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1997-05-27 Budget Work Session NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 25 BUDGET WORK SESSION, MAY 27, 1997 PAGE 1011 ASSEMBLY The New Hanover County Board of Commissioners held a Budget Work Session on Tuesday, May 27, 1997, at 7:00 P.M. in Room 501 of the New Hanover County Administration Building, 320 Chestnut Street, Wilmington, North Carolina. Members present were: Commissioners Ted Davis, Jr.; Charles R. Howell; Vice-Chairman William A. Caster; Chairman Robert G. Greer; County Manager, Allen O'Neal; and Clerk to the Board, Lucie F. Harrell. Commissioner Buzz Birzenieks arrived late due to attending a meeting of the New Hanover Regional Medical Center Board of Trustees. Chairman Greer called the meeting to order. He reported the purpose of the Budget Work Session was to provide direction to the County Manager on the recommended budget for FY 1997- 98. The budget contains a 4-cent tax increase, which if approved will increase the tax rate to 68.5 cents. A lengthy discussion followed on the amount of funding needed to cover the bond debt service for the 1993 Cape Fear Community College (CFCC) and School Bond issues. Vice-Chairman Caster requested figures on the funding needed to cover debt service in FY 1997-98 and the amount of payments that have been made on these bond issues since 1993. Budget Director, Cam Griffin, presented the following figures: FY 1997-98 Debt Service Cape Fear Community College $ 698,000 New Hanover County Schools 498,572 Total $ 1,196,572 Total Payments since 1993 $ 3,392,562 Vice-Chairman Caster requested a list of increases in the tax rate since FY 1995-96. The following figures were presented: Year Tax Levy FY 1995-96 63 cents FY 1996-97 64.5 cents FY 1997-98 68.5 cents Vice-Chairman Caster strongly objected to increasing taxes each year because of the tax burden being placed on property owners. He advised he had agreed to increase the tax rate by 1.5 cents during FY 1996-97 to pay debt service for the Cape Fear Community College and School bond issues. He expressed concern for the recommended budget containing an increase of 4 cents in FY 1997-98 and stated he could not support an increase of this size. The Commissioners were urged to establish a limit for expenditures and better control the amount of money needed to provide County services. In closing, Vice-Chairman Caster spoke on being frustrated about continued increases in expenditures, funding requests, and school needs. He expressed concern for not being able to provide the necessary funding to the schools, but stated, in his opinion, it had been difficult to quantify any improvements in schools with the sizeable increases in County funding provided to the schools for the past three years. He stated he could not support an increase of 4 cents on the tax rate, particular with the proposed school bond referendum which will increase taxes to pay for debt service in the next two years. NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 25 BUDGET WORK SESSION, MAY 27, 1997 PAGE 1012 Commissioner Howell reported statistically, New Hanover County had some of the brightest students in the State; however, there were too many students at the lowest level in the State. He stated after spending the afternoon with a representative from the Child Advocacy Commission, it was astounding to learn that New Hanover County ranks first in the State in out-of-home placements and second in juvenile arrests. He stated if money is not appropriated to help our children, they will be lost. Vice-Chairman Caster explained that money had been given to schools and other programs since the 1960's with no results shown for these efforts. A new program may be started, but the old program continues to receive funding. He stated this type of government places a tremendous burden on the taxpayers. ARRIVAL OF COMMISSIONER BUZZ BIRZENIEKS AT 7:45 P.M. AND REPORT ON THE TRANSFER OF EMERGENCY MEDICAL SERVICES TO NEW HANOVER REGIONAL MEDICAL CENTER Commissioner Birzenieks reported the New Hanover Regional Medical Center Board of Trustees had just voted to transfer funds in the amount of $2,000,000 to New Hanover County for operation of the Emergency Medical Services for FY 1997-98. The Medical Center will continue to review the transfer during the next fiscal year and decide if the hospital should operate the program. Commissioner Birzenieks advised that 2 cents would be saved on the tax rate by accepting the transfer. Chairman Greer expressed appreciation to Commissioner Birzenieks for the report and stated this was good news. Further discussion was held on the overall increase in expenditures. Commissioner Howell reported that New Hanover County had drastically changed because of rapid growth which has created a greater demand for services. During this time, the County has provided sewer, the WASTEC Facility, a quality fire service, a quality level of ambulance service, a state-of-the-art