Port Royal might have to dip into savings to balance its $4.7 million budget for the coming fiscal year, a move that Mayor Sam Murray said should be avoided if possible.
In an already tight budget year, Town Council directed staff to construct a budget that won't require a tax increase and will keep the millage rate steady. That means officials must search for ways to close a shortfall of more than $250,000, town manager Van Willis said.
Staff will put a hold on capital projects and look at all utility and franchise agreements, property tax collections, business license collections and personnel costs, among other things, for possible revenue increases and savings, Willis said.
But it probably won't be enough, he said.
The town probably will have to take a maximum of $100,000 from a reserve fund of $1.07 million to help close the gap, he said.
That money is traditionally reserved for "rainy days," Willis said.
"I don't know how much rainier it gets than where we are right now," he said.
But at least one council member is reluctant to use money from reserves.
Mayor Sam Murray, who said he hadn't discussed the issue with Willis yet, said the money would be critically needed after a hurricane or other disaster.
A healthy reserve fund also helps keep the town's bond rating high, Murray said.
Using money from the fund should "one of our last options," Murray said.
Among the capital projects being put on hold is the purchase of a new garbage truck and new vehicles for the police department, Willis said.
The town also plans to finish as much of a sewer upgrade project in the Fort Frederick Circle area as possible this fiscal year, which ends June 30.
Willis said as tight as this next budget will be, he's actually more worried about the next couple of years as Beaufort County completes a reassessment in December 2012.
Property values are expected to decline, but it's unclear whether tax rates can be increased to raise the same amount of revenue as they did before the reassessment.
South Carolina law provides a formula for reducing tax rates when property values rise, but doesn't say whether they can be increased when property values fall.
The county has asked South Carolina's attorney general to clarify the question.