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HomeMy WebLinkAboutMinutes - 20050420APPROVED 6/712005 MINUTES ORANGE COUNTY BOARD OF COMMISSIONERS 1NORK SESSION APRIL 20, 2005 7:30 p.m. The Orange County Board of Commissioners met for a Work Session on Wednesday, April 20, 2005 at 7:30 p.m. at the Government Services Center in Hillsborough, North Carolina. COUNTY COMMISSIONERS PRESENT: Chair Moses Carey, and Commissioners Valerie P. Foushee, Alice M. Gordon, Stephen Halkiotis, and Barry Jacobs COUNTY COMMISSIONERS ABSENT: COUNTY ATTORNEYS PRESENT: Geoffrey Gledhill and S. Sean Borhanian COUNTY STAFF PRESENT: County Manager John M. Link, Jr., Assistant County Managers Rod Visser and Gwen Harvey and Deputy Clerk to the Board David Hunt (All other staff members will be identified appropriately below) NOTE: ALL DOCUMENTS REFERRED TO IN THESE MINUTES ARE IN THE PERMANENT AGENDA FILE IN THE CLERK'S OFFICE. Chair Carey identified various handouts. 1. BudaetlCapital Fundina Issues a. 60-40 Capital Funding Options Budget Director Donna Dean handed out printed packages. She made reference to the "Summary of School and County Capital Funding Options." She said that this is the same information that was given last week, with the addition of options 5A, 5B, and 5C. This addresses the request by Commissioner Jacobs to have one half of Cedar Ridge debt to Orange County Schools and one half on the County's side. Rod Visser gave same mare historical background. He said that in the summer of 1996, when County staff was developing estimates of 10-year capital revenue and how the County might address a way to pay for anticipated needed debt service, which ultimately became the 1997 bond referendum, staff developed a number of options that were first presented in August 1996. The Schoal boards, in addition to the County Commissioners, reviewed those numbers and raised some concerns about what the new 10-year revenue numbers would produce for the two school systems compared to what they would have received under the old system done in 1995. And you may or may not recall that part of the 1997 bond referendum, what the Commissioners decided to da was to earmark that the first $40 million of the bands that the voters approved in 1997 would be paid through sales tax revenue. The balance of the debt service would come from an earmarking of 3.1 cents on the tax rate. When the school boards reviewed the first sets of options, they raised concerns that they would, over a 10-year period, ostensibly be getting a lot less in terms of pay-as-you-go money than they would have gotten under the old CIP system. So, the County Commissioners asked the staff to generate some other options, and that is where the now infamous option 5B came from, which involved OCS suggesting that they pay for half of the funding that would be required for Cedar Ridge High School and CHCCS, which were at the time paying their portion of McDaugle School debt out of automation projects; $50,000 far Utilities Extension; and $100,000 for Lands Legacy. The total far the County, based on the current policy, is $3.6 million. The next sheet outlines options 1 and 2. This is where the 60/40 split is an the pay-as- you-go revenues for the schools and the County. This is on line 42. The major differences between option 1 and option 2 are the Cedar Ridge debt. These options are different from the baseline option. In these options, the Public School Building Funds as well as school construction impact fees bath are taken off the tap to pay debt service. Once it is allocated out, the net school debt is $9.8 million. The County related debt is $5.1 million. The net County debt is $4.8 million and for schools and County is $14.6 million without Cedar Ridge, and $16.4 million with Cedar Ridge. She made reference to line 33 and said that this was the change she was referring to far property tax. The current policy has bits and pieces of property tax paying for certain debt issuances. This leaves $368,055 to be added to sales tax. The projected sales tax is added of $9.5 million. This leaves the net amount available for school and County capital projects at $9.2 million for option 1 and $7.5 million for option 2. The three cents property tax dedicated to schools recurring capital remains with the schools for options 1 and 2. The total amount for OCS is $2 million far option 1 and $3 million for option 2. The total amount for CHCCS is $5.5 million for option 1 and $4.9 million for option 2. The total amount for the County would be $4.8 million for option 1 and $4.1 million for option 2. Commissioner Halkiotis said that the bottom line is that, in order to remove the debt from OCS, the County is asking CHCCS to cough up $600,000 and the County to cough up $700,000. He said that the school board members need to understand this next week. He thanked Donna Dean for making this very clear and easy to understand. Donna Dean then