library and museum with a tremendous increase in human service and school needs. As this growth continues, the citizens will demand more services which in turn will cost money. He stated, in his opinion, the tax rate will have to increase to keep up with growth. Further discussion was held on school expenditures. Commissioner Birzenieks reported the School Administration was committed to a quality initiative program. After requesting the cost of the program, a letter was received from the Administrative Staff explaining that grant funding was received in the amount of $109,200, and $62,416 had been appropriated in the operating budget for the current fiscal year. He expressed concern for the quality initiative program failing and stated this would destroy the morale of teachers and school employees. The program requires teachers to be out of the classroom for intensive training sessions creating the need to hire substitute teachers which is expensive. Also, many of the principals and teachers have become dissatisfied and are leaving positions creating turnover, which is quite costly. He stated the $62,416 budgeted by the School System does not accurately reflect the cost of the program. In his opinion, the future impact on the school budget could be serious. Commissioner Birzenieks emphasized the need to establish a vocational education program in the schools. He commented on the School of Technology in Lincoln County and stated New Hanover County needed a vocational education school of this type. After visiting the school and discussing the benefits of this concept with teachers and the superintendent, he felt this type of school could save money for the schools and hopefully resolve discipline problems. Commissioner Davis asked if the money being given to the School System was earmarked for certain uses? Budget Director Griffin advised the Board has a limited amount of control over the schools; however, the Board could require the School to adopt a Budget Ordinance in certain categories. NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 25 BUDGET WORK SESSION, MAY 27, 1997 PAGE 1013 Discussion was held on the cost of opening three new elementary schools. Budget Director Griffin advised that $750,000 was the estimated cost for opening each school, which includes teacher supplements, maintenance, and electricity. Discussion was held on the WASTEC Facility. Vice-Chairman Caster reported this was a case where a bond issue was passed by the voters on the premise that enough revenue would be generated to support the operation of the plant. This has not happened and the County continues to transfer money from the general fund to support the operation. In the proposed FY 1997-98 Budget, $2.8 million dollars will be transferred to the Environmental Management Fund. He, again, asked when will expenditures be curbed. County Manager O'Neal commented on the problems being experienced with waste disposal in surrounding counties because of landfills becoming too crowded and stated the WASTEC Facility had allowed the County to control its density in solid waste disposal. He advised that waste disposal was a costly process. Further discussion was held on future expenses that will be incurred by the Environmental Management Department. Assistant County Manager, Dave Weaver, advised that additional funding would be needed in two years for the WASTEC Facility to comply to the recently enacted Clean Air Act regulations. Chairman Greer requested the members of the Board to turn to Page 22 of the proposed budget. He requested the Budget Director to show the expenses that had been incurred over and above the budgeted figures adopted July 1, 1996. The following figures were presented: FY 1996-97 FY 1996-97 Adopted Budget Amended Budget July 1, 1996 June 30, 1997 Difference General Fund $121,469,876 $147,031,683 $25,561,807 New Hanover Schools 32,993,167 33,203,167 210,000 Emergency Telephone Sym. 59,000 59,000 -0- Room Occupancy Tax Fund 2,058,000 2,058,000 -0- Environmental Mgmt. Fund 10,690,686 11,193,897 503,211 Fire Service District 4,178,072 4,062,066 (116,006) Water & Sewer District 11,792,192 10,976,993 (815,199) County Manager O'Neal reported the increase in the General Fund was due to hurricane related expenses, grants, and increases received from the state and federal governments for human services programs. The increase in the School Fund was due to increased County contributions for operating expenses and for an additional one-half cent sales tax revenue allocation. The Environmental Management Fund increase was due to landfill cell construction and closures. The Special Fire Service District decrease was due to delays in the 421 North Fire Station, which created a need for costs to be carried over to the FY 1997-98 Budget. The decrease in the Water & Sewer District was due to splitting the ½ cent sales tax with 1/4 being appropriated to the Environmental Management Fund and 1/4 appropriated to the Water & Sewer District. Chairman Greer stressed the importance of everyone understanding that the current fiscal year budget did increase from July 1, 1996, until June 30, 1997. NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 25 BUDGET WORK SESSION, MAY 27, 1997 PAGE 1014 Discussion was held on the general overall increase in funding for the proposed FY 1997-98 Budget. The following figures were presented: General Fund Increase $5,743,894 School Fund Increase $6,260.531 Environmental Management Increase $1,774,099 Discussion was held on the amount of funding to be received by the School System from the state-wide bond referendum. County Manager O'Neal responded the School System should receive approximately $16.5 million. Commissioner Birzenieks stated he felt the following questions should be answered: (1) How does the County know if the School Administration is operating the school system in the most cost-effective manner? (2) Is there any type of pre-assessment? (3) Are the classrooms being maximized? (4) Do schools have a salary lag, and if so, how much? (5) Do the schools have a zero based budget? Budget Director Griffin reported she was not sure about a salary lag, but would be glad to check into the matter. Also, the school had attempted to prepare a zero based budget. Commissioner Davis agreed with Commissioner Birzenieks and stated if more was known about the checks and balances of the money given to the schools, it would be more acceptable to the Board and general public. Further discussion occurred on school shifts, total utilization of classrooms, and implementing a vocational education program. It was agreed that issues of this importance should be discussed with the Board of Education. Discussion was held on the increase in the budget for the Board of Elections. County Manager O'Neal reported that $265,000 was budgeted for upgrading voting machines and $136,000 had been budgeted for holding elections. He advised that five elections plus two possible run-offs were budgeted for the next fiscal year. Vice-Chairman Caster requested the County Manager to see if the municipal elections could be held on the same date to reduce the number of elections. County Manager O'Neal responded he would be glad to check into this matter; however, with each municipality being granted a charter by the State, he felt the election date had been designated in the charter. Chairman Greer requested the Board to provide direction to the County Manager on the proposed tax increase of 4 cents. After discussion of the need to provide direction to Staff on proceeding with preparing the FY 1997-98 Budget, Vice-Chairman Caster requested the County Manager to outline what expenditures could be reduced to adopt the budget with an increase of 2 cents in the tax rate. County Manager O'Neal reported the tax rate could be reduced by taking the following action: NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 25 BUDGET WORK SESSION, MAY 27, 1997 PAGE 1015 Appropriated Fund Balance $1,000,000 Reduce funding to old School Pension Fund 200,000 Eliminate Market Adjustment for County Employees 326,627 Reduce EMS expenditures 100,600 Utilization of 911 Surcharge 100,000 Salary Lag 54,000 Reduce funding to school 100,000 Total Reductions $1,881,000 Commissioner Birzenieks commented on the importance of the County remaining competitive and stated that turnovers were costly. He asked if the 3% market adjustment was eliminated, would it be fair to the employees. County Manager O'Neal reported the merit program was of utmost importance to County employees. He stated the County employees needed to be compensated and stated if the 2% market adjustment and 2% merit increase could not be included in the budget, he would be comfortable with recommending a 3% merit increase with elimination of the market adjustment. Chairman Greer strongly objected to balancing the budget with appropriating $1,000,000 from the Fund Balance since the FY 1996-97 budget was balanced by transferring funds from the Fund Balance. He recommended increasing the tax rate by 3 cents. County Manager O'Neal reported that 1 cent on the tax rate could be saved by eliminating funding to outside agencies. Discussion was held on funding for outside agencies. Chairman Greer explained that on June 2, 1997, the outside agencies would present funding requests. He advised the Board would need to schedule another Budget Work Session to review these requests plus determine the exact tax rate for the FY 1997-98 Budget. ADJOURNMENT Chairman Greer reminded the Board of the joint Work Session with the Board of Education to hear a presentation on the Wirthlin Benchmark Survey for the School Bond Referendum. Commissioner Birzenieks reported the Wirthlin report should help the Board to decide about school needs and if people are willing to increase the tax rate to meet these needs. Chairman Greer adjourned the meeting at 9:35 P.M. Respectfully submitted, Lucie F. Harrell Clerk to the Board