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2018-05-03 Agenda Review NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 34 AGENDA REVIEW MEETING, MAY 3, 2018 PAGE 97 ASSEMBLY The New Hanover County Board of Commissioners met for Agenda Review on Thursday, May 3, 2018 at 4:00 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 Jonathan Barfield, Jr.; and Commissioner Rob Zapple. Commissioner Patricia Kusek was absent. Staff present: County Manager Chris Coudriet; Deputy County Attorney Sharon Huffman; and Clerk to the Board Kymberleigh G. Crowell. Chairman White called the Agenda Review meeting to order and announced that the purpose of the meeting is to review and discuss the agenda items for the May 7, 2018 Regular Meeting with discussions as noted: Consent Item 3. Adoption of State Road Resolutions. A brief discussion was held regarding the temporary cul-de-sac at Ervin’s Place Drive and if that was allowed. Planning Director Wayne Clark stated he assumed it was temporary until there is connection to the road. Consent Item 7. Adoption of a Resolution to Dispose of Surplus Property According to Procedures Outlined in North Carolina General Statues – Chapter 160A, Article 12. A brief discussion was held regarding ways to share with the public and non-profit organizations the surplus property items that are available since this item is listed on the consent agenda. The County has a system in place through the auction process to share what items are available, as well as providing the information to the non-profit organizations. The main outlet used to disperse the information is through an online notice. Staff will review the options and share with the Board the media release that is sent to the public. In response to Board questions, Chief Financial Officer Lisa Wurtzbacher stated that the County does not typically have problems disposing of the surplus property and the items are not retained very long. After the public auction ends, remaining items are sent to the landfill. Many organizations already know that governments dispose of surplus property regularly, but the County will make an effort to draw more attention to the notice. Consent Item 10. Approval of 2017-2018 Board of Education Budget Amendment #6. In response to Board questions, New Hanover County Schools Chief Financial Officer (NHCS CFO) Mary Hazel Small stated that the budget increase of $126,637 for classroom teachers’ salary is due to two reasons. First, there was a reduction in the state fund for the payments for the North Carolina Virtual Public School (NCVPS) Online Learning because some teaching positions were removed. Secondly, there was an increase through a transfer from another line item. Regular Item 11. Consideration of Elder Abuse Awareness Month Proclamation. Vice-Chairman Watkins will read the proclamation. Regular Item 12. Consideration of National Preservation Month Proclamation. Chairman White stated that Commissioner Kusek requested to read the proclamation. Regular Item 13. Consideration of Foster Care Awareness Month Proclamation. Commissioner Barfield will read the proclamation. Regular Item 14. Consideration of the New Hanover County Juvenile Crime Prevention Council Funding Recommendation for Fiscal Year 2018-2019. In response to Board questions regarding Teen Court funding, Chief Strategy and Budget Officer Beth Schrader stated there is not a duplication in funding and it a combination of two sources. The cash match is what Teen Court applies for through an outside agency and JCPC provides the balance of the money to actually fund the resources that actually fund Teen Court itself. It was also noted that Part III of page 14-1-6 is missing from the report due to a printing error. Staff will prepare the page and include it in the agenda packet. Regular Item 15. Presentation of FY18-19 Recommended Budget and FY19-23 Capital Improvement Plan. A brief discussion was held regarding how to proceed with reviewing the recommended budget. Chairman th White stated that County Manager Coudriet would present the budget at the Board Meeting on May 7 and each of the Commissioners have already met with staff several times over the past two months. He stated that he understands what the County Manager is recommending and he intends to support it as is. If any Commissioners have questions or concerns about any items he encourages them to meet with the County Manager to discuss. Commissioner Zapple stated that he has not met with NHCS Board of Education members and would like more information regarding the NHCS funding request. Specifically, he would like to know why there is $15 million of taxpayer money sitting in the NHCS fund balance and if some of that can be used for one-time capital or facilities expenses. He would like to know what specifically changed in the state laws and what exactly is being directed by the state as it appears to be another unfunded mandate for the local level to handle. Chairman White suggested Commissioner Zapple contact the Board of Education members to speak directly with them. He explained he has been doing this and each time has had his questions answered and NHCS CFO Mary Hazel Small is present today to answer any questions. Chairman White stated they had answered his questions sufficiently enough to convince him to support the County Manager’s recommendation to meet them at their ask of $2,800 and $3.6 million in capital. Regarding the state law change, it was primarily an unfunded mandate and he believes the funding to that presupposes that that’s actually the law. He feels that the school system is much more attune to what the state is most likely to do with their funding