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HomeMy WebLinkAboutAgenda - 11-15-2004- item 1ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: November 15, 2004 Action Agenda Item No. 1 SUBJECT: Sustainability Issues for Orange County Government DEPARTMENT: Manager/Budget/Finance/ PUBLIC HEARING: (Y!N) No Personnel ATTAGHMENT(S): As noted in "Background" INFORMATION CONTACT: Rod Visser, ext 2300 Donna Dean, ext 2151 Ken Chavious, ext 2453 Elaine Holmes, ext 2552 TELEPHONE NUMBERS: Hillsborough 732-8181 Chapel Hill 968-4501 Durham 688-7331 Mebane 336-227-2031 PURPOSE: To review and discuss various issues related to the sustainability of Orange County government operations. BACKGROUND: a. Sustainability Overview: In his 2004-05 budget message to the Orange County Board of Commissioners, the County Manager highlighted the growing importance of attention to the sustainability of County operations. He noted that "there have been, and continue to be, fundamental changes during the past few years in the way same County-related services are delivered that are impacting the County budget," Some of the examples cited included solid waste management, emergency medical services transportation, and animal services, The message further observed that "Under the leadership of the Board of Commissioners, Orange County has risen to the challenge in these areas where new leadership was essential to ensure a seamless continuum of service to the clients and customers of these functions, As we complete these transitions or contemplate other functions that could become part of Orange County government, we must be diligent in examining our ability to provide the corollary infrastructure of internal support that will match the high levels of service our citizens expect of existing Orange County government agencies, I recommend that during the course of the next year, the Board examine the sustainability of Orange County government in terms of organizational mission, functions, and resources." Tonight's work session is undertaken with that recommendation as a catalyst, z Staff will provide a detailed PowerPoint presentation at the work session to focus discussion on a number of specific sustainability considerations, Attachment A - sustainability Discussion Flowchart b. Overview of Revenue Picture: A key element that impacts sustainability is revenue. The staff presentation will touch on a variety of subtopics related to the County's overall revenue picture, including property tax revenue, property tax base, sales tax revenue, intergovernmental revenue, recent historical use of non-recurring revenue for operations, and fund balance. The Manager's 2004-05 budget message noted that the recommended appropriation of fund balance represented about 1,5 cents on the tax rate, compared to an appropriation four years before equivalent to 5.5 cents on the tax rate. The reduction in available fund balance over recent years is a direct reflection of the downturn in the economy and of unfavorable State budget actions that have included specific State funding reductions for certain county programs and the withholding by the State of revenues earmarked for local governments. As noted in an accompanying chart, Orange County's reduction in available fund balance in recent years parallels the experience of the other larger counties throughout North Carolina. The Manager wrote that "The good news is that fiand balance has been doing exactly what it is supposed to do -help us weather the tougher times associated with amulti-year State budget crisis and a faltering economy," However, the end result is less flexibility to absorb "bumps in the road", and greater reliance on increases in the property tax rate to produce needed resources to sustain schools and County services, The final observation in the budget message was that "I hope that we can work to the extent possible in the coming years to build fund balance back to our condition of the late 1990s to early 2000s that reflected a range of 12 to 15 percent of annual General Fund expenditures". One of the final tasks associated with the Board's adoption of the 2004-05 County budget was for staff to identify $400,000 in expenditure reductions to match the additional decrease of .4 cent in the recommended tax rate that was reflected in the June 23, 2004 adoption of the 2004- 05 budget ordinance, Staff are pleased to report that the required savings have been surpassed, primarily through hiring delays, lower than anticipated health insurance costs, and lower debt service costs resulting from post-budget adoption changes to the debt issuance plan with the Local Government Commission. Staff will continue to pursue additional budget savings throughout the remainder of FY 2004-05 both to improve our fund balance position for 2005-06 and to provide additional flexibility to address in 2005 objects of expenditure that have been identified since budget adoption and accordingly were not included in the 2004-05 budget. Attachment B-1: Chart -Unappropriated Fund Balance Attachment B-2: 4/05/Q4 Local Government Commission Staff Memo re,° "Fund Balance Available for Appropriation" c. Short Term Funding Initiatives Affecting sustainability: Along with revenue, the other major elements of sustainability relate to the funding needs to sustain operations, programs, and initiatives over time, As noted above, the BOCC and staff recognize that there are numerous initiatives already in progress or to be undertaken in the near term that will affect county capital and operating budgets soon, These include, but are certainly not limited to: employee retention, debt service for bond and alternative financing projects, mental health reform, and parks development and operation, As part of the PowerPoint presentation, staff will review a more extensive list of short-term sustainability initiatives, particularly those that will have impacts for the FY 2005-06 budget, No Attachments d. Longer Term School & County Initiatives Affecting sustainability: Beyond the short term needs, the County must also consider sustainability in the longer term context. A variety of other projects, programs, and other initiatives are likely to have operating budget impacts a couple of years down the road, or beyond, These include start up costs far new schools, County space needs, justice facilities, school funding equity, and the Durham Technical Community College satellite campus, Again, staff will present a more extensive list of these longer-term issues as part of the PowerPoint at the November 15 work session, No Attachments e. Temporary Personnel and Overtime Update: During the .June 2004 budget work sessions, the Board asked staff to bring back more detailed information about expenditures for overtime and temporary personnel. Staff have prepared reports on both of those topics, including narrative and graphic representation, The Personnel Director will provide a brief review of the major findings as part of the overall staff presentation, Attachment E-1: Overtime Costs Report Attachment E-2: Temporary Wage Expenditures f. Likely School Construction Overruns: During the past several months, architects for both school systems have advised the Boards of Education that the current budgets for major school construction projects are likely to be insufficient to build the schools to the currently contemplated designs, Escalating prices for concrete, steel, and fuel, among other factors, have led to estimates that the costs to build OCS Middle School #3 and CHCCS High School #3 are likely to be $6 million to $7 million (combined) higher than the project budgets approved by the BOCC, During the Board's October 25, 2004 work session, there was discussion about the likely project budget shortfalls and about the possibility of reallocating some portion of the $12.8 million in alternative financing currently earmarked in the County's debt issuance schedule for CHCCS Elementary School #10. In light of the apparent slowing of enrollment growth for 2004-05 compared to historical student growth, County and CHCCS staff have since met and reviewed 10-year student projections based on 20~h day CHCCS membership figures, That review indicates that Elementary School #10 is likely to be needed between FY 2006-07 and 2009-10, depending on whether current or revised (ta reflect State K-3 class size reductions) school capacity figures are used, It must be stressed that the staff projections described here are NOT the annual student projection updates that are performed under the Schools Adequate Public Facilities Ordinance (SAPFO) machinery by County, schools, and Town staff each year based on actual student membership as of November 15 each year. THOSE projections, which will be calculated during the next month or two, will become the basis for the 2005-15 Capital Investment Plan and will help determine in which academic year new school facilities will be needed to meet the Level of Service (LOS) standards established in the SAPFO machinery. a This work session provides the opportunity for the BOCC to further discuss options and timelines to address requests from both school systems for additional capital funding for the middle school and high school construction projects. Aftachment F - 10/29/04 OCS Superintendent Lefler FINANCIAL IMPACT: While there is no direct cost associated with having this discussion about sustainability considerations, future decisions the Board of Commissioners will make about programs, service delivery, and allocation of resources will fundamentally shape County operating and capital budgets well into the future. RECOMMENDATION(S): The Manager recommends that the Board receive the presentation as information, discuss the various sustainability issues identified, and provide appropriate direction to staff.