LEADERSHIP TEAM MEETING
January 8, 2002
Public Works, Delta Highway
PRESENT: Commissioners Anna Morrison, Bill Dwyer, Bobby Green, Peter Sorenson, (Cindy Weeldreyer was excused) Jan Clements, Chuck Forster, Jim Gangle, Ollie Snowden, Doug Harcleroad, Gary Ingram, Tony Black, Rob Rockstroh, Pat Rogers, David Suchart, Bill Van Vactor Paul White, Mike Gleason and Terry Wilson.
STAFF PRESENT: Tanya Heaton, Jeff Towery, Margaret Wilkenfeld (Dave Garnick was excused), Tony Bieda, Rick Schulz, Karen Artiaco, Peter Thurston and Recording Secretary Melissa Zimmer
1. Call to Order
Commissioner Bill Dwyer called the meeting to order.
2. Approval of Minutes:
February 6, 2001
MOTION: to approve the minutes of the February 6, 2001 meeting.
Morrison MOVED, Green SECONDED.
3. Review Discretionary General Fund Long Range Financial Forecast (FinPlan)
Tanya Heaton praised Dave Garnick for getting all of the COLA’s, merits and 18% health benefits in the FinPlan with money left over. She noted by using the FinPlan they plan and manage growth. She said for the project year of 01/02, the revenues are $48 million, the expenditures are $44 million, leaving a $4 million reserve for Lane County’s bonding rating and in case of a catastrophe. She noted that Hyundai and Sony taxes were in the plan starting in 02. She added the federal payments go through 06/07.
Heaton noted they have steep increases in 02/03 that are compensation expenses. She added they have a 2.4 state CPI for materials and services which leaves $311,000 for growth. She explained they ended up with an end-of-the year unallocated amount of $76,000. She said if the Leadership Team made no changes when they go to the Budget Committee, the allocation is $76,444, and that was only if the departments do their 2% lapse. She said they were counting on $932,000 in 02/ 03 and $907,000 in 01 and 02, for general fund lapse. She added if they don’t receive those amounts, they lose $76,000.
Heaton noted if they go forward, Lane County will be stable for the next four years and there wouldn’t be money for increases.
Van Vactor explained they were staying status quo and absorbing health benefit increases at 18%, COLA of 3.75% and a projected PERS increase. He noted they were absorbing a huge increase in personnel costs without any reductions.
Heaton stated the COLA’s and benefits for this year are $1.4 million--just in the discretionary general fund.
Sorenson stated they should be open to add packages, because they don’t know what will happen with the state cutbacks and couldn’t implement the strategic plan without people coming forward with ideas.
Gleason stated they are providing fringe benefits of 60% for entry-level positions. He declared something needed to be done about fringe benefits. He noted that Lane County had 20% higher health costs than Los Angeles County.
4. Overview of Road Fund Long Range Forecast
Snowden stated the Road Fund was in good shape through 06/07. He said Lane County would be flat for the five years for gas tax uses. He noted that Lane County had a drop off of registered vehicles. He stated the legislature developed a formula that splits three ways between ODOT, the cities and counties. He said the County gets its allocation based on the share of registered vehicles. He noted ODOT expects to see an increase in the number of alternative-fuel vehicles and that would translate to a lower gas tax..
With regard to expenses, Snowden said they assumed the same factors as the general fund with no increase in level of service, or employees. He noted that might be a wrong assumption, as they still have to account for the Endangered Species Act, plus drywell regulations that might require additional staff. He said they need to look at the implementation costs of technology. He said there was a proposal to use Title III money to convert tax maps, but that was not approved. He stated that he, Jim Gangle and Gary Ingram had met to devise ways to accomplish conversion of the tax map to an additional format. He said they could possibly fund it through the road fund, which would result in a $300,000 increase in personnel costs over several years. He suggested sending that to the TMT in the near future to see if there was interest in coming back with an add package in the budget process.
With regard to capital expenses, Snowden noted line 17 was based on their capital improvement program. He pointed out that there was approximately $8 million in projects that the Board hadn’t seen or approved. He said the funds for assisted housing roads were also included. He said in FY 01/02 they have $892,000 for expenses. He noted they had no applications for the assisted housing money. He said little of that would be spent and would be rolled to the next year.