explained options 3 and 4. These options are similar to options 1 and 2, with the only difference being the dedication of the 3 cents and the 1-cent. In option 1 and 2, these were separate and distinct {3 cents for schools and 1 cent for the County}. Options 3 and 4 offer an alternative to co-mingle the total 4 cents and put it in the 60140 split, where the schools would get 60°~ and the County would get 40°~. Commissioner Gordon verified that the 1-cent budgeted for county recurring capital used to be the School/Park Reserve Fund. Donna Dean explained each equation for options 3 and 4. This is on page 3 of the handout, Fiscal Year 2005-06 Capital Funding Options. Options 5A, 5B, and 5C are the options requested by Commissioner Jacobs last week. The major difference is, instead of including half of Cedar Ridge debt with OCS, this would remove half of the responsibility. The difference between 5A, 5B, and 5C is that 5A allows far all of the peak debt service to stay with the OCS, while the County would remove one half of the responsibility of their share of Cedar Ridge debt. Option 5B is a 50150 split - OCS is responsible for one half of their share of Cedar Ridge debt and would receive one half of the peak debt service. In option 5C, OCS would be responsible for one half of their share of Cedar Ridge debt and would receive no peak debt service. There is no impact to CHCCS or the County on these three options. Commissioner Jacobs said that if there is a difference in how much OCS get, the money should go somewhere. He asked where it was allocated. Donna Dean said that it is mainly in the peak debt service. With any of the options, it goes away to the County's general fund and it is not reallocated back to the schools. Commissioner Jacobs said that an the charts it just vanished and he suggested putting an asterisk telling exactly where the money went. Donna Dean said that prior to 1996 and prior to the current policy, CHCCS was in a similar situation and they were paying the debt on McDougle Elementary School out of their Commissioner Foushee asked when the County Commissioners are making a decision on the option, if it is the staff's expectation that they will also make a decision on the programming of the $12.8 million. John Link said that they do not need to be decided upon simultaneously necessarily, but should be decided upon in the next two weeks. There is another work session on May 5t" and the Board can talk about the $12.8 million. b. Major Budget Drivers for FY 2005-06 John Link said that this is the Budget Building Blocks PowerPoint presentation. Donna Dean said that at the County Commissioners' retreat in January, the staff outlined some major budget drivers far this year. Fiscal Year 2005-06 Budget Building Blocks: • One cent on property tax estimated to generate between $1,150,000 and $1,160,000 o Expect "revenue neutral" tax rate to be in the mid-70 cents range • Non-Property Tax Revenue {for example, fees and intergovernmental) estimated growth between 2 and 3 percent • Less fund balance available to appropriate than prior years CHCCS is expected to lose students next year according to DPI. She never remembers this happening. The net increase far students in both districts is only 58 students. If the per pupil allocation stays the same at $2,623, there would be a decrease in appropriation for CHCCS of $322,629 and an increase in appropriation for OCS of $474,763. When this happened to the OCS a couple of years ago, there was a hold harmless piece in the current expense appropriation piece, in that they made sure that OCS would not lose any current expense money. If this is done again this year for CHCCS, it would bring the per pupil up next year to $2,653. Commissioner Halkiotis said that it should be included in the information to the school boards next week that the County requested enabling legislation to allocate the per pupil the way DPI allocates it -based on actual numbers and not projections. Donna Dean then went over the next chart of Budget Building Blocks. There are projected increases of $10,441,674 and they include: - programmed debt service - $2.2 million - Medicaid - $560,000 - funding of positions added during 2004-05 - $445,000 - operational increases due to rising fuel and utility costs - $450,000 - pay plan - $1.5 million - reinstate school recurring capital from 2 cents to 3 cents and County capital funding from zero to 1 cent - $2.3 million - funding for net increase of 58 students - $152,134 - per pupil amount to hold CHCCS "harmless" for loss of 123 students - $534,540 - additional funding to begin addressing school funding equity - $2.3 million John Link said that he did not plan on recommending any new employees next year, but he would like to implement the pay plan and take care of the current employees. John Link said that there is not any magic revenue to overcome these increases other than property tax