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2024-05-13 Budget Work Session NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, MAY 13, 2024 PAGE 209 ASSEMBLY The New Hanover County Board of Commissioners met on May 13, 2024 at 1:06 p.m. for a Budget Work Session 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 Budget Work Session meeting to order stating the purpose is for the Board to discuss budget priorities for the 2024-2025 Fiscal Year. FISCAL YEAR (FY) 2024-2025 BUDGET WORK SESSION PRIORITIES DISCUSSION County Manager Coudriet reported that over the past several weeks, multiple versions of the budget have been shared, including options with and without the use of the revenue stabilization fund (RSF). The documents before the Board during this meeting reflect the most current version. Whether the recommended budget is th submitted to the Board on the May 20 agenda will be informed by the Board’s direction during this meeting. There are two hard dates that must be adhered to by state statute which are the presentation of a balanced budget to the stth Board by June 1 and the adoption of the budget by June 30. Chief Financial Officer Eric Credle shared the following information concerning the FY 2024-2025 budget:  FY24-25 Budget Work Session:  Agenda:  Budget scenarios  Hospital escrows  Opioid settlement - Joint-Elected Committee recommendation  FY25 Budget overview:  Final year before revaluation:  Values set four years ago continue to be used  Revenues generally flat versus higher costs:  $2.5 cents of tax cuts = $12.85 million current annual impact  Sales taxes have leveled off  Inflation is up 17.0% since last revaluation  FY24 Fund Balance budgeted usage:  Expected to be used  Unassigned Fund Balance likely to fall below 21% to approximately 18%  Budget scenarios:  Scenario 1 assumes $7.7 million of RSF corpus usage  Scenario 2 assumes no RSF corpus usage:  Includes eliminating funding for various American Rescue Plan (ARP) programs and reallocating those funds for General Fund expenses (e.g., $3 million housing commitment)  Both scenarios:  Property tax rates: no change from FY23-24:  45 cents: base property tax rate  7.25 cents: unincorporated area fire services rate  Sales Taxes: FY25 equals FY24 Budget of $116.2 million  No new programs – continuation of existing County services:  Minimal enhancements, General Fund:  Nine new full time employees (FTEs) with a total cost of $321,000:  Five are in Health to manage Medicaid expansion (50% state funded), one Cooperative Extension (100% reimbursed by a non-profit), three for Parks and Gardens  $450,000 for Comprehensive Plan Update  Sheriff’s Capital Outlay: $1.86 million which includes $1.6 million for a door control system upgrade at the detention center as the existing system is 20 years old, obsolete, and no replacement parts are available  Parks and Gardens Capital Outlay: $388,500 which includes $200,000 for Ogden Park tennis court resurfacing and $150,000 for Laney resurfacing  All other: $87,157 County Manager Coudriet responded to questions stating that he does not recommend funding the sustainability manager position due to limited revenue options and pre-identified expenditures. The position would cost about $110,000 annually, and funding would need to be secured for future years as well. The Human Resources and Strategy departments thoroughly reviewed this requested enhancement, which appeared in the initial draft. If the Board requests it, staff will reinstate it in the budget. Concerning the comprehensive plan update, County NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, MAY 13, 2024 PAGE 210 Manager Coudriet explained that the $450,000 cost would cover consultant fees, as the department lacks the capacity to undertake such a large-scale project internally. In response to further inquiries, Mr. Credle clarified that the $260,000 remaining from the $1.86 million capital outlay for the New Hanover County Sheriff’s Office (NHCSO) does not include any school resource officers (SROs). The funding is designated for updates to the jail camera system, a portable x-ray imaging system, a handheld fingerprint reader, a covered wagon trailer, and two storage shelters. He also confirmed that the $150,000 allocated for Laney resurfacing pertains to the tennis courts. A brief discussion regarding the NHCSO drug forfeiture seizures and inclusion into the department’s budget. County Manager Coudriet confirmed that the sheriff determines the priorities for the funds, which are then reflected through a budget amendment detailing their intended use. The data reflected of multiple years can be compiled to show both the amounts received and usage. Currently, there are no precise estimates of the funds to be received, as they typically depend on the results of forfeiture work and are thus regarded as found revenue.  Enhancements:  Stormwater Services:  Excavator - $150,000  Vacuum Trailer - $120,000  Environmental Management:  Waste Shredder = $1,147,603  Two FTE – Technicians - $70,189 Total Salary A brief discussion proceeded about the waste shredder. County Manager Coudriet responded to questions stating that the shredder could reduce landfill waste by 80%, resulting in significant cost savings. He clarified that the cost of the unit would not affect the proposed tip fee. The unit could extend the landfill’s life by several weeks or months each year and currently, there are about 40 years of landfill life remaining. The plan is for two or three people to operate the shredder, which will have designated operating times separate from the department’s full operating hours. Commissioner Scalise commented that although the shredder is costly, it offers a significant financial benefit and helps maximize the landfill’s lifespan.  