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The consolidated budget represents the revenues and expenditures for all the funds that report financial activity of City transactions. These funds include the General Fund, the Special Revenue Funds (Parks and Tourism Fund, Stormwater Fund, American Rescue Plan Act Fund, State Accommodations Tax Fund, Tax Increment Financing II Fund, and Fire Impact Fees Fund), and the Capital Projects Fund that are combined for the fiscal year consolidated budget.
The budget process begins by publishing the budget calendar in January. The City Council strategic planning retreat occurs in February or March, during which public input is encouraged. Work begins on the next fiscal year budget during the month of March when department heads submit their budget requests for the upcoming fiscal year to the city manager. The city manager and the finance director prepare projected revenues by examining trends in the local economy. They consider the economic forecast for the upcoming year, trends in tourism, expansion of businesses and construction, and future grant opportunities. Continual discussion with department heads occurs until a balanced budget is reached that takes into consideration the City Council’s established priorities.
The city manager and finance director present more detailed information to the City Council in April and May, which includes the revenue forecast and the presentation of the recommended consolidated budget at a Work Session. This is followed by department heads presenting their department budgets to the City Council at a separate Work Session.
The City issues a public notice 15 days prior to the public hearing on the budget, which is then followed by the first and second reading of the budget ordinance before City Council for approval and adoption prior to June 30. Public input and comments are welcomed throughout the budget process -- during the strategic planning retreat, budget work sessions, public hearing, and first and second readings of the budget ordinance.
Beginning with the FY2024 budget, the City of Beaufort included funding for capital projects in the yearly budget, instead of authorizing each one on a project-by-project basis.
The budget year – fiscal year – begins on July 1 and ends the following year on June 30. This cycle is in synchronization with the State of South Carolina fiscal year calendar.
The budget is approved by the City Council with two readings of the budget ordinance. The second reading must be approved before July 1. At each of the two readings, there is opportunity for public comment.
The General Fund is the City of Beaufort’s primary operating fund. It includes the revenues generated by property taxes, business licenses, building permits, grant revenues, franchise fees, and various other miscellaneous revenues. On the expenditure side, it includes most of the costs for salaries, benefits, and operations of the City’s departments and services including police, fire, public works, and administrative departments.
In addition to the General Fund, the other funds that make up the consolidated budget are:
Parks and Tourism Fund: The Parks and Tourism Fund is funded mostly through local accommodation and hospitality taxes from the hotel and restaurant industries and other fees associated with parks and tourism activity. All businesses serving prepared foods or beverages are required to assess a 2% hospitality tax to their customers. A 3% local accommodations tax is charged by the business on each customer’s nightly stay at lodgings such as hotels, inns, beds and breakfasts, and short-term rentals. A portion of salaries, benefits, and operational costs that support our parks and tourism activity comes out of this fund. These expenditures help to support Beaufort as a thriving tourist destination, and maintain and improve our City’s parks.
Stormwater Fund: Residents and businesses pay an annual stormwater fee which is applied to the annual real property tax bill. This fund helps pay for stormwater infrastructure. It is approximately $135 a year for most residents. A portion of salaries, benefits, and operations costs – all related to stormwater work – is paid from this fund. State Accommodations Tax Fund: Revenues in this fund come from the State of South Carolina’s 2% Accommodations Tax on nightly rental stays including hotels and short-term rentals within the City. Expenditures are restricted to tourism-related activities and development of workforce housing in accordance with state law.
Fire Impact Fund: New construction in Beaufort is assessed a fire impact fee once, and this helps to pay for capital equipment and improvements in the Fire Department. The fee is assessed based on the square footage of the home or business. For a 2,300-square-foot home, the fee is $305.43.
TIF II Fund: The Tax Increment Financing District II Fund is used to account for property tax proceeds generated in the TIF II district. These funds are restricted for expenditures and capital improvement projects that benefit the TIF II district, which encompasses portions along Boundary Street and surrounding areas. ARPA Fund: The American Rescue Plan Act fund accounts for the activity related to governmental services and projects impacted by the COVID-19 pandemic. The revenue in this fund was derived from federal grants.
Capital Project Fund: The capital project fund accounts for the activity related to capital improvements within the City. These projects are typically related to City infrastructure, and include stormwater drainage projects, streetscape projects, improvements at City parks, and new construction for public purposes. Currently, the City is engaged in a major stormwater drainage project for Downtown and The Point, and is about to undertake substantial improvements in Southside and Washington Street Parks. A streetscape project along Alison Road will be underway in FY2024, and will include many improvements, including putting utility lines underground.
