Henderson officials warn of tight budget after audit delay; manager proposes $3 million credit line to spur redevelopment

At a Feb. 18 strategic planning retreat, Finance Director Joey Fuqua told the Henderson City Council that a cyber attack delayed completion of the FY25 audit and left the city’s fund balance under pressure, potentially constraining the FY27 budget. Fuqua said compliance documentation for the Kerr Lake Regional Water plant remains missing and must be secured before the audit is fully closed and staff can complete budget entry for the next cycle.

Fuqua reported that the city’s FY24 unassigned fund balance was $6.7 million but estimated FY25 expenditures exceeded revenues by about $1 million, reducing the fund balance to roughly $5.7 million. He said the city has relied on fund balance to cover salary adjustments aimed at remaining competitive with neighboring municipalities and warned the pattern could continue unless new revenue streams are developed.

Fuqua provided revenue context: a $1.285 billion property tax base at the current $0.65 rate projects about $8.35 million in property tax revenues, while sales tax collections showed double‑digit growth tied to recent retail openings. He cautioned, however, that despite those gains the overall outlook remains tight.

City Manager Paylor Spruill emphasized redevelopment as the primary path to fiscal stability. He described recent developer interest, recommended creating a developer welcome package and holding a special meeting with development prospects, and proposed segregating Tax Increment Financing (TIF) funds to support property acquisition. To act quickly on opportunities, Spruill suggested establishing a $3 million revolving credit line; he said a credit line offers flexibility and faster action while municipal bonds could provide larger sums but require approval from the North Carolina Local Government Commission and carry longer repayment terms.

Council members probed capital needs and debt. Fuqua said the city’s total outstanding debt is about $77 million, driven largely by the KLRW project, and identified a $32 million state revolving loan and a $15 million revenue bond among large obligations. He noted three short‑term loans totaling $763,000 will retire by July 2027, relieving near‑term pressure. Councilmember Garry Daeke asked about a $1.7 million cost to complete William and Montgomery Park and expressed concern about annual debt service of roughly $300,000–$400,000.

Public safety capital also factored into planning. Officials noted the county’s volunteer rescue squad no longer provides certain services, increasing the Fire Department’s equipment needs; a replacement engine was estimated at $2 million to $3 million and would require phased funding.

Spruill urged immediate downtown roof inspections and remediation to prevent deterioration of historic buildings and suggested partnering with a commercial real estate firm to match vacant properties with investors. Council discussed naming‑rights sponsorships for a downtown pavilion and amortization clauses in interlocal arrangements with the County to ensure fair cost‑sharing.

No formal decisions or votes were recorded at the retreat. Next steps identified by staff included securing outstanding audit documentation for KLRW, proceeding with FY27 budget work once the audit is closed, and following up on outreach to developers and downtown property owners.