New Hanover County Schools (NHCS):  Operational funding of $101,566,738 ($5,533,278 increase)  No capital allocation: approximately $11.4 million remains from prior years plus lottery proceeds of $2 million are expected  Continue to provide the same number of nurses (every school – approximately 45) and mental health therapists (available to each school – approximately 33):  Related school funding for these services declined by $1.4 million for nurses (49% reduction) and $680,000 for therapists (100% reduction)  Pre-K funding at $1.95 million (level with FY24) During the discussion about the NHCS slide, Mr. Credle confirmed that the County is partially reimbursed for nurses and mental health therapists. Future reimbursements from NHCS for nurses will be reduced by half, and reimbursements for mental health therapists will cease. He confirmed that County staff recommend continuing to fund these positions to maintain service levels in schools. County Manager Coudriet reported that the school superintendent has never represented that NHCS is not valuing these specific positions, but to balance revenue and expenses more revenue is needed to fund the school system. None of the school district’s proposals cut or eliminate all the nurses or the mental health therapists, it just cannot afford to fund them any longer. Commissioner Barfield commented that money is spent on what is valued and thought necessary, like the earlier discussion about the sustainability manager position. The County spends money on what it values and feels to be important, and the message he is receiving is that while these positions are appreciated, the school district is having to make a choice to eliminate them and do something different. Commissioner Zapple noted that the school funding, which originally comes from the County’s allocations, is being redirected by the school system. Despite this, the County is effectively paying again for essential services, prioritizing the placement of a nurse and a mental health therapist in each school. To the public it may appear the County is funding the positions twice. County Manager Coudriet stated some of the NHCS reimbursement to the County includes local dollars initially provided by the County, although the school system also receives state funding for nurses. While some of the local funds are returned via contracts, the school system retains this revenue, and the County is contributing an additional $5.5 million. Commissioner Scalise stated that beyond the $5.5 million, there is another $2 million and another $2 million in connection with the pre-K, bringing the County’s total investment to nearly $10 million. The County considers this a priority to ensure students and teachers have what they need. Commissioner Barfield added that the research by County staff supports the need for nurses and mental health therapists in schools, and the County is prepared to fund these roles. County Manager Coudriet confirmed the approach is informed by historical decisions and priorities, noting the Board’s longstanding commitment to ensure each school has a nurse and the expansion of mental health therapists when their positions were eliminated from Southeastern, and later Trillium. Discussion ensued about the $5.5 million. County Manager Coudriet reported that the staff has identified the Board’s priorities as primarily student-facing positions. He offered to provide a detailed breakdown of these positions, which include funding for 47 teacher assistants, 15 classroom teachers, eight enhancement teachers, and six AIG teachers, in addition to covering nearly $2 million in locally mandated employment costs such as healthcare, retirement, and state raises. He explained that the allocation of these funds would be negotiated between both boards and was determined through discussions with each Commissioner, reflecting a majority agreement. He NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, MAY 13, 2024 PAGE 211 confirmed that this information has been shared with the school superintendent. Commissioner Scalise remarked that while the County cannot control how NHCS spends these funds, he feels it would be a shame if the funds go to raising administrators’ salaries rather than the front facing positions. He stated that such a use of the funds would be unacceptable and implied that the Board would likely withhold approval if that were the case. County Manager Coudriet confirmed he clearly communicated with the NHCS superintendent, finance officer, and assistant superintendent for human resources that these are the Board’s priority positions. Vice-Chair Pierce asked for clarification that the total funding being discussed is not $5.5 million but rather $9 to $9.5 million, which the County is investing in NHCS with a recommendation of specific uses but cannot necessarily control. If the public sees it going elsewhere, that is not due to the County. County Manager Coudriet confirmed the Board’s limitation over the $5.5 million. However, the funds suggested for nurses and mental health therapists will be under the County’s authority as those are technically County positions. Mr. Credle stated the numbers are about $7.5 million and the County is continuing the pre-K. It equates to $5.5 million in operating and approximately $2 million between the nurses and mental health therapists. Commissioner Zapple asked for confirmation that the funds are recurring, and statistically, over a ten year period, it is a $70 million investment that the County is adding to its existing investment to NHCS. Mr. Credle confirmed the assessment is correct.  