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2021-02-11 Budget Work Session and Agenda Review NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 34 BUDGET WORK SESSION AND AGENDA REVIEW MEETING, FEBRUARY 11, 2021 PAGE 773 ASSEMBLY The New Hanover County Board of Commissioners held a Budget Work Session and Agenda Review on Thursday, February 11, 2021 at 2:30 p.m. via in-person and remote in the Harrell Conference Room at the New Hanover County Government Center, 230 Government Center Drive, Wilmington, North Carolina. Members present: Chair Julia Olson-Boseman; Vice-Chair Deb Hays; Commissioner Jonathan Barfield, Jr. (remote); Commissioner Bill Rivenbark; and Commissioner Rob Zapple. Staff present: County Manager Chris Coudriet; County Attorney Wanda Copley; and Clerk to the Board Kymberleigh G. Crowell. Chair Olson-Boseman called the Budget Work Session and Agenda Review meeting to order and announced that the purpose of the meeting is to discuss budget priorities for Fiscal Year 2021-2022 and discuss the agenda items for the February 15, 2021 Regular Meeting. FISCAL YEAR 2021-2022 STRATEGY REVIEW AND BUDGET WORK SESSION Chief Strategy Officer Jennifer Rigby stated the Office of Strategy measures the County’s organizational capacity by conducting an employee survey every two years. A survey was completed recently and the results will be shared in the coming weeks. The strategic plan runs on a calendar year and has completed the third year of a five-year plan. Covid has impacted certain data and staff has looked at different angles to determine how to reach the County’s goals. Ms. Rigby then provided an overview of the performance measurements of the strategic goals as of December 2020 as follows:  2021 Strategic Plan Report Out: Year three of five-year plan:  Intelligent Growth and Economic Development: NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 34 BUDGET WORK SESSION AND AGENDA REVIEW MEETING, FEBRUARY 11, 2021 PAGE 774  Increase of more than 3,700 new residents  2% increase in completeness score for Complete Communities  Superior Education and Workforce:  Superior Public Health and Safety: NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 34 BUDGET WORK SESSION AND AGENDA REVIEW MEETING, FEBRUARY 11, 2021 PAGE 775 Ms. Rigby concluded her presentation stating that the data represents the hard work of 1,991 employees under the model of good governance and led by the Commissioners’ strategic vision. In response to Board questions, Ms. Rigby stated she will gather data regarding net new jobs in comparison to other counties in the state and report back to the Board. Regarding the 153,888 customer interactions, Ms. Rigby stated these may not be residents but are interactions with customers through various County programs. As to the education information, Mr. Coudriet stated when the 2018 information was put together, the data was sent from the New Hanover County Schools (NHCS) and they felt the goal that 75% of children would be ready for kindergarten was a realistic goal. The County is making progress towards the goal as 58% of children are ready for kindergarten. The decline in the reading level for third grade had been occurring prior to Covid. Regarding the data that is not available for education in 2020, Ms. Rigby stated there is a delay due to Covid since no testing was held last year. Vice-Chair Hays requested data be collected for education from 2020 as soon as possible. In response to Board questions regarding measurable standards for job growth, County Manager Coudriet stated appropriations were increased for Wilmington Business Development (WBD) several years ago and it was charged to work on several projects. The net gain in cost and the increase to the weekly average wage was due to their collective efforts and resources. Wilmington Downtown, Inc. (WDI) was a commitment from about 10 years ago for the course of two or three years to help with job growth downtown. However, that particular model has not been used since 2011 or 2012. It is clear in the contracts with the agencies that certain deliverables must be met, which is where the data is collected. Regarding the Choose Cape Fear campaign, County Manager Coudriet stated the County is not funding that any longer, but at the time of funding, it was $150,000 over two or three years. The funds were used to build a dedicated webpage and purchase equipment for the Wells Fargo event. This is the second year of not funding the campaign, but it is part of the Wilmington Chamber of Commerce’s business plan. Budget Officer Michelle Daniels continued the presentation