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1997-02-04 Budget Retreat NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 25 BUDGET RETREAT, FEBRUARY 4, 1997PAGE 817 ASSEMBLY The New Hanover County Board of Commissioners held a retreat on Tuesday, February 4, 1997, at 7:00 P.M. in the Conference Room of the Hampton Inn and Suites, 1989 Eastwood Road, Wilmington, North Carolina. Members present were: Commissioners Buzz Birzenieks; Ted Davis, Jr.; Charles R. Howell; Vice-Chairman William A. Caster; Chairman Robert G. Greer; County Manager, Allen O'Neal; County Attorney, Wanda M. Copley; and Clerk to the Board, Lucie F. Harrell. Chairman Greer called the meeting to order. County Manager O'Neal advised he had contacted Dr. Dale Martin, Superintendent of Schools about the survey being performed by the schools. The School System is conducting a customer satisfaction survey which is different from the public opinion survey to be conducted by the County. Commissioner Birzenieks expressed appreciation to County Manager O'Neal for presenting this information, and he urged the Board to move forward with conducting the public opinion survey to ascertain the attitudes and perceptions of the general public about school needs before determining the size of a school bond referendum. PRELIMINARY BUDGET PROJECTIONS Budget Director, Cam Griffin, reported the figures presented were projections; however, when the budget request for Cape Fear Community College was received, the figures were lower than anticipated. The preliminary FY 1997-98 budget projections were presented reflecting projected revenue of $109,170,434 representing a minus 3.0% in revenue collected. Projected expenditures were presented in the amount of $121,397,667 representing a 7.8% increase in expenses. The difference in the projected revenue and projected expenditures is $12,227,234 which represents 14 cents on the tax rate with the value of the penny being $882,000. Discussion was held on intergovernmental revenues. Budget Director Griffin advised these were revenues from the federal and state government that offset a portion of the operating expenditures of several departments. These programs are primarily in the human service area and contain a great deal of uncertainty about Welfare Reform and the related block grants. The increase in County dollars for Social Services is projected at 8%, and at 5% for the Health Department. Chairman Greer strongly objected to the taxpayers having to absorb the cost of federal and state budget cuts. He recommended informing the Department of Social Services and Health Department that New Hanover County will not make up the difference in budget cuts; therefore, these agencies will have to reduce their budgets accordingly. Commissioner Birzenieks reported the federal government will expect innovative ideas at the local government level. Chairman Greer agreed and stated establishing a joint vocational training program between the New Hanover County School System and Cape Fear Community College was an example of an innovative idea. Discussion was held on the programs and services administered by the Department of Social Services. The following chart was presented on mandated programs: Program/Service Total Cost County Cost AFDC (Work First Program) $ 8,747,000 $ 1,758,000 JOBS (Work First Employ- $ 1,047,000 $ 74,000 ment Service) NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 25 BUDGET RETREAT, FEBRUARY 4, 1997PAGE 818 MEDICAID $82,270,000 $ 4,888,000 State/County Special Asst. $ 1,600,000 $ 823,000 Food Stamps $14,629,000 $ 646,000 Low Income Energy Asst$ 395,000 $ 57,000 Foster Care/Foster Homes $ 3,608,000 $ 1,339,000 Children's Protective Ser. $ 2,197,000 $ 531,000 Adoption & Adoption Asst. $ 1,001,000 $ 226,000 Adult Protective Services$ 348,000 $ 145,000 Adult Homes/Adult Day Care$ 100,000 $ 32,000 Child Support Enforcement $ 1,222,000 $ (311,000) Services to the Blind $ 107,000 $ 28,000 Child Day Care $ 6,074,000 $ 141,000 Family Planning $ 18,000 $ 1,000 Further discussion was held on the cost of medicare and medicaid to the County. It was determined that a large percentage of medicaid reimbursement was for the elderly in nursing homes. SOURCES OF REVENUE Budget Director Griffin presented the following sources of revenue: Ad Valorem Taxes: It is assumed that ad valorem taxes will not increase due to hurricane damage. It is anticipated that growth in the tax base will cover the loss from the hurricanes. The Tax Administrator will have more definitive figures on the tax base in March. Sales Tax: Sales tax revenue is projected to be 3.5% above the amount budgeted for the current fiscal year. This estimate may change as additional sales tax receipts are evaluated. Intangibles Tax: This is a hold harmless reimbursement paid by the State to the county for revenues lost with the 1995 repeal of the North Carolina Intangibles Tax. It is based upon the prior year's actual receipts. Inventory Tax Reimbursement: This is a reimbursement by the State to the County for a portion of the revenue lost when the intangibles tax was eliminated on inventory. It is based on