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HomeMy WebLinkAbout2015-01-28 Budget Meeting Minutes Minutes of Budget Committee Meeting Wednesday, January 28, 2015 Page 1 of 17 Pages For Recording Stamp Only Deschutes County Board of Commissioners 1300 NW Wall St., Bend, OR 97701-1960 (541) 388-6570 - Fax (541) 385-3202 - www.deschutes.org MINUTES OF DESCHUTES COUNTY BUDGET COMMITTEE MEETING WEDNESDAY, JANUARY 28, 2015 __________________________ Present were Commissioners Anthony DeBone, Alan Unger and Tammy Baney. Also present were Tom Anderson, County Administrator; Erik Kropp, Deputy County Administrator; David Doyle, County Counsel; David Givans, Internal Auditor; Judith Ure, Administration; Wayne Lowry and Loni Burk, Finance; and citizen Budget Committee members Mike Maier, Bruce Barrett and Clayton Higuchi. No representatives of the media were in attendance. Chair Bruce Barrett opened the meeting at 1:30 p.m. __________________________ 1. Opening Comments. Tom Anderson noted that this is the same group as last year, and it is good to have consistency. This meeting is meant to give the Budget Committee an overview on what has happened and what is anticipated. Times are better than they were in recent years, which he hopes will make it easier to make policy decisions for the new fiscal year. There are some big moving parts, such as the Solid Waste fund, PERS reserves, and others. They will run down what they told the departments regarding parameters for the coming year. They will highlight the operating parts, the financial picture and what may be the bigger issues this coming year. Minutes of Budget Committee Meeting Wednesday, January 28, 2015 Page 2 of 17 Pages 2. County Financial Update. Wayne Lowry introduced Loni Burk, who is taking over Teri Maerki’s position since she is retiring and on a special software project. Mr. Lowry gave a PowerPoint presentation (a copy is attached for reference.) He reviewed the actual budget through 12/2014; the status of selected financial issues; and the budget assumptions for 2015/16. The Budget Committee members receive the same monthly financial update that is presented to the Board. a) General Fund Mr. Lowry went over the current projects. They zeroed out the Bethlehem Inn loan so there were some adjustments made. The beginning fund balance is about $700,000 larger than anticipated. Property taxes will likely come in stronger than anticipated as well, at 5.6% instead of 5%. They want to pay off the Solid Waste loan this year also; this has not yet been reflected. They will still be far ahead of the policy level fund balance. b) A/V & Property Taxes Mr. Lowry reviewed the market/assessed values. There has been less than 3% growth in the past. It is not quite back to where the amounts were some time ago, but is going in the right direction, with finally a sustained recovery in values. Property taxes are following the same trend. 911 stayed flat longer than the County of Sheriff funds, because 911 suffered compression. It was the largest local option tax in the area and lost a lot of revenue. This was also seen in the urban renewal areas of Redmond. c) Development Activity Mr. Lowry stated that it looks similar to the market value growth. They are going back to about 2003/2004 levels now, so are not there yet. This may come in better than expected the past few months. They had to add staff in CDD, so are going in the right direction. d) Room Tax Performance There was a dramatic increase in this; there was the new 1% in 2013/14 and some of this goes to the general fund. They were collecting more even before that, and it is higher than it has ever been. They budgeted a 7% increase plus the 1%, but it may be at 9-10% overall. Minutes of Budget Committee Meeting Wednesday, January 28, 2015 Page 3 of 17 Pages e) PILT/Forest Receipts For years, they expected no more revenue but it has been coming. It is not in the President’s budget at this time but some commitments were made to restore portions of it. It may be $400,000 rather than $1.3 million. Mike Maier said that PILT is for general use. Forest funds are for schools and roads specifically. Mr. Lowry stated that the uptick has been in PILT, and he is interested in seeing if there will be enough federal sources for this. Commissioner Baney thinks it might be at the $3 million as it is supposed to balance out. She thinks this is unique. They used to get less PILT and more SRS. PILT won’t be able to catch up to other jurisdictions that have gotten more SRS. Deschutes County was not heavily reliant on SRS. Mr. Maier added that it used to go into the general fund and was not sent to Road. Mr. Lowry said that there are new ways to calculate this, and maybe other counties have a different way of handling it. f) Health Benefits Trust Mr. Lowry stated that this fund continues to do well, and he projects a healthy year-end balance. Mr. Anderson said he budgeted a decrease in the ending balance to not have so much in it. Mr. Lowry noted that there have been a few fairly large payoffs that are unique. 