with information on the strategic focus areas funding and the key initiatives and programs that have been adopted since the inception of the strategic plan:  Strategic Focus Areas Expansion Funding Highlights: NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 34 BUDGET WORK SESSION AND AGENDA REVIEW MEETING, FEBRUARY 11, 2021 PAGE 776  FY21-22 Budget: Preliminary Projections for General Fund:  Revaluation:  Property Values:  Real - Estimating an average 30% increase  Personal - Estimating an average 2% increase  Revenue Neutral Tax Rate:  Statutory requirement to calculate and publish, not adopt  FY20-21 Revenues by Category – General Fund Adopted Budget ($350.8 million):  Fund balance: 1%  Ad valorem: 57%  Other financing sources: 1%  Other taxes: 1%  Intergovernmental revenues: 12%  Charges for services: 4%  Sales taxes: 23%  Other revenues: 1%  Revenue trends – General Fund:  Revenue Trends – General Fund: Ad Valorem Tax: NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 34 BUDGET WORK SESSION AND AGENDA REVIEW MEETING, FEBRUARY 11, 2021 PAGE 777  Revenue Trends – General Fund: Sales Taxes (includes collections for schools):  FY21-22 Preliminary Revenue Estimates – General Fund: Chief Financial Officer Lisa Wurtzbacher continued the presentation stating the preliminary estimates do not assume any one time revenues for the fund balance or debt to fund the expenses. She presented the following information on the fund balance:  Fund Balance – General Fund:  FY19-20:  Total fund balance of $106.6 million  $9.2 million increase in fund balance in FY19-20  Unassigned fund balance of 18.9%  FY20-21:  Original appropriation $4.8 million  Additional appropriation $4.4 million  Non-spendable: $0.2 million  Restricted: $40 million  Committed/assigned: $9.3 million  Restricted internally  Unassigned: $57.1 million  Fund balance policy is based on this fund  Equated to 18.9% of expenditures and transfers out, which is within policy range County Manager Coudriet stated the County policy requirement is to be at 18%-21% of fund balance. Anything over 21% goes into a capital reserve to pre-fund for the next year. There is no state policy, however, the Local Government Commission (LGC) has a rule for anything less than 8%, they reserve the right to assume control of operations. The percentage is proportional to units of different sizes. Regarding the costs after Hurricane Florence, Ms. Wurtzbacher stated it was about $27 million and it takes some time to get reimbursed. Most of what still needs to be reimbursed is for debris pickup. County Manager Coudriet stated NHCS has their own process to get reimbursed through FEMA and have their own fund balance to use during emergencies. However, if their fund balance was depleted, the County, as the taxing authority, could be requested by NHCS to provide revenue, then the County would be reimbursed by NHCS. Ms. Wurtzbacher continued the presentation:  FY20-21 Expenditures by Category – General Fund Adopted Budget ($350.8 million):  General government: 12%  Cultural and recreational: 4%  Human services: 17%  Economic and physical development: 0% NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 34 BUDGET WORK SESSION AND AGENDA REVIEW MEETING, FEBRUARY 11, 2021 PAGE 778  Public safety: 22%  Education: 27%  Debt service: 5%  Education debt service: 13%  Transfers: 0%  Expenditure Trends – General Fund:  Expenditure Tends – General Fund: Education:   Outstanding Debt as of 6/30/2020:  Cape Fear Community College: $104.9 million  New Hanover County Schools: $199.8 million  Parks and Gardens: $17.2 million  Other General Government: $84.9 million  Fire Services: $8.1 million  Environmental Management $0.7 million  Debt service requirements: In response to Board questions, Ms. Wurtzbacher stated the savings from the bonds will go towards the debt service rate and the rest will be put in the general fund rate. The refunding rate for the taxable bonds are at an interest rate of about 1.36% and the nontaxable refunding bonds are at about .53%. The limited obligation bonds will be refunded as well. She then presented the preliminary continuation budget estimates and other considerations for a continuation budget as follows:  FY21-22 Preliminary Continuation Budget Estimates – General Fund: NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 34 BUDGET WORK SESSION AND AGENDA REVIEW MEETING, FEBRUARY 11, 2021 PAGE 779  FY21-22 Other Considerations for Continuation Budget – General Fund:  Capital needs:  Capital outlay  Facilities maintenance and repair plan  Schools:  Teacher supplements  New school facilities