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2017-05-11 Agenda Review and Budget Work Session NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 33 AGENDA REVIEW MEETING AND BUDGET WORK SESSION, MAY 11, 2017 PAGE 782 ASSEMBLY The New Hanover County Board of Commissioners met for Agenda Review and Budget Work Session on Thursday, May 11, 2017 at 4:01 p.m. in the Harrell Conference Room at the New Hanover County Government Center, 230 Government Center Drive, Wilmington, North Carolina. Members present: Chairman Woody White; Vice-Chairman Skip Watkins; Commissioner Patricia Kusek; and Commissioner Rob Zapple. Commissioner Jonathan Barfield, Jr. was absent. Staff present: County Manager Chris Coudriet; County Attorney Wanda Copley; and Clerk to the Board Kymberleigh G. Crowell. Chairman White called the Agenda Review meeting and Budget Work Session to order and announced that the purpose of the meeting is to review and discuss the agenda items for the May 15, 2017 Regular Meeting and the FY17-18 Recommended Budget. DISCUSSION OF MAY 15, 2017 AGENDA ITEMS Consent Item 4. Adoption of Budget Amendments. In response to questions regarding Budget Amendment 17-076, Chief Strategy and Budget Officer Beth Schrader stated she would report back to the Board on the number of chairs to be replaced at the Senior Resource Center. Commissioner Zapple commented he hopes it is a complete replacement as the chairs are worn out. In response to questions regarding Budget Amendment 17-080, Ms. Schrader stated that Good Shepherd Center gives the County a number of different grants. The Good Shepherd Center writes the grants and then turns the proceeds over to the County for implementation. This particular grant is providing funding for the Gang Resistance Education and Training (G.R.E.A.T.) program. The County has several Senior Resource Officers (SROs) who are trained in this particular technique to do gang intervention. Regular Item 5. Presentation of Service Awards and Introduction of New Employees. Commissioner Zapple expressed appreciation to County Manager Coudriet for the inclusion of new employee recognition. REVIEW AND DISCUSSION OF THE FY17-18 RECOMMENDED BUDGET County Manager Coudriet asked Chief Strategy and Budget Officer Beth Schrader to provide an overview of the consensus Board changes as of May 10, 2017 from the Recommended to Adopted Budget: Additions (Reductions) Notes Funds replacement of seven maintenance vehicles CFCC Capital Outlay $210,000 with CFCC premiums NHC Schools Current Operating Expense (213,600) Adjustment to student population assumptions NHC Schools Current Operating Expense 830,190 Increase from $2,670 to $2,700 per pupil Reclassification of some Pre-K expansion NHC Schools Current Operating Expense (66,717) expenses to capital outlay Reclassification of some Pre-K expansion NHC Schools Capital Outlay 60,000 expenses to capital outlay Southeastern Partnership, Inc. 20,000 Cape Fear Resource Conserv. & Develop. Inc. (9,000) Wilmington Downtown, Inc. (40,000) Continuum of Care for Homelessness (Cape Fear Council of Governments) (25,000) First Tee of Greater Wilmington (10,000) Same as in FY17 Good Shepherd Center (11,000) Return to FY16 funding level Lenny Simpson Tennis & Education Fund/One Love Tennis (15,000) Martin Luther King, Jr. Celebration (5,000) Recovery Resource Center, Inc. (5,000) Wilmington Area Rebuilding Ministry, Inc. (WARM) (5,000) Wilmington’s Residential Adolescent Achievement Place, Inc. (WRAAP) (10,000) Total $1,120,190 ($415,317) Other Discussion Points: Fire Service District ($958,073) Reduce tax rate from 8.5 cents to 7.75 cents Fire Service District ($188,308) Eliminate Administrative Reserve General Fund (GF) Appropriated Fund Balance $1,146,381 GF to pay indirect costs for Fire Service District General Fund Appropriated Fund Balance $494,873 To balance CFCC Premiums $210,000 Funds replacement of seven maintenance vehicles The Commissioners discussed the following funding issues: County Appropriations to New Hanover County Schools County Manager Coudriet stated that based on staff discussions with the Board the recommended New Hanover County Schools (NHCS) per pupil amount has been modified from $2,670 to $2,700. It is important to note the amount of money the County has committed to the school system over the last ten years, but particularly the last five years, in terms of current expense, capital, and debt. When combining all of those expenditures into one measure,  NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 33 AGENDA REVIEW MEETING AND BUDGET WORK SESSION, MAY 11, 2017 PAGE 783 in looking at current year, not projecting, the County is appropriating $96.6 million. From 2007 that is an increase from $77.6 million to $96.6 million. The context matters and it demonstrates that the Board is supporting public education. The average daily membership (ADM) growth, has increased over the last several years. In 2014 the County’s per pupil amount