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2024-04-11 Budget Work Session and Agenda Review NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION AND AGENDA REVIEW, APRIL 11, 2024 PAGE 178 ASSEMBLY The New Hanover County Board of Commissioners met April 11, 2024 at 1:30 p.m. for a Budget Work Session and Agenda Review in Conference Rooms 138-139 at the New Hanover County Government Center, 230 Government Center Drive, Wilmington, North Carolina. Members present: Chair Bill Rivenbark; Vice-Chair LeAnn Pierce; Commissioner Jonathan Barfield, Jr.; Commissioner Dane Scalise; and Commissioner Rob Zapple. Staff present: County Manager Chris Coudriet; Clerk to the Board Kymberleigh G. Crowell; and County Attorney K. Jordan Smith. Chair Rivenbark called the meeting to order, stating that the purpose is for the Board to discuss budget priorities for the 2024-2025 fiscal year and the April 15, 2024 regular meeting agenda. FISCAL YEAR (FY) 2024-2025 BUDGET WORK SESSION PRIORITIES DISCUSSION County Manager Coudriet stated that revenue is aligned with expenses based on Board feedback discussions. However, the staff is not yet ready to recommend a budget. The intent is to present a budget reflecting the Board's input at the May 20, 2024 meeting. He also highlighted the need for the budget to belong to the Board. Chief Financial Officer Eric Credle shared the following information concerning the FY 2024-2025 budget:  FY24-25 Budget Work Session:  FY25 General Fund budget overview:  Final year before revaluation:  Values set four years ago continue to be used  Revenues generally flat / higher costs A brief discussion ensued regarding property values and the tax value disconnect. County Manager Coudriet stated that the only time the tax value changes is on July 1 of a revaluation year, and then it remains static for four years. The only time it changes between revaluations is if a change is made to the property that requires a building permit, and it is only an incremental change based on the investment. Mr. Credle added that the last time the revaluation was completed, the property tax base rose 33%. If the property tax base were 33% higher today, the County would have $76 million more in revenue. If the tax property tax base had increased just at the foot of the inflationary cost of 16%, that would be an extra $38 million.  FY24 fund balance budgeted usage:  Expected to be used  Unassigned fund balance likely to fall below 21% to approximately 18% Mr. Credle responded to questions stating that it is Board policy that the fund balance remains between 18% and 21%. County Manager Coudriet added that as part of the policy, if the fund balance dips below 18%, the Board must restore it to the 18 % minimum within two years. The fund balance last dipped below 18% after Hurricane Florence. When that happened, the Board restored it in one year. Although the fund balance is trending towards violating policy, it is not intended to go below 18%. Also, since the Board has a policy and works consistently with it, the County maintains the AAA bond rating through the bond rating agencies. Compared to the required fund balance amount by state statute, the County is well above the required 8% minimum.  Current budget draft anticipates usage of principal in both escrows  FY24 adopted budget:  Appropriated fund balance usage:  General Fund $5.8 million  Revenue Stabilization Fund (RSF) $4.6 million  Mental Health & Substance Use Fund (MHSUF) $4.3 million  Total $14.7 million  Significant changes:  Board of Elections $5.6 million  Robin Hood – state grant ($3.7 million) – MHSUF A brief discussion ensued regarding the corpus of the RSF and MHSUF. Mr. Credle confirmed that the County did not use any of the corpus last year. Accumulated earnings from the RSF came back a little higher than expected, so the corpus was preserved. For the Robin Hood project, $3.7 million was budgeted to be used from the MHSUF after accounting for the $1.5 million from Trillium. County Manager Coudriet confirmed that the Board did appropriate $5.8 million from the general fund and has not had to use it in previous years but did so for one-time expenses in the budget.  Property/sales tax revenue increase versus inflation:  Since last revaluation:  Property and sales tax: up 3.6% which includes the impact of 2.5 cents of property tax reduction ($12,851,903 current annual impact) NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION AND AGENDA REVIEW, APRIL 11, 2024 PAGE 179  Inflation index: Up 16.5%  Property tax trend data (in millions):  Sales tax trend data (in millions):  FY25 draft budget: Mr. Credle responded to questions stating that public safety overtime was under budgeted. There were also two policy changes, one for sworn officers working in the detention facility to be paid at an overtime rate of two times their salary instead of one and a half, and the other was moving from a 28-day measurement period to a seven day measurement period. If a public safety employee works 48 hours one week and 32 hours the next, they are still being paid overtime. County Manager Coudriet added that these policies were recommended to keep the Sheriff’s Office as close to fully staffed as possible. However, the office is still not fully staffed, even with the changes and the overtime. He confirmed that the overage in overtime is due to not being fully staffed. As to the reason for the staffing shortages, he explained that professionally, public