Snowden noted the County road partnership would still have $2.5 million per year. He wanted to return to the Board to extend that for another year.
5. Review Process for Title III in Upcoming Budget
Terry Smith, Analyst, explained that the Title III funds primarily affect the Sheriff’s Office, Department of Youth Services, and Public Works on preparation of Title III application items for the FY 03 budget. He noted the Board needed to determine the split that the statute imposes on the federal funds between Title II and Title III funds. He said the Board instructed the legislative committee to prepare recommendations for the Board. He explained the Title III budget allocations would be part of the regular budget process, the funds would be treated in a unique category and the projects that had been approved would be brought to the Budget Committee. He noted if they took the items that were approved in FY 02 and ran them for a full year (inflating at 3%) then they would have to spend $350,000 more than if the Board would make the same elections about Title II and Title III as last year (50/50 split). He said if there is a split, there would be about $4.5 million. He said they would underexpend this by $200,000. He noted the way the statute works, the revenue the County gets grows from an inflationary kicker of half the rate of the CPI rule. He added whatever problem they had this year would continue for the next four to five years and they would be close to the limit of what the program would support. He said the Board could either approve cuts in the programs that were approved, or put more money into Title III funds.
Sorenson asked if they should raise Title III funding if Title II money wasn’t being used and there was a bigger demand for Title III.
Smith responded the County has greater use for Title III funding. He believed they limited out everything they could do legitimately in the general fund budget with Title III funds. He explained there were things they could do with Title III funds that are currently being funded by general fund, but that would be a risk management decision. He stated there wasn’t more they could do.
Morrison stated it was imperative that the Board try to work with Title II monies. She said that would be the only way to free up Title III funds.
Smith said his recommendation to the legislative committee would be that Title II and Title III funds remain a Board decision, not a budget committee one.
Green asked Smith what other counties were doing regarding these funds.
Smith replied he had seen what other counties were doing, but Lane County had the Forest Work Camp and other counties were interested in that. He noted that two of the County’s most significant programs (Forest Work Camp, Department of Youth Services Youth Crew) are heavily dependent upon Title II funds. If those don’t get approved by the RAC, they would have a hard time keeping those operations going.
Smith noted that Lane County and other agencies don’t have an evacuation plan in place and if one was developed, they could justify conditional Title III expenditures. He added the radio network was estimated to be $6 million plus and there is no room in Title III to fund any of that.
Smith explained there was variation between departments about how indirect costs were prepared. He said there is redevelopment of Lane County’s indirect cost plan and when it is complete, the Sheriff’s Office, Department of Youth Services and Public Works would all three have departmental indirect expenses reflected in the County’s indirect cost plan. Those expenses would be allocated to indirect expenses in Title III items. He suggested that everyone use the same method for calculating indirect expenses. He recommended taking the County’s indirect cost plan and allocating it based on FTE, coming up with the number of Title III projects. He added that it might indicate the Title III expenses might go up because of reallocation of indirect expenses.
Smith said if there was interest at a policy level for Title III funds for after school education, the Board would want to develop a concept and then look for someone to provide that, as opposed to having agencies writing a proposal. He said there needed to be a policy discussion about what they wanted to accomplish.
6. Video Lottery Process for County Departments
Peter Thurston, explained this process began last year. He said the citizen committee recommended what is in Lane Manual, Chapter 4. He noted it was put into the manual by the Board and the Board then appointed a standing committee. He said there were three meetings where community members were invited to talk on recommendations for the use of the funds. He noted the committee will meet this week and they would be looking at answering questions about dealing with the general allocation and how departments may propose this and how they get screened. He said they spent over $900,000 this year from video lottery funds in a variety of ways. He noted the annual estimated revenue stream would be around $800,000. He added for this fiscal year they had to tap the reserve as they had overspent. He noted there was a strategic reserve of about $700,000.
Thurston stated that all of the definitions of what economic development is (as is defined in Lane Manual) came from the citizen review process. He added in the policy it also shared the resources 50/50 on an annual basis between the general uses by County department and strategic uses. He said the committee’s discussions to date had been that they would like to review proposals from the general fund and from the strategic funds before they are recommended for awards.
