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HomeMy WebLinkAbout9-4-13 PILT Update MemoDESCHUTES COUNTY I ;inano: l)cparrn1cnr MElVl0RANDUlVl Date: September 4, 2013 To: Board of County Commissioners Tom Anderson, County Administrator From: Wayne Lowry, Finance Director ~/ Re: PILT, Solid Waste Loan Repayment and payments from Solid Waste to the Road fund. These three issues were discussed by the Board at the work session on July 29, 2013. The purpose of this agenda item is to discuss proposed actions to resolve these issues. Attached you will find an analysis of the PILT issue and the solid waste payments to the road fund. You will also find a proposed plan to repay the solid waste loan from general fund resources over the next three years. At the end of our discussion on these issues. we would like the Board to take action to resolve these issues so that staff can move forward to implement the Board's direction. Solid Waste Loan Repayment September 4, 2013 Work Session Discussion Loan History The loan due to the solid waste landfill closure reserve fund 611 is due from two sources. As of June 30, 2013, the amounts due are $616,039 from the Humane Society, fund 129 and $3,249,366 from the jail expansion capital project fund 456 for a total of $3,865,405. These loans were made over a five year period between 2007/08 and 2011/12. Loan repayments from the Humane Society fund have occurred each year beginning in 2009/10 and amount to over $870,000. No loan repayments have been made from the jail expansion capital project fund. Repayment Strategy The Board gave direction to propose a plan for the repayment of the loan from the Jail expansion capital project fund. It appears there is agreement that the general fund is responsible for the repayment of this loan. The mechanics of repayment will entail the transfer of resources from the general fund to the jail expansion capital project fund. The jail expansion capital project fund will then make payments to the solid waste closure reserve fund reducing the liability in the capital project fund as payments are made. A reasonable repayment schedule over the next three years can be born by the General Fund without reducing its beginning working capital below the level estimated in the 2013/14 adopted budget. 2013/14 Payment $965,000 -The general fund could have the capacity to transfer this amount in the current year from the following two sources: A) General Fund Beginning Working Capital $500,000 -The general fund beginning working capital for 2013/14 is greater than anticipated in the adopted budget by $870,000. This unexpected resource could be used to pay down the loan. We are proposing to use $500,000 of this resource for this purpose in 2013/14. B) Transfer to COO $465,000 -The general fund is budgeted to transfer an additional $465,000 to COO in 2013/14 for its operations. It appears that the COD beginning working capital for 2013/14 will be $850,000 higher than anticipated in the adopted budget. Due to the significantly higher than anticipated beginning working capital, it appears this transfer will not be necessary. Instead, the general fund could transfer the $465,000 to the jail expansion capital project fund for repayment of the solid waste loan. 2014/15 and 2015/16 Payments of $1,165,000 -The general fund could make additional payments in each of the next two years from the following sources: A) Transfer to LED #2 $400,000 -The general fund has made transfers to LEO#2 over the past 5 years averaging $427,000. These transfers made up the difference between the commitment of $2,650,000 per year and the actual amount of room tax collected for this purpose. The general fund share of this commitment is declining as room tax collections continue to increase due to the improving economy. The general fund could commit to transfer $400,000 per year for the next two years to repay the solid waste loan as the necessity to fulfill the lED#2 commitment is fully born by the room tax. B) Transfer to COD Fund $500,000 -As mentioned above, the general fund supported the COD fund over the past several years totaling $3,174,511. COD's own revenues in 2012/13 came within $82,108 of COD expenses for the year. It is likely that as the economy improves, COD revenues will again carry the fund without continued subsidy from the general fund. The general fund could commit $500,000 per year to the repayment of the solid waste loan with these resources that will not be needed for COD in the future beginning in 2014/15. C) General Fund Beginning Working Capital $265,000 -General fund beginning net working capital is normally greater than anticipated each year due to stronger property tax revenues than anticipated. The first $265,000 of this potential resource could be committed to repay the solid waste loan. Solid Waste Reserves Repayment of the solid waste loan from the general fund is possible over the next three years as shown above. The solid waste operation has shown the need to fund several sizable capital projects over the next five years. The table below shows the reserves available each year with the proposed loan repayment and the projected capital needs for Solid Waste. It should also be noted that a $3,000,000 project is projected for the sixth year and is not shown on the table below. 