increases. Commissioner Jacobs asked for a history of tax increases per year. John Link said that in the last 4 years, the County Commissioners have increased the tax rate about 8 cents overall. The previous 4 years was about 14 cents. • Potential increases in Countywide property tax rate for: o Tier I -funding to address mandatestobligatians {e.g. local match for State teacher pay & benefit increases} o Tier I I -funding (if any) to restore certain State education budget cuts o Tier I II -funding to address some portion of OCS staffing and programming constraints identified in Educational Excellence report (all or some of resulting per pupil increase for CHCCS could be offset by reductions to CHCCS district tax} SCHOOL FUNDING EQUITY 2005-06 CURRENT EXPENSE CONCEPTUAL FRAMEWORK • Memoranda of understanding to establish mutual expectations of how Tier III funds would be used • If major needs might go unfunded, consider mechanisms outside of current expense appropriation, such as: o Contracts for nursing and social worker support o Contract with Durham Tech, schools for middle college program • As an alternative, NC Statutes permit school appropriations by purpose, function or project SCHOOL FUNDING EQUITY EDUCATIONAL EXCELLENCE REPORT Recommendations far Increasing OCS Resources Pre Kindergarten -12t"Grade 1. Increased Provision of Social Workers 2. Increased Resources for Exceptional Children {EC} Specialists in OCS 3. Improved Transportation for After-School Programs far OCS 4. District Resources for Grants and Data 5. Subject Area Specialists {Curriculum Alignment, Development, Implementation) 6. Increased Resources for Pre-School Services John Link said that in the short term, the memorandum of agreement that specifically talks about certain areas to focus on is a good start. Chair Carey made reference to Tier I I and asked if this assumes that the legislature is going to act before the County Commissioners have to act. He asked how to address Tier II if the legislature does not act. John Link said to make the best estimate and by mid-June we should know where the State is going. Commissioner Halkiatis asked if the County Commissioners could by statute set aside a certain amount of money, like a safety net and Jahn Link said yes. Commissioner Jacobs agreed and said that the money could be put in the general fund and then the Board could decide how it should be disbursed. This would allow more flexibility. Commissioner Halkiatis asked that this information be given to the school boards. He thinks this is as important as the 60140 issue. Chair Carey suggested scheduling another meeting to discuss this with the school boards, because the agenda next week is pretty full. Commissioner Gordon asked about the major advantages and disadvantages of pursuing Tier II and III. John Link said that, in the short term, they are able to address specific areas that the school boards deem necessary to address. Commissioner Gordon said that the Board could also give the schools the money and let them decide how to spend it. Jahn Link said that this is the question that the Board of County Commissioners has to answer. Chair Carey asked if the staff was expecting the Board to say whether it agrees or not with this tier approach. John Link said that if the Board reacts with horror tonight, the staff would pursue something else. Commissioner Foushee said that she senses a direct conflict with Tier III. She does see the advantage, but she would feel better if the Tier III approach was done in concert with the particular board of education, rather than the County Commissioners determining the functions and the projects. John Link pointed out that the memorandum of understanding would have to be signed by both parties, so there is no agreement unless both parties agree to it. Commissioner Halkiotis said that he did not know that the resource officers in CHCCS were originally funded with a COPS grant. The Chapel Hill Town Council then decided it would not fund it after a certain number of years, and the school system is looking at this. There are some commonalities in both school systems that could be pulled out for a specific focus. This could free up some money for the school systems and give them some flexibility. All of this would be done by sitting down together and there would not be any micro-managing. Commissioner Jacobs said that this approach was used with the school nurses where the County was paying for the additional nurses. Commissioner Jacobs asked about the $2.2 million far programmed debt service and asked for a breakdown of this. John Link said that his monthly luncheon with the two school superintendents is next Tuesday. The joint meeting is also Tuesday night, so funding equity could be discussed then ar as soon as possible. Commissioner Jacobs said that, once all of the information is gathered from Bob Segal, there should be a meeting with the two school