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2003-01-09 Budget Work Session NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 29 BUDGET WORK SESSION, JANUARY 9, 2003PAGE 456 ASSEMBLY The New Hanover County Board of Commissioners held a Budget Work Session on Thursday, January 9, 2003, at 5:00 p.m. in Room 501 of the New Hanover County Administration Building, 320 Chestnut Street, Wilmington, North Carolina. Members present were: Vice-Chairman Robert G. Greer; Commissioner Julia Boseman; Commissioner William A. Caster; Commissioner Nancy H. Pritchett; County Manager, Allen O’Neal; County Attorney, Wanda M. Copley; and Clerk to the Board, Lucie F. Harrell. Chairman Davis did not arrive until 5:45 p.m. Others present were: Finance Director Bruce Shell, Budget Director Cam Griffin; Senior Budget Analyst Norma Troutman, and Budget Analyst Charmaine Keel. Vice-Chairman Greer called the meeting to order and requested County Manager O’Neal to begin the budget discussion. County Manager O’Neal spoke on the number of challenges facing the County for the next fiscal year, and he and Budget Director Cam Griffin presented the following primary issues regarding the FY 2003-2004 Budget: One-Half Percent Local Option Sales Tax: • It is imperative that the additional one-half percent local option sales tax be enacted July 1, 2003 to replace local State reimbursements that were completely eliminated during FY 2002-2003. The Board of County Commissioners will be required to adopt a resolution by the end of March 2003 requesting the General Assembly to allow New Hanover County to impose the additional sales tax by July 1, 2003. Programmatic Goals: • The purpose of programmatic goals is to establish a guide for development of the FY 2003-2004 Budget with each County Department being given direction for the allocation of resources as deemed important by the Board of County Commissioners. All departments have been instructed that goals are dependent upon staffing and financial resources. The basic goals added for the next fiscal year are: (1) to promote programs, such as electronic monitoring for pretrial inmates, that provide for the needs of the County while reducing the cost of services; (2) continue expanding the use of the Internet and Geographic Information System resources by implementing a point based address procedure to support E911, Planning, Land Records, Inspections, and data exchange services, and to provide support services to initiatives involving water and sewer facilities mapping, disaster planning and response, and health programs; (3) initiate the use of video conferencing for first court appearances; (4) install a new tax system; (5) plan and define system requirements for a countywide integrated telephone system; (6) implement a network software for the remote control of desktop computers; (7) reduce outbreaks of infectious disease and other public health threats; and (8) be proactive in the County’s efforts to control the West Nile Virus as well as other vector borne illnesses. Capital Improvement Program: • The following FY 2002-2003 Capital Improvement Projects have been completed or are in the process of being completed: Judicial Annex Building Parking Deck next to the Main Library Detention Facility (new Jail) Federal Point Fire Station Administrative Annex at Market Place Mall Airlie Gardens Environmental Project The following Capital Improvement Projects have been requested for FY 2003-2004 and future years: Airlie Gardens Reception Center Construction of a Castle Hayne Branch Library Replacement of Carolina Beach Branch Library Permitting of Adjacent Landfill Property for Landfill Cell Construction Wrightsboro Park Hugh MacRae Park Ogden Park Community Building Phase III-B of Veterans Park Water and Sewer Priority List of Projects: •Brierwood/Brookfield Collection System •Middle Sound Sewer system •Kings Grant Water and Sewer System •Water System Upgrade •Porter’s Neck Water System •Flemington & Walnut Hills Wells •Water Treatment/Well Field •Northside Wastewater Treatment Plant Salary Adjustment for County Employees: • It has been over two years since County employees received a pay adjustment. A 5% salary adjustment at a cost of $2 million has been included in the budget based on employee performance. NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 29 BUDGET WORK SESSION, JANUARY 9, 2003PAGE 457 During FY 2002-2003, the City of Wilmington approved an average 3.3% step increase for employees and continued to pay all City employees a 4.5% employer contribution to 401K; the Town of Wrightsville Beach approved a 3% merit increase and 2% pay plan adjustment for employees; the Town of Carolina Beach employees were eligible to receive a 5% merit increase and after 5 years of service receive longevity pay; the Southeastern Center approved a 2.5% merit increase and 2.5% pay plan adjustment for employees; Cape Fear Community College approved a 1.82% pay plan adjustment and a non-recurring 1.5% mid-year bonus for all employees. Anticipated State Budget Problems: • With a growing State budget deficit of more than $1.5 billion, the Governor may use non-recurring revenue. For example, in FY 2001-2002, the Governor seized beer and wine tax to balance the State Budget. Revenue of $282,000 is currently allocated in the FY 2002-2003 Budget. The Governor may seize this revenue even though it is protected by House Bill 1490 that supposedly secures local government revenue. If the State should begin to reduce its match for human service programs, counties will be required to match these mandated programs. Discussion was held on the revenue that would be generated by implementing an additional one-half percent local option sales tax. Budget Director Griffin informed