The Mayor and Board of Commissioners have been holding budget workshops for the past few months and there are several facts and issues that are driving the process and options available to us as a community.

As we are experiencing in our private lives, the costs of many things continue to rise. In addition to the many unfunded regulatory requirements that are placed on governing bodies, we have a continuing dynamic of nature, governance and public demands that continue to drive up the costs of living in Saluda. By example:

• Human Resources costs including severance packages, disability and insurance costs continue to rise faster than inflation. The competitive salary costs of law enforcement has increased because of many factors including the drain on available professionals that are called to duty in the Middle East wars. We have lost many of our "home trained" police to other agencies (Federal, State & local) and will now have to bear the cost of replacing them and training new recruits.
• Emergency response costs have increased because of hurricanes, ice and wind storms that have hammered our area in the last several years. We have been fortunate enough to obtain some FEMA support but we expect that over $200,000 of costs will not be reimbursed. Most of the past costs have been paid from our emergency fund (Fund Balance) but State law requires that we replace those funds.
• The price of energy has increased almost 40% on average over the last 3 years. Everything from the power and light bills to the costs of driving City vehicles has increased significantly.
• County services such as the maintenance and operation of the solid waste transfer station are now being directly billed to the City. We will now have to pay an assessment required by the State on top of our base fees with our service provider.
• The costs of maintaining and operating our water and wastewater system have continued to increase. We recently received notice from the State of North Carolina that we will have to spend more money maintaining rights of way for our water and sewer lines. Looming in the not too distant future is a requirement that we capture and treat stormwater before we release it back to the creeks. Additionally, we need to continue to invest in new systems and technology that will bring our long-term costs down such as an automated meter reading system that has less than a 2 year pay back period.
• We have been and continue to be behind in maintaining our streets, sidewalks, parks, cemetary and buildings (especially City Hall). We have had to make investments in surveillance systems for the City Park and Library to stop what seems to be rampant vandalism by juveniles. The investments have been very successful but it's a cost that was not there before.
• Our attorney costs have increased as we have begun to manage the risks associated with our very litigious society. Issues such as zoning, regulatory compliance, self-serving third-party lawsuits, grant administration and day-to-day operations provide opportunities for the "disaffected" to continue their campaigns of punishing the masses. Prudence requires that we involve our legal counsel more actively in our decision processes. This means increased costs.
• In response to public demands, we have increased our expenditures on infrastructure including the addition of leaf collection and post-storm clean up of debris. These expenses are not insiginificant.
• Saluda now enjoys a popularity that energizes our volunteers and business organizations to create new festivals and events to bolster business revenues and charitable contributions (all positive things). However, there is a cost that has come with providing support and public safety for these events that comes from the City resources.

Over the last several years the citizens of Saluda have been confronted with significant increases in County tax rates as well as increases in our Fire Department assessments. In this environment, we have fought to find ways to save in our City operations as well as delay expenditures where we had some flexibility. As an example, in 2005 our citizens absorbed a $0.0925 increase in County taxes and an additional $0.01 increase in our Fire assessments. As we all know, increases in taxes at the County level typically do not provide increases in services at the local level. Nothing in the increases provided the City of Saluda with an opportunity to decrease or hold constant our taxation levels. The dilemma is that our costs were increasing as fast if not faster than the costs of governing Polk County.

The Mayor and Board realized at that time that passing any significant increases in taxes or assessments would severely stress many of our citizens (some of who could be considered Founders). We chose to delay or stretch-out any increases as long as we could to allow our neighbors to adjust as best they could. Foregoing tax and fee increases resulted in less investment in repairing and maintaining our streets, buildings, parks, cemetary and police during a period where we have experienced unprecedented service growth. Needless to say, this is not a sustainable condition.

On the other side, we have developed a more long-term budgeting strategy instead of the year-to-year (some say day-to-day) budgeting strategy used in the past. The value of a long-term budgeting strategy is three-fold.

• It provides each of us as taxpayers the opportunity to see and understand in advance the impact of tax rates on our own personal finances and allow us to plan accordingly.
• It provides the City opportunity to plan expenditures over longer periods of time to address infrastructure and resource deficiencies in a rational, deliberate manner.
• It keeps the tax rates lower over the long term and allows us to minimize the impacts of the property re-evaluations that will occur in 2008.

In evaluating our current budgetary needs over the next five years, we are better able to manage investments that will keep costs lower in the long run. Unfortunately, the "perfect storm" of events over the last few years has placed us in a position where a tax increase of $0.08 will be necessary just to meet our current obligations. We have also recognized that there are many precious citizens in our community that are vulnerable to tax and service fee increases. We are committed to finding ways such as the "Homestead Act" exemptions and reduced service fees to help these folks to maintain their lifestyles in our community. It is critical that we find a way to keep our community whole and the Board and Mayor are committed to doing just that.