boards to define "equity" and what should be achieved. Chair Carey said that he does not react in horror with this approach. He thinks that the process has to start with the funding. He still believes that it is the individual school board's decisions about how the money should be spent, with the exception of the Tier III items that the County will address this year. Commissioner Gordon agreed that the process should be started this year, and that it will require a tax increase in the OCS district. She thinks it is important to work with both boards of education an this. Chair Carey said that he might contact the school superintendents to see if the agenda far next week's meeting should be changed again to include this item of funding equity. 2. Board of County Commissioner Issues a. BOCC Communications Infrastructure Recommendations Information Technology Director Todd Jones said that this was a package put together in response to a request from Chair Carey and Commissioner Jacobs. The initial reason was to address communications and to ensure that there is a consistent approach between the County Commissioners, with County Commissioners and constituents, and with County Commissioners and the County staff. The staff put together a recommendation of a communications infrastructure for personal computing and portable devices. This recommendation is not mandated upon any Commissioner, but it should suit the needs and will allow for greater communication options. In answer to a question from Chair Carey, Todd Jones said that they were recommending ahands-off backup system that will periodically copy all of the County their own allocation, that was rolled into the equation too. As a result of these updated options, CHCCS received roughly equivalent to what they would have gotten under the old system, but OCS ended up well short, like $13 million over a 10-year period because they would be putting so much of their pay-as-you-go money towards Cedar Ridge. So what staff suggested and the Commissioners agreed to was this concept of peak debt service. VIlhen you earmark a certain amount of property tax revenue to pay debt service, after you have issued all of the bands or all of the debt that is associated with that, each year the amount of debt service that is required to pay that off goes down. Typically what would happen, is that the Board of County Commissioners would consider dropping the tax rate accordingly because not as much money is needed from property tax revenue for debt service. The County Commissioners decided to deliberately leave the tax rate at the same level, and the difference between how much the tax rate would produce in revenue and how much was required for the debt service that was being paid down mare and mare each year, that became the peak debt service. The idea was that after we achieved the peak debt service associated with the 1997 bonds, that the difference between those figures would accumulate up to roughly about $13 million over whatever period of years it took. This would essentially hold OCS harmless under this 1996-funding scenario, compared to what they would have gotten under the old funding scenario from 1995. Donna Dean said that the other piece that complicates things is that they did not anticipate in 1996-97 that the interest rates would be as low as they are now. They have been refinancing and the peak debt service target has moved a little. Commissioner Jacobs asked far a narrative of what Rod Visser just described above. Commissioner Halkiotis asked that this narrative be provided to the school boards at the joint meeting next week. Donna Dean explained the mathematical equations. She made reference to the Current Policy, which is in the sheet entitled, Fiscal Year 2005-06 Capital Funding Options. This is the baseline, where the County would get about $3.8 million, which is the least of any of the options. Beginning with the sales tax, which is projected to be $9.6 million far next year, the property tax dedicated to retire debt service is added to the sales tax, which is $13.1 million. The Skills Development Center rental and the Inmate Jail Fees are added to this amount. This brings the total revenue to pay debt and pay-as-you-go capital for schools and county to $22.9 million for next year under the current policy. From that $22.9 million, the existing projected debt is subtracted, of about $18.3 million. The net amount would be $4.6 million. The way the current policy is written, once it gets down to the $4.6 million, the amount is split 50% to the schools and 50% to the County. The schools would get $2.3 million. There is also $802,000 from the Public School Building Fund. She also added the 3 cents that is dedicated to school recurring capital, which gives $6.6 million going to schools' pay-as-you-go. This amount is split again to the schools based on the average daily membership. OCS would get $2.5 