HomeMy WebLinkAboutAgenda 12-14-21; 8-h - Fiscal Year 2021-22 Budget Amendment #5-A 1
ORD-2021-033
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: December 14, 2021
Action Agenda
Item No. 8-h
SUBJECT: Fiscal Year 2021-22 Budget Amendment #5-A
DEPARTMENT: Finance and Administrative Services
ATTACHMENT(S): INFORMATION CONTACT:
Attachment 1. Year-to-Date Budget Gary Donaldson, (919) 245-2453
Summary Brenda Bartholomew, (919) 245-
Attachment 2. December 9, 2021 Update 2552
on FY 2020-21 Year End
Financial Results
PURPOSE: To approve Budget Amendment #5-A for Fiscal Year 2021-22.
BACKGROUND: The BOCC received a recommendation at the Board's December 6, 2021
Business meeting to allocate $8 million in revenues over expenditures from FY 2020-21 and an
additional $4 million in fund balance amounts exceeding the County's 16% unassigned fund
balance policy. This mid-year budget adjustment in the amount of$12 million is recommended by
the County Manager to be allocated as detailed below in order to benefit County residents, both
school districts and County staff.
Employee Wage Adjustment
The County Manager requests a retroactive wage adjustment of three (3) percent for all
permanent employees in active payroll status on December 17, 2021 for FY 2021-22 to be paid
in two increments totaling $1.8 million:
• Retroactive three (3) percent wage increase for all permanent employees in active payroll
on December 17, 2021 for the period of July 1, 2021 through December 17, 2021; payable
on December 22, 2021.
• Three (3) percent wage increase for all permanent employees in active payroll status on
December 17, 2021 beginning with the payroll period effective December 18, 2021, which
is payable on January 7, 2022.
As per the Orange County Code of Ordinances Section 28-55, the Manager shall be responsible
for the administration and maintenance of the Salary Plan. The Manager shall recommend to the
Board of Commissioners such increases, reductions, or amendments to the Salary Plan as is
necessary to maintain fairness and adequacy of the Salary Plan. Based on the three (3) percent
wage adjustment, it is recommended that the current Salary Schedule be updated to reflect the
same percentage increase for all salary grades and ranges.
Schools Achievement Gap and Mental Health Funding
The County Manager requests $1.5 million to be distributed to the Orange County K-12 school
districts to support their needs for additional support to close the racial and ethnic opportunity gap
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and address the mental health of students. The funding would be allocated, as required, by
average daily membership. Based on the FY2021-22 allocations, Chapel Hill Carrboro City
Schools would receive $868,500, and Orange County Schools would receive $631,500.
Federal Emergency Management Agency (FEMA) Backstop
A total of $407,543 is requested to be set aside to offset non-congregate housing costs incurred
for persons experiencing homelessness during the pandemic. This amount provides a cash flow
need for pending reimbursable amounts from the NC Emergency Management.
American Rescue Plan Act (ARPA) Funding Replacement
A total of $3.95 million is requested to replace previously allocated American Rescue Plan Act
(ARPA) expenditures that have since been identified as either ineligible under recently released
U.S. Treasury Guidance or imposing a highly administrative and reporting compliance burden on
the County's non-profits partners.
Information Technologies ($204,000) — Capital Project# 30007
Revenues for this project:
Current FY 2021-22 FY 2021-22
FY 2021-22 Amendment Revised
Alternative Financing $13,262,616 $0 $13,262,616
Transfer from General Fund (in FY 2020-21) $1,595,257 $878,629 $2,473,886
ARPA $674,629 ($674,629) $0
Appropriated Fund Balance $200,000 $0 $200,000
Total Project Funding $15,732,502 $204,000* $15,936,502
Appropriated for this project:
Current FY 2021-22 FY 2021-22
FY 2021-22 Amendment Revised
Information Technologies Expenditures $15,732,502 $204,000 $15,936,502
Total Costs $15,732,502 $204,000* $15,936,502
*$674,629 for this project was funded with ARPA through a transfer to the County Capital fund
and $204,000 was funded directly in the Emergency Recovery Fund. This action will consolidate
all funding in the County Capital fund.