2014 has been a good claims year, going down almost $1 million from 2013. The budget was higher as well. Claims can be volatile. They project on a 52-week rolling average, and a check goes to EBMS every week. Some have been $600,000 a week but not in the past year. Generally claims are down from previous years. It could go $1million either way, since there is no way to anticipate it all. g) PERS Rate Projections A graph was put out by PERS in November 2013, shown by biennium. System wide pension rates are scheduled to go up a lot through 2017-19 but then will taper off. The assumption is there will be less tier 1 paid out as people die off. The newer graph shows an increase through 2015-17. If all assumptions pan out, system wide rates will come down over time after that. There have been two years of good earnings for PERS. 2014 show this at 7.29% which is less than before; it used to be 8%. This may mean a higher short-term expense. Minutes of Budget Committee Meeting Wednesday, January 28, 2015 Page 4 of 17 Pages 3) Financial Issue Status. a) Solid Waste Loan Repayment The County borrowed from this fund for the jail and for Brightside. It was similar to a line of credit to Bethlehem Inn and they are not issuing credit to Brightside anymore. Trusts are in place with proceeds to come to the County when paid. They sold the event center and some proceeds came to the County at that time. Mike Maier asked what the trust is worth. Mr. Lowry stated that the property is not due to be sold for a couple of years, and it is hard to get numbers from the trustee. The amount budgeted over three years was about $1 million. This time is was at $480,000. Mr. Maier said they need to start saving now for an expansion of the jail in probably ten years. They should set aside $500,000 per year, from the general fund and the Sheriff’s funds, so they don’t end up struggling for all of it later. They will need a big nest egg to address this. It is not too early to start setting funds aside, and they have no idea of what interest rates will be at that time. Mr. Anderson stated that they could make the same argument for several different things. The Courthouse is one of them, if they add another judge or two. They will likely have more general fund resources and demands for now, and have to not be tempted to do new things, but instead build up reserves for improvements so they don’t have to be financed. It is broader than just the jail. Mr. Maier wondered if the State will fund part of the Multnomah County courthouse expansion. If they will fund bricks & mortar, Deschutes County needs to go after that. Commissioner Baney said that the County did not let the courthouse go into disrepair so will be punished for keeping it up. If there is too much money set aside and things are not too bad, this makes it easier for the State t o ignore it. Mr. Maier would like to see the State match funds in this way. Mr. Anderson said there are two levels of requests. A group makes the first recommendation, which asks the Governor for funding. Then it gets more specific. Minutes of Budget Committee Meeting Wednesday, January 28, 2015 Page 5 of 17 Pages b) Bethlehem Inn They took care of the negative fund balance, combined it with the general fund, and lowered the fund balance but they are still within policy levels. A sale agreement is in place as of July 2014 to the Bethlehem Inn organization, and a March 2015 deadline to close the transaction. Otherwise it requires a reappraisal or renegotiation. He expects the $1 million to come in the spring. Mr. Anderson said that he met with them a number of times, and they could do it now but would have to borrow some. They are seeking additional grant money instead. Some are at the national HUD level and their board is optimistic. 4) Budget Assumptions for 2015/16. a) General Fund Support General Fund transfers have been to hold the line regarding general fund subsidies. General fund departments are staying the same, and don’t expect to get more. This year they will allow it to be similar but no more than needed to maintain service levels. Departments will have to justify the need. Mr. Anderson stated that this is basically to cover inflationary increases. Most of it is salary, with some materials and services. They are being viewed on a case-by-case basis. Mr. Maier said that there are exceptions, like a D.A. increase beyond this. b) Cost of Living Mr. Lowry stated that the biggest issue is the cost of living. The factors used for all contracts look at January through January. This reached the lowest point at .8% through December 2014. Some contracts are already in place, with AFSCME at 2%, and FOPPO, the D.D.A.’s and IUOE to be determined. 911 is at 1.5%. Numbers won’t be known until late February. Mr. Kropp said they have reopened AFSCME but only for fair share. The non-represented group decision is still to be made as well. They are looking at probably a 2% COLA overall. Minutes of Budget Committee Meeting Wednesday, January 28, 2015 Page 6 of 17 Pages Mr. Maier stated that if it stays at .8%, it will be hard to go to 2%. Mr. Lowry noted that they are already at this for some. There is the issue of the non-represented group. It is hard to know where this will go. c) Health/Dental Insurance Rates Mr. Lowry stated this is at $18,461 per person, about 4%, the lowest seen in a while. Another change is to assume that vacant positions will not be billed for this. This is good for some but not for other departments. With the 4%, the ending balance should vary no more than $400,000 either way. This will change in July. Mr. Maier noted that this is a sore spot for the Sheriff. If they put it in the budget, they got charged for it. Mr. Lowry said that payments will be for what they actually have. Clay Higuchi asked if a consultant has looked at this. Mr. Kropp replied that an RFP is being prepared for this service. It took a while, with a new director and staff changes in Personnel. There already was an external audit done. There won’t be recommendations for six months or more. d) Assessed Value – Countywide These figures will actual be out in September. They are using 5% countywide as