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HomeMy WebLinkAbout2015-05-28 Special Meeting NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 33 BUDGET WORK SESSION, MAY 28, 2015 PAGE 309 ASSEMBLY The New Hanover County Board of Commissioners held a Budget Work Session on Thursday, May 28, 2015, at 10:05 a.m. at the New Hanover County Government Center, Harrell Conference Room, 230 Government Center Drive, Wilmington, NC. Members present: Chairman Jonathan Barfield, Jr.; Vice-Chairman Beth Dawson; Commissioner Skip Watkins; Commissioner Woody White; and Commissioner Rob Zapple. Staff members present: County Manager Chris Coudriet; Assistant County Manager Tim Burgess; Budget Director Cam Griffin; Assistant County Manager Avril Pinder; Finance Director Lisa Wurtzbacher; and Deputy Clerk to the Board Kymberleigh G. Crowell. Chairman Barfield called the meeting to order and requested County Manager Chris Coudriet to begin the presentation. County Manager Coudriet thanked the Board for working with Staff on the budget and asked Budget Director Cam Griffin to start the presentation by reviewing the revised budget recommendation. Overview of Revised Recommended Budget Spreadsheet: Budget Director Cam Griffin presented an overview of the revised recommended budget spreadsheet, which is based on the Board directives from the May 14, 2015 work session to make up the additional adjustments of $916,035:  Decrease in Cape Fear Community College - $550,000 savings  Decrease in Childcare Subsidy for 100 children – $225,200 savings  Decrease in Juvenile Justice Study - $150,000 savings  Adjustments to Miscellaneous Funding - $9,165; this is a balancing number In response to questions regarding the Juvenile Justice Study, Director Griffin explained the study will review the implications in changing the age of juveniles from 16 to 18. It will also address programmatic needs and long-term space needs that would be from not only the County but also the State. If the NC legislature approves changing the age, the number of juvenile court counselors will increase. The juvenile court counselors are State funded but the County provides the operations space. The process will occur in phases once the rule is effective; the study will assist the County in being proactive, and it was suggested through the court system. Staff supports looking at the potential impacts now to see what kind of new service(s) may be needed and what the estimated growth of the caseloads may be which will translate to more office space needs over the long-term. In the budget recommendation Staff noted, it would ask that the Board ask the Chief District Court Judge to oversee it. Commissioner White reported on a meeting about the area where court is held that included Judge J. H. Corpening, II, the County Manager, and Community Justice Services (CJS) Director Kathy Stoute. It is a very confined area and does not allow for sufficient independent private counseling; people line the hallways, which affect the quality of hearings. County Manager Coudriet reported that the original proposed study cost of $250,000 was a proposed amount; Staff needed a number that they knew would not exceed and it had always been Staff’s hope that the number could be reduced. In response to questions about the long-term financial impact if the caseload increases, County Manager Coudriet stated that the juvenile court counselors could easily grow by 25% maybe 50% and there’s not enough space in existing facility to meet the operating requirements even when CJS moves back to the 320 Chestnut Street location. Also space will be a fiscal impact to the County. With there being more of a shift from the State to the County, there could be some gaps of service(s) that the State does not address that perhaps the Juvenile Crime Prevention Council (JCPC) could address or help the County fund. This issue has arisen in other states such as Georgia, and that information could provide guidance on this issue. County Manager Coudriet reported that the safe operating capacity of the jail is 585 and for the last few months, it was at or above that number over a period of weeks. Work is being done with CJS, Department of Social Services (DSS) and others in the community to try to stem the long-term trend of people being held in the jail for too long or for child support delinquency. Persons in jail for child support are not in a position to earn money to pay and while the jail needs to be an option, it should not be the first option. The County has been victimizing itself in the way it runs the child support program, by advocating placing people in jail and then not having enough bed space. The long-term policy position has been reshaped with support of DSS to hopefully address the issue and there are efforts to try to help create opportunities. For mental health or substance abuse issues, part of the reason the Board is being asked to consider supporting additional money to Trillium is to give people a real opportunity and real option other than a night or multiple nights in jail where there’s not a