safety is having difficulty retaining and attracting new people into the profession as people retire. Although the Sheriff’s Office has been creative in creating career paths for deputies in the detention center and those who do not want to be in senior leadership positions, it has been difficult to maintain full staffing and retain people in law enforcement. While there are fewer issues on the Fire Rescue side, that field also has difficulties attracting and retaining people to serve. The difficulties have existed for several years, especially post-COVID, but the policy changes impact the current budget year. It is not just an issue for the County but for other jurisdictions as well. As the policy changes become set and people understand them, he hopes to see a shift where people stay with the County. Mr. Credle confirmed in response to questions that to use the corpus of the RSF, a supermajority (4/5) of the Board must approve the appropriation. As for the MHSUF, County Manager Coudriet confirmed that only a simple majority of the Board (3/5) must approve the appropriation. As to the interest earnings, Mr. Credle stated that as some of the investments are maturing, they can be reinvested at higher rates. Investment earnings are NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION AND AGENDA REVIEW, APRIL 11, 2024 PAGE 180 accounted for and lumped in with all other investment earnings, including those from the escrow accounts. County Manager Coudriet confirmed that the County uses all the interest earnings each year.  New Hanover County Schools (NHCS):  County spending per average daily membership (ADM) 2022-2023 school year:  NHCS – ADM:  0.44% decrease since 2018  Notes: excludes charter schools, ADM is based on the average for the year (source https://datacenter.aecf.org/) except 2024 which is the second month ADM  NHCS ADM versus County budget: A brief discussion ensued about the ADM number. County Manager Coudriet stated in response to questions that 26,889 is the accurate number for the current fiscal year. $3,434 is the amount the County provides not only to the students in the public school system but also to the students in the charter schools. The ADM for just NHCS for the current fiscal year is based on 24,858 students.  NHCS – operating funding – including pre-k:  27% increase since 2018 NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION AND AGENDA REVIEW, APRIL 11, 2024 PAGE 181  NHCS – Capital Outlay:  385% increase since 2018 Regarding why NHCS has $11 million in capital, Mr. Credle stated that a lot of the work is likely done during the summer when students are not there. NHCS will likely use some of the funds this summer and the district staff feels there will be enough funding to complete projects this summer and the following year.  FY25 considerations:  $20 million shortfall – initially:  Depletion of elementary and secondary school emergency relief (ESSER) funds  Lower state/federal funding due to lower enrollment  Prior year's usage of fund balance  Reduction of 280 positions needed to balance the budget  Planned reduction of 170 positions by 6/30/24 saves $10 million – includes all ESSER  Glidepath of 18-24 months through attrition to reduce the remaining 110 County Manager Coudriet noted that while state and federal funding is trending down because there are fewer students, County funding is increasing. This funding trend will continue for the next fiscal year. For the current fiscal year, the County appropriated $3,434 based on the budgeted number of students but did not withhold funding when fewer students enrolled, so the appropriated amount was more.  Shortfall includes reductions of the following contracts with the County:  Therapists: $680,000  Nurses: $1,421,576 Mr. Credle responded to questions confirming that the County pays for school resource officers (SROs) within the school district. County Manager Coudriet provided a brief overview of school nurse funding, stating that some funding from the schools for nurses and mental health therapists is from ESSER funds. It is also possible that as enrollment declines, the state is funding fewer nurses. He is unsure how many nurses were funded by the County through the $1.4 million that is being reduced. Staff recommends that the County pick up the $680,000 for therapists and $1,421,576 for nurses that the school district will cut. The benefits of having mental health therapists in the school district for students was briefly discussed.  FY25 staff recommendation:  Start with level $ funding with prior year* $ 96,033,460 *Includes all Pre-K, half of which is recommended to be ARP-funded  Add funds equal to costs associated with: $ 5,533,278  15 classroom teachers, 6 AIG teachers, $101,566,738 8 enhancement teachers, 47 teacher assistants, and local employee mandated raises/benefits  ADM rate increases from $3,434 to $3,703  No capital allocation: approximately $11.4 million remains from prior years County Manager Coudriet responded to questions confirming that the board of education (BOE) will appropriate funds as it sees fit. In discussions with the school superintendent, he stated that the needs may shift, but this is where NHCS is now. Again, the $5.5 million in additional funding is proposed to fund 15 classroom teachers, six AIG teachers, eight enhancement teachers, 47 teacher assistants, and local mandated raises/benefits as presented by the school superintendent. The recommendation saves 76 