a projection. Rural areas are at 5.5%, and this affects Sheriff District #2, Sunriver and others. The collection rate is higher than 94% lately, so he is assuming it will be at 94.5%. e) PERS Rates There are four different categories of employees. This was started in 2003. Nearly half of employees are OPSRP rather than PERS, with no money match or other things that Tier 1 had. PERS rates for general service categories are going from 16.6% to 19.9%, or 3.3% of payroll. The overall change is 1.39% of payroll. This relates to about $800,000 in increased costs, plus add-on merit increases and COLA’s, which will bring this up to about $1.1 million. f) Internal Services There is new software for the cost plan, which will be more sophisticated over time in projecting costs. Two large new projects, finance & H/R software, may cost $1 million over two years. The personnel classification & compensation study will be $100,000. This was not allocated before. This will increase department costs by about 11.73%. Minutes of Budget Committee Meeting Wednesday, January 28, 2015 Page 7 of 17 Pages Mr. Anderson said he is hoping to soften this increase by spreading it out over a longer period of time. Some departments are just recovering fro m the previous years’ recession. Mr. Maier noted that they need to be able to show them measurable results. Commissioner Baney asked if the system will demonstrate staff efficiency. She asked if this should be in the general fund. Mr. Anderson said some are a cost of the departments doing business and they should share on a prorated basis. However, they have the ability to finance this cost over a period of years. They know the system in place isn’t doing the job and there is too much reliance on paper. The D.A.’s system was designed in a vacuum, but this will be for all, with a user group overseeing it. Mr. Maier said that some D.A. offices have great systems, better than what the previous D.A. insisted upon at the time. If something doesn’t work, it needs to go. One is case management and the other has to do with bails. Mr. Higuchi stated that the D.A. has to decide whether to digitize. It means a lot more work up front but means long-term efficiency. They all need to get away from paper time sheets and all that. It may mean fewer employees eventually. The managers and employees have to commit. It may take time to do it, but should not be funded without the right commitment. They need to make sure the departments know the benefits. Most efficient managers will want to do this. Chair DeBone said that John Hummel (new D.A.) knows about this, and he will work towards improvement. Mr. Maier added that he wants the D.A. to get what he thinks he will work if it is proven, and not have to be stuck with what he inherited. Mr. Kropp noted that once the County has committed to the personnel aspects, everyone has to go to it. There will be no going back. Mr. Lowry said he has talked with department heads several times about this. The Sheriff is committed to the process and his payroll is the most complicated at the County. Minutes of Budget Committee Meeting Wednesday, January 28, 2015 Page 8 of 17 Pages 5) Potential Uses of the PERS Reserve. Mr. Lowry went over the issues that have affected PERS rates over the years. The biggest concern over the past few rate-setting sessions is making up ground from poor earnings in the past. The assumption was 8% in the rate as a percentage of payroll, and it was able to stay near that, except for a few years during the .com bust, and a 30% reduction during 2007-09. Rates have bounced back since, with a smaller dip in 2011. Over time, the average, before the big crash, was over 10-12%. The recession impacted it overall. They reduced the earnings estimate to try to reflect the “new normal” investment environment. He is not comfortable projecting out beyond 2020 but PERS does so until 2033. There was a good rate increase in late 2014. This will hold for two years but will gradually come down. Reserves right now at $10.2 million, and the rate of return is about .73%, with an estimate of about $75,000 earnings. The total $10.2 million was appropriated last year. Mr. Lowry stated that there are several available choices. They can keep the funds as is and let it grow. They are assuming rates are based on current legislation. There was a cost of living reduction to pensioners, but that is still in court and needs to be solved. Mike Maier would like to have the money sitting in reserves until this is determined. They could apply funds internally starting in 2016 to smooth out future PERS rate increases that are expected on 7/2017 and 7/2019. This has been done in the past. They want to keep rates stable but meet up with the declining line in the future. Another option is a lump sum payment to PERS to create a side account to reduce future rates. A lot of jurisdictions have done this in the past, but some borrowed that money. Paying this from funds you already have is the best way to do it. Minutes of Budget Committee Meeting Wednesday, January 28, 2015 Page 9 of 17 Pages With option 2, applying funds over the next nine years, would benefit the County by $8.6 million. They would keep $2.7 million and build it up over time, using 2023-24 as a time period. This would shave off the increased rate during those years, after which the costs begin to decline. Option 3, a lump sum payment, goes to PERS and you can’t get it back. It is invested by PERS and you can win or lose. The County put $6.7 in and got earnings of 1.35% in 2004. There was a big loss in 2008, however, of $2.2 million. Even with this