the prior year's actual receipts. Real Property Transfer Tax: An excise tax is placed on each deed or instrument by which real property is conveyed. The revenue projected is based on an 8% increase over the FY 1995-96 actual amount received. Other Taxes: This revenue includes food stamp sales reimbursement, State wine and beer tax, and senior citizen exemptions. A modest 2% increase is estimated based on past performance. User Fees: These fees are charged to the direct users of County services. Inspection fees are expected to increase 2% over the FY 1996-97 budgeted amount. Interest Investments: There will be a slight decrease in interest on investments. Discussion was held on the hold harmless reimbursement paid by the State to the County for revenues lost with the 1995 repeal of the N. C. Intangibles Tax. The Board agreed to remind the legislators that reimbursements should not be reduced. DISCUSSION OF FUND BALANCE Commissioner Birzenieks expressed concern for the fund balance increasing only $700,000 and asked how much money should be reserved in the account? Deputy County Manager, Andrew J. Atkinson, reported the County had an 18% fund balance in unrestricted funds, which represents a NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 25 BUDGET RETREAT, FEBRUARY 4, 1997PAGE 819 strong reserve. He advised the Local Government Commission requires local governments to have an 8% fund balance. Commissioner Birzenieks asked the Budget Director if she felt the fund balance should be used to balance the FY 1997-98 Budget. Budget Director Griffin reported currently the County has a sufficient fund balance to operate the government for two months. She advised that $3 million of the fund balance was used last year to balance the budget; therefore there were no additional funds over the two-month cash reserve. Finance Director, Bruce Shell, reported the fund balance was at 17.8% with expenditures increasing every year. With the Environmental Management Department and Water and Sewer District depending on monies from the general fund for the operation of these departments, he would caution using the fund balance for the upcoming budget. He reminded the Board that a healthy fund balance was the key issue in future bond ratings for New Hanover County. Discussion was held on debt service. Budget Director Griffin advised that debt service would increase on projects that are currently approved including land for the new school on Carolina Beach Road. A 10% increase has been anticipated for schools over the FY 1996-97 budgeted amount plus additional debt service of $558,624. There will be a 5% increase in public safety due to an increase in the jail population and the overall general population, which increases the demand for fire services. The Fire Administration is now completely funded in the Fire Service District Fund. A 5% increase is anticipated for the Parks Department because of the costs associated with maintaining expanded parks. Also, funds in the amount of $1,875,732 have been included in the FY 1997-98 Budget to provide a 2.5% merit plan and a 2.5% market adjustment. DISCUSSION OF THE NEW HANOVER COUNTY PAY PLAN Commissioner Birzenieks requested an explanation of the market adjustment and merit increases. Human Resources Director, Andre Mallette, reported the market adjustments are based on performance. In order for the employee to receive a market adjustment, that employee must be functioning at the expected range of performance for the job. If the employee is not performing at the expected range, that employee will not be eligible to receive the market adjustment. Merit increases are also based on performance; however, the employee must be performing above the expected range for the job before being eligible to receive a merit increase. Merit increases can range from 1% to 10% depending on the performance of the employee. Each department is appropriated a specific amount of funding for the fiscal year. The department head must decide on the employees who deserve the market and merit adjustments through a performance evaluation. The County Personnel Policy requires the department head to perform a performance evaluation on each employee once a year. A lengthy discussion followed on why performance evaluations were not performed on the anniversary date of the employee. Further discussion was held on the need to perform an employee climate survey. Commissioner Birzenieks requested the County Manager to report on the status of this survey. County Manager O'Neal advised that Staff was in the process of preparing requests for proposals. He emphasized the importance of the employees knowing the survey would be confidential. A lengthy discussion was held on the increasing cost of the payroll. Commissioner Birzenieks asked if consideration had been given to contributing to the 401(k) Plan for employees in lieu of a market adjustment? NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 25 BUDGET RETREAT, FEBRUARY 4, 1997PAGE 820 County Manager O'Neal advised that law enforcement personnel receive a 5% percent contribution to the 401(k) Plan annually because of