Normally, the payments are delivered biannually as compensation for revenue lost by local governments when the General Assembly repealed a statewide inventory tax in the late 1980s. But this year, payments might be withheld in response to an anticipated state budget shortfall of nearly $800 million.
But local officials' concerns about withheld payments are tempered by recognition of their jurisdictions' relatively healthy budgets and optimism that the payments will be delivered.
Chapel Hill Town Manager Cal Horton said town revenues will be reduced by about $80,000 if the payments are not delivered. "It's $80,000 out of about $40 million, so it's a relatively small amount," he said.
Horton said the town received the second biannual payment at the end of last April. This year, Chapel Hill officials expect to find out if the town will get the $80,000 budget contribution in late June.
If the town receives the funds in June, it will still use the money to finance the current fiscal year, he said.
Like Chapel Hill, Carrboro could lose about $31,600 from withheld payments. "At this point we're treating it as a potential shortfall in our revenue estimate," said Bing Roenigk, assistant town manager.
Roenigk said she does not anticipate a detrimental effect on the budget. "We're not freezing or cutting anything yet," she said.
The withheld payments do affect the amount of cash in the town's fund balance, Roenigk said. With a compromised fund balance, the town's optimism could be challenged if incoming tax revenues are not as strong as expected.
The proportional impact of withheld funds on Orange County's budget is also relatively small, if not insignificant, said Assistant County Manager Rod Visser. The county's budget would receive a $450,000 hit, he said.
"It's less than one-half of one-half percent of total revenue of $110 million, give or take," he said. "Because the county has a pretty healthy fund balance, we can absorb a $450,000 shortfall without having to lay people off or reduce services."
Visser said he was also optimistic that the county would receive the funds.
Although the payments make up only a fraction of Orange County's budget, they contribute 3 or 4 percent of revenues for some counties, Visser said.
If the governor has not released the funds by the time the county must submit its budget for the coming fiscal year, county officials will have to decide whether to include the $450,000, Visser said.
The county might include the payments in the budget because of the state's past reliability, he said. "But we may hear some information in a week, a month or two months, and we may have different conclusions."
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