loss, they have benefited by $5.1 million over ten years. Had they done this later, in 2006, there would be a loss that may never have been recovered. The years before that had higher earnings. A lump sum payment of $7.5 million would show earnings of $7.4 million through 2033. That leaves $2.7 in the County Reserve, and the benefit to the County is $14.9 million. The rates change every year. This would reduce payroll by .98%. If a payment is made by June 1 2015, it would offset some of the PERS rate increases. Mike Maier said departments would be reduced and general fund transfers would be less. Mr. Lowry noted that it would lower payroll costs. Mr. Maier said it if went into a capital improvement reserve, would the departments care. Mr. Anderson stated that they would have to pass the savings on to the departments. Commissioner Baney asked if the investment can be made at any time. Mr. Lowry said it can. It cost $1,000 to get the calculation redone, through the actuary. The options are:  Option 1, keep the funds.  Option 2, apply to PERS reserves.  Option 3, a lump sum payment to PERS. There is a longer-term benefit to this one. Mr. Barrett said long-term has more risk and less control. Paying more up front now can level it out sooner. Option 3 means exposure to PERS investment policies with no control. Minutes of Budget Committee Meeting Wednesday, January 28, 2015 Page 10 of 17 Pages Mr. Maier asked if the rates go down next year, what would they do. Mr. Lowry stated that PERS can be volatile and they may want to build up reserves at this point. Mr. Maier said he is leaning more towards keeping this in reserves to insulate from market unknowns. This is option 2. It would mean b eing able to make more decisions internally. PERS lawsuits or future legislative bills might be an issue. Commissioner Baney stated that the Governor won’t touch PERS and the legislature is probably staying hands-off, at least at this point. Mr. Anderson asked if they keep it in reserves, will rates be locked in. Mr. Lowry stated that a rate change would be effective in 2017. Mr. Anderson said if the cases are overturned, this would mean less of an impact. Mr. Maier asked how long the funds would have to stay with the State i f it goes there. Mr. Lowry replied it is at least a 20-year commitment, so there is a risk. Mr. Higuchi said that option 2 has a lower return. If rates look to stay the same short-term, it will be a poor return. Mr. Maier said that most investments are this way. Mr. Lowry stated that maybe it will be $4 million instead of $7 million. Less risk means less return over the years. Mr. Barrett said that they need to go something , but he wants to be more conservative. Chair DeBone asked if the return long-term is optimal. Should they hold on to the money, he asked if it would hold its value. Mr. Maier stated that it all has to be collateralized. He asked if they can invest in real property instead. Mr. Lowry said it has to be for a County purpose, such as building something for the State to occupy. Those investments have done well. It has to be with an entity that will be able to pay it back. Mr. Lowry noted that local government is not structured to be that creative. Mr. Higuchi stated that they could possibly diversify some of the funds to soften the impact. Mr. Maier would prefer to keep flexibility at the local level. If the rates go down sooner, that allows for more reserves. He would rather continue to build the reserves or shave the savings. Mr. Lowry said that is how it is done with PERS. Mr. Maier feels they can make more than PERS. Minutes of Budget Committee Meeting Wednesday, January 28, 2015 Page 11 of 17 Pages Commissioner Baney said they can go with Option 2, and put a toe in the water on where to go from there. Mr. Lowry stated that there could be immediate results in the next fiscal year with this. They could reduce the amount from .75%. Any way you go, it is a gamble. Mr. Lowry said some jurisdictions have a huge debt burden because they borrowed to put it into PERS. Mr. Barrett said there could be a commitment on how it is handled, but Option 3 means gain or loss with no control. Mr. Lowy noted they could give some to PERS and keep the rest to handle as desired. Some flexibility can be maintained. Mr. Maier does not want to sell all, because they need to be prepared for economic problems. Mr. Lowry said if the departments see a decrease, it could be less than the true decrease, with the rest going into reserves. The bonds cost about 5%. PERS earnings cover the cost of the bonds, off the top. Mr. Higuchi said if it was invested, maybe this overhead could be avoided. Commissioner Unger asked about a pension bond side account. Mr. Lowry said once it goes to PERS, it is under their control. Mr. Lowry said there seems to be an aversion to giving $7.5 million to PERS to control. Perhaps they can give them a smaller amount, or wait another year or two to see how things go. They can try to buy down the rate to level things out. Commissioner Baney said she is hearing some concern about the court case. Perhaps they can readdress it again when that is resolved. Mr. Lowry noted that there could be ongoing appeals. Mr. Anderson stated if they defer a decision, the departments are looking at a 7.5% charge and some, including the Sheriff’s Office, feels they may have to do a rate increase. Mr. Maier thinks they need to wait for court decisions and also for the reaction of the legislature. Mr. Lowry stated the rates would stay the same for the next two years in any case, even if the cases are overturned. Mr. Barrett said that for