and school maintenance needs  Mass Transit Funding In response to Board questions, Ms. Wurtzbacher stated that each penny on the tax rate represents $3.6 million, which is based on the current adopted base. Regarding the projected enrollment and average daily membership (ADM) costs, NHCS Superintendent Dr. Foust stated those estimates will be reviewed and more information will be forthcoming. Several enrollment counts will be taken once students return to school under Plan A and a comparative analysis will be done weekly. Chair Olson-Boseman asked if in the proposed budget whether the raises given to the teachers in December 2020 is included and how does that affect their pay. She would like information on the cost to move the County to number one in the state for teacher salaries. Ms. Wurtzbacher confirmed that based on the preliminary continuation budget estimate at $357 million, it is included. She will provide updated information for teacher salary rankings in the state. County Manager Coudriet stated the information would th also outline what it would take to move the County from 27 in the state to the top five for teacher salary. In response to Board questions on a salary increase for County employees, County Manager Coudriet stated the projections have not yet been done for the next year, but with the Board’s authorization, it would be part of the recommended budget. The costs for the market and merit increases have been included in the continuation budget. The hazard pay one-time bonus was used with the CARES Act and is not a recurring expense. Not all employees received the hazard pay, only those who were in the risk of the public safety setting, however a majority did receive it. The market increase was $696 or 1.3%, whichever was greater. On average, County employees benefitted more than the combined school appropriation. Two of the County increases are recurring increases, whereas the bonuses to the teachers was a one-time expense. Commissioner Barfield stated to become first in the state for teacher pay, it would have to be supplemental pay, not a bonus. The bonus went to all school employees, not just the teachers. He asked if it the supplemental pay is what is being compared to other counties in the state. County Manager Coudriet confirmed that was correct and stated the differentiation comes from the supplemental pay funded by the County. The cost in the bonus provided to the school employees would be used to calculate the supplemental pay just for teachers. Chair Olson-Boseman requested a recommendation for how and if the County will fund the new schools being established. County Manager Coudriet explained it would take $2.7 million per year to bring the ththth ranking for teacher salaries from 25 to 12 in the state. If the County wanted to be ranked 4, it would be $10.5 million per year. It would be an average of an $8,000 supplement, which is still below Wake ($8,800), Charlotte- Mecklenburg, and Chapel Hill. Regarding the referendum, County Manager Coudriet stated the school system has the authority to ask the County for the consent to run a referendum on a supplemental school tax, but it must be approved by the Board. He is not certain whether it can take place during a regular election or a special called election. There could be a school supplemental tax approved by the voters that, at the time of the question, specifies how the dollars would be used. The property tax could be set at a rate and raised for those specified purposes but at the discretion of the Board to levy the rate every year or not. A brief discussion was held regarding pre-kindergarten education. The County is in the fourth year of funding three pre-kindergarten classrooms, which are year-round programs, and a total of 45 students. Chair Olson-Boseman requested the number of students be higher in pre-kindergarten. In response to Board questions, County Manager Coudriet stated there are six counties that have passed supplemental school taxes and of those, five are levied taxes. An option the County could consider would be to show a breakdown of a percentage of the tax bill and the rate, and what it funds. Ms. Daniels concluded the presentation and reviewed the upcoming budget deadlines:  Budget calendar:  November 19, 2020: Budget kickoff  January 22, 2021: Department budget submissions  February 11, 2021: BOCC budget work session  March 9, 2021: County Manager/departments joint meeting  April-May 2021: Budget work sessions  June 21, 2021: Budget adopted Chair Olson-Boseman thanked staff for the presentation. NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 