chance to de-escalate. These people may be in jail for doing something that is a crime, but had there been an opportunity to address the issue in a crisis prevention perspective it may not have gone that far. There is on average about 30 to 40 people nightly in the jail for these two issues. If the County can keep those people out of jail on any given night that allows the opportunity to delay what could be approximately a $30 million plus expansion of the jail. Staff is working hard with a collaboration of agencies to reduce what would be unnecessary because of unintentional action. Addendum Discussion – FY15-16 Budget Adjustment Options Staff provided the following in response to Commissioner White’s questions after the May 14, 2015 work session: 1) Salary Adjustment: NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 33 BUDGET WORK SESSION, MAY 28, 2015 PAGE 310 The Recommended Budget includes:  1.7% market adjustment  The equivalent of a 2% merit adjustment for 9 months  Each 1% salary adjustment is $750,000 Market:  Reducing the market adjustment (1.7% to 1%) would save $525,000  Not funding a market adjustment (1.7% to 0) would save $1,275,000 Merit:  Reducing the merit adjustment (2% to 1%) would save $562,500  Not funding a merit adjustment (2% to 0%) would save $1,125,000  Merit awards are effective the first pay period of the second quarter 2) School Adjustment: Reducing school funding by an additional $25 per student would save $675,900 3) Budget Comparison: FY14-15 FY15-16 Change 1 Library: Expenditure $ 4,723,095 $ 4,173,196 $ (549,899) Revenue (661,483) (604,406) 57,077 Net Cost $ 4,061,612 $ 3,568,790 $ (492,822) 2 Museum: Expenditure $ 1,227,387 $ 1,095,184 $ (132,203) Revenue (305,049) (254,877) 50,172 Net Cost $ 922,338 $ 840,307 $ (82,031) 3 Sheriff: Expenditure $ 40,859,534 $ 42,653,892 $ 1,794,358 Revenue (5,117,922) (4,808,212) 309,710 Net Cost $ 35,741,612 $ 37,845,680 $ 2,104,068 Notes: 1 FY14-15 Revised Budget included funds to purchase land 2 FY14-15 Budget included funds for the Museum Strategic Plan 3 FY15-16 Salaries and wages increased as a result of the relocation of nine positions to the Sheriff’s Office during FY14-15 and the cost of 1.7% merit. Operating increased due to increase in the medical contract for inmates. In response to questions about the budget comparison, County Manager Coudriet confirmed that with the exception of the Sheriff’s Office the Library and Museum have decreased spending in the recommended budget. When looking at the General Fund this is not an uncommon experience and it is how the County was effectively able to slow the growth in the overall general government and still make some of the meaningful increases in the other parts of the budget. In response to questions about dropping the merit pool by .5% instead of 1%, Budget Director Griffin stated the savings would be $281,250 and it is a little less as the merit is only for nine months. In a brief discussion about the elevators replacement project, Commissioner White responded to questions that if the inmate elevator was inoperable for a few days the fallback would be the staircase and he thinks that is what the bailiffs would use. If another elevator were used, there would never be a time the inmates would ride in an elevator with anyone except armed escorts. Commissioner Watkins suggested that at this time the project be delayed in order to provide a savings of $640,000; if there is a breakdown in the future, it will have to be addressed if not repairable. A brief discussion was held on the CFCC budget. In response to questions about the cuts of $550,000, the amount targets the maintenance building and remodeling of the Emmart Building kitchen, dining room and porch. County Manager Coudriet stated that while Staff did not identify a particular set of projects based on what they were hearing from the Board, the amount could be framed around the value of these two projects. However, the CFCC Board of Trustees will fund the things that it thinks are important. The request from CFCC was $3.8 million for capital outlay and with this revision it has decreased by $550,000. Commissioners White and Zapple reported they have asked to meet with CFCC staff to review what projects are fully funded and completed, what projects are in NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 33 BUDGET WORK SESSION, MAY 28, 2015 PAGE 311 midstream and what projects can CFCC foreseeably oversee and do next year. It was noted that the reduction is also almost the price tag for a parking lot, which is the top capital outlay request and will cost about $544,000; efforts will be made to see if the Trustees could or would shift some fees from the parking fee revenue to fund that expense. Commissioners White and Zapple will keep the Board in the loop. In response to questions regarding CFCC funding, County Manger Coudriet confirmed the original recommendation was $3.8 million and now it is essentially at $3.25 million and it may fluctuate based on upcoming meetings with the CFCC staff. Budget Director Griffin responded there are two