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HomeMy WebLinkAboutAgenda - 05-28-2009-11 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: May 28, 2009 SUBJECT: FY 2009-10 Budget Work Session DEPARTMENT: County Manager and Budget PUBLIC HEARING: (YIN) No ATTACHMENT(S): INFORMATION CONTACT: Scenarios For Possible Modifications to the FY Laura Blackmon, (919) 245-2300 2009-10 Manager's Recommended Budget Donna Coffey, (919) 245-2151 PURPOSE: For the Board to have an opportunity to review and discuss the Manager`s Recommended FY 2009-10 budget. BACKGROUND: The County Manager released her 2009-10 recommended budget on May 12, 2009. Since that time, the Board has conducted two public hearings to receive residents' comments regarding the proposed funding plan. Tonight's work session is the first opportunity the Board has had to discuss next year's proposed funding plan. The Manager attained the following Board directed guidelines: • County's operating budget was balanced at the County's revenue neutral tax rate (post revaluation rate) of 85.8 cents per $100 assessed value • Monies to fund day-to-day operations, fair funding, repayment of school related debt, and capital equal 48.1 % of the County's FY 2009-10 Recommended General Fund During tonight's work session, the Board plans to discuss the following budget related topics: • FY 2009-10 Annual Operating Budget Revenues, including the financial impacts of reducing ad valorem tax rate below revenue neutral • Chapel Hill Carrboro and Orange County Schools • Durham Technical Community College • County Employee Pay and Compensation During future work sessions in June 2009, the Board will continue to discuss the recommended FY 2009-10 budgets for County operations. The Board plans to adopt the FY 2009-10 budget on June 16, 2009. FY 2009-10 Annual Operating Budget Revenues 2 In February and March 2009, staff projected FY 2009-10 revenues would be approximately $174.3 million, a reduction of $8.7 million from the FY 2008-09 original budget of $183 million. The projections made during this time were very preliminary and based on early analyses of trends through January 2009. Prior to the release of the Manager's Recommended FY 2009-10 budget on May 12, 2009, the last revenue projection provided to the Board was during the March 24, 2009 work session. During the period between March 24 and May 12, 2009, staff continued to monitor and analyze projected revenues. In the end the Manager's FY 2009-10 Recommended Budget reflected total General Fund Revenues of $177.6 million, a reduction of $5.4 million from the current year original budget. The chart below summarizes major changes between preliminary and recommended revenue projections for next year. Analysis of Revenue Projection Changes between March 24, 2009 and May 12, 2009 Preliminary Projections Recommended Budget Real Property Preliminary projections were Recommended revenues based on Valuations calculated prior to end of final results of Revaluation after Revaluation appeal process appeal process completed Valuation estimates were fiscally conservative and anticipated large number of Revaluation appeals Motor Vehicle Anticipated decrease of 10% from Revised projections anticipate Valuations current year budgeted valuation decrease of 8-to-9% from current year budgeted valuation Property Tax Collection rates were fiscally Recommended collection rates reflect Collection conservative and based on current rates which are on target or Rates collection rates through first half of slightly higher than collections during current year first half of current year Sales Taxes Revenue projections were based Recommended revenues reflect on lower than budgeted collections receipts through May 2009 which are through first half of current year only slightly lower than original current year budget Anticipated 10-to-15% reduction in Articles 39, 40 and 42 budget due Anticipates 5% reduction in Article 39 to anticipated continued economic due to anticipated continued economic downturn downturn Anticipates 2-to-2.5% reduction in Articles 40 and 42 due to anticipated continued economic downturn Land Transfer Revenue projections were based Recommended revenues reflect and on significantly lower than budgeted activity through April 2009 Construction collections through first half of Related current year Revenues continue to be less than budgeted in current year Revenues Staff continues to be cautious and fiscally conservative with regard to County revenues for next year. Each day brings news that the State plans to reduce its support to county and school functions. During tonight's work session, staff plans to provide additional information regarding anticipated revenues for the upcoming fiscal year including the most up-to-date information regarding state support. Scenarios for Possible Modifications to the FY 2009-10 Manager's Recommended Budget The Board directed the Manager to develop funding scenarios for decreasing the recommended budget in order to attain a tax rate lower than the revenue neutral tax rate. A chart outlining possible modifications to the recommended budget is attached for the Board to review. The Manager plans to discuss the information in more detail during tonight's presentation. County Support of Local Boards of Education At their March 24, 2009 budget work session, the Board of County Commissioners decided the funding target for schools for FY 2009-10 would be 48.1 % of County General Fund revenues. The target is exclusive of the County's share of Durham Technical Community College funding and is consistent with the school funding target endorsed by Commissioners in May 2000. The following school related components are included in calculation of the target percentage: Local Current Expense -supplements State and Federal funds received by each district for the day-to-day operation of schools. Examples of expenses paid from these funds include salaries and benefits for locally paid teachers and utilities. North Carolina statutes mandate boards of county commissioners provide local current expense monies to school districts. Counties having more than one school administrative unit, as is the casein Orange County, are required to provide equal per pupil appropriations to each system. The funding level, however, is discretionary and varies from county to county. Recurring Capital -pays for facility improvements, equipment, furnishings, and vehicle and