Cape Fear Community College (CFCC):  Operational funding of $11,922,167 (level with prior year)  Capital allocation of $1,920,000 (level with prior year)  Other:  Non-County Agency funding at $1,608,313 (level funding) versus expected committee recommendation of $2,461,219  Genesis Block: recently received a $75,000 economic development request not in either scenario (to fund food hall incubator, connect diverse-owned businesses to contracting opportunities, entrepreneur training curriculums) Discussion ensued about operational funding for CFCC. Mr. Credle responded to questions stating he believes there may be raises, but the specifics are uncertain as the CFCC Board of Trustees, not the County, determines if and by what amount raises occur. Commissioner Zapple noted that due to the funding recommendation being $11.9 million instead of the requested $13 million, it suggests the Board is not considering raises unless they apply across the board. County Manager Coudriet noted that while most CFCC positions are state- funded, the County historically contributes to supplements. The County may not directly fund raises for CFCC faculty as these appropriations are not typically included in the County's budget, which means the County does not directly associate with these expenditures. However, the County does see it regarding some senior staff positions. Commissioner Scalise praised CFCC as a vital component in training the County’s citizens and others to become employed in society, have good paying jobs, and learn. He expressed concerns about maintaining its budget amid 17% inflation, suggesting this effectively prevents the necessary increases to match inflationary pressures. He is reluctant to keep the budget flat and worries about the long-term implications of such a decision. Unless fully unavoidable, he does not feel it is good direction to hold the line on the budget. County Manager Coudriet stated the FY25 recommendation of $11.9 million aligns with FY24 funding, noting a slight increase from FY23, which was $11.4 million. Based on a ten-year trend, the historical funding will be shown as relatively flat. Commissioner Barfield remarked on his service on the CFCC Board of Trustees for several years, noting past funding consistency and significant County investments outside of the budget, such as the $12 million for the purchase of the Bank of America building for the nursing and allied health programs and ongoing debt service payments for CFCC facilities built with the 2008 bond issuance funds. Also, the County’s funding has covered the salary increases for the CFCC president and part of this year’s CFCC request, like last year, is for an increase for the president. The state covers the staff and counties cover operational costs of the buildings. The County has shown its commitment, but the ask is for more funds like others even though more funds cannot be obtained from sales taxes as those have remained flat and priorities must be made. Regarding operational costs, County Manager Coudriet clarified that faculty expenses are covered by the state, while the County's $11.9 million appropriation primarily supports facility maintenance. The capital funding of $1.9 million for the next fiscal year matches the current year's allocation, although CFCC had requested about $3 million for various upgrades. Mr. Credle responded to questions stating the state reimbursement for the nursing program facility is in process. The County paid $12 million for the building and there is $15 million for renovations. CFCC was allocated at least $30 million for the entire building renovation and whatever funds are expended will be reimbursed to the County. The state reimbursement will pay back the debt service over the next 19 years. County Manager Coudriet responded to questions stating Genesis Block’s request falls under economic development, not the outside agency portion. Genesis Block did not submit its request on time and only presented it to the Board and staff about ten days ago. It is not an emergency request but part of the FY25 request. Although there is an allocation of $75,000 in the current year, staff requires agencies to state their requests annually. Since the request was not received in time, the FY25 budget currently allocates zero funding for the organization. He is not certain whether other economic development requests are zeroed out for FY25, but most involve contractual obligations that carry over annually or have been requested on time. Genesis Block gave no reason as to why it did not turn in its request as others had. A brief discussion ensued about debt service. Mr. Credle explained in response to questions that