December 2, 2008

9:00 a.m.

Harris Hall Main Floor

APPROVED 4/15/2009


Chair David Crowell presided with Budget Committee members Scott Bartlett, Bill Fleenor, Bobby Green, Sr., Denis Hijmans, Alice Kaseberg, Tony McCown, Peter Sorenson and Faye Stewart were present. Bill Dwyer was excused. County Administrator Jeff Spartz, Budget/Financial Planning Manager Dave Garnick and Recording Secretary Melissa Zimmer were also present.


I. Call Meeting to Order


Chair David Crowell called the meeting to order.


II. Committee Business


Jennifer Inman, Budget Analyst, reviewed the materials in the Budget Committee binders.


III. Governor's 2009-2011 Biennial Budget and Potential Impacts on Lane County


Alex Cuyler, Intergovernmental Relations Manager, reported that he just received the governor’s budget.  He explained that the budget is analyzed by the legislature and the co-chairs will release their proposed budget early in the legislative session.  He indicated that budget bills will be produced and voted on by the Ways and Means Committee and they will have the legislatively approved budget by the end of the session.


Cuyler noted in the governor’s proposed budget there are a number of areas where the governor was relying on the legislature to act.  Cuyler indicated that there will be several tax increases the governor is proposing including a 60 cent tax increase on a pack of cigarettes.  Cuyler recalled that the governor in the last legislative session tried to impose an 80 cent per pack tax on cigarettes to fund Healthy Kids in the state of Oregon.  He indicated that measure was referred to the voters and was voted down. 


Cuyler indicated that the governor expected about $1 billion more in revenue for this biennium and ended up with $1.2 billion less for this biennium than he had anticipated.  He said the governor has had to take cuts in the 2007/2009 general fund appropriations across the board by 1.2 percent.  He added that it equates into about a five percent cut in expenditures during this past six months. Cuyler thought there could be short term implications for counties.  He stated the discretionary budget mimics the County’s budget as there are services the public relies on in public health and public safety.  He added that this budget could go down as much as $1 billion over the next biennium depending on revenues.  He noted that $6.4 billion for K-12 education is a slight proposed increase.  He heard it was actually $49 million less than the project need for K-12.  He indicated that the budget tries to pay attention to higher education and proposes a $1 billion increase in capital expenditures for facilities.  He added the budget fully funds the Healthy Kids and Oregon Health Plan, but in a reduced scope, through expansion of provider taxes.  He noted that a provider tax is one of the tax proposals the governor is making paid by hospitals and insurance companies.  He said they are estimated to raise about $700 million in additional revenue.  He thought this would be one of the major fights during the legislative season with the hospitals and the insurance lobby coming out in opposition.  He indicated that the Emergency Board was asked to come up with additional funds because cigarette taxes were lower than projected.


Cuyler noted this budget reduces care for seniors above certain levels and mental health and addiction services delivered at the community level.  He noted that this budget has a new proposal for transportation funding.  He recalled that the governor released his Jobs and Transportation Act, and it proposes to raise $1 billion per biennium through an increased fuel tax, an increase in registration, title fees and title fees that are new to the state. Cuyler added that this budget proposes another round of transportation infrastructure funding with Connect Oregon 3 being proposed in the budget.  Cuyler indicated that it raises the amount to $150 million funded by lottery backed bonds.


Cuyler reported that the governor is placing a high focus on renewable energy.  He said the governor is proposing the creation of a renewable energy fund for development of community scaled demonstration projects.  He added that the governor’s budget maintains state funding for county juvenile departments.  He indicated that it maintains the funding currently in place.  He noted there is full funding for 24/7 coverage from Oregon State Police patrol.  He indicated that there was enough funding to begin the state’s next prison in Junction City, beginning in July 2009.  He said there are implications from Ballot Measure 57.  He indicated that it will impact the number of people that Oregon incarcerates over the next biennium.  He added there would be an increase in health care cost to the prison population and they tend to be a more expensive population in terms of health care costs than the general public.  He recalled within Measure 57 funding there are proposals for local funding to ensure the repeat property offenders leaving prison receive community based addiction treatment, intensive supervision and jail sanctions for non-compliance.  He added it would enable counties to enhance drug court programs.


Cuyler noted that the funding for salary schedules for state employees assumes no cost of living increases in the next biennium.  He added the budget assumes a five percent per year increase in health care cost for state employees and the governor will ask the legislature to re-examine salary increases for elected officials.  He noted $9.8 million was proposed in the governor’s budget.


With regard to revenue, Cuyler said there is a proposal to increase the corporate minimum tax.  He indicated that the tax has not been raised since the 1930’s and this tax has been continually debated.  He noted the federal government is asking the state for a return to a more responsible management of federal forestlands in Oregon to allow growing jobs in alternative energy development such as biomass. 