million, plus $970,000 for impact fees, plus $275,581 for peak debt service, less $1.7 for their portion of Cedar Ridge debt. The net amount for OCS, based on the current policy, is a little less than $2.1 million. Of the $6.6 million, CHCCS would receive $4 million, plus $1.6 million in impact fees, which totals $5.6 million for pay-as-you-go. Commissioner Gordan asked about the impact fees for each district. Donna Dean said $3,000 for OCS for single-family homes and multi-wide mobile homes and $1,420 far multi- family and for singlewide mobile homes. CHCCS is $4,407 and $1,907 respectively. The staff will verify these numbers and have them for the meeting next week with the schools. Commissioner Jacobs asked that the justifiable maximum be included also. Donna Dean continued explaining the equations. On the County's side, of the $4.6 million, the County would receive $2.3 million. Based on the current policy, there is one cent on the property tax going to County projects, which is $1.1 million. There are also smaller restricted revenues that would go into County projects - $50,000 for Human Services pay-as-you-go. When the Board adapted the current policy, this debt went away from CHCCS and was absorbed into the County's debt. In questions to Donna Dean, Commissioner Gordon verified that the bond and alternative financing for High School #3 was $17.5 million and verified that CHCCS was using some of their impact fees to pay for High School #3. Commissioner Jacobs made reference to option 4, which has Total OCS of $2.8 million and in option 5C it goes down to $2.15 million. He asked if the difference would go into the general fund and Donna Dean said yes. Chair Carey said that it would be subject to the County Commissioners every year to decide how the funds would be used, as well as the school boards. Commissioner Jacobs said that this could help the schools some with operations. John Link said that the general fund could be used for any purpose. Commissioner Gordon pointed out that in the next couple of years, the County is at its debt capacity and also that the $12.8 million far Elementary School #10 will probably have to increase, because it will be in the future and the costs will rise. John Link said that this tracks back to getting a construction standard. Chair Carey said that this is supposed to be discussed at the joint meeting with the school boards. Chair Carey said that at the last meeting, the Board indicated a desire to review the basic assumptions that the staff included in these options. Donna Dean said that Greg Wilder put something in a Q&A format. The Board decided to read this document at home. The document will also be provided to the school boards. Commissioner Jacobs asked for a list of the school capital projects, with the costs included. Rod Visser said that they see this as being part of the broader CIP process, which would be later in May or early in June. Commissioner Halkiotis suggested putting all of this information in an orderly format in a notebook for the school boards next week. Commissioner Gordon said that if the County Commissioners are trying to decide how to allocate the capital dollars, then they need to see the list of the school projects with dollar amounts. Chair Carey said that, depending on how much money is allocated to the schools, their priorities might change. The County Commissioners need to tell the schools how much money they have so that they can make the priorities and decide how to spend the money. John Link said that, far the coming year, the Orange County amount could range anywhere from $3.6 to $5.2 million. He will be focusing on what the lowest amount would accomplish. He is puzzled as to why others cannot do the same thing. He thinks that an educated guess could be made. Discussion ensued an when the priority lists with dollar amounts could be brought back. Donna Dean said that the timeline has the school CIPs back by June 7cn John Link pointed out that items 6, 7, and 8 an the Q&A document are policy decisions that need to be made at some point. The staff will make a recommendation if the Board desires. The Board agreed to have the staff make a recommendation. Commissioner Gordon asked more clarifying questions about the peak debt service, which were answered by Donna Dean. Finance Director Ken Chavious said that philosophically there is peak debt, but technically there is not, because the County has been issuing debt. The debt has not peaked yet. Commissioner Halkiotis asked how much debt the County was still working on and Donna Dean said debt from the bonds of 1988, 1992, 1997, and 2001. Commissioner Halkiotis suggested that someone take a picture of some classrooms at Durham Tech and show them to the school boards to show what Spartan learning and teaching conditions look like. Commissioner Halkiotis said that this year is an unusual set of circumstances. He does not think that there will