than the Commissioners would be so he took them at their word for that, as has always been done. NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 34 AGENDA REVIEW MEETING, MAY 3, 2018 PAGE 98 Chairman White stated that on the fund balance, he has had many discussions over the last five years. It has decreased from 8% to 6%, NHCS has taken some of the Board’s concerns to heart in his opinion, and have appropriated more than they have in the past. Regarding the appropriate level of that fund balance, Chairman White thinks that is for NHCS to decide in consultation with the County. They have been comfortable at 6%, which is 100% County dollars, no state or federal dollars, but it’s still 6% of their overall budget. The question of whether that is too high or not high enough is a reasonable question. However, for the purposes of the County budget, he is comfortable that NHCS has used it sufficiently to this point to get us to where we are. He hopes over the next year that discussion continues between their finance team and ours, to understand it better and to use the cash portions of it more efficiently. The Board of Education is an elected body and he feels both boards work well together and always have. When there is disagreement, it’s in a civil manner and its difficult territory to trespass on sometimes when they have an elected office and a job to do. Chairman White stated he will make those comments at any time and has made them many times in many places. He thinks it’s a huge increase year over year, but it’s a commitment that the County has made. In response to Board questions, Ms. Small stated as to state salary and benefit changes for the two-year state budget, the state has published next year’s salary schedules for teachers. For one of the first times, NHCS is not estimating for teachers, unless the state changes their mind, but they already voted on it. There will be a 6% increase and the goal has been to steadily try to increase the average teachers’ salary. Benefit rates have been set for next year and are known. Again the state could change its mind, but it has been voted on and the amount is known. The $96 is just for the state mandated raises and benefit increases. NHCS has also taken out items it would like to do locally in addition to that and the only formal ask is $2,800. Commissioner Zapple stated clear communication has resulted in good cooperation between the County and the school system. Starting three years ago, there was a request to move from approximately $2,620 up to $2,700. There were active discussions amongst the Commissioners of how to do it and it was able to get to $2,700 last year. This year’s request seemed to come all of a sudden with an official ask of $100 in one year with little notification of what was happening. He assumes internally there was more information that drove that, but he never heard it and doesn’t know if other Commissioners were aware of it. A $100 increase in per pupil supplemental funding is a large request and takes millions of dollars to make that happen. In reviewing the information, he understands why and if he were in Ms. Small’s position, he would be advocating for as much extra money as possible. He does have concerns about creating a fund balance when it’s not required. He has heard from individual administrators, classroom parents, etc., that needs are not being met on a daily basis and when there is approximately $15 million sitting in fund balance, he would like to know why is it that amount. Commissioner Zapple further stated that he knows sometimes there are pay issues and there has been some discussion among the staff that instead of doing every month, they wanted to request quarterly payments or a portion at a time to help ease that out over the year. He said he thinks the system that currently exists by law would work, but instead there is $15 million of taxpayer money that was dedicated by this Board to NHCS that is sitting in fund balance. He would like to find every way to take as much as possible out of that fund and put it back into the classrooms. This is his motivation behind asking about it and he does not doubt the need for $3.6 million in capital. He stands ready and willing to appropriate the it. However, he would like for it to come with some type of agreement through the fund balance. In response, Ms. Small stated that as it relates to the fund balance, there are some concerns with cash flow of state and federal money for salaries and this represents less than 1 month of salaries. Federal funds are not received until October, so NHCS has to fund the Title I teachers for a couple of months and there are some cash flow issues. There have been years at the Federal, State, and local levels where they had mid-year reductions. NHCS wants to be comfortable that there is enough money to cover payroll for that next month if there is some kind of crisis. While NHCS knows the County will always be able to help in the event of any kind of disaster, there were concerns if there was any trouble with its state and federal funding, the fund balance would be available for use. The school system is not allowed to have a federal and state fund balance; only a local one. For this reason, she recommended to the Board of Education to have a fund balance and the Board is comfortable with 6%. There is no required amount. If there was a specific percentage that the County wanted to recommended, the Board of Education would certainly consider it. The very significant and main reason that drives it is payroll and payroll is 86% of the budget. Commissioner Zapple thanked Ms. Small for the information. During the budget process is