now there is an advantage to wait. Mr. Anderson proposed a use of the funds to bring down the rate to the departments. Any reduction will benefit them. Mr. Barrett noted that the money is sitting there so this is an appropriate use. Commissioner Baney appreciates them not staying stagnant but instead taking action. Minutes of Budget Committee Meeting Wednesday, January 28, 2015 Page 12 of 17 Pages 6) Status of Budget Issues by Department. Mr. Anderson said that some departments have budget issues to be addressed. The Clerk’s Office is working on the “get out the vote” initiative, and will propose some options. There is a big moving part in that budget based on the Secretary of State and legislature. The Sheriff’s Office transition may increase rates overall. There is a lot of room for this. There is a 30 cent gap for the biggest district. Mr. Anderson said they need to add staff and have been spending down reserves. The D.A.’s Office has a new attorney but no other additional staff. The new D.A.is doing well and the transition is going very smoothly. He is very involved. Justice Court is breaking even. This fund has been improving due to more officers in Redmond giving citations to Justice Court. Sheriff citations have inched up as well. There is a bill proposed in the legislature to increase civil fines. The local fines are less than those in the valley at this time. There have been lots of meetings with the Health Department to deal with finances, which are very complicated overall. He expects to see a budget that is structured similar to the department ’s org chart. They will look to their own funds first and the general fund last. It takes time to turn this around, but one more year should make a difference. Solid Waste is doing better with volume, and they are considering restoring some hours. There is a long-term capital needs project: the closure fund. The loan payback will largely cover cell 6 construction. Mr. Higuchi asked what revenue would result from increased hours. Mr. Anderson stated that this also has to do with customer service. They would have to add staff to cover additional hours. Mr. Maier noted that many people still expect Sunday hours, so this needs to be considered. Commissioner Baney said it is a matter of who they serve. It might not be a big moneymaker, but you have to look beyond that. Mr. Maier feels they should do this if they have the money. Mr. Higuchi said people should learn to adjust instead. Commissioner Unger feels that if the ability is there, they need to provide the service. Minutes of Budget Committee Meeting Wednesday, January 28, 2015 Page 13 of 17 Pages Mr. Higuchi feels that other taxpayers will have to subsidize for the few who want more convenience. Commissioner Baney said they would not raise rates to do this. Chair DeBone likes the idea of adjusting for the seasons. Mr. Anderson said they may be able to provide funds to Solid Waste out of transportation without directly impacting the public. They are waiting for Waste to Energy Group to finalize its financial plans. Chair DeBone said with fuel costs down, it is likely making it harder for them. Mr. Anderson said that Road Department is excited about doing some bigger projects. Mr. Anderson stated that CDD numbers are up. They need to determine whether to pay back reserves; he feels this is important. COBA asked that payback not occur so they can keep rates down. Mr. Maier would like to see a policy that if reserves are built up, there should be an understanding of how it will be handled with the builders. Now is the time to talk about this. Mr. Barrett said that the builders seem to just want a minimal service level. Mr. Anderson said COBA’s opinion was to keep service levels and a subsidy. Mr. Maier stated that now that no one is asking for anything, this is the time to set it up for the future. Commissioner Baney said the department was being asked for big commitments for long-range planning. Chair DeBone stated they purchased the long-range planning while other work was down. Mr. Maier noted that the County subsidized building and other services, which benefited specific developers and property owners. Mr. Higuchi does not understand why they subsidize the building industry. They don’t want to pay for permits anyway. Mr. Anderson said the customer wants permits and to know building is done well. The State oversees all of this. He said the builders and property owners should be happy to have this service. Mr. Higuchi stated that they loan money to the Fair & Expo already. Commissioner Unger said they have to protect the asset. Mr. Maier said anyone can use it. The average person does not open their home up to the public. Mr. Higuchi feels that the public doesn’t want to pay for this. Mr. Maier said the public voted for the Fair & Expo and wants the County to take care of it. Minutes of Budget Committee Meeting Wednesday, January 28, 2015 Page 14 of 17 Pages Mr. Barrett stated that they talked about marginal rate increases so they don’t all happen at once. Mr. Maier said this was in relation to tipping fees. Mr. Anderson said they try to do rate increases to builders gradually so the impact is not so much. They probably won’t suggest rate increases except for inflation since volume has increased so well. They do have to add staff for the additional work, so it is not all profit. Mr. Anderson stated that Community Justice/Juvenile is supported somewhat by the general fund. The philosophy of the detention center should be analyzed to use some of that space short-term, to maximize staffing. Commissioner Baney asked if this is based on