when debt service is taken out the interest rate is in the four percent range. The County is allowed to make interest on the funds in the account and anything made over what is being paid must go to the Internal Revenue Service (IRS). NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, MAY 13, 2024 PAGE 212  Budget scenarios continued: Discussion ensued about the Board receiving the detailed budget binder. County Manager Coudriet responded to questions explaining that historically the binder is provided when the recommended budget is presented. However, due to the current unprecedented situation, the staff is still aligning the recommended budget closely to the Board’s comfort level. If he were required to present on May 30th, it would involve using $7.7 million from the RSF. The staff work continues to finalize a recommended budget that allows the Board to discuss potential cuts and what should remain. As to the cuts noted on slide 10, he has not specified which items to cut from each department shown on the slide because he prefers that departments, such as the IT department led by the chief information officer, decide how to manage a reduction of $400,000 being considered if RSF is not used. He acknowledged that some Board members prefer not to use RSF and explained the departments shown on the slide, being larger departments, can manage a two percent budget reduction to generate scale and not use RSF. However, he believes using the $7.7 million from RSF is necessary for the departments. Vice-Chair Pierce expressed concerns about focusing reductions only on the larger departments. County Manager Coudriet explained that achieving the necessary scale without using RSF would require smaller departments like Veterans Services to cut disproportionately more from their budgets than larger ones like NHCSO. That is why he would have the department heads and their teams decide how to make these cuts on the operations and maintenance side. Regarding the reduction in SROs, he explained that the number would revert to the levels at the end of the 2022 school year, before the community building program began, rather than maintaining the increased numbers from the first day of school in 2023. He added that while some reductions might affect the NHCSO programs, the budget also includes recommended enhancements. He reiterated that he is not advising the Board to cut these programs as those decisions rest with the Board. His role is to outline the financial scenarios, and unless directed otherwise by the th Board by May 30, he will recommend using the $7.7 million scenario. Vice-Chair Pierce voiced concerns about cutting large departments such as the NHCSO as the department functions are related to public safety. County Manager Coudriet explained that he is trying to generate a scale for the Board. The discussion involves significant sums, not just minor amounts, and substantial savings can only be achieved through the largest departments, as eliminating four smaller departments cannot achieve a tenth of what is needed to avoid using RSF. Extensive discussion ensued about what steps the Board needs to take to move forward. Commissioner Barfield expressed his understanding that the county manager needs the Board to review the budget to identify potential cuts. Given the limited funds, there are three options: utilizing the RSF, cutting programs, or raising taxes. With no interest in raising taxes, the Board must decide which reductions to make to balance the budget. The county manager has presented some scenarios, but ultimately, the decision on funding sources lies with the Board, not the county manager. He noted the importance of finding alternative funding sources or making cuts and encouraged the Commissioners to thoroughly review the budget to determine specific cuts where there is consensus. Commissioner Scalise agreed, suggesting it could be done promptly with receipt of the line item binder. He further stated that he is not in favor of cutting the NHCSO and wants to determine a way to avoid using the RSF. Commissioner Zapple expressed agreement noting there is a reasonable answer in the information provided to the Board. Although the data suggests using $7.7 million from the RSF, it does not have to be that amount. County Manager Coudriet responded to questions explaining that the Board has been presented with cuts exceeding $7.7 million, offering $600,000 in additional options. A “plug and play” scenario document has been created that may help the Board with its decisions. He noted that the information being provided shows where the budget is balanced, provides options reflecting no revenue stabilization, illustrations of cuts, and what would be recommended but it is for the Board to decide. Vice-Chair Pierce raised concerns about the focus of cuts, noting that while larger departments might be targeted, smaller amounts like $100,000 for the Senior Resource Center (SRC) meals expansion, $50,000 each for Parks and Gardens, and Emergency Management are also being considered. County Manager Coudriet responded by explaining that the SRC meals expansion was funded by ARP and highlighted the challenges of meeting a $3 million commitment to housing without using RSF, emphasizing the need for significant cuts to avoid using RSF. What is being shared reflects that there is no desire to use