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04-15-2013 Budget Work SessionBUDGET WORK SESSION OF THE ISLE OF WIGHT COUNTY BOARD OF SUPERVISORS HELD ON THE FIFTEENTH DAY OF APRIL IN THE YEAR TWO THOUSAND AND THIRTEEN PRESENT: JoAnn W. Hall, Chairman Byron B. Bailey, Vice - Chairman Rex W. Alphin Delores M. Darden Alan E. Casteen Also Attending: Mark C. Popovich, County Attorney W. Douglas Caskey, County Administrator Michael W. Terry, Director of Budget and Finance Donald T. Robinson, Director of Information Resources And Legislative Affairs Melinda J. Goodwyn, Acting Clerk Chairman Hall called the budget work session to order at 10:00 a.m. Supervisor Alphin moved to appoint Melinda Goodwyn as Acting Clerk. The motion was adopted by a vote of (5 -0) with Supervisors Hall, Bailey, Alphin, Darden and Casteen voting in favor of the motion and no Supervisors voting against the motion. Supervisor Bailey expressed that the Board unanimously asked for a 5% reduction and what has been presented to them is a 1% increase. So, he does not believe that there is much to talk about since that is not even close to what the Board directed. Michael Terry, Budget and Finance Director, advised that they will be able to show that they have done the 5% overall reduction. He stated that the work session today is to deal with the roll out, prioritization, revenue and to examine things in detail. Mr. Terry advised that staff has requested that Davenport be present at the work session on April 22, 2013 to discuss how to use proffers to balance off issues and the opportunity that the County may have for restructuring. Davenport will be giving the County a perspective on how they can help save the County some funds on the budget. Also, the IOW County Schools will be present to discuss their position on what they are proposing. He further advised that staff would like to give the departments an opportunity to discuss their positions at the April 29, 2013 work session, and discuss anything else the Board would like addressed. Regarding the revenue highlights, Mr. Terry explained that in the current year there was a one -time revenue approach to several items. He stated that the Board should be aware that this was going to impact the County for 2014 and 2015 as a result of not addressing these one -time revenue streams. 1 Regarding the assessment, Mr. Terry stated that when they developed the budget, and the budget that was adopted, it was based on a projected assessment, and when the actual assessment came in, there was a $1.7 million shortfall. Regarding the 5% reduction demand, Mr. Terry stated that they really had to look at that. He explained that there are some expenditures that the Board has discretion over and others that it does not. Federal programs and debt service cannot be reduced. The dollar amount that they could reduce is roughly $20 million. They have exercised that and the number for the proposed cut is about $1.3 million, which has been removed from the proposed budget. He further stated that to go further than the 5% reduction still will not be enough to close the gap. Regarding the use of Unassigned Fund Balance, Mr. Terry stated that it is not as robust as they would like it to be at this point. So, to consider that they would have a lot to put upon the FY 2013 -14 budget is an unrealistic expectation. Donald Robertson, Director of Information Resources and Legislative Affairs, presented information that was provided by Dr. Mike Chandler regarding how the budget is comprised of multiple revenue sources, and what the Board has discretion over. When talking about reducing the County budget by 5% they have two (2) areas that they can look at. They can look at the $20 million piece of the pie which accounts for about $1 million, and they were able to carve out a little more than $1 million. The other piece of the pie is the portion that encompasses public education. So, they had to carve out another $1 million plus out of public education in order to meet the direction that was given from this Board. That is not 5% off of the $94 million; it is 5% off of the local dollars which the County has the discretion over. Mr. Terry advised the Board that they found some fresh revenue, about $400,000, that was not in last year's budget. He advised that they are recommending not doing the reassessment that is coming up, which is about $300,000. They could delay that for one (1) year and the County could save $300,000 for this current year. Regarding stormwater fees, Mr. Terry stated that some of the staff in the Engineering Department could be offset if the stormwater fees are approved and implemented as well as still covering the new positions that they are seeking. They were able to pick up another $301,000. Supervisor Casteen requested that a copy of that information be forwarded to the Board. Supervisor Alphin inquired if this information was included in the current budget that they have in their package. He further inquired if the 5% of the $52 million was included. 