was roughly $2,485 and following the Board’s direction will now be $2,700 in 2018. There will be approximately 27,000 students in the school system, which is NHCS and charter schools. Charter schools are important in the discussion as the NHCS system does share its ADM funding directly with the charter schools. There are approximately 1,000 students enrolled in charter schools in our community. County Manager Coudriet then reviewed the Sensitivity Analysis information: Sensitivity Analysis:  Recommended Budget: $2,670 per pupil, $2.0 MM in capital plus Pre-K Expansion $2,670 $2,680 $2,690 $2,700 $0 $ 73,924,040 $ 74,200,770 $ 74,477,500 $ 74,754,230 $1.0 MM $ 74,924,040 $ 75,200,770 $ 75,477,500 $ 75,754,230 $2.0 MM $ 75,924,040 $ 76,200,770 $ 76,477,500 $ 76,754,230 $3.0 MM $ 76,924,040 $ 77,200,770 $ 77,477,500 $ 77,754,230  Pre-K adds $387,000 operating plus $100,000 for one-time capital. He explained that the total spending for the school system for next year, if the Board proceeds with the $2,700 and the staff recommendation of $2 million in capital, would be an appropriation of $76.7 million in general operating expenses. Debt has to be added on top of that and it is also important that the Board continues to support Pre-K in $387,000 operating plus $100,000 in one-time capital outlay. In total, the increase funding in the K-12 system is approximately $2.3 million in FY18 versus the current year. In response to Board questions about the funding increase, County Manager Coudriet confirmed the increase is approximately $2.37 million in K-12 from current to next fiscal. Capital is $2 million in the current year, which is effectively what’s proposed for next year. The $76.7 million includes capital. The increase can be attributed to counting the natural growth in the school system of approximately 400 - 500 students, the appropriation increase from $2,660 to $2,700 and giving that additional number of dollars to each new student that shows up, maintaining the $2 million in capital, and also making the Pre-K operating expense and the one-time capital. In response to Board questions about the State appropriation per student, County Manager Coudriet requested NHCS Superintendent Dr. Markley to provide the information. Dr. Markley stated that the State appropriation is $5,616 per pupil. In response to additional questions, Dr. Markley confirmed that the total per pupil appropriation of funds from the State and the County is approximately $8,300. He further commented that North Carolina funds education in reverse manner of most states. In most states the local government is the primary provider with property tax being the base source and State being supplemental. Regarding questions about the five Academically and Intellectually Gifted (AIG) teacher positions that the Board of Education proposed to eliminate, Dr. Markley stated that based on the County appropriation of $2,700 per pupil and the Senate budget released earlier in the week setting a lower amount for raises, the five AIG teachers can be retained. He also confirmed that it is the Board of Education’s decision whether or not to keep the positions. Dr. Markley expressed appreciation to the Board of Commissioners for their efforts for the funding and being good partners with NHCS. This school system has a better working relationship with the Board of Commissioners than almost any of the other school systems across the state. Chairman White commented that the historical value the County and NHCS has in working together is important. With this budget, this will be five years of growth which is approximately $12 million in operations or approximately a 22% increase and enrollment has increased by about 5.5% to 6%. The record demonstrates that the Commissioners have and do unanimously support the schools. He commended NHCS for doing its best with finite resources and the proof is in the test scoring as it relates to peer counties. This school system consistently continues to rank at or above everyone else in the State and that’s something everyone is proud of. However, he feels the school system, in the future, can better communicate to the parents and Parent Teacher Associations (PTAs) the language of partnership and teamwork that does exist between the Commissioners and Board of Education which has been demonstrated today. The decision to retain the five AIG teachers was never a decision that the Board of Commissioners is empowered to make. It is always a decision the Board of Education is empowered to make. He expressed appreciation of all the Commissioners being able to come to a unanimous agreement on per pupil funding and commended the County staff, Dr. Markley and the Board of Education for working together on this matter. Commissioner Zapple stated that this is a completion of a commitment that County staff made approximately three years ago and he believes it is important that we keep our commitment to that. We said it and we did it and it