RSF, and the cuts must be extraordinary as the balance will not be achieved through nickels and dimes out of smaller departments such as Veterans Services. The movement must be on the order of at least $3 million, if not several million, to not use RSF. The County is consistent with prior commitment to policy or in the best interests of the community. Commissioner Barfield commented that had the property tax rate not been reduced in previous years, the County would have an additional $12 million in the budget. He further stated, for the record, that he is in favor of using the RSF to make things work. As one who voted to sell the hospital and recognizing what those funds would be used for is to stabilize the revenue unless the Board is going to increase the tax rate. He believes that the County staff are the professionals who understand the needs of county government, more so than himself when it comes to staffing levels. He is not NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, MAY 13, 2024 PAGE 213 going to try to do the county manager’s job in terms of getting to that level of detail. He would support either dipping into the RSF or increasing the tax rate. County Manager Coudriet confirmed in response to questions that the ARP funds will last into the FY25 budget, and it is already in said budget. Budget development has been aimed in terms of how to drive scale to achieve no use of RSF, which is at $7.7 million. He and Mr. Credle confirmed that the NHCSO overtime line item has dropped from $1.4 million to $1.2 million while the elementary SROs line item has increased due to refinements. County Manager Coudriet also confirmed that if revenue were raised, the Board would be able to fund priority initiatives for the school district, such as more student-facing teachers. Regarding RSF, the interest generated can be used and is already accounted for as a revenue item in the budget, while the $7.7 million is the principal usage. The interest from RSF has been part of the budget for the past two fiscal years, during which the property tax rate was also reduced. However, there has not been a reduction in the overall spend in the budget, necessitating the identification of recurring revenue sources. When the Board decided to cut taxes by half a cent last year, it had also added expenditures to the budget that staff did not recommend. Mr. Credle added that this year’s interest earnings are allocated for operations and will be used again next year if the same programs continue, as no new funding is available. Discussion ensued about the funds from the hospital sale. County Manager Coudriet clarified that one escrow account remains, which will break in 2025 with about $25 million; 50% of this will go to the New Hanover Community Endowment (NHCE) and 50% to the medical foundation. He emphasized that none of these funds will flow to the County, which received its $350 million at the hospital sale's closure. In response to questions about the interest in these funds, Mr. Credle confirmed that it still exists. County Manager Coudriet responded to further questions by explaining that the County and taxpayers would not have access to the interest from the $25 million escrow as the escrows were specifically set up to address liabilities and employee stabilization measures outlined in the asset purchase agreement. He explained that these funds would remain earmarked for hospital-related expenses until the escrow breaks, at which point any unspent funds would be distributed as stated earlier. The County does not control these escrows and has no claim to either the interest or the principal. Mr. Credle stated he does not think the idea is to use the RSF principle every year, rather it is serving as the one-year bridge to reach the upcoming property revaluation. County Manager Coudriet confirmed that using any RSF funds next fiscal year would still generate a 5% return but on a reduced corpus. Commissioner Zapple expressed concerns about public confusion and frustration over the escrow fund allocations as they seem to not directly benefit the community. He noted the issues with public access to funds directed to the NHCE by the asset purchase agreement, suggesting there are issues that need attention. County Manager Coudriet stated he is not able to disagree and will not, but the County must follow how the asset purchase agreement was constructed and reiterated that not all funds were public; Novant borrowed significant amounts to execute the agreement. While some cash from the hospital was taken as part of the County’s $350 million, any additional funds were borrowed by Novant and not solely for the County's benefit; these also went into establishing the NHCE, which aims to serve the community. Commissioner Barfield stated appreciation for the explanation, noting that without giving false expectations about next year’s budget, the implications of setting the tax rate based on revaluation is an opportunity for county government. It provides the ability to increase revenue coming in to cover costs. He disagreed with past decisions to cut the tax rate, as expenses continued to increase and has put the County in a difficult financial position. He stated that when setting the new tax rate next year, comparing rates with other counties such as Pender County is irrelevant due to different property