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Council weighs using $2.5M in reserves for capital needs while awaiting FEMA reimbursements
Summary
Council spent significant time reviewing a proposed use of $2.5 million in general-fund reserves for one-time capital projects (paving, greenway, ADA work), discussed accommodations-tax allocations for beach nourishment and noted $12M still expected from federal hurricane reimbursements for Matthew and Florence.
Oak Island — At a budget workshop on April 28, town staff and council traded detailed questions about using up to $2.5 million from the general fund for one-time capital needs and about the town’s longer-term approach to beach nourishment and FEMA reimbursements.
A council member asked whether the proposed budget was only balanced by dipping into reserves; staff confirmed the plan assumes up to $2.5M of one-time fund-balance usage but emphasized that these are not ongoing operating costs. Staff also described the town as exceeding the policy minimum for unassigned fund balance and said the town remains ‘‘well compliant’’ with its fund-balance policy even after the planned drawdown.
Council reviewed capital items that staff said should be prioritized: dedicated street-paving allocations (Powell bill + parking revenue), a $1M placeholder for greenway planning, $300,000 for ADA renovations at the recreation and community centers, park/playground improvements ($250,000), and various equipment and HVAC replacements. Staff recommended scoping and phased implementation for the greenway and cautioned that some projects require state approvals and are candidates for external grants.
On beach funding, staff reiterated the town’s practice of assigning the accommodations (room-occupancy) tax to visitor-related services and beach nourishment. The town’s revenue forecast for the 3% room-occupancy tax was presented conservatively at about $3.575M, while the 2% dedicated beach fund and a separate beach-nourishment fund (fund 47) carry larger project-level expenditures. Staff stressed the town should not assume federal cost-share or FEMA reimbursements until federal approvals are final; staff said the town is awaiting roughly $12 million in reimbursements tied to storms including Matthew and Florence but that timing and partial disallowances remain possible.
Why it matters: Using reserves for one-time capital can accelerate needed infrastructure repairs, but council members repeatedly cautioned against creating a pattern of routine reliance on fund balance. Some council members advocated modifying the fund-balance policy or adopting guardrails so future councils are not placed in difficult trade-offs between reserves and ongoing service levels.
Next steps: Staff will provide an itemized breakdown of the $2.5M allocations, fold capital priorities into the recommended May budget, and present grant-seeking options for the greenway and Davis Canal projects.