when the most impact can be made and the funds are going to good work within our educational system. He would appreciate knowing Chairman White’s point of view as it represents a large part of his views as well. However, he still questions having that amount of money set aside when there are specific needs within the classroom. Chairman White stated that while he does not disagree with anything Commissioner Zapple has stated and are many of the things he has said for years. He feels that that the two percent decrease is meaningful and he knows some of it was committed to capital last year. By asking the same questions, the information technology cycle has gone from an eight-year cycle to a six-year cycle. They are looking at going to 5 ½ or 5 years. He thinks they are using $1.7 million of the fund balance this year in this new upcoming budget. He does share Commissioner Zapple’s concerns about the fund balance, but also recognizes they are a sovereign body. It is money the Board allocates, but NHCS is in a better position to decide what that should be. Some counties do different things and it is an arbitrary thing. His personal view is that NHCS is better positioned to make that decision. Chairman White further stated that over time the way the Commissioners discuss it does affect how NHCS deploys it and he thinks staff has given them suggestions on how they can deploy it in the future a little more efficiently. Ultimately, it is their decision, as long as the County knows what it is and as long as the County is always a part of that conversation, as it always has been. He wishes it were a lower amount as he does not think it fair that the NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 34 AGENDA REVIEW MEETING, MAY 3, 2018 PAGE 99 county taxpayer holds 100% of the risk of those dollars for state and federal payroll. He understands that and has said that, but the Commissioners do not have any jurisdiction to change that unless it just does not appropriate for them. It is not an irrelevant question, but for his personal vote that is how he felt comfortable at 6%. Then visit it year over year because things change. Commissioner Zapple stated that regarding the communication aspect, three weeks ago the Board of Education announced this increase. It was information NHCS was aware of internally but the information did not arrive at the County until three weeks ago. It goes to credibility as these are two large institutions that want to get along and indeed seem to get along well. Commissioner Zapple pointed out that, as Chairman White stated, the Commissioners have done a great job of keeping the County’s own fund balance and creating a strong policy that allows for funds to be available if the school needs it. He thinks there are internal controls that could be used to help the school board smooth out payments, again, by going with block payments instead of every month. In regard to the amount of money, percentage-wise it does not sound like very much, but as this school system grows, as the county grows, the amount of money is going to increase the fund balance. Commissioner Zapple further stated that his final thought is how that fund balance grows. The amount of money allocated to the school system, in good faith, from the Commissioners, from the taxpayers that they represent, goes in it. When that money is not fully spent by the end of the year, it gets moved over to a fund balance. It would be different if the unspent funds could be returned to the County and there was a request for money to be set aside for a fund balance, and to have this kind of a discussion. NHCS could bring that forward and say it needs 2%, 3%, etc. for these specific reasons. Then the two groups could isolate that and have that discussion, but that is not what happens. He feels there is an over ask so the Board of Education can build its fund balance. He’s not sure that’s fair to the taxpayers as he does not think they fully understand that. In response, Ms. Small stated that she does not think this is an over ask. The budget is set based on positions, and they budget tightly, so a lot of it is salary lag, not just with the local money, but also with the state positions. The savings are captured locally, so there is no reversion to the state. When looking at the total budget with 4,000 employees, there are some savings. The fear is if they do not do that and do not have the vacancies, they do not want to come up short. Efforts are made to keep it stable so there is not growth and it use to be transferred to capital outlay, but the Local Government Commission (LGC) no longer allows that. This is in part how Anderson Elementary was built, with a fund balance transfer. As that is no longer allowed, NHCS is trying to keep it lower since it is not being saved for capital purposes. While computers could probably be purchased with, it cannot do building items because those are not allowed. It is not an intentional over request, only an estimate. The Board of Education makes a determination of how much to appropriate in the next budget. Before things were cut in the late 2000s, NHCS used to appropriate a certain amount automatically in the budget. While that is not done quite as much any longer, the amount needed to balance is still done. When the economy was tight, there was a lot of fear, so there was not as much turnover. There was no salary savings and there was a shortage. They got out of the habit of doing that and it’s a different time now, so they might be able to go back to doing that if it’s the County’s wish. Commissioner Zapple thanked Ms. Small for the information. In regards to facilities and capital outlay, he