Crisis Diversion Facility Design
A total of $250,000 is recommended to be transferred to the County capital fund to support the
conceptual design for a Crisis Diversion Facility as recommended by the Behavioral Health Task
Force. The facility would serve as a therapeutic alternative to the Orange County Detention Center
or hospital Emergency Departments for residents experiencing a behavioral health crisis.
Crisis Diversion Facility ($250,000) — Capital Project# 10080
Revenues for this project:
Current FY 2021-22 FY 2021-22
FY 2021-22 Amendment Revised
Transfer from General Fund $0 $250,000 $250,000
Total Project Funding $0 $250,000 $250,000
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Appropriated for this project:
Current FY 2021-22 FY 2021-22
FY 2021-22 Amendment Revised
Crisis Diversion Facility Expenditures $0 $250,000 $250,000
Total Costs $0 $250,000 $250,000
Future Capital Pay-As-You-Go Funding
A total of $4 million is requested to be transferred to the County capital fund to serve as a Pay-
As-You-Go funding reserve for future capital projects or debt service payments on capital projects.
This may assist in mitigating future tax increases.
Future Capital Needs ($4,000,000) — Capital Project# 19900
Revenues for this project:
Current FY 2021-22 FY 2021-22
FY 2021-22 Amendment Revised
Transfer from General Fund $0 $4,000,000 $4,000,000
Total Project Funding $0 $4,000,000 $4,000,000
Appropriated for this project:
Current FY 2021-22 FY 2021-22
FY 2021-22 Amendment Revised
Unallocated $0 $4,000,000 $4,000,000
Total Costs $0 $4,000,000 $4,000,000
Recurring Needs
Employee Wage Adjustment $1,883,875
Schools Opportunity Gap and Mental Health $1,500,000
Fund
Total $3,383,875
Non-Recurring Needs
FEMA Backstop $407,543
Sportsplex ARPA Funding Replacement $790,000
Visitor's Bureau ARPA Funding Replacement $560,000
Information Technologies ARPA Funding $878,629
Replacement
Outside Agencies ARPA Funding $1,729,953
Replacement
Crisis Diversion Facility Design $250,000
Transfer to Capital PAYGO $4,000,000
Total $8,616,125
Total Allocations $12,000,000
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SOCIAL JUSTICE IMPACT: The following Orange County Social Justice Goals are applicable
to this item:
• GOAL: ENSURE ECONOMIC SELF-SUFFICIENCY
The creation and preservation of infrastructure, policies, programs and funding necessary
for residents to provide shelter, food, clothing and medical care for themselves and their
dependents.
• GOAL: FOSTER A COMMUNITY CULTURE THAT REJECTS OPPRESSION AND
INEQUITY
The fair treatment and meaningful involvement of all people regardless of race or color;
religious or philosophical beliefs; sex, gender or sexual orientation; national origin or ethnic
background; age; military service; disability; and familial, residential or economic status.
FINANCIAL IMPACT: This budget amendment provides for the allocation of $12,000,000 in
General Fund reserves for the amounts as referenced in the Abstract narrative in actions
occurring in both FY 2021-22 and FY 2020-21. In FY 2021-22, the General Fund is increased by
$5,113,828, the County Capital Fund is increased by $4,454,000 ($674,629 in ARPA funding was
replaced with General Fund reserves for zero budget impact), and the Emergency Recovery Fund
increased by $407,543. In FY 2020-21 the Sportsplex Fund received a General Fund transfer
amount of $790,000 and the Visitors Bureau Fund received a General Fund transfer amount of
$560,000.
ENVIRONMENTAL IMPACT: There are no Orange County Environmental Responsibility Goal
impacts associated with this item.
RECOMMENDATION(S): The Manager recommends the Board:
• Approve Budget Amendment #5-A for Fiscal Year 2021-22; and
• Authorize staff to incorporate the necessary updates to the County's Salary Schedule and
otherwise to reflect the three (3) percent employee compensation actions described above.
