2010-01-19 Budget Work Session NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 31
BUDGET WORK SESSION OF JANUARY 19,2010 PAGE 741
ASSEMBLY
The New Hanover County Board of Commissioners held a Budget Work Session on Tuesday, January 19,
2010, at 12:30 p.m. in the New Hanover Room of the New Hanover County Library, 201 Chestnut Street,
Wilmington,North Carolina.
Members present were Chairman Jason R. Thompson; Vice-Chairman Jonathan Barfield, Jr.;
Commissioner Robert G. Greer; Commissioner William A. Caster; Commissioner Ted Davis, Jr.; County Attorney
Wanda M. Copley;Deputy Clerk to the Board Teresa P.Elmore; and County Manager Bruce T. Shell.
Chairman Thompson called the meeting to order and requested County Manager Bruce Shell present a
budget overview for FY 2010-2011.
County Manager Bruce Shell reported that Finance Director Avril Pinder will present an overview of the
County's financial position and Budget Director Cam Griffin will give an overview of the County's projected
economic position, current budget position, and budget challenges for next year. Assistant County Manager Chris
Coudriet will facilitate discussion with the Board in setting goals and direction for staff to follow in developing the
budget.
Financial Position as of June 30,2009
Finance Director Avril Pinder presented an overview of the County's fund balance and financial condition
reporting that:
General Fund FY 2009
Revenues
Budget $311,872,311
Actual $297,940,565
Difference $(13,931,746)
Transfers In $707,908
Total Difference $(13,223,838)
Expenses
Budget $237,265,572
Actual $217,022,694
Difference $(20,242,878)
Expenses and Transfers
Budget $323,159,360
Actual $301,131,026
Difference $(22,028,334)
Fund Balance FY 2009
Actual Revenues&Transfers $298,648,473
Actual Expenses&Transfers $301,131,026
Income(Loss) $(2,482,553)
Beginning Fund Balance $68,504,541
2009 Loss $(2,482,553)
Ending 2009 Fund Balance $66,021,988
Reserved Fund Balance $21,950,297
Unreserved/Designated Fund Balance $3,132,950
Unreserved Fund Balance $40,939,041
Financial Ratios
• Solvency Fund Balance= 14.64%ratio
o Solvency measures a government's ability to meet long-term obligations
o County's goal of undesignated,unreserved fund balance= 16.67%
o Large payout of$42M for nano-filtration plant reduced the percent
0 16%ratio without payout
o County's Fund Balance percentage is below the average of peer group of 20%
• Self-Sufficiency—Charge from Expense Ratio=4%of revenues coming from fees
o Self-sufficiency addresses the extent to which service charges cover total expenses.
• Leverage—Debt to Asset Ratio= 108%
• Leverage means the extent to which total assets financed with long-term debt
• $3.2M Bonds used to pay off borrowed installment debt
• County ratio is high due to counties financing schools but not owning the asset
The Commissioners requested Staff to provide a graph showing the County's debt without the School debt
in order to have a more accurate debt to asset ratio.
• Capital-Capital Asset Condition Ratio= 62%
o Capital is the condition of capital assets as defined by the remaining useful life and shows
whether the unit is investing in its capital assets. Benchmark is 50%or greater.
• Service Obligation-Operations Ratio=.98%
0 Service obligation measures whether a government's annual revenues are sufficient to pay for
NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 31
BUDGET WORK SESSION OF JANUARY 19,2010 PAGE 742
annual operations. Benchmark is 1%or greater.
• Financing Obligation-Debt Service Ratio=22%
o Financing obligation addresses service flexibility or the amount of total expenses committed
to debt service. The large increase is due to the payoff of the $42M nano-filtration plant.
Without the payoff, the ratio would have been 7%. The modest increase was due to a new
issue of$43M school debt.
• Liquidity-Quick Ratio=5.4%
o Liquidity measures a government's ability to meet its short-term obligations. Benchmark is
2%or greater.
Finance Director Pinder concluded by saying that the County has done an outstanding job in weathering the
economic storm of the past year. Only $2.48 million of the Fund Balance was used for the Budget although $10
million was set aside. She expressed appreciation for the Board's leadership in making the difficult decisions to
make the County viable and financially strong.
Projected Economic Position for FY09-10
Budget Director Cam Griffin gave the following status report on the County's Budget:
Known Changes in Revenue: Expense Revenue
Decrease in State Funding:
Beer and Wine(one year) $(247,000)
Elimination of Reimbursement for Misdemeants $(160,000)
Increase in Revenue(savings due to not holding special $ 170,000
election on Sales Tax Referendum in November 2009)
Increase in Revenue- Adjustment in Tax Base $ 337,000
Known Changes in Expenditures:
Additional Rent for Probation Officers $60,000
Estimated FY09-10 Shortfall in Revenue:
Sales Tax-General Fund Impact(assuming sales tax will $(1,556,000)
be 11%down from FY08-09. Adopted budget included
6.5%decrease).
Inspections Revenue $ (750,000)
Projected Decrease in Revenue for FY 09-10:
Estimated FY09-10 Shortfall $60,000 $(2,206,000) $2,266,000
Budget Director Griffin noted that if the State budget is further impacted by less revenues, the legislators
may further reduce the County's funding designated for human services.