the Board that approximately $6.1 million would be generated during the next fiscal year. Further discussion was held on the State eliminating local government reimbursements during the current fiscal year. County Manager O’Neal explained that New Hanover County lost $4.5 million during the current fiscal year because of legislative action that repealed the following items: (1) the sales taxes imposed on purchases made with Food Stamps; (2) property taxes imposed on inventories held by manufacturers, retailers, and wholesalers; (3) taxes on intangible personal property; and (4) reduction of taxes levied on residential property owned by low-income elderly taxpayers. All local governments lost this revenue and the State promised to hold local governments harmless. He urged the Board to consider imposing and levying the additional one-half percent local option sales tax effective July 1, 2003 to replace State reimbursements. In further discussion of State funding cuts, Budget Director Griffin reported on the following issues of concern: Department of Social Services: Possible Reductions in State Foster Care Financial Participation: • If the State reduces funding for this program, the County will be required to provide a greater match. In FY 2002-2003, State revenue was received in the amount of $471,656 representing 50% of funding for the program. If the State completely eliminates funding, the County will be required to fund the program. Elimination of State Adoption Assistance Payments: • If the State reduces funding for this program, the County will be required to provide a greater match. In FY 2002-2003, State revenue was received in the amount of $158,253 representing 54% of funding for the program. If the State completely eliminates funding, the County will be required to fund the program. Changing State/County Special Assistance Fund for Domiciliary Care Placements: • If the State reduces funding for this program, the County will be required to provide a greater match. In FY 2002- 2003, State revenue was received in the amount of $1,072,789 representing 50% of funding for the program. If the State completely eliminates funding, the County will be required to fund the program. Without funding, all the current clients could be referred to nursing homes which will substantially increase the cost of care. Foster Care Specialized Placement for Children: • The County primarily funds this care. If the cost or number of placements increase, the County’s expenditures will increase. Medicaid Uncertainties: • Medicaid is a large portion of the budget, and each year there is concern for any changes that could negatively impact the County’s budget. Public Safety Communications: An increase of $194,252 is needed to lease communicating equipment for a period of one year. Parks: Temporary staff is needed to meet the following demands: 1) more facilities, particularly with the addition of 212 acres for parks and landscaping at Veterans Park; 2) longer playing seasons by user groups; 3) more tournaments programmed by user groups; and 4) new sports and activities programmed by user groups. Southeastern Center for Mental Health, Developmental Disabilities, and Substance Abuse Services: The Southeastern Center continues to move forward with implementation of the Mental Health Reform Act enacted by the State of North Carolina. There is no anticipated major increase in FY 2003-2004. Liability and Property Insurance: Due to the new jail, the liability insurance rate is projected to increase by $300,000. Library: If a decision is made to open all branch libraries on Fridays, it would cost an additional $54,800. Sheriff’s Department: With the opening of the new Jail, the following increases are anticipated: •Increase of $750,000 for the first-year of the jail operation and court security funding. • NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 29 BUDGET WORK SESSION, JANUARY 9, 2003PAGE 458 •Funding for eleven (11) COPS Grant School Resource Officer positions from August 3, 2003 through June 30, 2005 at $560,000 per year as per a grant agreement accepted on November 13, 2000 by the Board of County Commissioners. •Purchase of eighteen (18) cars at approximately $25,000 each for a total of $450,000 to replace vehicles with at least 125,000 miles. New Hanover County Schools: The following issues will have to be considered when preparing the FY 2003- 2004 budget. •Payment of State salary increase for local employee positions paid by New Hanover County. The estimated salary increase is 2% at a cost of $500,000. •Request for step increase of 4% (2% for current year and 2% increase for FY 2003-2004) at a cost of approximately $900,000. This item is a priority of the School System, not a requirement. •Request to reinstate third grade teaching assistants at a cost of approximately $500,000. This is a priority of the School System, not a requirement. •Continued concern for capital needs. This is a priority of the School System, not a requirement. •Shift technology funding from the capital outlay to current expense (leasing for technology needs). The first year will focus on Willison and Gregory Schools with remaining schools to follow in future years. Debt Service: The projected change in debt service from FY 2002-2003 to FY 2003-2004 is as follows: General Fund(increase)$ 372,294 Public Schools Fund (decrease)$ 321,144 Special Fire District (increase)$ 48,236 Environmental Management Fund (decrease)$ 178,720 Water & Sewer District (increase)$1,218,972* *Up due to the number of capital projects In closing, Budget Director Griffin advised that in order to balance the FY 2003-2004 Budget, a combination of the following items may be required. •Elimination or reduction of current programs. •Implementation