values, emphasizing that the community expects certain services that require adequate funding. The Board must determine how to pay for them and spending the RSF interest cannot continue when, eventually, there will not be any interest to spend. He reiterated that the county manager cannot resolve the problem for the Board and it either accepts the county manager’s solution or finds its own solution that can be agreed upon. Commissioner Scalise commented that three options for fiscal management are raising taxes, using RSF, or cutting spending. He advocated for further analyses to ensure the budget is as lean as possible, distinguishing between needs and wants, and prioritizing essential services to avoid tax increases and minimize RSF reliance. While there are challenges with this approach, he is dedicated to exploring all avenues to achieve a balanced budget without compromising essential services. Commissioner Barfield reiterated that the County is a growing community attracting residents from metropolitan areas who expect certain amenities. In his first year on the board, he voted against the budget because it did not raise revenue. Instead, the Board made significant cuts, including reducing staff, combining departments, and implementing furloughs to balance the budget. Mr. Credle responded to questions, providing a brief overview of his process for evaluating each budget line item for potential savings. Regarding the NHCSO overtime line item, it was a policy change put into place about a year ago to address staffing shortages to take overtime pay from one and a half times to two times. It was not intended to be a permanent change. It is a significant savings if the overtime is put back to one and a half times.  Budget option: NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, MAY 13, 2024 PAGE 214 Discussion ensued about slide 11. Commissioner Zapple stated that if the Board were to make the cuts in the right hand column, it would reduce the RSF amount needed down to $3.3 million from the $7.7 million. County Manager Coudriet agreed, adding that it represents a viable alternative if the Board chooses to pursue it. While there is currently no recommended budget for the Board, the most balanced figure involves using $7.7 million from the RSF, which clearly does not meet the Board's preferences. He recognized the Board's concerns and discussed how the staff can assist in achieving substantial savings. He explained that slide 11 allows the Board to manipulate various budget items, directly impacting the overall financial outcome. He confirmed in response to questions that this third option does reflect much of the cuts coming from Port City United (PCU). Commissioner Scalise stated that he is in favor of the PCU cuts, citing that he does not think the department achieved its objectives. Also, unfortunately, the recent news over the last couple of months has repeatedly indicated the need to bring the department to a close at the end of FY24. County Manager Coudriet confirmed that the $859,000 for the school therapists is being moved from ARP to MHSUDF and is not a cut, merely a change in funding source within the hospital escrows. Discussion ensued about using the principal of the RSF. County Manager Coudriet confirmed the requirement of a supermajority vote, four-fifths, to use the principal. Vice-Chair Pierce stated that the Board needs to decide whether to do this and, if not, how to address the $3.3 million gap. Commissioner Zapple stated to find a resolution, the Board should thoroughly review both the budget summary and the detailed binder to identify any possible adjustments not extensively discussed today. The goal is to find solutions for the remaining $3.3 million deficit. He believes the forthcoming property reevaluations might offer more financial flexibility, potentially easing some budget constraints. He noted the importance of maintaining the momentum of community building programs and expressed a preference for moderate adjustments rather than deep cuts that could undermine these efforts. The $3.3 million is a reasonable compromise that respects various perspectives within the Board and advocates for responsible RSF usage. Commissioner Scalise noted that during the previous year's budget discussions, he and Commissioner Zapple identified about $2.5 million in cuts. He reiterated his intent to closely examine the line items and noted that the current financial challenges, including needing an additional $10 million due to school funding issues, have significantly complicated the budget situation. If that were not the case the County would not be in the position it is right now. Commissioner Zapple agreed with Commissioner Scalise. Vice-Chair Pierce emphasized Commissioner Scalise’s statements reiterating that the County would not be here if there was not a shortfall in the school system and it was within a short amount of time that the $10 million had to be found. She stated for the record that she is not in favor of dipping into the RSF for many reasons because she thinks there are other areas where the funds could probably be found, there is a revaluation next year, and she agrees with Commissioner Barfield’s point that there will be some/a lot of changes next year with the revaluation. She reiterated that as far as dipping into the RSF, she is not in favor of it and