should be noted. Outside Agencies Discussion was held about the funding level for Wilmington Downtown, Inc. (WDI). Commissioner Zapple stated that there are multiple economic development groups in the County and he is currently serving on the WDI board. He believes the funding level request should not be reduced and should be maintained at $65,000. WDI is NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 33 AGENDA REVIEW MEETING AND BUDGET WORK SESSION, MAY 11, 2017 PAGE 784 important in how it benefits the downtown area and the County as a whole. WDI is meant to promote the economic growth and investment in downtown Wilmington which is a part of New Hanover County. It does so by working with all types of investment projects including retail, office, single and multi-family residential, hospitality, arts, culture, film production, historic preservation, and commercial investment. He feels there is no economic development organization in the County that helps more with small businesses than WDI. Commissioner Zapple further stated that in 2016 the downtown area had a total tax value of over $630 million and that’s what WDI is representing in one form or another. There are 880 businesses with 10,900 employees and 2,100 residents in the downtown area that WDI is representing. The 2016 value of the privately-owned taxable real estate was $427 million. The downtown area generated $2.6 million in property taxes in 2016. From 2012 to 2016 the tax value of properties in the downtown area increased by 9.3% while the County’s ad valorem property values increased only by 7.8%. The difference is what is used to help lessen the financial burden on residential property owners. The return on investment (ROI) for every dollar that the County invests in the WDI contract, at its current rate of $65,000, is for every dollar the tax value of downtown grew by $256. The ROI for every dollar the County invested in WDI in 2016 had a return of $1,260 in additional investment occurring in the downtown area. Commissioner Zapple stated that he does not think any of the other economic development organizations on the outside agency list right now can show those kind of numbers that have this type of direct impact. He understands there’s conflict in thinking of WDI as a downtown or City of Wilmington thing but it is a County thing that is a major economic engine for the County. The funding of $65,000 represents less than 15% of WDI’s entire budget, which is approximately $416,000 per year. He further stated that there is now an agreement with the City of Wilmington to move to a Municipal Services District (MSD) which adds another layer of investment going in downtown by taxpayers. A request has been made for a County position on the MSD Board of Directors and Advisory Board. He would greatly appreciate the Commissioners reconsidering the funding amount and returning it to the $65,000 level. Chairman White expressed appreciation for Commissioner Zapple’s comments and stated that he doesn’t disagree with them in any way. He understands there is consensus on the number and the reductions are half of the jail diversion/LINC program and the funds for that program have to be found somewhere. The reductions are consistent and in no way targeted toward WDI and there is recognition of the partnership the County has with WDI. There was a desire to bring the funding back into conformity with where it was a few years ago. There was also a goal of trying to find some of the funds for the jail diversion/LINC program which will cost $264,000. No group has been singled out. It’s just trying to reallocate dollars to something with just as much priority/importance. Chairman White concluded his comments stating that this is his view on why he would support the numbers as presented during today’s meeting. A brief discussion was held about the funding for WDI over the past several of years. In response to Board discussion and questions, County Manager Coudriet confirmed that in the early years of funding WDI the level was $25,000. There was a multiple year commitment of $50,000. One year he recommended $25,000 and it was negotiated up to $37,500 where it stayed for couple of years until the current year. Commissioner Zapple stated that since 2012 which is the last year it was at $50,000, it has been there or at $37,500 since that time until the current year. WDI has also been tasked with additional items from the County such as the Grace Street Project which they are handling at no cost increases. While he understands all the other cuts, he singled this one out due to having a lot of contact with it and is incredibly impressed how much the County gets out of every dollar that goes in down there. He also thinks there is a fairness issue. He doesn’t know another agency that for a $65,000 investment, the County receives this level of return and it sends a clear message to small businesses that the County is maintaining them and helping them grow. Commissioner