legislation that was adopted by the General Assembly. He reported the N. C. Association of County Commissioners and N. C. League of Municipalities had lobbied for all local government employees to receive the same benefit; however, this effort had not been successful. Director of Personnel, Andre Mallette, presented a chart reflecting the savings that would be gained from making a contribution to the 401(k) Plan versus a salary increase. He advised money would be saved because FICA and the retirement benefit would not have to be paid by the County. After further discussion, Staff was requested to include information on the County contributing to the 401(k) Plan for employees as an option to consider when deciding on salary adjustments. DISCUSSION OF SERVICES PROVIDED BY THE SOUTHEASTERN CENTER County Manager O'Neal reported the new Director of the Southeastern Center had made great progress in reorganizing the Center and implementing a billing and collection procedure. Unfortunately, the New Hanover County Mental Health Center ranks 40th in the amount of funding received from the State because of State Law, politics and the demographics of the regional facility. The County has approached the legislators about this funding inequity with little success. This lack of State funding has caused the Southeastern Center to struggle financially. DISCUSSION OF BUDGET FUNCTIONS Budget Director Griffin presented a chart outlining the budget functions of General Government, Education, Cultural & Recreation, Public Safety, and Economic & Physical Development. Vice-Chairman Caster asked how the County knew that funds appropriated to the District Attorney and Courts were being spent efficiently? County Manager O'Neal responded the County by State Statute is responsible for providing space, furniture, and maintenance of buildings for the Court System. The State Auditor is responsible for performing an annual audit of the courts. Discussion was held on the distribution of fees collected by the Courts. Deputy County Manager Atkinson reported the facility fees are used to maintain the buildings; however, the fees are minimal and do not cover the cost of maintenance. The State has increased court fees, but a majority of the money collected is returned to the State. After further discussion, Staff was requested to provide figures for the County dollars provided to the courts and jail and a report showing the fees collected and the amount of money returned to New Hanover County. DISCUSSION OF THE HUMAN RELATIONS DEPARTMENT Discussion was held on the EEOC functions and training courses being provided by the Human Relations Department. Deputy County Manager Atkinson reported the Human Relations Staff was performing an excellent job in handling EEOC complaints in a timely manner. The department has held seminars on sexual harassment to better educate area companies about the law and how to deal with this issue. These seminars have been quite successful. One major focus of the department has been to be more proactive in the community which has resulted in a better understanding and working relationship among the local agencies and organizations. Commissioner Birzenieks complimented the Human Relations Department for the excellent job provided to local companies in NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 25 BUDGET RETREAT, FEBRUARY 4, 1997PAGE 821 handling EEOC complaints. He stated without this service, local companies would be paying exorbitant fees to resolve these issues. DISCUSSION OF THE FIRE SERVICE DISTRICT Budget Director Griffin reported the Fire Service District has a current tax rate of 2.5 cents per $100 of property value. A tax increase will probably be necessary in future years for improvements in fire protection. A total of ten paid firefighters will be hired during the current fiscal year to provide fire protection to the Highway 421 north area. The projected salary for one firefighter is $29,422. Depending on the recommended funding for the volunteer fire departments and the cost of operating the 421 North Fire Station, it may be possible to postpone or minimize a tax increase for another year by using funds that have accumulated. The Fire Administrator has estimated that in the next three to four years there will be 20-25 paid firefighters; however, these positions will be phased in over a period of time. In FY 1996-97, a penny on the Fire Service tax rate generated approximately $496,000. County Manager O'Neal reported the fire tax was one of the lowest in the State. Chairman Greer commented on the annexation planned by the City and stated the Fire Service tax should remain at 2.5 cents. He cautioned moving too quickly on increasing fire services until the annexation has been completed. DISCUSSION OF TRANSFERRING EMERGENCY MEDICAL SERVICES TO NEW HANOVER REGIONAL MEDICAL CENTER Discussion was held on moving forward with the transfer of Emergency Medical Services to New Hanover Regional Medical Center. County Manager O'Neal reported this request had been submitted to Mr. Hobbs. After further discussion of saving approximately $2 million, Staff was requested to