PREVIEW Town of Hillsborough FY10 BUDGET & 7-YEAR FINANCIAL PLAN May 11, 2009

Budget Goals for FY10 No rate increases No rate increases Minimal impact to service delivery Minimal impact to service delivery No employee layoffs No employee layoffs Protect savings and prepare for at least one more “tough” year Protect savings and prepare for at least one more “tough” year Continue training & cost containment efforts Continue training & cost containment efforts

How Others are Balancing Budgets Across the board “cuts” Across the board “cuts” Layoffs Layoffs Pay reductions Pay reductions Furloughs Furloughs No Merits/COLAs No Merits/COLAs Hiring Freezes Hiring Freezes Health insurance contributions Health insurance contributions Raise health insurance deductibles & lower benefits Raise health insurance deductibles & lower benefits No pay increases for promotions Reduce/eliminate 401k Freeze travel/training Reduce paid holidays Reduce vacation days Early retirement programs Using savings Slashing capital & operating Reducing services/levels

How Hillsborough Balanced its Budget Departments given “bottom line” budget amount, set priorities and made their own cuts (few changes made by town manager) Departments given “bottom line” budget amount, set priorities and made their own cuts (few changes made by town manager) Operating expenses slashed (via many small cuts & changes) Operating expenses slashed (via many small cuts & changes) Delayed almost all capital projects Delayed almost all capital projects No vehicle & equipment replacements No vehicle & equipment replacements No Merit or COLA funded No Merit or COLA funded Personnel reduction & “hiring freeze” savings included Personnel reduction & “hiring freeze” savings included

What Determines the Budget Climate? Revenuesor Expenses (Needs)

Less Operating Revenue to Fund Operations

Big Cuts to Expenditures

FY10 General Fund Highlights FISCAL Tax Rate: “Revenue Neutral” (Drops from 67 to 62 cents or 8%) Tax Rate: “Revenue Neutral” (Drops from 67 to 62 cents or 8%) Average property value increases 13.74%, while personal, vehicle, & public service drop 5% – 20% Average property value increases 13.74%, while personal, vehicle, & public service drop 5% – 20% Net increase in property tax due to new growth is only 0.7% or $29,181 Net increase in property tax due to new growth is only 0.7% or $29,181 Operating budget: 12.7% decrease Operating budget: 12.7% decrease Fund Balance Approp.: $96,956 Fund Balance Approp.: $96,956 Fund Balance Level: 30% Fund Balance Level: 30% Personnel: 0.52 FTE decrease Personnel: 0.52 FTE decrease Health Insurance: + 5.6% Health Insurance: + 5.6% PROJECTS/KEY ITEMS Nash St. Sidewalk Project Fleet Maintenance Facility (replace) Street Repaving ($100K) Riverwalk Phase II (Grants for land acquisition + partial design) Personnel-related programs are still funded (e.g., longevity, employee recognition, wellness, safety, tuition reimbursement, customer service & innovation program)

FY10 WATER/SEWER FUND HIGHLIGHTS No rate increases for water or sewer No rate increases for water or sewer Operating budget decreases by 21.4% Operating budget decreases by 21.4% Positions decrease by 1.0 FTE Positions decrease by 1.0 FTE Retained earnings appropriated: $55,380 Retained earnings appropriated: $55,380 Fund balance level: 30% or 3.6 months Fund balance level: 30% or 3.6 months Radio-read and meter replacement project ($750,000) Radio-read and meter replacement project ($750,000) Sewer line repairs for I&I ($60,000) Sewer line repairs for I&I ($60,000) Debt refinancing saves $20,000 per year Debt refinancing saves $20,000 per year Capital facility fees for new conx to increase after 7 years Capital facility fees for new conx to increase after 7 years

“Cost Containment” & Operational Redesign Effort A lot of little ideas add up to make a difference! A lot of little ideas add up to make a difference! Complete “ideas” list with updates is in the appendix of the budget workbook Complete “ideas” list with updates is in the appendix of the budget workbook Two pages of highlights are found at the end of the budget message Two pages of highlights are found at the end of the budget message Impacts on employees Impacts on employees

Operational Redesign Ideas Approved or In-Process Retiree health insurance eligibility, increases from 20 to 30 years for new hires (Done) Retiree health insurance eligibility, increases from 20 to 30 years for new hires (Done) Increase purchase order limit $300 to $500 (July 1 st ) Increase purchase order limit $300 to $500 (July 1 st ) Police department reorganization (In process) Police department reorganization (In process) Fleet mechanic & supervisor switch (Done) Fleet mechanic & supervisor switch (Done) Change work hours for COP & CID officers (July 1 st ) Change work hours for COP & CID officers (July 1 st ) Change Holiday Pay Structure (July 1 st ) Change Holiday Pay Structure (July 1 st ) Eliminate uniform cleaning in HPD patrol (July 1 st ) Eliminate uniform cleaning in HPD patrol (July 1 st ) Eliminate bottled water use, coffee, etc. (Done) Eliminate bottled water use, coffee, etc. (Done)

Operational Redesign Ideas Recommended for Implementation or Review Longevity Pay Eligibility Starts at 5 Years for New Hires Longevity Pay Eligibility Starts at 5 Years for New Hires Take Home Vehicle Policy (Still gathering data) Take Home Vehicle Policy (Still gathering data) “Reinvestment Program” – Return 50% of eligible savings categories made by departments in FY10 to use in FY11 at their discretion “Reinvestment Program” – Return 50% of eligible savings categories made by departments in FY10 to use in FY11 at their discretion Eliminate Petty Leave (14 hours annually) – Add 6 hours vacation per year Eliminate Petty Leave (14 hours annually) – Add 6 hours vacation per year Reduce bulk item, limb, & bagged leaf pick-up to the first 24 days of the month – frees up time for public works to maintain parks Reduce bulk item, limb, & bagged leaf pick-up to the first 24 days of the month – frees up time for public works to maintain parks Charge residences using more than one roll-out cart Charge residences using more than one roll-out cart Employee payroll “direct deposit” mandatory starting January 2010 Employee payroll “direct deposit” mandatory starting January 2010

Predictions for FY11 General Fund Projected Deficit: $834,799 General Fund Projected Deficit: $834,799 Water/Sewer Fund Projected Deficit: $366,451 Water/Sewer Fund Projected Deficit: $366,451 Major expenses must be funded: fire/aerial truck, garbage truck, vehicles & equipment, utility projects, etc. Major expenses must be funded: fire/aerial truck, garbage truck, vehicles & equipment, utility projects, etc. “Flat” revenues will require rate increases, position reductions, and more drastic changes “Flat” revenues will require rate increases, position reductions, and more drastic changes What’s the best way to encourage innovation for FY11? What’s the best way to encourage innovation for FY11?

When Will Things Get Better? Economists predictions Economists predictions Hillsborough is poised to exit recession strongly Hillsborough is poised to exit recession strongly Plenty of high quality approved developments (e.g., Waterstone, Oakdale Village, Bellevue Mill, and Corbinton Commons) Plenty of high quality approved developments (e.g., Waterstone, Oakdale Village, Bellevue Mill, and Corbinton Commons) Plenty of potential developments seeking approval (Forest Ridge, Truck Stop Redevelopment, UNC Hospitals, & others) Plenty of potential developments seeking approval (Forest Ridge, Truck Stop Redevelopment, UNC Hospitals, & others) Challenges for town board, employees, and management Challenges for town board, employees, and management 1. Our roles in encouraging moderate & steady growth in the future? 2. Living within budget 3. Prioritizing investments in capital, services, & employees

QUESTIONS, CONCERNS, & SUGGESTIONS