Kusek stated that she has spent a lot of time going through the entire outside agency book and in the past four years the funding for all of the agencies together has doubled. While she understands Commissioner Zapple’s passion for WDI, there is not an agency on the list that each Commissioner doesn’t have a particular passion for. She thinks over the years this is what has enabled various agencies to get to the point that they are at. Some agencies have never completed contracts and some have not submitted financials or audits. County staff has been in touch with those that are in violation. If the agencies are not in compliance by July 1, 2017, her proposal would be that they do not receive any further funding. There is a policy coming forward addressing how outside agency funding requests come in through County Commissioners so that new requests that come up between now and next budget cycle get brought before the full Board, discussed, vetted, and voted on. While she understands it is tough on these agencies, she would much rather the “belt be tightened” a little bit and be able to redirect those funds as is being done to the school system. She thinks that’s the proper way for the funds to be directed. Discussion was held about the two-year funding cycle and associated contracts. Commissioner Zapple stated while he agrees with Commissioner Kusek’s points, WDI is a good steward of County funds. There has also been a lot of hard work for years to set up the situation of working on a two-year cycle. County Manager Coudriet stated that he’s not certain that the current year funding for WDI was predicated on a two-year agreement. He recommended the amount and did so again for the upcoming year, but he does not distinctly remember that the record will demonstrate that there was a contractual funding agreement for that amount. Chief Strategy and Budget Office Beth Schrader stated that for clarification purposes, all the outside agencies were funded on a two-year cycle except for the Battleship and a couple of others that are three-year. The agreements were done on a two-year cycle and each include a non-appropriation clause so that the Board has the freedom to, on an annual basis, determine whether or not it chooses to appropriate funds for an agency. Again, since it was a two- year funding cycle, a two-year contract was done with a non-appropriation clause which leaves the flexibility. Commissioner Zapple commented that an agency’s expectation and anticipation if funded at one level, it would receive it on the second level unless the Commissioners took action to defund it. County Manager Coudriet stated that WDI has been part of the budget for any number of years. He’s not certain that with WDI being a perpetual NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 33 AGENDA REVIEW MEETING AND BUDGET WORK SESSION, MAY 11, 2017 PAGE 785 part of the budget that there was any negotiation between it and the County that in the current year it is $65,000 and next year they can expect it to be the same. He does not distinctly remember that being the agreement with WDI. Although for next year’s budget he recommended $65,0000, it was not because there’s a signed agreement with WDI for that amount. Mr. Coudriet and Ms. Schrader further explained that there are signed agreements with outside agencies. For outside agency funding, when it is done through the annual budget there is a contract that is signed with that and there’s a non-appropriation clause that the County Attorney has said is to be in every contract. Deputy County Attorney Kemp Burpeau stated that the two-year contract is in place unless it is modified. Mr. Coudriet stated that there are any number of agencies that are a part of the budget for an ongoing basis. There is a signed document with everyone but that doesn’t mean every agreement commits money on a two-year basis. Ms. Schrader stated that she can provide the contracts associated with all outside agencies and each contract has a non-appropriation clause that is included as part of the documents that are signed. As with all of the agencies that were part of the two-year funding request, including WDI, each one has a contract that potentially runs for two years with the option of the Commissioners, if there’s money that’s appropriated. Regarding whether or not WDI will receive a funding increase with the creation of the MSD, WDI Executive Director Ed Wolverton stated potentially. It is a bid process and will depend on if WDI is awarded the contract for services by the City of Wilmington. During discussion about other outside agencies, County Manager Coudriet stated that he was not speaking for Commissioner Barfield, but did have a discussion with him about continued funding for Wilmington’s Residential Adolescent Achievement Place, Inc. (WRAAP) for another year. He reported that Commissioner Barfield was comfortable with him bringing up the item for discussion. This is an agency that