2013/14 2014/15 2015/16 2016/17 2017/18 Total Solid Waste Reserves 2,122,257 2,924,346 2A69,253 3,511,353 3,781,537 2,122,257 • loan Repayments 965,000 1,165,000 1,165,000 3,295,000 . Reserve Deposits 545,000 450,000 450,000 450,000 450,000 2,345,000 • Solid Waste Projects -707,911 -2,070,096 -572,900 -179,816 -1,187,000 -4,717,723 Solid Waste Remaining Reserves 2,924,346 2A69,253 3,511,353 3,781,537 3,044,537 3,044,534 Requested Action: The Administration requests that the Board of County Commissioners approve this plan for repayment of the solid waste loan from resources in the general fund over the next three years. Actual amounts repaid each year may vary depending on available funds and will be subject to budget committee and Board approval through the budget process. I PILT and Solid Waste Payments to Roads September 4, 2013 Work Session Discussion Two outstanding issues from the July 29,2013 work session included how to allocate the greater than anticipated PILT revenue for 2013/14 and whether or not the payments from solid waste to the road fund should continue. Both of these issues are discussed below along with Administrations recommendations. PILT There seemed to be consensus among Board members that the excess PILT revenue realized in 2013/14, estimated by Chris Doty in his most recent memo at $1,252,194, should be directed to the road fund $1,064,365 (85%) and to the natural resources fund $187,829 (15%) to replace the expected loss of Secure Rural Schools revenues. This leaves a piece ofthe annual Pill payment that approximates the historical level of funding included in the general fund. Excess PILT funds would then be used for major maintenance and capital projects in the road fund and forestry and noxious weed programs in the natural resources fund. No budget adjustment would be necessary unless the receiving funds needed to appropriate the additional resources for projects in 2013/14. Solid Waste payments to Road Fund History and Background Solid Waste tip fees were increased by $5.00 per ton in 2007/08 and all of the incremental revenues were committed to the road fund. The amount paid from solid waste to the road fund is determined by multiplying the previous calendar year's tons of municipal waste by the $5.00 per ton rate. The total is then included in the budget for the transfer the following fiscal year. Solid Waste revenues fell during the recession and the commitment to the road fund was reduced to $2.50 per ton through the budget committee process for 2010/11. A history of the solid waste operating fund showing revenues, transfers to the road fund and EFB are shown below: 2009/10 2010/11 2011/12 2012/13 2013/14 Solid Waste Revenue 6,510,034 6,494,736 6,517,877 6,806,370 6,754,776 Transfer to Road Fund 708,567 291,740 285,773 276,272 282,148 EFB Actual 318,001 1,141,691 807,470 1,224,767 It appears that even with the current payment at $2.50 per ton from solid waste to the road fund, solid waste has been able to increase its beginning net working capital by an estimated $400,000 beyond the amount budgeted for 2013/14. This provides the solid waste fund with its largest beginning net working capital since 2008/09. The decision to transfer solid waste resources to the road fund through the tip fee increase had a rationale when it was first instituted that solid waste hauling throughout the County has an impact on county roads and therefore some of the revenue generated from solid waste activities should be used to address those impacts. This strategy also allowed the road department to replace declining forest revenues used for road maintenance and capital projects. Both of these reasons still exist and have not changed. Because the payments to the road fund are unrelated to the need for the solid waste department to fund its capital projects over the next several years, we suggest that the payment continue as budgeted for 2013/14. If a decision to eliminate the transfer to the road fund is made in the budget process for next year, perhaps the amounts should be dedicated to the landfill closure reserve to ensure that sufficient funds are available as closure costs increase over time and the life of the landfill draws to a close. Requested Action: The Administration requests that the Board of Commissioners direct that the excess portion of the PILT payment for 2013/14 in the amount of $1,252,194 be directed to the road fund and the natural resources fund as set forth above. We also request that no change be made for this year in the payment from solid waste to the road fund so that this issue can be studied further prior to the 214/15 budget process.