bus purchases. State statutes mandate counties to fund recurring capital. However, the amount of money counties allocate to this function is discretionary and varies from county to county. Equal per pupil allocations required by law for current expense appropriations are not applicable to this category of local school funding. Per the April 2007 Commissioner approved County Capital Funding Policy, it is the intent of the Board of County Commissioners to dedicate the equivalent of four cents on the annual ad valorem property tax to funding recurring capital expenditures - 3 cents for school projects and 1 cent for county projects. The Policy further states, "However, there will be times when the County will be bound fiscally and unable to 4 achieve full funding. During those times, Commissioners may find it necessary to depart from the Policy." To date, Commissioners have funded the equivalent of 2 cents for schools recurring capital and no monies for County recurring capital. Long-Range Capital -supports school capital projects through the County's Capital Investment Plan (CIP). Capital projects are funded through a combination of State and local bonds, non-bond financing and pay-as-you-go funding sources. Pay-as-you-go funding includes dedicated half-cent sales tax revenues and property tax earmarked under the Board's April 2007 Capital Funding Policy. The Capital Policy also allows for North Carolina Public School Building Capital funds and School Construction Impact Fees to offset School related debt service. Similar to Local Current Expense funding, the amount of money counties allocate to long-range capital expenditures is discretionary and varies from county to county. School Related Debt Service -repayment of principal and interest on School related debt including general obligation bonds and private placement loans. North Carolina statutes require counties to pay for school related capital items such as acquisition and construction of facilities. In instances where counties borrow monies to pay for such items, the State mandates counties to repay the debt. The amount of money counties borrow for school related projects is discretionary and varies from county to county. Fair Funding -monies, split equally between the two school districts, to offset costs of safety and health services such as School Resource Officers and School Social Workers. The State does not mandate counties to provide funding for these resources. It is important to note, the 48.1 % target only includes funding for the items identified above - current expense, recurring capital, long-range capital, school related debt service and fair funding. It does not include additional non-mandated County financial support Orange County Commissioners commits to schools. Examples of such appropriations include supplementing state funding for school health nurses in order to staff each school with at least one school health nurse. Recommended funding for this contractual agreement between the County Health Department and each school district totals $617,732 for FY 2009-10. This agreement/contract has been in place since 2001. In addition, County departments provide a number of services and programs to each school district. An grange County Financial Support to Chapel example of such a program is the Hill Carrboro City and Orange County Schools Tobacco Cessation program operated FY 2009-10 Recommended Budget through the Orange County Health County also financially agencies such as Schools that provide for middle school The chart below County's financial school districts. Total Current Ex ense $58,508,208 Recurrin Ca ital $3,000,000 Lon -Ran e Ca ital $4,311,827 School Related Debt Service $18,616,833 Fair Fundin $988,000 School Health Nurses $617,732 School Social Workers $572,000 School Resource Officers $500,000 Proceeds from CHCCS Special District Tax 18 721 785 $ ' Department. The supports non-profit Communities in after school programs students. summarizes Orange supportto the two 5 During tonight's work session, Commissioners will have the opportunity to dialogue with the Boards of Education about county funding and anticipated State funding for schools next year. County Support of Orange County Campus of Durham Technical Community College The Orange County Satellite Campus of Durham Technical Community College, located at the Waterstone Development located just south of Hillsborough off Highway 86, held its grand opening on May 2, 2008. As with local school districts, counties in North Carolina are responsible for supplementing state and federal appropriations to community colleges. For the most part, counties are responsible for day-to-day operating costs such as utilities, security and custodians. Counties are not responsible for teaching staff. The recommended budget provides $742,567 to DTCC for fiscal year 2009-10 compared to $771,647 in the current year. FY 2009-10 funding includes current expense appropriation of $537,521, recurring capital of $15,000 and debt service allocations of $190,046. County Employee Pay and Compensation The Manager's Recommended FY 2009-10 budget included the following proposals with regard to County employee pay and compensation. • No cost of living (COLA) or in-range salary increases • Allows for up to 4% health insurance premium increase • Maintains County's living wage at $10.12 • Funds highest priority reclassifications identified by Archer consultants in Pay and Classification Study • Implements twelve-month hiring freeze for all vacant positions 6 • Funds retirement incentives for employees eligible to retire prior to October 1, 2009 • Allows for voluntary unpaid leave • Suspends County's non-mandated contribution to employees' 401 (k) accounts The recommended budget anticipates a net savings of $900,000 through implementation of the hiring freeze, retirement program, voluntary unpaid leave and suspension of 401(k) contribution. In an effort to reduce the recommended 85.8-cent tax rate, the Board may wish to implement additional County employee related programs. Examples of programs generating additional savings for the County include employee furloughs, and longevity pay reductions. Staff plans to share information related to such programs during tonight's work session. FINANCIAL IMPACT: Included in the Background section. RECOMMENDATION (S): The Manager recommends the Boards discuss the topics noted and provide direction to staff, as appropriate.