local needs. Mr. Anderson stated it is not that well developed yet, but is a concept to be discussed. They are not as far along with this as they are with Health. Mr. Anderson said that adult corrections will likely be the same with the funding split. They have the justice reinvestment funds this year to reduce the population in State prisons. It has to be applied for but probably won’t be enough. They are using some of it for risk assessments. The County has been doing a lot of this already so will be penalized for not being in as bad a shape as other jurisdictions. Regarding Property & Facilities, the Design Center has not yet been sold. Mr. Barrett recommended that they take another look at this. Mr. Kropp said they did not borrow to sell it so time is not critical. The north campus concept has been handling by spreading out and adding space, but it is not consolidated as originally planned. They are meeting the departments’ needs at this point. Mr. Anderson said there is room in Redmond City Hall for Justice Court and CDD. They also are revamping the Unger Building and purchased another smaller building. Mr. Maier suggested they buy a Sheriff’s Office substation location in Sisters and stop paying rent. Renting small space short -term makes sense, but not long term. Regarding Veterans Services, Mr. Kropp said their volume is still way up and they may request additional staffing. There is grant money from the State to advertise services, but that means more work in the office. Minutes of Budget Committee Meeting Wednesday, January 28, 2015 Page 15 of 17 Pages Mr. Maier said that veterans from other counties come here for better service. Mr. Kropp stated that an audit showed that a wait time being too long for Deschutes County veterans means they should turn others away. Mr. Maier stated that maybe the other counties could be approached about Deschutes County taking those over. They could have office hours in the different places with administration being in one place. Mr. Kropp said that the travel time takes away from time that could be spent with the veterans. Commissioner Baney it is similar to the landfill issue; more customer service but the cost is higher. Regarding the Law Library, Mr. Kropp said the public library system is putting together a proposal to have the law library there, under contract. This would allow more hours and access. The average citizen could have more access also. It is a better benefit to the general public. Mr. Anderson said that 911 is a big deal right now. Stakeholders are involved in getting staff where it needs to be, plus a new communications system that could be centralized. They are gearing up for spring 2016 to propose a permanent levy for operations and maintenance of infrastructure. They are hoping that construction can be done with existing funds and grant money. The current infrastructure needs to be improved. The Director is pushing to partner with the State to piggyback on their work as much as possible. The new Director is doing great and has developed, with the partner agencies, positive relationships that did not exist for a long time. Extension/4H still has two County employees, but those will be transferred to the State. This is fully supported. It was a holdover from years ago. The County remains the governing body, like Sunriver or Black Butte Ranch. It will only change in regard to the employees. Mike Maier asked about COVA moving to Sunriver. Commissioner Baney said that the move has been mostly positive and there have been few complaints. Black Butte Ranch is supportive and it gets this service away from Bend into the greater County. Mr. Anderson said they report it is doing well. Sunriver Resort already has a way to handle visitors but this allows people to learn about more than what is in Sunriver. Minutes of Budget Committee Meeting Wednesday, January 28, 2015 Page 16 of 17 Pages 7) Departmental Presentation Format. Mr. Anderson said the desire this year is to zero in on specific issues , but allow lots of time for discussion. Commissioner Baney said they always run out of time and does not think they are addressing all they should. Part of this is meeting during a holiday week with a reduced number of days. Mr. Maier likes to see the measurables and how they have improved, and what the big issues are. Mr. Anderson said the Board is having a retreat in a couple of weeks, and the idea is to tie in the goals with what the departments present. Mr. Barrett said that they need to review the rocky points, which should be discussed before they ever come to the Budget Committee. Juvenile and the Health Departments come to mind. He does not like surprises and being asked to help them overcome those challenges. 8) Budget Calendar. Mr. Lowry said that the meetings are scheduled Tuesday through Friday, May 26 through 29, starting at 9 AM. Commissioner DeBone asked about starting at 8:30. Mr. Maier would like to have some time after each session. Mr. Kropp suggested they can schedule the presentations for set times and leave some time in between. Mr. Lowry stated they could advise the departments of this. Mr. Higuchi stated that he does not need longer breaks in between, but it is up to the Commissioners. Some presentations could be shortened since some of this information is already known. Mr. Lowry stated they worked through all the lunches last time. If everyone wants to start earlier to have more discussion in between, he will arrange for it. Mr. Barrett said it is harder for him to be here at 8:30. Mr. Higuchi said some of the partners tend to take a lot of time. Mr. Barrett said