2 Mr. Terry referred to page 7 of the FY 2013 -14 Proposed General Operating and Capital Budget -Draft 1 and stated that the column labeled "Proposed" represents the 5 %. Supervisor Alphin asked who came up with the numbers for the "Proposed ". Mr. Terry responded Budget and Finance and the County Administrator. He further stated that the departments were given the same charge guidelines requested by the Board. Gerald Gwaltney, Commissioner of the Revenue, addressed the Board concerning an inquiry from the Smithfield Times in which he was requested to compile data reflecting what taxes were for homes built ten (10) years ago versus now. He advised that homes in the Smithfield Times reading area were selected to include Aspen Woods, Cypress Creek, Eagle Harbor, Gatling Point, Moone Plantation and Waterford Oaks. He advised that Eagle Harbor had showed the biggest decline. He advised that the sample home built in Eagle Harbor is actually paying about $180 less this year than when originally built; Cypress Creek is basically flat, no changes; Gatling Pointe is 6 %; and Aspen Woods, Moone Plantation and Waterford Oaks were at an 18% increase over a 10 -year period. He advised that while the following was not included in the Smithfield Times study, he did conduct a sample from the Courthouse to the southern end of the County, which showed Carrsville at 23 %; Mill Creek -Zuni at 25 %; Walters Highway- Stevens Drive at 26 %; and Windsor Woods at 26 %. He advised that that real estate taxes in some areas were actually less than they were ten (10) years ago. He concluded that inflation during the last ten (10) years is at 25% and almost all the property samples have taxes at or below that inflation rate. County Attorney Popovich arrived at 10:30 a.m. Chairman Hall declared a break at 10:50 a.m. The Board returned to open session at 11:00 a.m. Mr. Terry distributed a memorandum dated January 28, 2013 which was sent to the Schools based on the guidance received from the Board which stated very clearly that budget requests for FY2013 -14 should reflect a 5% decrease for operations and, if appropriate, , include a narrative outlining any negative impacts on operations resulting from the 5% budgetary decrease; provide information based on categorical funding with line item details attached; look for additional opportunities to reduce line items where appropriate without negatively impacting core services; and if there are operational critical needs that require additional funding, please provide the appropriate documentation to explain /support your request. He distributed and explained the analysis sheet he prepared for the schools. He advised that the local appropriation adopted in FY12 -13 was $27,693,445. He stated that 3 the Schools submitted a budget for the local portion at $32,625,558, which is a net change of $12,046,336. He further stated that staff believes that they can identify of that $12 million the inclusion of $3,631,106 for Debt Service, $1,900,000 for VRS and $300,000 for Unassigned Fund Balance, which leaves $6,215,230 that he is not able to address. He stated that staff recommends that the Board allow the Schools to be at the next work session to discuss and address their expectations. He advised that he would forward this analysis to the Schools with the request that they discuss the $12,046,336 or at least the $6,215,230 that he is not able to identify. Mr. Robertson stated that he thinks that it is important to note that what is proposed in some respects represents the only way that staff could get to the 5% mandate that the Board has placed in front of them. The Schools' number is so much larger in terms of the amount of local revenue that is contributed to schools, that if they did not do that they could have not even gotten close in terms of the 5% on the discretionary dollars discussed about earlier. Brian Obal, Vice President, Wells Fargo Insurance Services, addressed the Board regarding the Health and Dental Renewal program. He presented the document entitled "Isle of Wight County -2013 Employee Benefits Strategy/Planning Meeting" and provided a historical breakdown of the three (3) renewal periods beginning in 2011. Mr. Obal stated that at the last Board meeting, the Healthcare renewal for July 1, 2013 was presented for approval by the Board with a combined medical and dental overall negotiated increase to Isle of Wight County of $200,916. He discussed the proposed four (4) options to mitigate that expense: Market to Insurance Companies (Procurement); Premium Contribution Strategy; Benefit Design Modifications; and Employee Education/Behavior Modification; benefit design. Brandy Day, Human Resource Director distributed and discussed information on The Local Choice (TLC) health benefits program, which is a state prepared health insurance program through the Department of Human Resource Management of the Commonwealth of Virginia. Mrs. Day explained that it is a health benefits program that was created by the General Assembly in 1989 and has been providing health coverage to local jurisdictions since 1990. They used the state's significant purchasing power to reduce the administrative cost and shared claim experience, which offers financial protection for local governments. Mrs. Day stated that she would recommend the Key Advantage Expanded and the Key Advantage 250. She provided a 2013 -14 Cost Projections for Anthem (current insurance) and 2013 -14 Cost Projections for TLC. She stated that the annual savings would be $138,852.72 for health insurance. The dental would be $14,663. There will not be a cost increase to the employees. Mr. Obal commented that a lot of the points that Mrs. Day made are very true. One thing to consider with TLC is the exit liability. He explained