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Year-To-Date Budget Summary
Fiscal Year 2021-22
County Emergency
Fund Budget Summary General Fund Capital Relief Fund
Original Budget $240,762,361 $0 0
Additional Revenue Received Through
Budget Amendment #5a (December 14, 2021)
Grant Funds $2,494,707 $1,072,716
Non Grant Funds $590,781 $131,500
Fund Balance for Anticipated Appropriations
(i.e. Encumbrances)
Fund Balance Appropriated to Cover
Anticipated and Unanticipated Expenditures $4,562,042 $4,454,000 407,543
Total Amended Budget $248,409,891 $5,658,216 $407,543
Dollar Change in 2021-22 Approved Budget $7,647,530 $5,658,216 $407,543
Change in 2021-22 Approved Budget 3.18%1 0.00%1 0.00%
Authorized Full Time Equivalent Positions
Original Approved Full Time Equivalent
Positions (includes Permanent and Time
Limited) 947.980 0.000 2.500
Changes to Full Time Equivalent Positions 3.625
Total Approved Full-Time-Equivalent
Positions for Fiscal Year 2021-22 951.605 0.000 0.000
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Attachment 2
Update on FY2020-21 Year End Financial Results
The County's auditors are finalizing the FY2020-21 Financial Audit. The results of this audit will show
positive results in two areas. On an operating basis, the audit will show a surplus of approximately $8.9
million before transfers. Of that amount, approximately $8 million is available for a mid-year budget
adjustment. In addition, the fund balance reconciliation contained in the audit will show $4 million in
available one time resources resulting from a decrease in the fund balance appropriation used to balance
the FY2020-21 Budget compared to the smaller amount appropriated to balance the FY2021-22 Budget.
This memorandum will summarize the primary contributors to this positive financial outcome, outline a
framework for the investment of those funds through a mid-year budget adjustment, and propose a
timeline for the Board's consideration. A more detailed table of budgeted versus actual expenditures and
revenues is attached.
FY2020-21 Budget Results
The FY2020-21 Budget was presented to the Board of Commissioners in May of 2020. At that time, the
State was entering its sixth week of the Governor's Stay at Home order. Unemployment rates in the
County were beginning to increase, and the County's otherwise resilient local economy was suffering.
Under these circumstances,the County Manager's recommended budget included conservative revenue
projections and austere expenditure measures designed to protect the County's financial well-being.
Fortunately, the federal government asserted a variety of economic stimulus initiatives to individuals,
private businesses, and the public sector to avoid widespread economic distress. Those stimulus
measures manifested in positive impacts to the County's primary revenue sources.
Property Tax and Motor Vehicle Collections
The collection rates for property taxes and motor vehicle collections were adjusted down in the FY2020-
21 Budget in anticipation of residents struggling to pay those obligations. Property tax collection rates
were decreased from 99.2% in FY2019-20 to 98.7%in FY2020-21. However,the actual collection rate did
not decrease. Rather, it stayed consistent with the FY2019-20 rate at 99.27% resulting in a positive
property tax revenue variance of over$1.6 million.
The collection rate for Motor Vehicles also performed in excess of expectations. That rate was budgeted
to decrease by 0.5%. However,the actual collection rate exceeded 100% at 103.8%as both current year
and delinquent tax bills were paid. This positive variance amounted to over $400,000 in surplus
collections compared to the budgeted amount. Both of these positive variances are expected to be
recurring, so the funds could be used to support ongoing operating expenses.
Sales Taxes
Sales taxes were budgeted to decrease by 4.5%from the FY2019-20 budgeted amount. Actual sales tax
collections, however, exceeded FY2019-20 collections. This unexpected performance resulted in actual
collections exceeding the FY2020-21 budgeted amount by over $4 million. Although the Department of
Revenue will not disclose the amount of sales tax collected from online sources, online purchases during
and after the stay at home order likely fueled some of this growth, and direct federal stimulus payments
to individuals and families helped to enhance retail sales. Those direct stimulus payments were
distributed in April of 2020, December of 2020, and March of 2021.
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Due to the three month lag in sales tax reporting from the Department of Revenue, the impact of the
December 2020 stimulus was not known until April of 2021, and the impact from the March stimulus
payments were not known until June 2021. The following chart illustrates how those stimulus payments
amplified the seasonal variations in sales tax collections compared to FY2019 and FY2020.