is focused on a narrowband of at-risk rdth kids in the community, 3 – 8 grades, and it provides after school and summer hours for academic and social enrichment opportunities for kids largely unsupervised. The current year commitment is $10,000 and Commissioner Barfield would like for the Board to consider maintaining that for at least one more year due to the focused services it rdth provides for 3 – 8 grade students. Chairman White stated that there is consensus to leave the funding level for WRAAP at zero. He stated that he did speak with Commissioner Barfield and out of deference to Commissioner Barfield, and without making a commitment to change his vote, Chairman White requested that County Manager Coudriet find out more information about the agency. In response to questions about meeting the basic requirements, County Manager Coudriet confirmed that WRAAP is on the list of not meeting the basic requirements. Chairman White stated that was not part of his decision to ask for the reduction because there is a need to find money for the jail diversion/LINC program and the schools and that’s what these cuts are really about. As WRAAP is on the list of not having met the basic requirements, he reiterated his request that County Manager Coudriet obtain more information, report back to the Board with his findings and between now and the adoption of the budget the Board can confer. Vice-Chairman Watkins stated that he is in agreement that for those agencies that have not submitted a contract and those that have not submitted financial statements or audits, they do not receive funding. County Manager Coudriet stated that the draft outside agency policy has been provided to the Board on this issue. Unless told otherwise, staff plans to bring it forward to the first meeting in June. A brief discussion was held about the funding for Southeastern Partnership, Inc. being increased from zero to $20,000. Vice-Chairman Watkins stated most, if not all, the Commissioners received a phone call from Wilmington Business Development (WBD) CEO Scott Satterfield who explained that Southeastern Partnership, Inc. has been a “bird dog” for WBD and their continued funding was instrumental to the ongoing success of not only New Hanover County but southeastern North Carolina. Commissioner Zapple commented that it seems Southeastern Partnership, Inc. and the Southeastern Economic Development Commission (SEDC) perform the same functions. County Manager Coudriet explained that Southeastern Partnership and the SEDC are two distinctly different entities. SEDC handles federal economic dollars and if it did not exist and the County was not a dues paying member, the transfer of the Economic Development Administration (EDA) funds would not be possible. He noted that everyone does not receive nor competes each year for this type funding and the County has not received any funds. Chairman White stated that he did not support funding the Southeastern Partnership, Inc. last year nor this year. After receiving a number of phone calls, he was convinced to reluctantly support it for the upcoming year. In response to Board questions about the funding levels for both organizations, County Manager Coudriet stated that the funding for Southeastern Partnership, Inc. is recommended at $20,000 and funding for SEDC is recommended at $18,500. Commissioner Zapple commented that these are two economic development groups and understands the theory behind funding them, but we have WDI in our own backyard that is delivering, with clear evidence, to us every single day. He again asked that everyone contact him or Mr. Wolverton to discuss the funding request and/or answer any questions. He expressed his appreciation for the opportunity to state his position on the WDI funding. Vice-Chairman Watkins requested that staff look into how to receive a benefit of being a member of the SEDC. County Manager Coudriet stated that while the County itself has not received EDA funding, he remembers in years past that Cape Fear Futures was originally funded through EDA dollars and two of the three beach towns have received EDA funding. On occasion it may be challenged because sometimes those dollars have to be looked at on a census track and income and there may be a considerable number of places the County is not eligible. NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 33 AGENDA REVIEW MEETING AND BUDGET WORK SESSION, MAY 11, 2017 PAGE 786 Regarding the document presented during this work session showing the consensus Board changes as of May 10, 2017 from the Recommended to Adopted Budget, County Manager Coudriet did confirm with the Board that no changes are to be made to the document as of now. ADJOURNMENT There being no further business, Chairman White adjourned the meeting at 4:49 p.m. Respectfully submitted, Kymberleigh G. Crowell Clerk to the Board Please note that the above minutes are not a verbatim of the New Hanover County Board of Commissioners meeting.