Van Vactor noted that Garnick put $400,000 in the FinPlan to help backfill the loss of video lottery money.
Dwyer said they had to ask the departments if was there are other things they could legitimately fit into the criteria for the funds.
Van Vactor said in order to implement this proposal, the departments have to build a budget. He said they have to ask the departments to take out video lottery funding and put them back in as add package. He said the budget committee would have full discretion to restore that under the 50% allocation, or the money in the Fin programs or to delete the program.
7. Update on State Revenues
Bieda passed out a sheet on the $830 million in state general fund budget cuts. He said it looked like worst case scenario in what type of expenditure rollbacks would be contemplated for the rest of the state biennium. He said the Governor would come back the week of January 14 with a revised rebalanced plan that restores some cuts through a combination of short and long-term revenue proposals. He noted the process to resolve this is with the governor meeting with 14 members of the legislature. Bieda said if Kitzhaber can reach agreement with the group there would be a call for a special session.
Bieda said the governor has tried to position this without more taxes, but looking at the structure of the revenue system in Oregon and revisiting it. He said things would be worse in the next biennium unless it is worked out now.
Pat Rogers stated it would affect their dedicated funding stream, not flexible money, including the Relief Nursery, Birth to Three and First Steps with Healthy Start. She noted the cuts were $5 million statewide.
Lisa Smith said the Department of Youth Services, was looking at a 15-bed loss.
8. Internal Cost Review:
Information Services Direct Charges
Ingram stated the budget remains 58% general fund, and the rest is picked up by other funds. He said they had an increase of almost 8% in personnel services costs and the only two line items in personnel services that went up was operating salaries and benefits, covering COLA’s, merits and benefit increases. He noted that was about $300,000 of an increase over staff. He said he added one FTE this year due to a personnel situation. He said personnel services went up 7.89%. He noted purchased insurance went up about $2,500 and indirect went up $36,000. He said those were the only two increases. They kept the materials and services to 1.16%, when it is generally at a 3% growth rate.
With regard to allocations, Ingram stated the drivers they had used for the last five years were not working well on spending the resources. He said they had seen some departments going up, and others will go down, and in general, they offset each other. He said he was meeting with the IS information group and proposing allocating the budget based on the actuals they had used for the past three years. He said if they can’t work things out, they should make adjustments on departments that are going up that shouldn’t be going up. He said that last year the Sheriff’s Department spent $70,000 more than estimated in the budget. He said they would be going up this year with Assessment and Taxation going down, as well as County Administration and Management Services, but the District Attorney’s budget would be going up.
Rick Schulz suggested that every department should show what they are really doing. He noted what shows now is what is allocated, not what really is incurred. He noted any decrease went through general expense. He added for all non-general fund departments, they spread it out as if it was an increase. He noted this year there was a one-year retro adjustment going into general expense.
Schulz stated costs were being hidden and if they really wanted know what it costs to provide Public Safety, Assessment and Taxation, and the District Attorney’s office, the indirect and IS charges have to be put in.
Clements wanted a clearer sense of what the service actually costs. He asked if there was a better way of evaluating and possibly contracting out.
Ingram responded it was hard to monitor because they have to work out a quarterly report or something that tells them that. He noted they look at the cost allocation and they want to simplify it. He said they have to see how they had allocated things in the past few years. He said the trend across the country is cost models and charge back systems.
Clements requested that the IS and RIS directors have an evaluation of what the City of Eugene is doing. He sees them setting themselves up to be independent of the operation and it would have an effect on the rest of the region. He wanted a true evaluation on where they are going and what the ramifications would be to the County.
Ingram noted that 50% of the RIS budget is with the City of Eugene.
David Suchart noted the indirect costs were completed and distributed to departments. He noted each department was given a worksheet to question any costs they found or allocations found. He explained that Erin Payton, Maximus, was hired to meet with various people in different departments in putting together the report. He said any reductions that would occur, (unless they did immediate allocations) would not show up as a reduction in the expenses of the department which pay to operate. He said if they want to lower the depreciation amount, it would be a policy decision.
Erin Payton suggested blending all of the buildings together for a buildings use charge and then dividing that among all departments that occupy space in all of the buildings. She said they would average out the building use allocation so those departments that have a relatively small building allocation might grow and those with new buildings would drop.
