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2002-01-24 Budget Work Session NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 29 BUDGET PLANNING WORK SESSION, JANUARY 24, 2002 PAGE 38 ASSEMBLY The New Hanover County Board of Commissioners held a Budget Planning Work Session on Thursday, January 24, 2002, at 5:15 P.M. in Room 501 of the County Administration Building, 320 Chestnut Street, Wilmington, North Carolina. Members present were: Chairman Ted Davis, Jr.; 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 called the Budget the meeting to order and welcomed everyone present. He requested County Manager O’Neal to present the budget report. County Manager O’Neal spoke on concerns and challenges for the current budget year and stated that actions taken to reduce expenditures will offset the predicted shortfall in sales tax and provide funding for the proposed shortfalls in the salary accounts for the Sheriff’s Department and Jail Health for this year. At this time Medicaid projections are within budget. The State has warned that by June 30, 2002, Medicaid expenditures may exceed the amount budgeted. Additional changes may be necessary to cover a Medicaid shortfall or actions taken by the State that could negatively impact the County budget. The following report was presented. CURRENT FISCAL YEAR 2001-2002: The current budget is being impacted by the following issues: Revenues: •Sales Tax: After the first quarter of the current year, the preliminary estimate is that revenue from the sales tax will be $1,300,000 less than budgeted in FY 2001-2002. However, with the downturn in the economy and events of September 11, 2001, things may become worse. •Property Tax: The property tax collection has come in as projected. Expenditures: •Medicaid: Estimated expenditures will exceed the budgeted amount for the current year. •Salary Accounts for Sheriff’s Department: After the first six months of the current year, it appears that salary accounts for the Sheriff’s Department will be $700,000 over the amount budgeted. •Jail Health: It is estimated that providing health care to inmates in the jail will exceed the current budget by $185,000. Jail Health expenditures vary with the severity of inmate medical conditions. •TANT (Temporary Assistance for Needy Families): With the number of people in need of assistance, it is estimated that expenditures will exceed the budgeted amount. •State Reimbursements: There is concern that Governor Easley will freeze reimbursements to local governments or pass the State Medicaid shortfall to counties to assist with State budget problems. The County budget cannot absorb these actions in the current budget year without making reductions in services. Staff will keep the Board notified of any changes made by the State that impact the budget. NEXT FISCAL YEAR 2002-2003: Revenues: •Sales Tax: Revenue projections for the sales tax will be more difficult to accurately project because of the current economic climate. Sales tax receipts will also be negatively impacted by the last phase of annexation. The sales tax is the second largest revenue source for the County. Expenditures: •Schools: Pension Fund Contribution: The County is responsible to fund a separate pension plan that existed before the State Teachers Retirement System was established. The pension fund contribution for FY 2002-2003 is $750,000 representing an increase of $250,000. Future Bond Referendum: Some discussion has been held by the Board of Education about holding another school bond referendum. The members would like an estimated range for the amount of the bond issue from the Board of County Commissioners. Technology: The School System would like to update its technology through leasing new equipment. NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 29 BUDGET PLANNING WORK SESSION, JANUARY 24, 2002 PAGE 39 The School Budget should be presented to the County Budget Director by April 15, 2002; however, pursuant to State law, the budget does not have to be presented until May 15, 2002. •Cape Fear Community College: The first building on the North Campus will open in the fall of 2002. The College is requesting an additional $1,000,000. •Department of Social Services: Increases are projected in Medicaid, TANF, and other programs. •Health Insurance Portability and Accountability Act (HIPAA): As a result of the September 11, 2001 event, HIPAA was enacted by Congress. This is federal legislation that will impact every organization that provides health insurance by requiring standardization of electronic data interchange to protect patient health information and reduce fraud and abuse. The cost to local government is unknown at this time but the increase could range from 40 percent up to 200 percent. Local compliance with HIPAA must be accomplished by April 2003. The major departments that will be impacted are the Department of Social Services, Health Department, Human Resources, Finance Department, Information Technology Department, Sheriff’s Department and Southeastern Center. •New Judicial Expansion: Additional costs will be incurred with the need for a higher level of security for the Judicial Expansion. •New Jail: Additional costs will be incurred with the opening of the new Jail. Staff is working with consultants to see if some of the services can be privatized. •Health Insurance for County Employees: The cost to provide health insurance to employees is projected to increase by 25 percent representing an additional cost of approximately $1,800,000. •Mental Health Reform: The impact of the mental health reform has not been determined at this point. Additional paper work will be required and SEMH Director Constantini is working with Assistant County Manager Patricia Melvin to project additional costs. •Salary Adjustment for County Employees: Once more