different categories in funding for CFCC: 1) debt and 2) actual contribution. CFCC does not actually get the funds budgeted for the debt and the reduction discussed today will not affect the debt service. Fund Balance and AAA Bond Rating Discussion The County achieved the AAA rating because of establishment of the 21% fund balance policy. Only 75 or 80 counties out of 3,300 in the country have been able to obtain this rating. In response to Board questions, Finance Director Wurtzbacher stated the balance is currently about $63 million. When the County received the AAA rating, it was immediately able to drop its interest rate significantly and refinance some of the debt. By doing so, the County was able to save approximately $4 million over the life of one of the issuances. During a current refunding a savings of approximately $2 million was realized and over the years savings have been realized in the millions. Assistant County Manager Avril Pinder noted that counties such as Durham, which has a 16% policy, have a more diverse economy and jobs where New Hanover County is heavy on tourism. The County’s higher rate is based on research and analysis and how it reached the 21% or 22%; was not compared just to Durham at 16% but rather, looking at all the factors that go into obtaining a AAA rating. Discussion was held by the Board about the possibility of adopting a new fund balance policy to lower the percentage from 21% to 18%, 17% or 16% and the potential effects of being able to retain the AAA rating, as they do not want to lose the rating. Some Board members expressed concerns about lowering the percentage policy. While it is the taxpayers’ money, some feel the current percentage is a responsible amount to have as it allows a higher level of security in the event of a major disaster and the ability to cover needs until federal reimbursement is received. Concerning questions about the rating agencies’ potential response to the change, County Manager Coudriet stated the policy more than the percentage is probably what will be the deciding point with the rating agencies and it could be a red flag. If the County was not going to the bond market in July and the Board changed its fund balance policy that might be one thing, but the policy has been in place effectively two years and to change the policy now to avoid raising the tax rate would certainly be a red flag 60 days later to the rating agencies. The rating agencies are going to require Finance Director Wurtzbacher to explain, “Where is your 12 million of fund balance going to?” and if 6% of it is going to one-time capital and the rest is going to pay for general operations that is going to be a problem for them from a rating perspective. County Manager Coudriet further stated that he firmly stands by the policy and thinks it is what puts the County where it is and there are intricate details the rating agencies will look at on how the money is used within the confines of the Board’s public policy. With today’s adjustments, 21% is effectively the level where the County will be which represents 75 days of cash on hand for the County which does business 24 hours a day, seven days a week. It also accounts for an ebb and flow in property tax collections, the majority of which arrives in November and December as sales tax arrives three months in arrears. The County will not begin collecting next year’s sales taxes until October 2016. Further discussion was held with the Board’s understanding that it is the policy not the percentage that the rating agencies will be using as a deciding point. Some Board members commented that if advocated by staff that this is more of a cash flow balance sheet analysis, debt coming off each year with a lot of debt coming off in five or six years, and how the fund balance has grown from 16% to 21% since passing the policy, the rating may remain at AAA. A reduction would allow the Board not to have to raise taxes by 2 cents if there is a policy change from 21% to 19% or 18%. Finance Director Wurtzbacher reported on her conversation with the County’s rating agency, Moody’s, about changing the Fund Balance policy. The Moody’s representative essentially stated that they do see organizations change their Fund Balance policy but typically, it is to strengthen the policy, not weaken it. If the Board did change the Fund Balance policy to weaken it, the change would be a credit red flag. The representative did not say it would change the rating but stated it would be a red flag and reiterated the importance of having revenues from the Fund Balance be for one-time expenditures. One-time revenues is another item within a whole host of factors the rating agency reviews and the representative was not able to say if 21% is right or if 16% is right; Staff would also have to present some sort of business case. In response to questions, Assistant County Manager Pinder stated that Staff does report one-time revenues as positive. A brief discussion was held about the potential effects of outstanding legislation on the local economy as well as the County’s budget. Senate