they need to see the measurables. Regarding COVA, Mr. Barrett would like to hear more from their board and less from the director. Chair DeBone suggested that they start at 9 AM on Tuesday but at 8:30 the other days. Mr. Maier stated that it appears that there seem to be fewer big issues this time, although it is hard to know what might come up. Mr. Anderson said there will likely be a school based health care center discussion. They will probably talk about the transfer from Road to Solid Waste. Mr. Lowry said Friday they look at everything and some can be called back in to answer specific questions if necessary.. Commissioner Baney stated the Sheriff's tax rate increase needs to be discussed. The jail expansion was done with existing funds, so this might come into play. Mr. Maier stated that one is operational and one is capital. Mr. Higuchi said that the Sheriff warned them previously he was going to have to do this. Mr. Maier does not feel there is going to be bad press on this, given the Sheriff's relationship with the public. The media likely won't show up anyway. He believes the District funding is solely for operations. It would be good to know if this is the case; staff will check. It was decided that it is easier for all if they start at 9 AM, to allow some time to get other things done before the meetings start. 9) Other Items. None were offered. Being no other items discussed, the meeting was adjourned at 4:20 p .m. DATED this l~Day of 2.~ 2015 for the Deschutes County Board of Commissioners. Anthony DeBone, Chair Alan Unger, Vice Chair Ta~~iSSioner Recording Secretary Minutes of Budget Committee Meeting Wednesday, January 28, 2015 Page 17 of 17 Pages Deschutes County Budget Committee Meeting January 28, 2015 1 :30 p.m. -4:00 p.m. 1) Opening Comments ­Tom Anderson 2) County Financial Update ­Wayne Lowry a) General Fund b) A/V & Property Taxes c) Development Activity d) Room Tax Performance e) PILT/Forest Receipts f) Health Benefits Trust g) PERS Rate Projections 3) FinanCial Issue Status ­Wayne Lowry a) Solid Waste Loan Repayment b) Bethlehem Inn 4) Budget Assumptions for 2015/16 ­Wayne Lowry a) General Fund Support b) Cost of Living c) Health/Dental Insurance Rates d) Assessed Value -Countywide e) PERS Rates f) Internal Services 5) Potential Uses of the PERS Reserve ­Wayne Lowry 6) Status of Budget Issues by Department ­Tom Anderson, Erik Kropp 7) Departmental Presentation Format 8) Budget Calendar 9) Other Revised 1/26/2015 Deschutes County Budget Committee Update January 28, 2015 County Financial Update •Budget/Actual through December 2014 •Status of Selected Financial Issues •Budget Assumptions for 2015/16 General Fund Actual 2013 Actual 2014 Budget 2015 YTD 2015 Dec 2014 Projection 2015 Variance Property taxes 20,734,019 21,906,239 22,736,401 21,092,663 23,136,401 400,000 Other Revenue 6,989,608 5,625,940 5,429,040 3,441,001 5,742,640 313,600 Total Revenue 27,723,627 27,532,179 28,165,441 24,533,664 28,879,041 713,600 Operating Expenditures 12,480,872 13,195,239 13,744,086 6,462,525 13,594,086 150,000 Transfers 13,930,307 16,327,584 14,076,394 7,311,861 14,076,394 Total Expenditures 26,411,179 29,522,823 27,820,480 13,774,385 27,670,480 150,000 Beginning Fund Balance 9,059,394 10,371,843 7,692,433 8,381,199 8,381,199 688,766 Ending Fund Balance 10,371,843 8,381,199 8,037,394 19,140,478 9,589,760 1,552,366 Assessed Value 0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 40,000,000 45,000,000 07 08 09 10 11 12 13 14 15 Countywide Sheriff Unincorp at 3% per year Countywide Market Value Property Taxes 0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 General LED #1 LED #2 9-1-1 Development Revenues 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 20 0 1 20 0 2 20 0 3 20 0 4 20 0 5 20 0 6 20 0 7 20 0 8 20 0 9 20 1 0 20 1 1 20 1 2 20 1 3 20 1 4 20 1 5 Building Planning Electrical Environmental Room Tax 0 1000000 2000000 3000000 4000000 5000000 6000000 Room Tax Revenue Room Tax Revenue Federal Forest Receipts 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 2008 2009 2010 2011 2012 2013 2014 2015 PILT Forest Total Health Benefits Trust Actual 2013 Actual 2014 Budget 2015 YTD 2015 Dec 2014 Projection 2015 Variance Dept Premiums 12,874,815 14,485,502 15,517,000 7,982,589 15,966,200 449,200 Other Revenue 3,265,725 3,712,369 3,992,000 2,037,383 4,045,440 53,440 Total Revenue 16,140,540 18,197,871 19,509,000 10,019,972 20,011,640 502,640 Personnel 197,101 129,509 144,917 61,494 144,917 Admin/Welln ess 15,762,814 14,726,294 16,385,812 7,991,405 16,235,473 150,339 DOC 886,351 932,031 1,005,277 415,091 1,040,277 -35,000 Pharmacy 1,877,480 1,916,777 2,015,321 654,352 1,892,738 122,583 Total Expenditures 18,723,746 17,704,610 19,551,327 9,122,342 19,313,404 237,922 Beginning Fund Balance 14,551,028 11,967,822 11,585,710 12,461,082 12,461,082 875,372 Ending Fund Balance 11,967,822 12,461,082 11,543,383 13,358,712 13,159,318 1,615,935 County Health Benefits Trust 0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Revenues Expenditures Ending Balance PERS Projection November 2014 Solid Waste Loans @ 12/31/2014 •Humane Society $ 480,005 Remaining balance to be repaid over time from a private trust set up to benefit the animal shelter. •Jail Project $1,036,421 Board approved making final payment of estimated $1,040,000 from the general fund at this mornings BOCC meeting. Bethlehem Inn •Board approved transfer of $2,700,000 from the general fund to close out the Bethlehem Inn fund in June 2014. •Sale agreement dated July 22,2014 for sale of the property to the Bethlehem Inn organization for $1,000,000. The Inn has until March 15, 2015 to fund the transaction. 