of the 110 positions that would otherwise be cut. County Manager Coudriet confirmed that he is unaware of any exceptional children (EC) teacher positions being cut. Commissioner Barfield noted that this Board has no authority over any other elected body, and the BOE does not have to honor the Board’s request of how to spend the funding if it does not want to. County Manager Coudriet confirmed that 88 to 90 of the 180 positions are already vacant so no one is having their job cut. The school district’s expectation of the 180 positions is that it needs to sunset for more vacancies, that it will be done through attrition, retirement, or other changes that may occur. County Manager Coudriet stated that with the supplement being increased to $3,703, plus the funding being picked up for school nurses and mental health therapists, the total increased funding for the school district is over $7.6 million. This will retain a nurse in every school and a therapist available for each school. Regarding pay raises required to be funded locally, that is only for the approximately 800 employees that the County funds over what the state funds. A brief discussion ensued about the positions that the County funds and how there are nearly 1,300 fewer students than there were a few years ago. As the school district NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION AND AGENDA REVIEW, APRIL 11, 2024 PAGE 182 compares to other counties, New Hanover County funds approximately a third of the positions, whereas other counties fund closer to 20%-25% of their school districts' positions.  Cape Fear Community College (CFCC):  Operating budget:  Capital Outlay:  General Fund:  Port City United (PCU)/community building:  PCU total budget: approximately $5.74 million  Total: $5,740,000 (includes $24,000 of rounding)  Notes: *Not currently budgeted **The current working version of the budget assumes that Administration & Call Center remain largely intact for FY25 - $1,134,900 in the general fund budget plus $284,000 in ARP Budget for a total of $1.4 million versus a fully loaded cost of $1.6 million County Manager Coudriet responded to questions regarding the 911 call center, stating that he believes there are about 85 people who work in 911. As for the PCU call center, the center operates 24/7, has 13 employees, and is located at 320 Chestnut Street. Regarding the number of phone calls that come in at 2:00 a.m., County Manager Coudriet stated that all those details were part of the outcome report that was shared with the Board a couple of weeks ago. Commissioner Scalise stated that those details would help guide the dialogue on this topic. Commissioner Barfield noted that when the County started PCU, ARP funds did not exist, and the County planned to pay for the program through RSF. When the ARP funding became available, the County was able to shift and allocate those resources to free up the general fund. However, there was never the intention to fund the department by anything other than through the general fund. The Board at that time voted unanimously to approve the program with that funding plan. County Manager Coudriet, in response to questions, clarified that the Board voted to use the RSF when the general fund could not fund the program completely. Also, it was predicated on a different tax rate and there will be an increased need to use the RSF at the current tax rate. Mr. Credle confirmed in response to questions that according to this plan, the mediation and outreach program and the violence interrupters will only be funded via ARP until December 31, 2024. To fund the programs for the remainder of the fiscal year, it will have to be via the general fund. With the programs currently suspended, County Manager Coudriet stated there will have to be Board consensus for the programs to continue. Commissioner Scalise stated that he does not believe the mediation and outreach program should continue beyond the current fiscal year. A lengthy discussion ensued regarding the mediation and outreach program. Commissioner Zapple questioned whether there has been an uptick of violence since the mediation and outreach team has been in place and whether issues such as those with Bull City United in Durham have been taking place here. County Manager Coudriet stated that the information in the report that was previously shared with the Board reflects that mediation efforts in the neighborhoods directly served have had an 85% average success rate out of almost 52 team interventions since July 2023. It also states that mediation and outreach specialists opened 1,714 cases to connect community members with needed services. County Manager Coudriet confirmed that violence in the community was down but could not confirm that it was because of the investments in PCU. NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION AND AGENDA REVIEW, APRIL 11, 2024 PAGE 183 Discussion ensued about the community resource coordinators (CRCs). Commissioner Zapple commented on the importance of the CRCs, how the positions related to community building, and the benefits seen by teachers and principals, even if not by NHCS administration. County Manager Coudriet, in response to questions, stated that he believes the Legal Aid/Second Chance program was only meant to be for two years. Although he understands Commissioner Zapple's comments, he is hesitant to recommend the $1.3 million needed for this program without knowing if it will be put to