Property taxes, which comprise 23%, are the largest percentage of Beaufort’s revenues. Property taxes are determined by the assessment of “real, vehicle and personal property” – i.e., your home, car, boat, etc. State law requires real property values to be reassessed every five years, which is being applied in Beaufort County on the 2023 real property tax bill.
Other sources of revenue include building permits, business licenses, hospitality and accommodations taxes generated mostly by restaurants and hotels, grants, and various miscellaneous revenues. If more businesses are opening in Beaufort, if more homes are being built, and if more tourists are continuing to visit here, then these revenues are likely to increase during strong economic cycles.
The millage rate is the tax rate set by each taxing jurisdiction, such as the county, school district, or municipality. As explained by the South Carolina Revenue and Fiscal Affairs Office, the value of a mill represents the amount of property tax revenue one mill will generate. A mill equals 1/1000 of the assessed value of the property subject to property taxes. For example, if the assessed value of a property totals $100,000 the value of a mill is $100.
For FY 2024, the City of Beaufort’s municipal mill rate is 73.9, which is comprised of 58.3 operating mill and 15.6 debt mill. The operating mill is capped by state law based on the Consumer Price Index and population growth. The debt mill is set based on annual debt service payments. If your residential home is appraised at $350,000, the City of Beaufort will receive approximately $1,035 in property tax revenue.
Our capital projects, which may be funded in phases, are paid for by City resources and leveraged with federal and state grants, bonds, and private/public partnerships.
City Council determines these priorities through its annual Strategic Planning process. These projects are determined by overall City needs – such as replacing outdated infrastructure (old drainage pipes that don’t have the capacity to meet current drainage needs); improving roads and adding sidewalks, streetscape landscaping, and placing utilities underground where possible; maintaining our historic properties (such as the Arsenal and Carnegie Library building) and major improvements and amenities to City parks.
Projects are prioritized based on various factors, among them public safety, public benefit to residents and business owners, and funding availability.
When necessary, the City borrows bonds to fund capital improvement projects. Current bonds include:
Further details of the City’s debt service can be found in the City’s Annual Comprehensive Financial Report for fiscal year ended June 30, 2022, in the long-term debt section beginning on page D-21 and accessed through ACFR-Final-2022 (cityofbeaufort.org).
No. These funds are bonded against future Parks and Tourism Fund revenue mostly funded by local accommodation and hospitality taxes, and they do not impact property taxes in any way.
According to Moody’s rating agency, the City has a very strong credit position. The Aa2 rating is slightly above the median rating of Aa3 for US cities. Notable credit factors include a robust financial position, healthy tax base, and sound wealth and income profile. The stronger the bond rating, the lower the interest rates on new borrowings. The City has leveraged this bond rating to reduce debt service payments and the impact to taxpayers.
The City maintains reserves or fund balance to serve as a measure of the financial resources available in a governmental fund. It is essential that governments maintain adequate levels of fund balance to mitigate current and future risks, ensure stable tax rates, maintain favorable bond ratings, and not jeopardize the continuation of necessary public services, in accordance with generally accepted accounting principles (GAAP). City Council has set a minimum fund balance target of 25% of expenditures and recurring transfers, along with a 3% reserve for stabilization, bringing the total fund balance target to 28% of next year’s General Fund expenditure budget. This allows the City to have enough funds on hand to pay for over three months of expenditures in the event of an emergency.
City Council and City managers seek to attract and retain a dedicated and talented workforce that is responsive to those who live in Beaufort, work here, own businesses here, or visit here. Our last compensation study was completed in September 2021. The analysis of the City’s compensation system revealed some opportunities for improvement. The City periodically reviews our pay structure to remain competitive in the marketplace.
The salary structure is an administrative tool for making fair and consistent basic salary decisions. As such, the City implemented a merit-based performance management system several years ago to ensure that the basis of compensation is fair, that employees know what is expected of them, and that annual salary increases are based on performance.
Merit pay is used to reward successful performance. When budgeted, merit increases will be awarded to employees who consistently exceed performance standards as reflected on their annual evaluation. In addition, due to the unprecedented inflationary rates affecting our community, the fiscal year 2024 recommended budget includes a 5% cost of living adjustment (COLA) for all employees, except for the city manager. The city manager’s salary is set by his employment agreement and may be adjusted by City Council, usually in conjunction with the city manager’s annual review.
The ability to provide pay increases may vary from year to year depending on the economy, budget constraints, and other priorities set forth by Council.