34 BUDGET WORK SESSION AND AGENDA REVIEW MEETING, FEBRUARY 11, 2021 PAGE 780 BREAK: Chair Olson-Boseman called for a break from 4:06 p.m. until 4:18 p.m. Upon return from the break, County Manager Coudriet reported that to the question of what it would take, recurring, to get teacher pay to the number one position, north of Wake County, which is more than $8,800, is about $13 million per year. Regarding the average compensation for the current year to a County full-time employee, it was $1,383 ($696 for market and the average merit was $687) which is recurring, and when adding the employees that received the hazard pay of up to $277, which is not recurring, over the course of 12 months an employee could have expected a raise of about $1,660. Employees who were less than full time received compensation proportional to their hours. A total of 1,670 county employees received hazard pay. Anyone who was not working remotely, for every hour worked, received a 5% differential in their hourly rate. DISCUSSION OF FEBRUARY 15, 2021 AGENDA ITEMS Chair Olson-Boseman stated the Board would now review the February 15, 2021 agenda. Discussion was held on the following agenda items: Consent Item 3. Approval of Eight Donations for Accession into the Museum’s Permanent Collection. In response to Board questions, County Manager Coudriet stated since this is a County asset, the Commissioners must approve to remove surplus or receive the donation if it has a certain value. Regular Item 4. Approval to Apply for Funding through the Federal Surface Transportation Block Grant Program-Direct Attributable (STBGP-DA) Fund for Construction of Bicycle and Pedestrian Trails along Middle Sound Loop Road from Red Cedar to Publix, and along Market Street from Mendenhall to Porters Neck Walmart. In response to Board questions, County Manager Coudriet stated the total project cost is $691,841 and the local match is $138,368, which has already been accounted for in the current year budget. The trail will ultimately connect across the entire Cross-City Trail. Regular Item 9. Providing Customer Delight in Health and Human Services: An Overview of Improvements to Processes that Enhance Our Customer’s Experience and Create Innovative Solutions. County Manager Coudriet stated an update will be provided on the customer’s experience in Health and Human Services (HHS) as new business processes have been improved. It has been two years since the Board first asked for the analysis to consolidate the Health and Social Services departments. Regular Item 10. 2021 Reappraisal Update. Tax Administrator Allison Snell stated the full presentation will be shared on the results of the 2021 reappraisal at Monday’s meeting. Regarding the difference between reappraisal and reevaluation, Ms. Snell stated the terms are interchangeable and mean the same thing. Staff tries to use the same term throughout the process for consistency. Regular Item 12. Consideration of Non-County Agency Funding Policy Revisions. Chief Financial Officer Lisa Wurtzbacher stated this request is to approve an update to the process that was created in 2017. It does not change the process, but formalizes that non-county agencies could be funded for three years and have the option to be placed in vendor status, as determined by staff. If not moved to vendor status, an agency would be required to wait three years before they could apply for funding again for their specific program. This is reflective of the Board discussion when the process was first established. The purpose of the three year waiting period is to allow other organizations to apply for funding, and also the hope is the agency would move to vendor status so they could have predictable funding. In response to Board questions, Ms. Wurtzbacher stated that DREAMS is part of the non-county agency pool. Commissioner Barfield stated his concern is that non-county agencies like DREAMS that may not be specifically part of the strategic plan, but provide services to the community that other agencies do not provide. If they have funding for three years then have to wait for three years for funding, he is not sure he can support that. In the past, some of the same groups received funding year after year. Ms. Wurtzbacher stated DREAMS is one of the agencies that is not eligible to be moved to vendor status and is in its second year of funding. A list of the agencies with details of their status will be provided to the Commissioners. ADJOURNMENT There being no further business, Chair Olson-Boseman adjourned the meeting at 4:33 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.