Cuyler reported that the prison population was 13,557 on July 1, 2008, a growth of .4 percent during fiscal year 2008.  He stated the population is expected to grow in the next year by 324 beds or 2.4 percent.  He added that over the 2009/2011 biennium; the projected growth of the population will be 730 inmates.


Cuyler reported that there is a total of $13.9 billion proposed in Human Services.  He indicated that some of the increase will come from a provider tax and an increase in the tobacco tax.  He noted for the Oregon Commission of Children and Families, there is a 6.4 percent decrease from the 2007/2009 budget.  He indicated the reduction is a result of forecasted revenue shortfalls and it has been shared equally across all programs in the administration. 


Cuyler noted there are cuts in the Public Health Division.  He said there will be reductions in medical assistance programs and in mental health.  He added that dental services will be eliminated for everyone other than pregnant women.  He noted that outpatient mental health services for non-Medicaid adults will be eliminated and in-patient psychiatric care will also be reduced.  He noted for seniors with the Department of Health Services there will be an elimination of in-home care services to clients receiving less than 80 hours of service per month.  He indicated that most of the services are implemented by LCOG.


With regard to public safety, Cuyler indicated that it has been impacted by Ballot Measure 57.  He said a total of $3.55 billion is an increase in the legislatively approved budget but the governor noted the consequences of the difficult choices that must be made by implementing the voters’ choices regarding sentencing for criminal offenders.  He noted the Criminal Justice Commission dealt with forfeitures and they will see an 88 percent increase on revenue through the sale of forfeited properties and other items involved in criminal cases.  He reported that the Oregon Youth Authority’s budget is increased for closed custody beds and it holds the counties’ safeguard payments to county juvenile partners. He said it will be maintaining the 950 closed custody beds throughout the state equal to current capacity, but does not fund all of the 1,150 beds forecasted in the October 2008 Department of Administrative Services’ economic analysis forecast.


Cuyler commented that the governor is trying to maintain the current funding and his priorities are with children and green infrastructure development.  Cuyler indicated the governor was dealing with the downturn in federal pass through dollars and the governor has been forced to take additional dollars from the general fund.  He noted that funding for LRAPA is reduced in the proposed budget and there are cuts for Economic Development.


Rob Rockstroh, Health and Human Services, reported that for Public Health there will be a $600,000 cut statewide. He noted there is a $640 million cut for the Developmentally Disabled.  He indicated that 24,000 patients will be pushed out of long term care.  He added there will be an additional $300,000 in managed care cuts.  He noted with regard to Mental Health, 90 percent of outpatient services are scheduled to be cut.  He indicated that figure was $28 million biannually involving 5,860 patients.  He reported that there will be a cut of $22 million for family planning.  He added communicable disease work in the state lab is also being cut.  He commented with the cuts, there will be more indigent people who no longer will have access to care, but more people will have Oregon Health Plan coverage.



Lane County Property Tax "Real Market Value vs. Assessed Value"


Anette Spickard, Assessment and Taxation, reported that as of January 1, 2008, the total value of all property in Lane County (except for the 100 percent exempt accounts) was $44.3 billion.  She noted that under Measure 50 rules only $24.5 billion is taxable.  She noted there are over 170,000 property tax accounts and 15,000 more that are exempt from the cities, counties and the state.  She added 115,000 are residential and 17,000 are in farm forest special assessment programs.  She noted that Lane County has 14,000 manufactured homes, the most in the state.  She indicated there was $379 million in property taxes due for 2008.  She added that Lane County gets 9 cents on the dollar.  She said that totaled $34 million dollars for this year.  She noted that $31 million is for the general fund and $3 million is to pay the bonded debt for the Juvenile Justice Center.


Spickard explained that 2007 was the real estate market that drove this year’s tax bills.  She added that during 2007 they added $1 billion of new market value to the County as a result of new construction projects.  She noted under Measure 50 rules they are allowed to add new taxable value for subdivisions and partitions and those totaled $387 million in new market value.  She indicated that the largest construction was in Junction City and Creswell.  She reported that Eugene had new construction of $384 million but it is down significantly from previous years’ activities.  She added that Springfield was up due to the River Bend Hospital construction.  She reported the total real market value increased 4.74 percent from the previous year, lower than what they saw in 2004, 2005 and 2006.  She noted the activity that occurred in 2007 only resulted in a taxable value increase of 3.27 percent.  She said the amount of general fund revenue for Lane County grew by $1.1 million from the previous year.


Spickard reported that her department has completely caught up with all of the work of the subdivisions and new property development.  She recalled it was a focus of their department several years ago where they were behind two to three years in getting new tax lots added to the role.  She indicated that all of the properties are now on the role and continuing at the three percent increase.