wants to keep it intact like it is and continue to earn the interest. She expressed concern that once the seal is broken on the funds, it will continue to occur yearly. Commissioner Barfield stated that the County's financial challenges were not caused by the schools, but by the Board's decisions to reduce taxes in recent years despite knowing future needs would arise. He emphasized the importance of foresight, especially considering potential unexpected events like storms, school shortages, and the eventual cessation of ARP funding. He suggested that the meeting might not need to continue at this point as some Commissioners have expressed the need to examine the detailed binder to make informed decisions. County Manager Coudriet, addressing inquiries about the binders’ availability, stated he expects to have them ready for the Board by tomorrow. He asked whether the Board would prefer not to have the recommended budget presented on May 20th, given that the statutory deadline is June 1st. Without clear direction from the Board, he is obligated under st state law to present a balanced recommended budget by June 1 to avoid placing the County in violation of budgetary requirements. Commissioner Scalise expressed his comfort with County Manager Coudriet moving forward with the budget reflecting the third option, noting that further deliberations by the Board were necessary. He reiterated his opposition to using the RSF principal and anticipated making additional suggestions once the recommended budget was available. Commissioner Barfield reiterated his opinion that the discussion should conclude at this point, noting the lack of sufficient information needed by Commissioners to make an informed decision. County Manager Coudriet emphasized the need to align expenditures with revenues but pointed out the challenges of presenting a budget that the Board would accept, reiterating that if presented today, it would reflect the $7.7 million from the RSF. He also expressed reluctance to recommend a budget that entirely avoids using the RSF due to the potential downstream negative consequences of such decisions. Vice-Chair Pierce stated her appreciation for restoring the SROs and NHCSO funding in slide 11, stating her discomfort with any cuts to those areas. After further discussion, the consensus of the Board was that County Manager Coudriet should present the recommended budget at the May 30th agenda review meeting. County Manager Coudriet confirmed that the budget th public hearing can be scheduled for the June 17 meeting. He noted the necessity to continue this meeting to address additional technical matters related to complying with legal requirements on the opioid settlement funding. BREAK: Chair Rivenbark called a break from 2:50 p.m. to 3:07 p.m. Mr. Credle continued the presentation as follows:  Hospital sale escrows:  Established in February 2021:  $300 million RSF  $50 million Mental Health / Substance Use Fund (MHSUDF)  All funds continue to be in government-issued investments  Returns are gradually increasing with matured investments from approximately 1.8% weighted average rate in FY24 to 2.0% in FY25 NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, MAY 13, 2024 PAGE 215  MHSUDF:  MHSUDF strategies: Mr. Credle confirmed in response to questions that there is still $50 million in the MHSUDF, and FY25 would be the first year to use the principal. The $3.7 million in slide 14 does not include the $1.5 million from Trillium. County Manager Coudriet added that his understanding is that the $1.5 from Trillium will come over time in the form of reimbursement payments for bed nights.  RSF: Mr. Credle explained that slide 15 reflects strategies carried forward from the previous year, all approved to be funded by the MHSUDF. He noted that Chief Strategy Officer Jennifer Rigby and her team are responsible for evaluating these strategies, and she is present to address any questions. Ms. Rigby explained how the mental health scholarships will work. The initiative includes two programs: one offers scholarships to individuals pursuing advanced degrees in mental health fields, and the other provides fellowships for those aiming to become mental health nurse practitioners, a role crucial for enhancing mental health care. Recipients can attend any school of their choice but must commit to living and practicing in the County for two to three years post-graduation. Should they choose not to fulfill this commitment, they must repay the scholarship amount to the County. The psychiatric fellowship program follows a similar model, although the degrees involved are more costly. MedNorth is the County’s federally funded qualified health center. The funding will enhance service capacity to reduce the waitlist for mental health and substance use disorder treatments. This will include hiring two full-time peer support specialists and a part-time therapist, aiming to ensure that uninsured and underinsured individuals are seen within three weeks of referral. MedNorth has indicated it can achieve five additional contacts per day with the capacity increase. She is not aware if MedNorth has contacted NHCE for funding. Mr. Credle then provided an overview of the FY25 programs to advance the MHSUD Strategy as follows: NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, MAY 13, 2024 PAGE 216  MHSUD Strategic