Board of Supervisors Budget Work Session   3/2/2017

is around capital program and CIP debt management.

And I guess we should do a mic check.

Great to have you.

And with that, our first topic is the Capital Improvement Program.

So it looks like, okay, Trevor's gonna take us forward, sounds good.

I think it helps us kind of communicate through the process of the request and where we are as far as what's in the recommendation.

There are things like those plans here.

What number?

Could you help me know?

Eleven.

Yeah.

There's no project management fees in that because it's a project that is being managed by Rivanna So really it just reflects that that was in last year's request That it's happening, correct So another example is the public safety training facility That has no yeah.

So that was requested in 17.

So we zeroed that out.

Yes ma'am.

So I think this really focuses on what happened in the fiscal year 18 changes.

There's something that I think you mentioned, Bill had mentioned earlier that you're doing differently on this project, that you've saved money, but can you refresh my memory on it?

That's not reflected in this request and current model.

Is that the reason why the sum went from 77

I'm going to look towards our management analyst to answer that question.

Give that girl a chair.

I'm assuming that that would be the explanation, but I just want to confirm that.

Lindsay, would you mind just stepping in and answering those two questions?

Hi, I'm Lindsay Harris, budget analyst for CIP and debt.

The borrowed proceeds transfer has reflected a change that we are borrowing the GO bond earlier than anticipated.

I think that same question reflects the conservationist as well.

Okay.

Thank you.

The interest rate.

Sorry.

That's exactly.

When you say that, you know, you're dangling candy in front of us.

What number?

It is number 63.

And we'll want to have an agreement with the senior center to make sure that those funds are used for qualifying purposes.

$500,000.

Excuse me, $500,000 a year over the four-year period.

So this is showing the total encumbrance here.

And that funding source is tied to tourism.

We're in 18 right now, right?

We're talking about 18 now.

Because I couldn't remember.

There's $250,000 planned for an appropriation, I believe coming in April, for year-end monies for ACE in 2017.

Ann's question is, in the original, not original, in our adopted FY17 budget, we didn't allocate any money for ACE.

Yeah, you can count on that.

I'm looking for it.

I'm getting a nod from the crowd.

This was very helpful.

It may be good to share.

We all got it, I think.

and maybe in the original.

Because it is good to know that many counties automatically fund their seniors operationally right out of their budget.

One other project to note.

Yeah, exactly.

So with the referendum and with the additional funding of this year, that percentage has flipped for the first time in many years probably.

It doesn't have anything new.

It does reflect that we are, you know, we are still emphasizing our maintenance replacement program, but we are, you know, finally doing some capacity, which is... That's important to point out that you're not actually decreasing your efforts around that.

You're maintaining the same...

But I'll be transitioning the mouse to Laurie.

All right.

Thank you, Trevor.

At the end of your five-year period, just to make sure we have some contingencies built into your plan and some reserves, we'd like to see two million in the end of that fifth year, and it's a chart, a model I'm gonna show you here in a minute that we hit that this year as well.

Whoops, next, go that way.

So that's good news.

between fiscal year 17 where you see it's a 0.6 percent fiscal year 18 you're projecting 0.3 percent that's a 50 percent reduction and yet we're not incurring more debt this year because the debt is actually yes we are because you're factoring thank you I just answered my question yeah there it is okay

So this kind of progress is really, really important for us to continue to keep an eye on.

I know a lot of communities get in trouble because they build and build and then the maintenance costs go up and up as a percentage of their budget and can't usually mow down a park or a museum or a firehouse.

So the extent of our maintenance program has remained pretty steady at the time.

Aside from the decline aspect of it, if we put more in maintenance, it keeps us from building.

Our new projects went to zero for three years because we were spending every bit of cash we had in keeping up our air conditioners and things like that, which was the right thing to do, but it was painful.

So you see that we did, that's one thing we strive for when we put the model together.

Why do we have the 1.3 increase in 2019-20?

So now that it's all about, it's connected to that but it's also about the whole model itself and making sure that the model balances through the five years and that's why we had to move it out forward the next year and we couldn't get the model to balance with all the other projects.

So it's because other things are coming in really and displacing it essentially so if we weren't,

But in doing so, we had to use one-time funds that came from fiscal year 16 to, rather than put those in capital, we used those to pay that early debt service.

Okay.

We're actually, there's more like one to cut the whole program.

