancing could save up to $4 million and reduce debt by about 20%, which would free up nearly $600,000 each fiscal year. Council members described that savings as freeing up about 2 cents per $100 in valuation without having to raise taxes.

“I think it’d be a great thing to do, but we’re not there yet,” Bailey said.

The Salisbury City Council will hold a public hearing on the budget on June 1 during its regularly scheduled meeting, and a vote is expected at the following June 15 meeting. Bailey said more information should be available at that time regarding whether refinancing the city’s fiber-optic network is feasible and allowed by the LGC.

If refinancing is not allowed, council members signaled approval for using its surplus instead of raising taxes. But refinancing is ideal as it prevents a dip in the fund balance in future years.

A total of $357,027 is currently budgeted to provide 5% pay increases for sworn police officers and 5% to 15% raises for certain public works positions. While that rate puts those wages at market rate, Bailey said an additional 1.5% raise for sworn officers, which amounts to $92,000, is not included. Implementing the additional raise is intended to incentivize and address recruiting challenges.

Another incentive Bailey and council members have considered is an increase in the city’s match to employees’ 401K, except sworn officers, from 3% to 4%, which would total nearly $186,000.

Additionally, Bailey expressed concern for the pay rates in the IT and fire departments. He reports two vacancies out of seven in the IT department. And though he reports no vacancies in the fire department, he foresees it being a future issue to consider. An additional $258,000 not budgeted is intended to address recruiting issues in other departments.

With all of the additions, $535,920 is needed.

Bailey also said he’s skeptical of the current forecasts from property tax collections because the number of permits and developments in the city don’t seem reflected in property tax revenue collections for the city at this time. He is meeting with the county tax assessor for more clarity soon, he said. The budget keeps the tax rate at 71.96 cents per $100 in property valuation.

Currently, the general fund is budgeted $1.37 million higher than the current fiscal year. A total of $45.64 million was adopted for 2020-21, while $47.02 million is proposed for 2021-22. Most of the increase is attributed to police and public works pay increases, special projects within the Planning Department and Development Services such as the Neighborhood/Downtown Revitalization program, streetscape amenities and roof and HVAC projects.

The water and sewer fund is currently budgeted with a $765,515 increase compared to the 2020-21 fiscal year, with a bulk of the increased expenses attributed to an added position, special projects and consulting services for the city’s ongoing legal battle with the Federal Energy Regulatory Commission. Bailey is recommending a 2% increase in water and sewer prices, which would increase the average bill for a customer using 4,000 gallons by $1.16.

The budget also will include a $1.15 increase in residential curbside collection with one waste container and one recycling container. A proposed 8-cent increase to stormwater fees is intended to offset inflation. The stormwater fee increase also would provide funds for stormwater projects to reduce flooding and pollution to maintain compliance with the existing National Pollutant Discharge Elimination System (NPDES) permit.

Council member Tamara Sheffield was firm in her opposition to the stormwater rate increase, but other council members agreed it’s necessary with the ongoing issues across the city and prevents a higher and unexpected rate increase in the future.

A net increase of $115,552 is anticipated for the transit fund, primarily due to increased personnel costs due to a 2% cost-of-living adjustment and part-time salaries for ADA transit services. About 1.64 cents of property tax revenue is used for the city’s public transit system.

Additionally, eligible uses for federal American Rescue Plan dollars and transit ridership remain two major question marks. The city is planning to resume charging fare fees again in January. So, the current proposed budget only includes half a year’s worth of fare revenue.

The city is budgeting a little more than $111,000 of the approximate $425,000 in federal funding expected for transit. For the 2020-21 fiscal year, a bill in the General Assembly eliminated the funneling of State Maintenance Assistance Program funds, and it’s unclear if they will be renewed for the upcoming budget. The city typically receives around $200,000 in SMAP funds each fiscal year, said Budget and Performance Manager Anna Bumgarner.

The city is meeting with leaders in Spencer and East Spencer to discuss the capability of continuing routes in those areas, with federal and state funds expected to help offset those costs.

Contact reporter Natalie Anderson at 704-797-4246.