Wilson stated they were using depreciation funding to do the repairs of the buildings as needed. She said they were managing the building on a generic basis.
Suchart stated they were trying to make up a deficit of 25 years. He said he should be taking all of the money that would be going to the Juvenile Justice Center and putting it away. He said instead of a thirty-year deficit, they should go with a 50-year deficit.
Clements was concerned about the serious state reductions, as they are looking for money to carry on the existing operations.
Suchart noted a portion of the mental health facilities was used for bond indebtedness so they didn’t have to go into debt as much. He said they were not in a position to take on any major projects.
Rockstroh liked the idea of pooling funds between departments.
Van Vactor said that setting up funds is where they need to develop financial policies. He recommended that either Policies and Procedures or Finance and Audit work on the development of a policy. He didn’t think they could afford it this year. He asked Payton if Lane County’s indirect plan produced accurate results.
Payton replied it did.
Sorenson asked about the possibility of charging rent for each department.
Payton said they could consider the building use allocation and cost plan as equivalent to a rental charge so the departments that don’t have office space shouldn’t be allocated the building charge or rental fee. She said the departments with small spaces should get a small charge and the departments in new buildings would get a larger rent. She said it was describing the building use allocation as a rental fee.
Morrison suggested this should go to either Finance and Audit or Facilities, but not to Policy and Procedures, to fine-tune it.
Risk Management Charges and Benefit Rates
Karen Artiaco, stated they put benefit increases of 18% into the budget based on the increases from last year. She said the increases in benefit costs affects the whole country, not just Lane County. She said there is an aging population with increasing expenditures. She noted that 20 cents out of every dollar that Lane County pays in health insurance premiums goes on prescription drugs.
Artiaco stated within the past year they tried to institute changes in the health plan. She said that LCPOA, Admin Pro 626 and Prosecuting Attorneys agreed to increased deductibles and out of pocket expenses. She noted that AFSCME did not go along with the increased deductibles. She said AFSCME has about 600 employees and that is about 40% of the covered employees they won’t see cost savings. She noted there would be double digit increases for health care for at least the next four or five years. She added that other increases have to do with PERS. She noted that in 1999, Lane County had an unfunded liability of over $40 million, but with the changes in the market over the last year, there was an actuarial study for the year 2000. She noted that in one year, Lane County’s unfunded liability went from $40 million to $66 million, or a 60% increase. She said as it stands now, if they had to reflect that in the current cost, the PERS cost would go up 1/2 percent. She said that Lane County would be paying $6 million more in the next fiscal year for benefits than in Fiscal 99.
With regard to workers compensation, Artiaco explained this was to pay the claims and manage the workers comp program for the County. She said that Lane County is self-insured. She said they were averaging under $500,000 per year and at any given time, they were managing about 100 open workers compensation claims. She said they find they have to take issues to appeal as the population grows older. She said that she also handles liability claims that have plus direct expenses for the self-insured program. She noted in liability claims over the last few years, they are paying about $150,000 per year and the cost of managing the program. She added the bulk of claims are not from new employees, but due to the aging work force.
Wilson was impressed with how small the workers compensation claims are overall. She noted with the medical costs going up, it would also increase the workers compensation costs.
Dale Wendt explained the County Fleet Department has 267 vehicles and they lease them to every department as well as external non-county agencies. He said they have 205 pieces of heavy equipment, rented to engineering, road maintenance and parks. He said their annual projected revenues from the vehicle fleet is about $950,000 and their annual revenue from the heavy equipment is $3 million. He noted that fleet does work for other agencies. He said they have investment earnings off of equipment replacement fund. He said their total other revenues are around $1.2 million.
Dwyer asked how the sales of the used vehicles went.
Wendt noted they get 236% of the asking price and advertising on the Internet was positive. He said they had 13,000 hits. He said the savings was about $80,000.
9. Discussion/Budget Development Parameters
To be discussed at the next meeting.
10. Recommendation Motion for Budget Parameters
To be discussed at the next meeting.
11. Budget Schedule
To be discussed at the next meeting.
Van Vactor stated the agenda team would set another date for the next Leadership Team meeting.
Meeting adjourned at 12:00p.m.