Bill 369 (S369) that concerns the sales tax redistribution probably will not be decided by the legislature until after the County has adopted its budget as well as the coastal storm damage reduction legislation. Some Board members commented that having the Fund Balance policy remain as is might be in the County’s favor and cushion the impact, if significant, of these pieces of legislation. In response to Board questions about S369, County Manager Coudriet does not believe there is any proposed impact for the year that begins July 1, 2015. The three sales tax bills under consideration by the legislature convene around the idea of July 1, 2017, which means it would begin with the sales tax collections in October 2017. It will be known in time for the next fiscal budget because it would be roughly a year. NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 33 BUDGET WORK SESSION, MAY 28, 2015 PAGE 312 Capital Improvement Project Discussion A brief discussion was held about the need to continue concentrating on capital outlay as far as what needs to be done and the prioritization of it. In response to questions about the HWY 421 water and sewer expansion, County Manager Coudriet reported that the project will begin this budget year. In response to questions about the project break down over the next five years, Finance Director Wurtzbacher stated that what is in the General Fund budget is to do a preliminary engineering report (PER) which will provide a more accurate cost and timeline information. The $2 million budgeted does not have an impact in FY16 because it would be funded through a capital improvement project (CIP) fund and funded through debt. County Manager Coudriet reported that it is budgeted in the CIP, but there is not a commitment of funding for next fiscal year in that amount; it is in the years thereafter in the equivalent of $900,083 on average of debt because it would be borrowed money. In response to questions about the prioritization of CIP recommendations, Staff confirmed that the public safety items will be funded through grant funds and are not part of the 55.4 current tax rate. Based on discussions today about removing the elevator replacement project from the list will provide a savings of $800,000. Staff confirmed that the Carolina Courtyard Renovation is funded by the Parks Bond and fundraising and the Ogden Skate Park is in the current year budget and being paid for with cash. It was further noted that none of the $6.9 million proposed in the current budget has been borrowed on; it is a pay as you go, but the project will be rolled over even though it is in the CIP ordinance so it is not required to be rolled over. In response to questions about what projects could be delayed in an effort to reduce the impact, Finance Director Wurtzbacher stated that the following items are coming from the General Fund for FY16: 1) the elevator replacement project which the Board discussed taking out; 2) the design for roof replacement for the Government Center and the libraries; 3) some HVAC replacements and 4) drainage improvements. In response to questions about the recently approved School Bond, County Manager Coudriet confirmed that the top priority was the Porters Neck Elementary School. The County approved the land, design and the engineering, which totaled approximately $1.7 million. The County will recoup the cost of design via bond proceeds but not the cost of the land, which Staff did not seek as the goal was to minimize the bond request while making sure the funds will go to other projects. The land was the property of the Rock Church and they purchased it using funds out of their fund balance. Childcare Subsidy Discussion The Board discussed the recommendation to decrease the childcare subsidy by $225,200 for 100 children. Request was made of Staff to quantify it in some measure of what one working mom, who’s not on the welfare rolls saves the Department of Social Services (DSS); how do we measure the success of these additional dollars compared to the reduction in dependency on the system; what is the return on investment of someone getting off another roll somewhere. Concerns were expressed by some Board members that the reduction may lead to other unintended consequences in terms of increased costs to DSS and that this is a Federal and State funded program and providing local funding blurs the lines even more. The numbers are tracked monthly at DSS and there is accountability for the individuals that are in the program. In response to the Board’s questions, Assistant County Manager Pinder stated there are policies followed about who is funded, who receives daycare and they are prioritized. The first group is foster care and the second group is work first; in October 2014, there were 748 children on the waiting list and as of April 2015 the count has grown to 776. In response to questions about how many children receive Federal and State assistance, Assistant County Manager Pinder reported 1,445 children are being served and the waiting list is just the people who have recently applied. County