that it is a self- insured program, so they track your specific experience in 4 utilization. If you agree that if you were to exit you pay back the loss incurred by your group. That is a non funded liability. So, you would want to have a reserve fund to prepare for that potential exit if that would ever happen. A lot of organizations do stay in because of the fear of leaving. There are no negotiations to the renewal rate. It is what it is. There probably are some clients who have had some great renewal experiences and other who have had average increases from 12 to 14 percent. The County is at 7% increase, which is below an average trend of 12 to 14 percent. He further stated that another point of consideration is that the TLC only offers the following plan designs to choose from: $250 deductible, $500 deductible, $1,000 deductible and the HSA. Supervisor Casteen commented that before he can consider casting an opinion about tax increases they have to be sure of what the revenues and the expenses are going to be. When we came up with the 5% number we thought it was 5% of the total budget, and then we realized that we should have asked for three times that. Supervisor Alphin expressed that they dug a pretty big hole last year and they have to deal with it. He thinks that it is incumbent upon the Board to see the situation that they are in. In this proposed budget, they cut Schools 5% from last year, and a number of departments have been cut 5%. When you add all those cuts and the additional revenue, according to staff, we still have to increase real estate taxes 10¢ just to balance the budget. In addition to that, we are looking at a stormwater management fee that is included in this budget, which is another 3¢. That is 13¢. That is exactly a 20% rise in real estate taxes. That is distasteful to him. He would not like to go down that route. He would not like to make such a drastic change. He would like to shy away from these one -time things if possible. Supervisor Darden stated that they did look at some one -time things last year and maybe they should not have but they did. In hindsight maybe they should have adjusted the tax rate earlier. She would entertain a small tax increase on the rate; maybe 4 to 5 cents, somewhere she could and the citizens could be comfortable with. She is not comfortable with 10¢. She still wants to dig deep and find any more cuts that can possibly be made to keep the tax rate adjustment as low as possible. Supervisor Bailey expressed that he cannot see a tax increase when people are not making as much money as they used to. He wants to see the revenue side and as many cuts as can be made, and as little as possible tax increase. He is a no tax person. He does not feel at this time that he would increase taxes. Chairman Hall stated she does not know if she could go for 10¢ either. She thinks that they are going to have to find something somewhere between zero and 10¢. That means going back and figure out what else can come out. She has been getting deluged with emails from School supporters asking for full funding of the Schools' budget, and she writes every one of them back 5 stating that it is not going to happen. If the Board has to start looking at cuts and the 10¢ to even balance out with a 5% school cut, how are they possibly going to come up with more money. She just does not know what the answer is. She would like to ask that everyone go back and take another look at this and see what can come out. County Attorney Popovich requested a closed meeting pursuant to Section 2.2 -371 LA.7 of the Code of Virginia for the limited purpose of consultation with legal counsel requiring the position of legal advice pertaining to school appropriations. Supervisor Bailey moved that the Board enter the closed meeting for the reasons stated by the County Attorney. The motion was adopted by a vote of (5 -0) with Supervisors Hall, Darden, Bailey, Alphin and Casteen voting in favor of the motion and no Supervisors voting against the motion. Supervisor Alphin moved to return to open session. The motion was adopted by a vote of (4 -0) with Supervisors Hall, Darden, Bailey and Alphin voting in favor of the motion and Supervisor Casteen absent for the vote. Supervisor Alphin moved that the following Resolution be adopted: CERTIFICATION OF CLOSED MEETING WHEREAS, the Board of Supervisors has convened a closed meeting on this date pursuant to an affirmative recorded vote and in accordance with the provisions of the Virginia of Freedom of Information Act; and, WHEREAS, Section 2.2- 3712.1) of the Code of Virginia requires a certification by this Board of Supervisors that such closed meeting was conducted in conformity with Virginia Law; NOW, THEREFORE, BE IT RESOLVED that the Board of Supervisors hereby certifies that, to the best of each member's knowledge, (i) only public business matters lawfully exempted from open meeting requirements by Virginia law were discussed in the closed meeting to which this certification resolution applies, and (ii) only such public business matters as were identified in the convening the closed meeting were heard, discussed or considered by the Board of Supervisors. VOTE AYES: Hall, Darden, Bailey and Alphin NAYS: 0 ABSENT DURING VOTE: Casteen ABSENT DURING MEETING: 0 At 12:30 p.m., Chairman Hall declared the budget work session adjourned. Byron 9.1ailey, Chairman Carey Mil Storm, Clerk