continue to proceed with the transfer. DISCUSSION OF ENVIRONMENTAL MANAGEMENT DEPARTMENT A chart was presented showing annualized revenue versus operating expenditures for the WASTEC Facility. A lengthy discussion was held on whether the WASTEC Facility should be closed. Chairman Greer expressed concern for the amount of funds that have to be appropriated from the general fund each year to operate the incinerator and stated as new environmental regulations are enacted and the facility grows older, maintenance and the cost of new equipment will be become exorbitant. Discussion was held on the debt service. Assistant County Manager, Dave Weaver, reported debt service was $3.8 million; however, excess revenue in the amount of $840,525 had been generated during FY 1996-97 to assist with payment of the debt service. He advised that more equipment would have to be purchased to comply to the Clean Air Act and stated in order for the WASTEC Facility to become self-supporting, a county-wide mandatory trash collection system should be implemented. Chairman Greer reported, in his opinion, Staff was trying to keep the incinerator open. He advised that implementing a mandatory trash service would fix the problem with the taxpayers absorbing the cost. He stated if the WASTEC Facility cannot be competitive, the Board should consider closing the plant. Commissioner Birzenieks stated the Board could mothball the facility; however, it would be expensive. He asked if a mandatory trash collection system was provided in zones, would the system be cost-effective. County Manager O'Neal advised that a zoned mandatory trash collection system would be a savings to the County and the NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 25 BUDGET RETREAT, FEBRUARY 4, 1997PAGE 822 residential customers. More collection services could be provided at the current hauler fees because two or three haulers would not be servicing one area. Further discussion was held on establishing a mandatory solid waste collection system in the unincorporated County. Chairman Greer strongly objected to this idea and advised he felt that a study should be performed on the operation of the Environmental Management Department so the Board will know if the WASTEC Facility should remain open or closed. After a lengthy discussion on the advantages of a mandatory system, four members of the Board agreed to authorize Staff to proceed with developing a plan for a solid waste collection system. DISCUSSION OF UNMANDATED COUNTY SERVICES County Manager O'Neal advised the following services were not mandated: Human Relations, the Human Services Transportation Service, Cape Fear Museum, Parks Department, Print Shop, Veterans Services Administrator, and outside agency funding. After discussion, Staff was requested to review the services that can be reduced, eliminated, or transferred to other providers. DISCUSSION OF BUDGET SHORTFALL Commissioner Birzenieks commented on the need to provide direction to Staff and made the following recommendation for reducing the budget shortfall: Increase the tax rate by 3 cents = $2,600,000 Transfer EMS to the Hospital = $2,000,000 Implement a mandatory trash system = $2,800,000 Remove Capital Improvement Expenditure = $ 300,000 401(k) contribution instead of market adjustment = $ 385,000 Fund Balance = $ 700,000 TOTAL $8,400,000 Chairman Greer reported he felt the tax rate would have to be increased. County Manager O'Neal stated with the items presented by Commissioner Birzenieks, the budget could be balanced with a tax rate increase of five to six cents. After further discussion, Staff was requested to proceed with preparing the following items so these issues can be considered and discussed at the next Budget Work Sessions: (1)Request the local Legislative Delegation to protect revenue reimbursements to counties from the repeal of the 1995 N. C. Intangibles Tax without a reduction. (2)Prepare a report on contributing to the 401(k) plan in lieu of a salary increase. (3)Prepare a report on County costs for operating the courts and jails with figures presented on the fees collected and the amount of money returned to the County. (4)Continue to pursue the transfer of Emergency Medical Services to New Hanover Regional Medical Center. (5)Proceed with preparing a recommendation for a solid waste disposal system in the unincorporated County. (6)Remove the $300,000 Capital Improvements Plan from the FY 1997-98 Budget. NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 25 BUDGET RETREAT, FEBRUARY 4, 1997PAGE 823 (7)Review all services and eliminate, downsize, or transfer to other providers if possible. Staff was requested to prepare a recommendation to be considered at the next Budget Work Session. (8)Inform the Department of Social Services and Health Departments that New Hanover County will not provide additional funding for state and federal budget cuts in the FY 1997-98 Budget; therefore, expenditures and services will have to be reduced in the FY 1997-98 budget requests. ADJOURNMENT Chairman Greer adjourned the meeting at 10:30 P.M. Respectfully submitted, Lucie F. Harrell Clerk to the Board