be any relief for Medicaid. He thinks there will be more unfunded mandates and that this year will be one of the most challenging budget years in the last 15 years. c. Funding Equity in School Operating Budgets John Link said that this was not about numbers, but about an approach to addressing school funding equity for the coming fiscal year. SCHOOL FUNDING EQUITY RESEARCH & ANALYSIS Fall 2003 presentations, work sessions, public hearings on potential school merger impacts and funding equity September 15, 2003 staff report -appendices reflect hypothetical financial and taxation impacts under various funding equity scenarios Equity/merger actions reserved pending results of three education initiatives o Educational Excellence Work Group - UNC School of Education study of resources o School Collaboration Work Group -regular facilitated meetings of Chair, Vice Chair, Superintendents, Manager o County/School Efficiency Study -Robert Segal, CPA SCHOOL FUNDING EQUITY CONSIDERATIONS • Main factor affecting funding equity is approximate annual proceeds of $13 million from CHCCS special district tax • At same point in the future, BOCC must define "equity" so that ultimate target will be clear o Absolute funding equity (e.g. local ar total annual per pupil funding identical between school systems}? o Programmatic equity (e.g. all OCS &CHCCS students with access to all of each systems programs)? o Or -somewhere between these two ends of the spectrum, andlor some combination of funding and programmatic equity? SCHOOL FUNDING EQUITY SUPPLEMENTAL FUNDING • If effort is to be made to narrow the local per pupil funding gap, there are three main approaches prescribed in NC statutes available to BOCC: 1. Levy countywide supplemental tax 2. Levy Orange County Schools supplemental district tax 3. Increase countywide property tax rate • First two approaches require majority approval in referendum of voters to establish authority to levy tax; due to time constraints, cannot be implemented before 2006-07 • Third approach could be used for 2005-06 SCHOOL FUNDING EQUITY 2005-06 CURRENT EXPENSE CONCEPTUAL FRAMEWORK • FY2004-05 per pupil appropriation of $2,623 as foundation Commissioners' data onto a separate hard drive to ensure that the data is stored safety and securely off-site. Todd Janes made reference to the wireless recommendations and the caveats. He cautioned the County Commissioners not to rely on cell phones for emergency communications because the coverage is not complete throughout Orange County, and there are certain types of emergencies that will overwhelm the system. They want to look at the possibility of using some EMS technology to provide the County Commissioners with some reliable communications. Also, some of the newer wireless devices can be frustrating to use. He encouraged the County Commissioners to try one of these devices before committing to one. Commissioner Gordon asked about security for the wireless laptop. Todd Jones said that there is a lot of discussion in the IT community about wireless security. He said that each person could choose whether to go onto a wireless network. There are usually several networks to choose from. It is also possible to have an encryption that only allows recognized devices to connect to it. Commissioner Gordon said that the real question is need. There are certain items that the County Commissioners are paying for on their own. She asked how this would be handled. Todd Jones said that the recommendation is that the items that are mentioned in the package would be items that the County would pay for, or to provide as a stipend so that the County Commissioners can pay for it. Commissioner Halkiotis asked what it cost to go wireless at Southern Human Services Center and Todd Janes said that it is $50 a month. Commissioner Jacobs asked if the laptops had an A drive and Todd Jones said no, but it can be outfitted into the docking stations. Commissioner Jacobs said that he does not generate a lot of County documents and what he does generate could be backed up on a floppy disk. His main concern has to do with email. Regarding the cell phones, he thinks the only useful function would probably be text messaging. He would rather pay for his own cell phone otherwise so he can use it for personal reasons. Commissioner Gordon agreed with Commissioner Jacobs about the cell phones. Todd Janes said that they do not want to mandate anything on the County Commissioners, and individual needs can be discussed. Chair Carey agreed about the cell phone and said that he would rather pay for his own cell phone so he can use it for personal reasons. b. Commissioner Roles on Boards and Commissions and Process far Selecting Chairs for Boards and Commissions DEFERRED A motion was made by Commissioner Jacobs, seconded by Commissioner Halkiotis to adjourn the meeting at 10:15 p.m. Moses Carey, Jr., Chair David Hunt Deputy Clerk to the Board