Sales Tax Collections by Month
$3,000,000.00
3rd Stimulus-March 2021
2nd Stimulus-December 2020
$2,500,000.00
$2,000,000.00
$1,500,000.00 1st Stimulus-April
2020
$1,000,000.00
$500,000.00
$ Large Refund
P ice p� owe eve >a �eo �
$(500,000.00)
2019 2020 2021
Medicaid Hold Harmless
In April of 2020, the Office of the State Treasurer warned counties that, "Based on our expectations, we
urge counties to be very conservative about budgeting how much revenue they budget for the MHH
[Medicaid Hold Harmless] payments in their 2021 budgets." Hold harmless payment are made from the
state to counties because counties exchanged a portion of their local sales and use tax revenue for the
state's agreement to assume responsibility for certain non-administrative Medicaid costs several years
ago.
The FY2020-21 Budget estimated the County would receive a Medicaid Hold Harmless payment of$1.75
million. Since sales tax revenues Statewide did not suffer the expected losses,the County's Medicaid Hold
Harmless payment exceeded the budgeted amount by over$2 million. The audit will reflect this payment
in the sales tax category. Since this revenue is not in the County's control and, therefore, not as
predictable, it should be considered non-recurring revenue available for one time expenditure.
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Unassigned Fund Balance
The FY2020-21 Budget implemented a number of expenditure austerity measures intended to maintain
fiscal flexibility. The Budget included a hiring freeze, did not provide a wage adjustment for employees,
suspended employee performance rewards, and suspended all conference,training, and travel expenses.
These intentional austerity measures, along with other restrained spending in departments, resulted in
actual expenditures that were under the budgeted amounts. This means that the $8.2 million fund
balance appropriation used to balance the FY2020-21 budget was not required. Of that $8.2 million
appropriation,$1.9 million was used to balance the FY2021-22 Budget,$2.3 million was applied to achieve
the sixteen percent unassigned fund balance target based on increased budgeted expenditures, and the
remaining$4 million is available for one time expenditure.
Framework for Investments
Based on the factors cited above,this proposed framework for investment includes a total of$3.38 million
in recurring expenses and $8.61 million in non-recurring expenses.
o Opportunity Gap Reduction and Student Mental Health Support Fund-$1.5 million
Both school districts highlighted two priorities in their expansion budget requests for FY2021-22,
closing the racial and ethnic opportunity gap and addressing the mental health of students. In
response to that request, this proposal creates an Opportunity Gap Reduction and Mental Health
Support fund that would be exclusively dedicated to those priorities.
The resources contained in this fund would be allocated, as required, by average daily membership.
Based average daily membership reported in October 2021, Chapel Hill Carrboro City Schools would
receive$868,500,and Orange County Schools would receive$631,500. This fund would exist outside
of the districts'current expense budgets to emphasize this investment as it relates to the Board's goal
of promoting equity and social justice in the community. The fund is anticipated to be a recurring
expense. As proposed, each District would propose a spending plan each year with key performance
indicators which could not supplant current spending. The districts would have the flexibility to
determine the amount of funds used to address each priority area.
o Employee Wage Adjustment-$1.9 million
Orange County employees have not received an across the board wage adjustment for two years.
Employees did receive a one-time pandemic relief payment of$900 per employee, but this payment
was not applied to base wages. Employees in surrounding jurisdictions received wage increases
between two percent (2%) to five percent (5%) this fiscal year. The second proposed recurring
investment is in Orange County employees with a 3.0% wage adjustment that will be retroactive to
July 1, 2021.
o Outside Agency Base Budget Funding-$1.7 million
The FY2021-22 Budget recommended funding the entire Outside Agency budget using American
Rescue Plan Act (ARPA) funds. However,the new reporting requirements associated with the use of
ARPA funds would require outside agencies of all sizes to track expenses and submit reports on a level
that they have not been required to do before and many may not have the administrative capacity to
complete.