Plan:  Data 2021-2023:  FY25 Opioid Settlement Fund Joint Committee recommendations:  Program/initiative: Tides, Inc.; recommending organization: New Hanover County  Program/initiative: The Healing Place; recommending organization: New Hanover County NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, MAY 13, 2024 PAGE 217  Program/initiative: MedNorth; recommending organization: New Hanover County  Program/initiative: Face the Music/Recovery Unplugged; recommending organization: New Hanover County  Program/initiative: Staff Capacity; recommending organization: New Hanover County  Program/initiative: Withdrawal Management Wearable Devices Coastal Horizons and OpiAID  Projected cash flow with Coastal Horizons/OpiAID proposal: Mr. Credle stated that unless there are objections, the recommendations will be considered a complete product and essentially not objected to by the Board. Ms. Rigby provided, in response to questions, an overview of the Face the Music/Recovery Unplugged program. She noted that the program does have an excellent success rate and meets individuals where they are. Commissioner Zapple commented on his desire to see more people who could be helped by the program. With it being outside the County and the state, it will be outside the County’s purview. However, he understands that not all residents can find effective services that work for them within the local area or state. Commissioner Barfield noted his experience in trying to get someone the help they need and the lack of services in the County. The unfortunate fact is that some do have to go outside of the County to get the help they need. County Manager Coudriet stated the program is a different form of treatment from The Healing Place of New Hanover County (THPNHC). There is not one right version of treatment, and there is a need for as many different modalities as possible. He agrees with Commissioner Barfield that the community's needs far surpass what is currently available locally, reiterating the importance of having a variety of treatment modalities to effectively address the gaps. Ms. Rigby confirmed that once the program is approved for funding there will be an evaluation and determination of how to decide which people are served. County Manager Coudriet clarified the distinction between the recommendations from the Opioid Settlement Fund Joint Committee and the activities at THPNHC. This uses the opioid settlement money to diversify the available treatment and recovery options. Ms. Rigby and County Manager Coudriet confirmed the funds are not tax dollars, but the settlement funds based on the lawsuit NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 36 BUDGET WORK SESSION, MAY 13, 2024 PAGE 218 against companies who manufacture and distribute opiates. The funds are designated for opioid-related treatments and are kept distinct and separate from other funding sources such as those for THPNHC. County Manager Coudriet confirmed that there is the ability on an annual basis to evaluate whether the deliverables are being achieved as expected for the settlement funds. There is the ability to change course on how the funds are being spent if it is determined that has not occurred and the amount is $35 million spread over 18 years. If the Board chooses not to support these after the first year, the staff would likely recommend this to the elected officials committee, which would then advise the larger governing boards. Ms. Rigby added that what is being presented is a five year plan with opportunities for the Board to review on an annual basis. Discussion ensued about the differences between the MHSUDF and the opioid settlement fund. County Manager Coudriet explained that the County is quite different from the other 99 North Carolina counties in that it has both funds. The MHSUDF is kept separate and not part of the opioid settlement. The approximately $35 million that the County will receive over the next 18 years is not intended to focus on mental health treatment. It is opioid first, then if there is a mental health or some co-occurring substance use disorder that can be treated. The overarching driver of need must be opioid addiction. Ms. Rigby added that this strategy was shared with the Board about a year ago when it approved the strategy and funding plan. The Board will be provided documentation after this meeting that ties all the different initiatives back to the strategies. Ms. Rigby explained in response to questions on the staff capacity initiative that a portion of the funding for the initiative will come from the general fund. These are existing staff members in the Strategy Office who are administering the program, so a portion of the opioid settlement funds can be utilized. She provided a brief overview of the two positions. County Manager Coudriet reiterated that the two positions are not new, they already exist, and that Ms. Rigby determined how to help the general fund save money by utilizing the settlement funds. Commissioner Scalise stated he is comfortable with the recommendation. County Manager Coudriet and Mr. Credle reiterated that the detailed binders will be provided to the Board th by the end of business on Wednesday, May 15. ADJOURNMENT There being no further discussion, Chair Rivenbark adjourned the meeting at 3:43 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.