Yeah, totally.

Each year you give us a number that you're kind of expecting an increase in revenue.

So that's why we deferred it one year.

I know you're estimating our tax rate.

We actually do.

When you said you're carrying them forward, you're assuming they're not going down, but how much are you guessing?

So we're assuming that the assessments will continue to increase.

It came out, I guess it was last year and that was a real driver in why we ended up in a concerning position was because we base everything on that assumption.

It's a combination of both.

And I think we had anticipated a 2.4 increase in assessments and they came in at like 1.8 or 1.6 or something like that.

The main thing to think about this in my opinion and thinking about it your CIP your five-year plan it's a plan and we do it every year so this model look a little different every year as we get data that's more precise and get closer and what you're gonna do you're gonna appropriate the capital plan which is just year one so when you go to appropriations and fiscal year 18 appropriations it's it's the appropriation of the first year but we always have this five-year model

Should we put a penny in in fiscal year 18 dedicated to the CIP to begin to build towards fiscal year 20 as contingency planning?

So it's going and coming and going and coming and so I think that's why we thought it was okay on the CIP but others can weigh in.

I think I missed the first part of what you said.

But there are other inputs that come along from the two cents at the top.

Right, will happen in two years.

You want to titrate when you borrow so that you don't have a whole lot of money sitting in a bucket costing us, not earning much interest and costing us interest in order to plan ahead.

No.

So we wouldn't depend on one time for debt.

Where is that transfer?

So it shows up in its fund balance as it hits fiscal year 18.

It's in the fund balance as you get started.

That's the purpose of a model like this is to have those kind of conversations because you've got to think through all those things.

But I just wanted to raise the question.

And that's right.

Would we be in a better position if we decided as a board to add a penny dedicated to the CIP this year?

That might enable you to borrow another $17 million or something.

So from that standpoint it might be a card worth exploring knowing what we may be facing in the future as educational capital needs.

Adding a penny sooner in addition to the pennies that are already reflected on there will give you the capacity that I think that you're referring to as you contemplate what other projects and or what other conditions might then be impacting the county in the future.

But I want to mention that we are showing you a history on that as well that you'd asked.

and ironically I would be in the position of advocating the tax increase when I voted against the budget last year with a tax increase but I'm looking at this really from a fiscal management standpoint to best position the county to deal with all of the uncertainties that I think are going to get larger with time rather than smaller.

So there's that balance in there that makes it hard.

belittling that, but at the same time, I think we have quite a few people out there that got pretty well knocked this year.

The catching up has been.

The catching up has been tough.

March 7th.

Several of us agree with you at this point.

All right, so I'm gonna move on, if that's all right.

Thank you.

And it also has your memorization

I apologize for the noise.

It was very successful, and I don't know if Bill wants

I just think, as she said, Betty and her team did just a great job in getting the word out there and we had some good bidders.

I can't remember, it might have been nine bidders.

Yeah, so that, again, an indication of how valuable these bonds were.

Who won the bidding?

I believe it was Citibank.

And Merrill Lynch.

And Merrill Lynch on the least revenue.

Sure, that makes sense.

She'll do that, yeah.

Probably.

You can see some of the impacts of that, yes.

So, the nest egg generated by the savings will help to offset the early payment on the loan because we budgeted, we went out earlier than we were originally planning.

No.

No?

But I think reserving those funds would be the prudent thing to do.

No, he's saying the opposite.

They're going to go up.

They're not putting it off.

It's going to be dedicated still to the project.

I was thinking you were saying to reserve that money aside so that we're not going to do the project now.

and you can see the impact over the life of the loans is almost 9.4 million dollars, so a good move.

Oh good, okay.

We found another source for that.

That's fine.

And then Trevor's slide.

So the recommendation here is to restrict or prioritize the use of these interest savings for capital costs that we'll be seeing here later this spring.

We're going to have potentially cost-push inflation not only by labor but also commodity cost, especially if there's an import duty imposed and commodities coming in overseas.

We know for sure the impact of labor right now.

And we have deportation that also has an effect on available labor supply.

It's a plead.

But in any event, we really want to bring that to you so that we have a process in place so that in May you could pull the trigger.

I just don't want our bidders to just figure that we're going to cover whatever they give us.

I'm not sure that you'd want to signal that.

So we just have to be, I'm just warning us.