If one of these sub-recipients were to fail to produce the required documentation,the County's overall
compliance could be jeopardized. Therefore, this plan replaces ARPA funds with general fund
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resources. The ARPA funds that were designated for this purpose will be available for other
community needs.
• Ineligible American Rescue Plan Act(ARPA) Expenditures-$2.2 million
As the interim spending rules on ARPA funds continue to evolve, some of the proposed expenditures
contained in the first recommended County allocation are clearly eligible expenditures. For example,
the FY2021-22 Budget applied ARPA funds to deficits in the Visitors Bureau and Sportsplex Funds.
Given the federal eligibility framework that was in place at the time, covering revenue shortfalls
appeared to be an eligible use of funds. However, as the guidance has evolved, the measurement
that is being used to determine a revenue shortfall is on an organization wide basis, not an individual
fund basis. As a result, $1.35 million proposed to cover the deficits in the Visitors Bureau and
Sportsplex funds are ineligible uses.
Likewise, prior federal guidance on information technology related expenditures cast a wide net of
eligible uses. However, the ARPA guidance restricts the use of funds for technology to those related
to the direct COVID-19 response or supporting residents negatively impacted by the pandemic, not to
other organizational expenses related to transitioning to remote work. As a result, $878,629 in
information technology software and equipment that would have been eligible under prior federal
COVID-19 programs is not eligible under the ARPA rules.
• Federal Emergency Management Agency Reimbursement Backstop-$407,543
The County expended a total of approximately$2,840,015 on non-congregate housing for individuals
experiencing homelessness during the height of the pandemic. To date,the County has only received
$638,956 in reimbursements for that housing,despite the many assurances provided by the State that
reimbursement was certain. As the County continues its reimbursement claim for the balance of
funds, this proposal recommends setting aside $407,543 in an Emergency Recovery Fund for the
purposes of offsetting unrealized reimbursements. In the event that reimbursement is received,
these funds would be available for repurposing.
• Crisis Diversion Facility Design Funds-$250,000
The Behavioral Health Task Force has outlined the business case for a Crisis Diversion Facility that
would offer a therapeutic alternative to either the Detention Center or the Emergency Room for
residents experiencing a behavioral health crisis. The team has defined programming needs through
a variety of stakeholder engagements and will be in a position to proceed with conceptual design in
2022. This proposal recommends allocating$250,000 to support that conceptual design.Any funding
remaining from the conceptual design phase could be applied to architectural work later in the project
if it proceeds or could be repurposed for other capital needs if it does not proceed.
• Transfer Funds to Capital Reserve-$4 million
Finally, this proposal recommends transferring the one-time unassigned fund balance surplus to a
capital reserve fund for uses to be determined at a later date. For example,these funds could be used
to substitute cash for future borrowing thereby reducing pressure on the County's debt service costs.
If all $4 million were applied to next year's Capital Budget in this way, it would eliminate the need for
a projected tax increase until 2024. Alternatively, the Board could authorize additional, one-time
capital spending for school or County capital needs without incurring additional debt service expense
in the future.
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• Summary Table of Proposed Uses of Funds
Recurring
Employee Wage Adjustment $ (1,883,875)
Schools Opportunity Gap& Mental Health Fund $ (1,500,000)
TOTAL Recurring $ (3,383,875)
Non- Recurring
FEMA Backstop $ (407,543)
Ineligible Federal Expenses-S-Plex, VB, IT $ (2,228,629)
Outside Agencies $ (1,729,953)
Crisis Diversion Facility Design $ (250,000)
Transfer to Capital Reserve $ (4,000,000)
TOTAL Non-Recurring $ (8,616,125)
GRAND TOTAL $ (12, 000,000)
Next Steps and Timeline for Consideration
The financial audit must be submitted to the Local Government Commission by December 1, 2021. When
that occurs,the audit officially becomes a public document.
County management is prepared to present these preliminary spending recommendations on December
6. Following the Board's deliberation on these recommendations, a final budget amendment reflecting
the Board's action on December 6 would be prepared for the December 14 meeting. This amendment
will include an action to change the salary schedule since the Board adopts this schedule as part of the
budget ordinance. The change would reflect the amount approved by the Board.
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