Nags Head staff outline FY27 budget plan, warn CIF drawdown will shrink reserves

Town staff presented the recommended fiscal‑year budget at a May 20 workshop, saying they balanced near‑term needs by drawing on the capital investment fund (CIF) and restricted fund balances while preserving a general fund target of 25%–35% of expenditures.

Amy (staff) described how the town’s capital reserve funds — including beach nourishment taxes and facility fees recorded in the general fund — make the overall budget figures appear larger because state accounting requires interfund transfers to be recorded as both revenue and expenditure. She said the FY27 plan uses more CIF fund balance than annual contributions to help close the gap between rising personnel and capital costs and flat shared revenues.

Staff emphasized the budget is a planning document, not a final commitment. The presentation noted the town has a separate CIF policy and said the CIF percentage is projected to fall from about 40% in FY26 into the low‑20s in FY27–28 if current plans hold. To address future pressures, staff included a placeholder 2¢ tax increase for FY28 to guide multi‑year planning, subject to board deliberation and additional financial planning work.

Commissioners asked staff to clarify interfund accounting and how to read actual operating spending. Andy Grama explained that interfund transfers can double‑count amounts on summary pages and recommended excluding interfund lines to view true operating expenditures. Staff also noted the Local Government Commission’s guidance is more conservative (roughly an 8% recommended minimum), but the town follows Government Finance Officers Association (GFOA) best practices and its board policy of a 25%–35% unassigned general fund balance.

The presentation closed with staff offering to provide slides and the recorded workshop online and to prepare a budget ordinance and public hearing for the mid‑June meeting if no substantial public comment requires further deliberation.