questioned why there are literally hundreds of empty desks in some schools. There is a sense the goal is to try to buy a way out of this without fully recognizing how to most efficiently use and distribute the student body throughout the County to make use of those desks. He hoped Ms. Small could carry this concern back to the Board of Education. Commissioner Barfield stated he understood the rationale. The same thing has been done in the Department of Social Services (DSS) through the last several budgets. DSS was carrying a higher than needed balance and over the last couple of years, the budget has been reduced by approximately $4 million in total. In the end, he thinks it was a better use of taxpayer resources to make sure the funds were being put in the right place. He feels the Board of Education should really look at their historic numbers, as DSS did even though it’s one of the bigger agencies with 300 plus employees and a $30 million+ budget, which is nothing like the school system. Over two years, Ms. Schrader, Ms. Wurtzbacher, and County Manager Coudriet were able to move roughly $4 million back into the general fund. It would be prudent to look at lean principles within the school system as we do in county government, to make sure there is not any waste. The County partnered with the hospital to learn the lean principles and utilized the techniques with the Health Department and DSS to find ways to improve processes, create better quality, and to increase profitability. The hospital had a $52 million profit a couple of years ago, mainly because of lean principals. He thinks NHCS should look system wide and partner with the hospital, as the County did, to find ways to be more efficient when there are limited dollars moving forward. He understands the need for a fund balance but at the same time he thinks it would be good for the school system to take a look its historic numbers and make sure it’s not holding more than its needs. He believes this is a conversation for the budget and finance departments to have where they could review things in detail. County Manager Coudriet stated that he passed out the recommended budget which would be officially presented at the Board Meeting on Monday and staff is available for any questions. Commissioner Zapple expressed concerns with the budgeting for Cape Fear Community College (CFCC). He suggested another review be done at reducing the general administration and other expenses that the County is not obligated to fund, which is a total of about $300,104 for full time support personnel and portions of the administrative expenses. He understands most of the funds going to CFCC are state mandated. These expenses are not and have not been reviewed in a while and he feels it is time to look at those line items. He would appreciate another review being done on this by the Commissioners and staff. Chairman White stated that in 2013, he had asked the same question and incurred no small amount of wrath for posing the question. It was a reasonable question. His view of it right now, he has not revisited it since then, is that NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 34 AGENDA REVIEW MEETING, MAY 3, 2018 PAGE 100 it’s not unlike the County funding 698 NHCS positions. The County does not have to do that, but it does because it affects favorably the quality of education, improvement in retention, and the County is at or above our peer counties because of the investment that we make in education on the public side. The same argument can be made about CFCC. He had the same questions and still does. He thinks there are reasons its static, one of which is because four years ago the CFCC Board of Trustees started requiring that the institutional funds be listed out on a sheet of paper and accounting for it month after month. It was about $6.3 million in fund balance. What was being presented was a one- line balance of institutional funds of $6.3 million. What was not seen was the 35 categories of the accounts and what they were for such as parking, books, vending, etc. As a result of that scrutiny, setting aside the legalities of some of it and the tough decisions that were made there, is a more transparent budget that has now stabilized and has year over year stayed at $10.9 million with zero capital. That is a consequence of asking those tough questions and taking what comes with asking those questions. The budget is now static this year. He does not think in any way is it objectionable to ask the County Manager to look at that particular number again. We really should ask the question every year and we should ask about the fund balance for the school system every year. These questions need to be perpetual, in his view, for the very reasons that he, Commissioner Barfield, Commissioner Zapple, and others have asked about over the years. He does agree that the County Manager Coudriet needs to look at it and ask. If County Manager Coudriet comes back with a recommendation of less, CFCC and the Commissioners would need to know why. Planning items: Vice-Chairman Watkins stated that it would be helpful to have any traffic impacts and the level of service on the roads involved in the planning items. Commissioner Zapple requested that someone, such as a NCDOT representative, be present to discuss the traffic issues. Planning Director Wayne Clark stated that staff would be prepared to answer general questions relating to the trip generations and there would be outside people to answer questions about the roads. ADJOURNMENT There being no further business, Chairman White adjourned the meeting at 4:40 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.