Challenges to Services for FY10-11 Budget
Expenditures Expenditures Revenue
Furlough Days: $250,000/day--10 days $2,500,000
Increase in General Fund Bonded Debt $3,064,000
Parks Bonds $1,739,000
Cape Fear Community College Bonds$ 1,408,000
Decrease in Installment Debt $ (641,000)
Amount to Restore Leave Accrual $ 500,000
Increase in Employer Contribution to State $ 940,000
Retirement System
Savings from Reorganization and Retirement Incentive $(1,000,000)
Increased Rent for Probation Offices $ 120,000
$5,483,000
Revenue
Eliminate Appropriation of Fund Balance(to restore fund balance) $(1,933,000)
Decrease in Sales Tax due to Final Phase of Medicaid/Sales Tax Swap $(1,300,000)
Loss of Reimbursement for Misdemeanants $( 160,000)
$3,393,000
Projected Shortfall $ 8,876,000
1 cent tax=$3M Refilling all vacant positions would cost$4.7 million
Additional FY10-11 Concerns:
1) Loss of revenue due to City of Wilmington Annexation June 2010. Preliminary estimates on impact of
annexation on FY10-11 Budget will be a loss in sales tax of$93,000 (last 3 months). Fire Service District
projected to lose$280,000.
2) Funding approval needed to complete the purchase of 800 MHz radios($1M).
3) Funds are needed to staff or maintain projects funded by the Parks bonds.
4) Capital Improvement Projects and maintenance of County facilities have been underfunded.
5) Funding is not available for economic development activities.
6) Funding is needed for downtown space needs in county-owned buildings and court-related facilities.
7) Cape Fear Community College and the Schools participated in the Expenditure Reduction Plan and may
NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 31
BUDGET WORK SESSION OF JANUARY 19,2010 PAGE 743
need County funding that exceeds FY09-10.
8) Human Services Departments dealing with increased caseloads due to current economic conditions with
reduced staff.
9) Concern regarding the State budget shortfalls and how it will impact the County.
In closing, Budget Director Griffin reported that the Budget notebook includes tax rate comparisons of
other counties in the state and contains other pertinent information for the Board's review.
Discussion on Setting Goals and Budget Priorities
Assistant County Manager Chris Coudriet led the Commissioners in discussing goals and priorities for the
budget process.
In general consensus,the Board discussed and set the following priorities and major goals:
• Develop a long-range plan for three to five years with flexibility for changes in the board's membership
and other environmental conditions and would allow flexibility to react to current needs
• Develop three broad policy statements
• Consider zero-base budgeting for discretionary departments(20%of budget)
• Look at cutting funding levels at 10-20%and determine impacts
• Staff to prepare a tax rate report on mandated programs and departments
• Consider full costs of grants-direct and indirect costs
• Staff to create a schedule showing impact of grants for each budget year
• Staff to perform a cost-benefit analysis of grants to determine whether the grant is cost-effective
for the County
• Consider debt ratio before approving other projects
o Determine whether goals should drive the budget;i.e. mental health facility
• Develop Fund Balance policy
• Fund Balance should not be used to balance budget
• Goal of not less than 16.67%(2 months operating expenses)
■ Any funds over goal amount can be used for debt reduction
• Inform public of increased County obligations as mandated by the State
• Report on dollars associated with County services
• Show drivers of costs outside the County's control
• Show the donation part as well as parts the County is forced to raise for operating expenses because
of changes in State policy
• Continue to focus on Customer Service
• Remove temporary measures of furlough and other reductions in benefits
• Determine value price of customer service
■ Reinvestment in people or services
• Strengthen relationships and partnerships with the municipalities within the County and develop
regional collaboration with neighboring counties of Pender and Brunswick
o Initiatives to include transportation,mental health,and beach renourishment
■ Develop a strategic approach with limits of 2 to 3 goals
• Promote New Hanover County-spend more time and resources on brand development
• Inform/educate the public on County services
• Market the County to lead the community
■ May require more Commissioner involvement with community projects and events
• Generate revenue by maximizing fees for services
o Increase tipping fees for the Environmental Management Enterprise Fund to pay back loans to
General Fund-estimated at$7 million
• Staff to develop plan on solid waste proposals to pay back General Fund
• Increase fees for services instead of increasing property tax
• Eliminate General Fund subsidies where possible to make programs self-supporting
• Policy on an annual commitment to determine budget goals
In closing, Chairman Thompson stated that the Board has agreed on several policies for staff to implement
in the budget process. The tax rate will be determined later when more is known on the specific needs of the County
Departments and funding impacts on the budget. The Board will continue discussion on a policy for funding non-
county agencies. He requested Staff to provide responses for the additional information within three weeks. Budget
work sessions were tentatively scheduled to be in conjunction with other Board meetings as needed.
ADJOURNMENT
There being no further business, Chairman Thompson adjourned the meeting at 2:45 p.m.
Respectfully submitted,
Teresa P.Elmore
Deputy Clerk to the Board