Chatham County finance staff report Q2 budget steady but sales tax softening

Daryl Butts, finance staff, told the Chatham County Board of Commissioners on Jan. 21 that the county’s fiscal-year 2025 second-quarter budget review (the first six months of the fiscal year, July–Dec.) shows spending is generally on track but sales-tax-driven revenues have softened compared with recent years.

The report matters because sales tax and property tax are the county’s largest locally collected revenues; a sustained sales-tax decline could reduce discretionary funds for county services and capital projects.

Butts said most budget functions are near expected year-to-date rates once timing differences are removed, and that the county’s capital outlay spending has improved: “We’re at about 50% expended for the year,” he said, noting vehicle deliveries to the sheriff’s office that were delayed during the pandemic are now arriving in the same fiscal year as ordered. He also pointed to benefits and allocation lines that look high in Q2 because of the timing of transfers to the county’s self-insurance and debt-reserve funds.

On revenues, Butts said ad valorem (property) tax collections are stronger than a simple 50% midyear benchmark — most property-tax receipts arrive in November–January — and collection percentages remain high. Motor-vehicle collections are likewise performing above last year. By contrast, locally collected sales tax collections through four months are below last year’s unusually strong totals, with a roughly $67,000 shortfall through the month of collections that has hit the county financial system. “Through four months, we’re at about a third of our budget… and we’re actually slightly behind where we were last year,” Butts said.

He and commissioners discussed causes: the county’s previous multi-year sales tax spikes reflected extraordinary construction and industrial activity, notably Wolfspeed permits and materials delivered in FY24. Butts said FY25 looks more like a return to steady growth rather than the 10%+ surges of prior years: “We may have gone slightly lower than what I would consider the norm, to a more slow growth,” he said. He noted statewide patterns are similar: “the vast majority of the counties in the state are in a very similar situation.”

On other revenue lines, the county saw a roughly 25% year-over-year drop in excise/recording fees and a marked reduction in building inspection revenue compared with FY24, when large industrial permitting drove atypical receipts. Butts highlighted Article 46 sales tax (the locally-dedicated portion) budgeted at $3.2 million for FY25; through four months it had collected about $1.2 million, roughly $17,000 behind the comparable period last year but on pace to meet budget if current trends hold.

Commissioners asked for clarification on “transfers in and out” (debt-service and reserve transfers) and on the treatment of leases under GASB 87, the Governmental Accounting Standards Board rule that required new reporting of leases and subscriptions on FY24 financial statements. Butts said some timing and accounting differences drive apparent anomalies in year-over-year charts; the finance team will annotate slides to call out those timing effects.

Commissioners and staff said they will continue to monitor collections, particularly in January when the bulk of property-tax receipts are posted to the books. Butts recommended fiscal prudence and pointed to the county’s conservative budgeting approach in recent years as a defense against revenue volatility.

Ending: The county will bring updated collections data as January and February receipts post; staff said they will continue to present quarterly updates and to annotate future slide decks to clarify timing differences and one-time items that affect year-over-year comparisons.