2015/16 Budget Assumptions •General Fund Transfers –…assume your FY 2016 general fund transfer will be similar to the FY 2015 transfer but no more than is necessary to maintain current service levels. •General Fund Departments –…departments that rely on General Fund revenues for their base funding should also assume that available funding will be similar to the FY 2015 level. 2015/16 Budget Assumptions •COLA – 12 mo thru Dec 14 .8% –AFSME Contract 2.0% –FOPPO, DA’s, IUOE to be negotiated TBD –DCSEA, 911 Minimum 1.5% –Non-Represented TBD •Health Premium to Depts $18,461 4.0% –No charge for vacant positions •Assessed Value Increase 5.0% 2015/16 Budget Assumptions PERS FY 2015 FY 2016 % Change % of Payroll Change Subject Salary Projected Cost PERS General Service 16.60% 19.91% 19.9% 3.31% 20,382,164 $674,469 PERS Public Safety 23.44% 23.78% 1.5% .34% 9,668,535 $32,873 OPSRP General Service 14.52% 14.53% 0% 0% 21,140,281 $2,114 OPSRP Public Safety 17.25% 18.64% 8.0% 1.39% 6,263,965 $87,069 1.39% 57,454,945 $796,525 Internal Service Funds Allocations for FY 2016 •New Cost Plan Software in use for FY 2016 •New temporary projects being charged out to departments –Finance H/R Software project for FY 2016 and FY 2017 $400,000 – Personnel Class & Comp Study for FY 2016 only $100,000 •Total increase with new projects $1,049,000 –11.73% increase over FY 2015 Questions/Discussion 2014/15 PERS Discussion Deschutes County January, 2015 Outline of Discussion •Long term projection of County PERS rates •PERS Reserve •Alternative uses of the PERS Reserve Recent Developments •Reduced earnings assumption to 7.75% •Change in Actuarial method •SB 822 delayed portion of rate to 2015/17 •Rate collar adjustments •Re -amortization of UAL’s from previous years •Hangover from 2008 PERS Investment Losses •2015/17 Rates issued September 2014 •Future Projections issued November 2014 PERS Earnings Since 1989 -30 -20 -10 0 10 20 30 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Assumed Earnings Earnings From PERS Projections Nov 2013 PERS Projection November 2014 Projected Deschutes County PERS Rates as % of Payroll 8 10 12 14 16 18 20 PERS Rates PERS Rates Deschutes County PERS Reserve •Balance at 12/31/14 $10,204,000 •County rate of return .73% •Earnings Estimate per year $75,000 •Total Appropriated for 2015 $10,226,000 PERS Reserve Options 1.Keep funds for future use 2.Apply funds internally starting in 2016 to smooth future PERS rate increases expected 7/1/15 and 7/1/17. 3.Lump Sum payment to PERS to create a side account to reduce future rates. Option 2 - Apply funds over next 9 years •Earnings through 2023/24 $1,100,000 •Funds left at end of period $2,721,000 •Benefit to County $8,642,500 Projected PERS Rate Smoothed with Reserves beginning in 2015/16 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00% 11 / 1 2 12 / 1 3 13 / 1 4 14 / 1 5 15 / 1 6 16 / 1 7 17 / 1 8 18 / 1 9 19 / 2 0 20 / 2 1 21 / 2 2 22 / 2 3 23 / 2 4 24 / 2 5 25 / 2 6 26 / 2 7 27 / 2 8 28 / 2 9 29 / 3 0 30 / 3 1 31 / 3 2 32 / 3 3 PERS Rates Dept Rates Option 3 - PERS Lump Sum Payment •Creates “Side Account” •Side accounts are amortized over 20 years •Side accounts receive PERS fund Earnings and Losses each year •Contributions are irrevocable •The County has one side account already with an offset of 1.06% of payroll Pension Bond Side Account Beginning Ending Rate Balance Earnings Contributions Balance Relief 2004 6,761,232 774,394 271,236 7,264,390 1.35% 2005 7,264,390 960,352 499,525 7,725,217 1.43% 2006 7,725,218 1,206,679 574,538 8,357,359 1.47% 2007 8,357,359 843,608 552,597 8,648,370 1.45% 2008 8,648,369 -2,221,797 660,283 5,766,289 0.95% 2009 5,766,289 998,850 687,406 6,077,733 0.99% 2010 6,077,734 715,777 664,734 6,128,777 0.99% 2011 6,128,776 166,717 652,415 5,643,078 0.93% 2012 5,643,078 792,361 525,756 5,909,683 0.96% 2013 5,909,683 901,103 530,502 6,280,284 1.06% Total 5,138,044 5,618,992 Lump Sum Payment to PERS •Assume payment of 75% $ 7,500,000 •Earnings through 2033 $ 7,443,000 •Funds left in County Reserve $ 2,700,000 •Benefit to County $14,943,000 •Rate Reduction .98% of Payroll Projected PERS Rate With Lump Sum Payment to PERS 8 10 12 14 16 18 20 PERS Rates PERS Pre-Pay Option 1 – Keep funds for Future •Low Investment Yield •Projected PERS rate increases on 7/1/15 and 7/1/17 are not addressed. •Questions as to under what conditions funds will be used? Option 2 – Apply funds to PERS Increases Beginning 7/1/15 •Low Investment Yield (.7%) •Hold Back $2,721,000 for future use •Earnings generated through 23/24 $1,100,000 •Dept PERS rates declining through 23/24 Option 3 – Lump Sum Payment to PERS Beginning 4/1/15 •PERS Assumed Investment Yield (7.75%) •Hold Back $2,700,000 •Earnings generated through 2033 $7,443,000 •Dept PERS rates decrease by estimated .98% of payroll Comparison of Options 1, 2 & 3 8 10 12 14 16 18 20 PERS Rates #1 PERS Pre-Pay #3 Apply Internally #2 SLGRP Transition Surplus Beginning Ending Rate Balance Earnings Contributions Balance Relief 2004 33,361,488 2,499,289 2,120,377 33,740,400 6.26% 2005 33,740,401 2,521,538 2,221,171 34,040,768 6.28% 2006 34,040,768 2,527,299 2,449,531 34,118,536 5.98% 2007 34,118,536 2,514,876 2,682,591 33,950,821 5.68% 2008 33,950,821 2,474,210 3,023,195 33,401,836 5.48% 2009 33,401,836 2,438,423 2,921,543 32,918,716 5.35% 2010 32,918,716 2,400,121 2,917,203 32,401,634 5.24% 2011 32,401,634 2,356,164 2,949,584 31,808,214 5.24% 2012 31,808,214 2,308,532 2,951,570 31,165,176 5.06% 2013 31,165,176 2,192,185 2,878,922 30,478,439 5.16% 24,232,637 27,115,687 Questions/Discussion