of the one-half percent local option sales tax. •Increase in the ad valorem tax rate. •Use of fund balance as a revenue source. •A thorough review and increase of fees if appropriate, which will not be a significant source of increased revenue. County Manager O’Neal encouraged the Board to direct him to not use the fund balance as a revenue source to balance the budget. Staff has been able to improve the fund balance during the past two years, which has allowed the County to maintain its bond ratings. He also reiterated the importance of implementing the one-half percent local option sales tax effective July 1, 2003. Commissioner Pritchett spoke on the need to implement the sales tax and reminded the Board that not only would the County receive additional revenue, but the four municipalities would also receive revenue. In further discussion of the revenue that will be generated to the four municipalities by imposing the one-half percent local option sales tax, Budget Director Griffin was requested to provide a chart showing how much revenue would be received by each municipality. In concluding the presentation, County Manager O’Neal advised that the Recommended Budget would be presented to the Board of County Commissioners on May 5, 2003, with the Public Hearing held on May 19, 2003, and final adoption of the FY 2003-2004 Budget on June 2, 2003. Commissioner Caster commented on the demand for use of athletic fields and asked if some type of user fee system could be established to assist with the cost of maintaining the fields. Vice-Chairman Greer responded that the Parks Department already charges some fees and stated that he felt charging more fees would not be well received by the public. Commissioner Boseman spoke on the use of recreational facilities being a good investment because of the need to keep young people off the streets and suggested keeping the fees limited so everyone could use County recreational facilities. In discussion of statements presented showing fund balance transactions, contingency transactions, and budget amendments, Vice-Chairman Greer suggested that quarterly statements of these transactions should be forwarded to the Board to keep the Commissioners updated on financial transactions occurring during the current fiscal year. NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 29 BUDGET WORK SESSION, JANUARY 9, 2003PAGE 459 County Manager O’Neal advised that he would be glad provide this information on a monthly basis. A lengthy discussion was held on the cost of mandated programs. County Manager O’Neal advised that if the State and Federal governments remove matches from the mandated programs, the County will have to pay the difference, which will be a significant amount of money. A lengthy discussion was held on the need to implement the additional one-half percent local option sales tax. County Manager O’Neal advised that if this sales tax is not levied, he would have to provide the Commissioners with a list of departments that the County is not required to operate, and the Board will have to decide what departments to eliminate. This means that many of the amenities now provided to our citizens, such as the Department of Aging, the Library, the Museum, Human Relations, etc., could be eliminated which would reduce the quality of life for residents living in New Hanover County. Chairman Davis asked if it was possible to cut an additional 5 percent from some of the departments to see if the budget deficit could be reduced. County Manager O’Neal responded that he and the Budget Director were in the process of reviewing some departments to see if any additional items can be cut; however, a majority of the programs in the Department of Social Services are mandated and will have to be funded by the County. Over the last few years, the administrative core of New Hanover County government has remained about the same and the demand for services had continued to grow, which means that fewer employees are providing increased services. Chairman Davis stressed the importance of educating the public about the services provided by the County, particularly funding for mandated programs in the Department of Social Services, funding for Schools, Cape Fear Community College, the Jail and Courts. These are huge sums of money that have to be paid by all counties. It is important for the public to understand where taxpayer dollars are being spent. County Manager O’Neal agreed and advised that an effort would be made to keep the public informed during the budget process. After further discussion, Chairman Davis requested direction from the Board. Vice-Chairman Greer advised that after seeing the figures presented, it was his opinion that every member of the Board knows that the additional one-half percent local option sales tax will have to be levied July 1, 2003, if the County wants to maintain the quality of life that our citizens deserve. He suggested placing the resolution on an agenda in February. Consensus: After discussion, it was the consensus of the Board to place the sales tax resolution on the February 17, 2003 agenda. Chairman Davis asked if any other member of the Board would like to comment. Commissioner Boseman expressed concern for charging County residents to visit Airlie Gardens and suggested eliminating this fee since taxpayers are paying for the acquisition, operation and maintenance of the gardens. County Manager O’Neal advised that he would be glad to prepare an analysis of the revenue generated from the fees charged to local residents visiting Airlie Gardens and report back to the Board. After hearing no further comments, Chairman Davis adjourned the meeting 6:30 p.m. Respectfully submitted, Lucie F. Harrell Clerk to the Board