data is gathered for the FY 2002-2003 budget, it is hoped that some sort of salary adjustment can occur. Staff will continue to monitor this situation. Increase in Debt Service: The general fund debt service will increase by $855,697, and the school debt service will increase by $2,812,217. The debt service for these two funds is equivalent to 2.2 cents on the tax rate. The debt service for Cape Fear Community College is approximately $1,400,000. Fund Balance: Maintaining a strong fund balance must be addressed in the FY 2002-2003 budget. The County has established a goal of no less than two months, or 16.7 percent of expenditures in available fund balance. As of June 30, 2001, the available fund balance is less than the goal, but it is above the required 8 percent established by the Local Government Commission. If the County does not maintain or increase the current level of its fund balance, the current AA bond ratings (AA rating with Moody’s Investors Service and AA- with Standard and Poor’s Rating Service) will be lost. This will have a negative impact on the ability of the County to borrow money at low interest rates. Proposed Programmatic and Policy Goals for FY 2002-2003: 1. To provide a safe community for all New Hanover County citizens. 2. To continue investing in electronic technology (Internet and Intranet) for the efficient facilitation of County business. The County has invested heavily in technology which has reduced the number of new employees. 3. To protect the environment and the quality of life enjoyed by New Hanover County citizens. 4. To ensure the health and welfare of all New Hanover County citizens. 5. To ensure equality of all New Hanover County citizens. 6. To ensure and encourage prompt, courteous and professional services from all County employees. 7. To provide for the recreation, educational and cultural needs of the community. Capital Improvement Program Requests : No capital improvement program requests have been recommended in the FY 2002-2003 budget; however, it is important for the Board to be reminded of the capital needs of the County. In concluding the presentation, County Manager O’Neal requested direction from the Board and stated that without an increase in the tax rate radical changes will occur in County services being provided to the citizens. He offered to answer questions. A lengthy discussion followed on the $700,000 shortfall in salary accounts for the Sheriff’s Department. County Manager O’Neal explained that part of the shortfall was due to appeals by employees in the Sheriff’s Department over NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 29 BUDGET PLANNING WORK SESSION, JANUARY 24, 2002 PAGE 40 the pay and classification plan with a number of employees receiving retroactive pay that was not budgeted. Another reason for the shortfall was the number of incidents that occurred after the September 11 event which created overtime pay. Colonel Sid Causey explained that when the current budget was adopted, each division was cut, which created a problem for the Uniformed Patrol Division. An effort has been made to cut overtime as much as possible; however, with more calls than usual for service, particularly bomb threats after September 11, it has been impossible to respond to calls without incurring some additional overtime hours. Currently, there are only 8 officers working per shift and if the budget cuts continue, it will become a safety issue for the department. Detectives are being used as back-up to provide assistance to the Vice Squad. In the past, comp time was given instead of overtime and this created problems with officers who were scheduled to take personal leave. Further discussion was held on the use of Controlled Substance Abuse and Federal Forfeiture monies. Colonel Causey advised that most of the money received from these funds is used to purchase cars and law enforcement equipment. County Manager O’Neal informed the Board that Budget Analyst Norma Troutman had been assigned to work with the Sheriff almost on a daily basis to determine how to cut overtime and overall expenses. Since this is a large department with multiple tasks and issues, no recommendations have been received from Ms. Troutman as of this date. Commissioner Boseman requested County Manager O’Neal to continue to pursue this matter. After a lengthy discussion on ways to cut the budget, County Manager O’Neal offered to keep the Board informed on any changes at the local or state level until budget requests have been received from all County Departments on February 15, 2002, and reviewed by Administrative Staff. He advised that once this process was completed, he would make a budget recommendation to the Board. After further discussion, the Board agreed to allow the County Manager to prepare a recommendation after reviewing department budgets. The County Manager was also requested to check into the following issues: •Privatization of food services at the new jail. •Privatization of security personnel for the Judicial Expansion. •A report on the amount of County funding due Corning, Inc. •Preparation of an economic model for the Water and Sewer District. •A list of County owned properties that could be sold. •Recommendation from the Budget Analyst on the operation of the Jail. In closing the meeting, Chairman Davis informed County Manager O‘Neal that he would not vote for a tax increase to balance the budget FY 2002-2003. County Manager O’Neal responded that he would be glad to prepare a budget recommendation without a tax increase but stated many programs and services provided to the citizens will have to be eliminated or drastically cut. ADJOURNMENT Chairman Davis expressed appreciation to Staff for the information presented and adjourned the meeting at 6:35 P.M. Respectfully submitted, Lucie F. Harrell Clerk to the Board