work. Commissioner Barfield stated his belief that the changes in NHCS Board leadership led to a disconnect in addressing community issues. Teachers are closest to the problem, but elected officials are making policy decisions without understanding the community needs. He credits the County’s investments with helping to reduce violence and the mediation and outreach team for its role in preventing incidents. Even if County investments were not the direct cause of reduced violence, its investments certainly played a role as part of the whole solution. Vice-Chair Pierce stated appreciation for the discussion and expressed concerns about continuing the mediation and outreach program until December. She suggested evaluating the call center's activity, reducing hours, and possibly relocating staff to other needed positions, such as the 911 call center. She does not favor using the general fund to move the program forward. County Manager Coudriet explained in response to questions that the United Way Capacity Building funds which the Board allocated supports 13 nonprofits over the past two years, allowing CRCs to work in 10 schools, with nonprofits absorbing two to three positions each. He provided a brief overview of the contracts with Voyage, Communities in Schools, and LINC which provide for CRC members to engage directly in schools. There are approximately 22 CRCs who work in 10 schools. Commissioner Scalise stated that the current Board is not bound to what the Board did two years ago, nor will the Board in two years be bound to the decisions of the Board today. He does not want to use any of the RSF and prefers to see the funding for PCU reallocated to the needs of the schools. Commissioner Zapple advocated for the CRCs as well as the mediation and outreach team, referencing the 52 specific situations that did not result in gun violence because of the program. As to the discussion about the sheriff and district attorney not being in support of the program, Commissioner Barfield requested that they attend the next meeting to speak on the public record about their respective stances. Discussion proceeded regarding the suspension of the mediation and outreach program. County Manager Coudriet stated that a review of the program's policy and procedures is currently underway. He intends to bring back one of the employees currently on administrative leave to assist with the analysis, which is set to run through April th 29. There are currently nine employees on administrative leave. There will need to be Board consensus on which of the policy items is continued and at that point Mr. Credle can determine what funding comes from where. Vice- Chair Pierce suggested removing Legal Aid/Second Chance, Technical Certifications, United Way Capacity Building, reducing or eliminating CRCs, and reducing Administration. Commissioner Scalise stated without a substantial change to PCU, he will not vote in favor of the budget and will not vote to support using the RSF. Vice-Chair Pierce stated that she did not vote for last year's budget and unless the PCU matter is resolved, will not do so this year. The effort was made, the program has failed, and the funds need to be redirected elsewhere. Chair Rivenbark stated that he will support the budget if there is a substantial change to PCU.  Other community building programs:  The current working version of the budget maintains all SROs and Pre-K Expansion  Notes: *Not currently budgeted. Elements and Too Good for Violence is budgeted to end on 12/31/24 upon expiration of ARP A brief discussion ensued about SROs. County Manager Coudriet stated that the primary change that came from the community building program was ensuring there was an SRO in every elementary school. The plan also put additional SROs in some of the impact zone schools. Middle and high schools have at least two SROs, maybe more. He also confirmed that SROs must have specific training. Regarding the expansion of Elements and Too Good for Violence, he explained that expanding the programs allowed the caseloads for both to grow. Both programs, Elements, which the Sheriff’s Office administers, and Too Good for Violence, which is administered through Community Justice Services, had a waiting list, and the funding will allow at least a continuation of those caseloads through the end of the year. Once the Board decides on an end date, staff can begin work on ramp-down plans to reduce caseloads. The programs will still exist once the expansion has ended, as they were in existence prior to the formation of PCU. Further discussion was held about the programs within PCU. County Manager Coudriet asked the Board whether there was interest in continuing with the CRCs, either school based, or community based. He stated that there are 22 CRCs, and even if the Board were to fund the program, he cannot guarantee that the positions will be returned to the schools as the BOE must provide approval. Commissioner Scalise stated that his position is to pull back on almost all the PCU programs and reallocate those funds to the schools. County Manager Coudriet confirmed in response to questions that ARP funds for PCU must be spent by December 31, 2024. Discussion ensued regarding the CRCs. Commissioner Zapple reiterated the successes of the program and noted that the program can continue to work with at-risk youth. Commissioner Scalise stated that he has been contacted by teachers and individuals from Communities in Schools