With regard to tax collections, Spickard reported that they have already processed all of the timely payments they received through November 17, resulting in $332 million.  She stated that represents 88 percent of the tax that has already been collected.  She added that over 80 percent of all accounts paid in full and took the three percent discount and only 10 percent paid less than the minimum amount due.  She noted that more than half of their accounts are paid through a lender or tax service company and those businesses continue to pay the property taxes to protect the assets from tax foreclosure even if the individual property owner is behind on their mortgage payments.  She stated that the primary source of tax revenue in the County comes from residential property owners.  She added that commercial properties represent 12 percent and they pay more than 12 percent of the tax.  She noted that most residential properties are paying tax on 58 to 60 percent of their real market value so any fluctuation in the real estate market for residential would have little impact on tax revenue.


Spickard reported that based on what is happening with some other states, values are going back to the pre bubble levels. She said that Oregon tends to lag the market nationwide and market corrections happen later.  She said they would have to see almost a 40 percent drop between January 1, 2008 and January 1, 2012 to have an impact.  She said if they were to have something happen similar to what happened to the recession of the 80’s, it wouldn’t be enough to bring the entire value of the County below the Measure 50 assessed value impacting tax revenues.


Spickard explained that with the 2008 market, they are seeing more residential sales that are short sales and bank sales.  She noted that the sales volume has dropped and there are fewer recordings with Deeds and Records.  She said they have seen a decrease in the number of new building permits compared to prior years.  She said of those taken out, construction has not begun and many permits are for remodels instead of new construction.  She noted that commercial multi-family construction projects have been continuing.  She indicated that they have seen redevelopment up Coburg Road, the Oakway area, West 11th and the Gateway area.  She noted that any effects after January 1, 2008 will not show up on the tax statements until October 2009.   She said they have received approximately 2,000 sales that fell outside their normal range, meaning they are plus or minus ten percent different than what they have the house on the tax roles.  She explained that a short sale would not be considered a good sale for the purpose of changing everyone’s house values.


With regard to Measure 50, Spickard indicated that it requires that they continue to increase the maximum assessed value on all properties by three percent per year and compare it to the real market value.  She reported that most people still have a real market value significantly higher than their assessed value so the three percent adjustment will continue.  She said that with the slow down in the real estate market, Measure 50 is providing stability to local governments because they can still receive the three percent growth in the taxable value of the properties. 


Spickard reported that the total value of state industrial accounts located in Lane County and appraised by the state as of October 2007, was $1.58 billion.  She said between October 2007 and June 30, 2008, as a result of appeals or agreement to reduce values to avoid appeals, the Courts ended up reducing the value of the accounts to $1.42 billion.  She added the newest values for the October 2008 tax role have the accounts at $1.38 billion.  She noted over one year the properties have lost $200 million in value.  She indicated for the County there is about $254,000 in lost revenue in the one year correction.  She commented that this economy is affecting the manufacturing sector and they may see more reductions in the coming year.


Spickard summarized that they are seeing less new construction activity, lower industrial values, urban renewal continues to affect the tax levy and $348,000 was diverted from the operating levy to support the seven urban renewal districts that currently exist.  She said there is another one coming from the City of Lowell.  She said it looks like Oregon’s economy will be slow or in a recession through 2009/2010 and they are being affected by the credit crunch with the real estate market.  She noted the population growth and income levels in Lane County are below state averages and they need people coming in to buy things.  She added that the large scale construction projects are happening for public entities like EWEB or the basketball arena and River Bend.  She indicated these projects were employing people but not generating property tax dollars.


Spickard wasn’t sure how the elections will affect property taxes.  She said the state budget doesn’t look good.  She noted the state has less capital gains revenue coming in.  She recommended that for projecting property tax revenues, a best case scenario for the next few years is three percent.



d. Public Comment


Carol Berg Caldwell, Eugene, asked if the Steve Schriver survey had been provided to the Budget Committee.  She said it was a survey of 19 chairs and vice chairs of neighborhood associations.  She said in the past the County has used fear, hype and marketing to try to pass public safety measures.  She noted the responses from Schriver were that they felt safe in their neighborhoods.  She added in the past two weeks they have been inundated about criminals released on the streets and making Lane County less safe.  She asked if they were going to ask for a real analysis from the Sheriff’s Office on the types of crimes people are in the jail for, or whether to fund more jails and Sheriff or to give more money for social services that do so much to reduce crime.


Crowell thought asking the Sheriff about the crimes and people released would be good information for the committee to have.


Fleenor acknowledged that the Steve Schriver survey was not scientifically valid.  He said it was a pole of 19 community leaders and there was no sampling or control group.  He commented that it was more anecdotal than scientific.


Deb Frisch, Eugene, noted an often cited statistic is that Oregon ranks 50 in the nation on per capita law enforcement and Lane County is the lowest in Oregon.  She said the fact is used by the District Attorney and Sheriff to justify the transfer of limited Lane County tax money from Human Services to prosecution and incarceration.  She commented that if there was a comparable measure of funding for social services, Oregon would be at the bottom of that list and Lane County would be at the bottom of the state.  She said there is a lack of diversity on the Budget Committee.


There being no further business, Chair Crowell adjourned the meeting at 10:50 a.m.



Melissa Zimmer

Recording Secretary