Manager Coudriet added that there is not a child that’s in foster care that’s not getting daycare, because they are first in line. The children that are on the waiting list are not those that fall into foster care, work first or other higher threshold criteria. It is the bottom third or parents who may or may not be economically eligible yet, but have simply made application and then there has to be a determination of whether or not they would qualify based on the rules. As such, not all of the 700 children would qualify so Staff settled on 150 as the likely number that would be qualified but that number would actually turn into 225 because children roll off and new children could come on. A child, who is a priority, is not being not served because of State dollars and Smart Start dollars. County Manager Coudriet confirmed, in response to Board questions, that this is extending a new benefit that the County never extended before. There was one year that the County intentionally made up for children who got caught up in the State rule change; the County did not want children to lose their benefit and continued funding until the children were in public school or the parents were no longer financially eligible. He further commented that he believes there is no question that there are individuals in the community who would like to work, but are unable to do so because of the daycare cost and this creates an opportunity, for someone with an economic hardship, to qualify and put their talents to work in the workforce. In response to questions about other daycare alternatives (family, church, etc.), County Manager Coudriet reported that is not part of the eligibility criteria. When analysis was done, it came to a reasonable number that out of the 700 children approximately 150 would ultimately be accepted into the program by responsiveness of the parent to follow-up and if doing so then being determined to be eligible. Board members discussed that there is agreement that there is a need within the community and this is an effort to address the problem at the root rather than have to deal with these issues in the future. There are qualitative and quantitative aspects of children in daycare during their formative years. Through various studies correlations have been made between a child receiving this service and as such, entering school at the appropriate level, ability to learn throughout their career, and becoming less likely to use government resources later in life. In response to questions about level/type of daycare provided, Assistant County Manager Pinder reported that daycare facilities must be five star rated agencies and those rated agencies do have some early education components including NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 33 BUDGET WORK SESSION, MAY 28, 2015 PAGE 313 nutrition components. In response to Board’s request, Staff will provide copies of the Harlem Study and Duke University Study. The Duke University Study was conducted within the last 36 months, took a 20-year look specifically at Smart Start, and published the data. In response to additional questions, County Manager Coudriet confirmed that the County does have Smart Start, but the County’s funding is effectively a local expansion of the opportunity. Outside Agency Funding Board members asked each other to consider in the coming weeks possibly providing funding for:  The Friends of Fort Fisher for $5,000; this is an auxiliary group for Fort Fisher; the State provides funding for the park. Suggestion was made to simply add it back into the budget rather than reducing other outside agency recipients to provide the funding.  The Cape Fear Resource and Conservation Development under economic development; it has been funded in the past; it’s more of an economic development, grant funding organization; this is an organization where there are partner counties and the funding would essentially equate to work they might do on the County’s behalf to help secure a small grant.  The Children’s Museum in the amount of $10,000.  The Arts Council of Wilmington and New Hanover County for $10,000; it submitted a request for $25,000. The Council is the hub of the arts and cultural community and has an impact on multiple organizations within the community. General Discussion and Board Directives It was noted by Commissioner Zapple that a 1.9 cent increase to the property tax rate equates to an increase on a house valued at $200,000 of approximately $39 per year and that over the last eight years, the County has borrowed or bonded, after receiving approval by the taxpayers, approximately $340 million. Chairman Barfield asked County Manager Coudriet and his staff to work with the information provided during today’s work session and provide the summarized information via email; upon receipt of the information the Board could then decide if it needs to have one more work session. ADJOURNMENT There being no further discussion, Chairman Barfield adjourned the meeting at 11:45 a.m. Respectfully submitted, Kymberleigh G. Crowell Deputy Clerk to the Board