who have stated they do not support the program's continuation. Commissioner Zapple NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION AND AGENDA REVIEW, APRIL 11, 2024 PAGE 184 stated that he welcomes further discussion of scaling PCU one way or the other to get full Board support. County Manager Coudriet, in response to questions about welfare checks on children who miss school, stated that the Department of Social Services does this when a referral is made. The CRCs are in the schools to work with students who are considered at-risk and have daily interactions with the students. Vice-Chair Pierce stated that she wants to support at-risk youth and how possibly the CRCs can be evaluated and scaled appropriately. It would be good to have a discussion with the BOE about the CRCs, but if the BOE is already signaling that it is not in favor, she does not know how to support that program. She added that she is not in favor of violence interrupters through the mediation and outreach program and believes that the County should not be putting employees in those situations. County Manager Coudriet noted that based on the discussion, there appears to be Board support to retain part of the call center, CRCs, and part of the administration division. A brief discussion ensued regarding the legal aid program through PCU. Commissioner Barfield highlighted the importance of getting involved and working with at-risk youth, which can improve their lives. He provided an example of a student he worked with and how, years later, the student became involved with a leadership program in junior high school. That example confirms that at-risk students can become productive citizens in society through these programs. Commissioner Zapple commented on the importance of the technical certification piece of PCU, which is where individuals are connected to the community college to obtain technical certifications to gain employment. Commissioner Barfield added that nonprofits are scrambling for funding, and the endowment did not disburse grants to nonprofits working with at-risk youth, creating a poverty mentality. He believes there should not be a poverty mentality in the County, especially not with an endowment worth $1.3 billion. There is a scarcity of funds in how they are being distributed throughout the County, but there is not a scarcity of funds. Vice-Chair Pierce agreed that the endowment could greatly help the schools and hopes they will make the ask. The Board agreed that another budget work session is needed. County Manager Coudriet stated that staff will take the direction provided today, work through the budget, and send an update to the Board for comment. The material not covered today will be moved to the next budget work session once the date is determined. DISCUSSION OF APRIL 15, 2024 AGENDA ITEMS The Board reviewed and discussed the agenda items for the April 15, 2024 regular meeting as noted: Consent Agenda Item #2: Adoption of Budget Amendments. Regarding budget amendment (B/A) 24-066, County Manager Coudriet stated that the grant is for infrastructure improvements at the Blue Clay Business Park. This is the last grant from the legislature that was approved for the project. Regarding B/A 24-068, Chief Deputy Jonathan Hart stated that the funding will go into the surplus line for operational expenses. Staff has not identified where the funds would be spent. Chief Deputy Hart noted that the department recently purchased e-bikes from this fund to help with downtown enforcement around the community college and parking. Consent Agenda Item #3: The New Hanover County Schools - Approval of Reallocation of Capital Fund Expenditures. New Hanover County Schools Assistant Superintendent for Operations Eddie Anderson responded to questions stating that NHCS has participated in the Clean Classrooms for Carolina Kids school program, which runs through the Department of Public Instruction (DPI) and Response to Intervention (RTI). NHCS is ahead of the game by testing 100% of the schools for lead, which has been primarily found in sinks and electric water coolers. If a high level of lead is found in any of those fixtures, they are immediately closed and replaced. All testing has been completed, but not all results have been received. The testing looks for lead and asbestos. Regarding funding for computers and technology items, Mr. Anderson stated that some of those purchases were made through ESSER funds, so the request is to reallocate the funds to a different need. Regular Agenda Item #12: Consideration of Request to Purchase the Wrightsboro Fire Station. Fire Rescue Chief Donnie Hall responded to questions stating that the County has been making lease payments for the site, and the purchase price buys out the remainder of the mortgage on the property. ADDITIONAL ITEMS The Board recognized Public Health Director Jon Campbell for his service to the country, noting his recent call to active duty and looks forward to seeing him back in his County role upon completion of his assignment. Assistant Public Health Director Alicia Pickett will fill in during his tour of duty. ADJOURNMENT There being no further discussion, Chair Rivenbark adjourned the meeting at 4:32 p.m. Respectfully submitted, Kymberleigh G. Crowell Clerk to the Board Please note that the above minutes are not a verbatim record of the New Hanover County Board of Commissioners meeting. The entire proceedings are available online at www.nhcgov.com.