The Town Manager has posted his proposed budget online. It becomes the first draft of the Town Council’s budget, which we must adopt by the end of June. In this post I’ll summarize what is in the budget, how it impacts you, and how you can impact it over the coming weeks as we work to finalize it.

Tax Changes

Key Takeaways: Tax rate is proposed to rise 2.5 cents and utility rates rise 4%

I’m not one to bury the lede, so I’ll start with the bottom line: the proposed budget includes a 2.5 cent increase in the property tax rate. The 2.5 cents can be divided into 1.6 cents for the 2021 voter approved infrastructure bond, and another 0.9 cents for capital investments and operations. This 2.5 cents represents an increase of about $125 on the annual property tax bill of a $500,000 home.

Let me be clear, the 1.6 cents for the bond is baked in — it is happening. It is a result of the 2021 bond vote. The bridge it’s funding is currently under construction, more projects are coming, and the money from the 1.6 cents is going directly into a debt service fund to pay for money we have already borrowed and can not, legally, be used for anything else.

The other 0.9 cents can be further divided into 0.4 cents for our capital fund (or “community investment fund”), and 0.5 cents to fund essential positions, which I’ll get into in a bit. 0.9 cents is around $45 a year on a $500,000 home.

During our budget presentation, Town Council asked the manager asked for a menu of options of recommended changes for use of an additional half cent, one cent, and cent and a half of property tax revenue on top of the 0.9. At the last Finance Committee meeting, I asked to be added to that menu of options what budget changes would be recommended if we were to eliminate the 0.9 cent increase. I expect the property tax rate will be one of the primary topics of discussion in the coming weeks.

Utility Rate Changes

Generally around 4% or less. From the budget:

A common theme in the budget is the rising costs of insurance (up 16% per employee), which I’ll dig into in a bit, but this impacts all departments. Electric is seeing a 3.5% underlying contract costs for wholesale power, which is quite low and we’re very happy with. We’re not likely to see increases this low from Duke in future years - next year is penciled in at 4.5% by contract. Other things driving electric rates are hard costs for equipment, which is increasing at a rate greater than inflation, and that is before we feel any tariff impacts - which could result in a drastic increase in costs and thus rates in future years. But all of that is unknown now and not hitting us this budget.

The water budget includes 4 new positions and some significant capital projects including a sewer extension and a UV treatment system replacement.

Our utility rate increases are lower than neighboring utilities, and our resulting rates are among the lowest in the region.

Staffing Changes

Key Takeaways: Budget saw 60 new positions requested, 28 approved

Below is the table summarizing the position changes in the proposed budget. 60 new positions were requested, many in line with a previously adopted 4 year staffing plan. 28 new positions were included in the budget. Of the 28, I want to highlight an IT Security Specialist, 2 new SROs (for the new high school) that are we obligated to provide, and 6 new firefighters to help relieve staffing pressure at our fire stations.

We plan to refresh the 4 year staffing plan this coming year.

Of these positions, the public safety (firefighters) and communication specialists (customer service agents to help with call volume and general customer service on utility issues) were identified as specifically being funded by the 0.5 cent property tax increase.

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And a word on insurance. The Town of Apex is “self insured” - meaning, we pay out claims we receive directly. We currently pay 100% of employee costs and 60% of family costs for our employees. We’re expecting to see a 16% increase in insurance costs this year, which is massive. A lot of that is driven by the adoption of high cost of GLP-1 drugs, ie Ozempic and similar. A lot of organizations are struggling with how to address the rising pharmaceutical costs here. As a first step, we are raising the copay of these drugs from $25 to $100.

Revenues

Key Takeaways: General fund revenue up 3% YOY

A common piece of feedback I get is “What about all the growth? Why don’t you just use THAT money?”

If I can specifically address that: We are in fact aware of property that has annexed into the town, and property tax revenue from new property is accounted for in the new budget. We know the addresses of those properties, and I can assure you they will get sent a tax bill like everyone else, and any money they collect will go into our general fund, and our budget anticipates that being collected as reflected by an increased revenue amount.

It does not come close to covering increased costs year over year. It used to, actually. But not today.

Part of the issue is our growth has dramatically slowed, and the days when new property and homes can subsidize inflationary and other costs (both due to growth and not) are long gone.

Another issue is sales tax revenue is projected to only grow 2% YOY, which is the lowest number I’ve ever seen.

Yet another issue: we’re seeing property tax collection rates start to dip (from something like 99.9% to 99.8%). Although minor, each 0.1% reduction in tax collection rates means $100,000 less in revenue for the town, in addition to being a worrying signal for the economy. We’ll be watching closely to see if this trend continues.

Our only meaningful lever for revenue is property tax rates. We also set many many fees, etc - but in practical terms property tax + sales tax make up the vast majority of revenue and we don’t control sales tax rates.

Expenditures

Key Takeaways: We have a balanced budget

Ok, what about expenditures? How are we spending all this money? Well, most of our expenses are people - salaries, benefits, and some capital to support them like equipment. As well as capital projects. Capital projects have two basic flavors, so called paygo (where we pay cash), which have a direct budget impact, and debt financed, which have a varying level of impact over the terms of the financing, which can be from 5 to 20 years. Generally bigger stuff is debt financed and smaller stuff is paygo.

I do want to point out the election this year will cost Apex $200k, which could be $0 if we moved to even year elections.

Here is my favorite chart showing at a high level how our budget is allocated

And a little more granular on the General Fund:

Capital Projects

Key Takeaways: Capital expenditures are down year over year to balance the budget. Still, we have multiple design projects setting us up for success in the future.

So what capital projects are included? Well the best place to view that is the CIP and seeing what is scheduled for FY 25-26. Remember what I said earlier though: because a lot of this is debt financed, moving or deferring it won’t save much (if any) money in this years budget, and they are only likely to get more expensive in future years. Deferring CIP projects generally doesn’t save money, it costs money. If you want to save money, you need to cancel stuff (or down scope them so they are actually cheaper).

I know a lot of people are uncomfortable with just the very concept of debt, but it is the most financially efficient way to fund large projects. It’s not too dissimilar to 30 year mortgages we all have. You *could* try to save up and buy a house in cash, but by the time you did so (if you’re even able to do so), the cost of that house probably has gone up so much you couldn’t buy it.

Anyway. Here is the important bit of the projects we’re going to try to start this year. Some of these are just design, and not the full costs. Refer to the full CIP for a better long range view of our capital plan

Next Steps

In short: we have a Finance Committee meeting on Thursday, a budget workshop on May 8th, a public hearing on May 27th and potential adoption of the budget on June 10th.

This is a challenging year. I encourage you to stay involved and share your thoughts—your input truly helps shape our town’s future. I am working on organizing an Office Hours Session next week to talk about the budget, likely next Monday night at 6pm, location TBD.

-terry