And we will be prepared to say, well, here are some options how you might cover the additional cost, if that should be the case.

So.

the whole project that we're doing with the schools and the upgrades and all that we want to have that be right.

I mean, there might be, if you were very draconian about it, you might take off the gym, for example.

It would just be absurd.

major scope changes that can be available to us.

I mean it just

In the late 80s, Brodess Wood opened with four trailers because the renovation shrank.

We don't have to belabor it, but you get the point.

All agreed to look at that.

I urge us to be bold and be prepared to go where we don't really all want to go but face the reality under the needs of the CIP that if we don't do that we're really jeopardizing other key projects that we prioritize.

Anyway, okay.

So it's basically just the one year slice of your five year plan there.

There's projects that were in the bond referendum.

Yeah, a lot of it is that.

I just want to make sure that's clarified.

get their appropriation authority ahead of time so they can get moving.

They want some of those construction projects to start as soon as the last child walks out the door, and that makes perfect sense.

But it just causes us to have some administrative things we have to do together.

Just to clarify that that's where we're accelerating.

We have it now, because what happened was we just went out and sold the bonds.

That's right.

We won't have to go through that cycle.

So if you appropriate in April, the first of April, $15 million for that project, and then the bids come in at the end of April, and it's like, oh, it's not.

It's more.

What do you do?

These are the things that we would find to be acceptable in terms of solutions, if it meant scope changes or whatever it might mean.

With the timing and that the school system is, yeah.

That sounds good.

So we appreciate you all coming to the meeting.

Yeah, we're going to go there next.

He can talk with you about this possibility.

So we'll look at that, and when we come back to the board in June or July with the legislative priorities, we'll have all that laid out.

That way.

Yes.

We're both asking for it.

even thinking about this April we're compressing a lot of bids into one month and the idea is if

So it does result in higher costs.

Without the other people who weren't ready to do it yet.

By the time, if you're bidding in late April, sometime the work has already filled up and the go-to companies that we normally get bids from may not even bid.

Are you talking to them already and alert them that this is coming?

I know he's shooting emails out and talking to many of the contractors, so they're hopefully standing by.

Having more lead time would be really valuable for the county, absolutely.

So on recommendation three on the enabling legislation and moving these appropriations in April and May, is the board generally okay with that and then we'll proceed concerns on that?

So you're in charge of that, making sure that doesn't happen.

Well, at least you get an endangered species.

And if there's anything else you'd like to have us plan for, let us know.

I think in that oversight committee discussion, continuing to fine tune that strange and wonderful line between maintenance and new is always a challenge every year, and I know you've made progress, but that would be good.

and then you see the rest of the story there.

Just for discussion purposes, I don't have a position on this, but Rick's argument about preparing for a possible cliff in the future given uncertain conditions, is that something y'all can model as an alternative for us to just know how it plays out in that spreadsheet that you have?

So we would model changes in the revenue side?

I'm not talking about.

Right, correct.

It's easy to talk about it.

Kind of like scenario planning.

I figured they would follow up with that.

Any other scenario that you're interested in besides Penny in FY18?

Yeah.

Yeah.

You mean for the future or for this year?

We'll be bringing back some scenarios.

We've done it I think with oversight where she actually did some scenarios as you're there with the model live.

Like what happens if the fiscal cliff is even worse?

Yeah, okay.

Manipulating projects in and out is a little harder.

I suspect none, but is there any interest in looking what would happen if we took down a penny this year rather than going up a penny?

this year or in the future?

I think given those.

On the likelihood of doing it.

In the past I always have said that.

I wouldn't be for that particularly.

I mean, it'd be kind of interesting, but it seems so unlikely that we would do it that it would just... Well, we may hear in the next weeks or so of town halls information from people, but I mean, we certainly will discuss it at the end of March, even if we haven't... Well, it's okay.

Happy to do that if you're interested in it.

We can see what we get from town halls, but I was, you know...

That's what we did.

Kind of the opposite of what Rick's saying is instead of building up our reserves.

That's why I ask if anybody has any interest in it.

That's kind of interesting.

I wouldn't think anybody would have it, but I'm asking the question.

the budget then operate and that allows us to say well do we take that penny keep the penny and keep the tax rate the same but take that penny and convert it over to CIP I think that's a great idea I think it's a good exercise

So I'm just asking the question of what would a penny do to our budget and seeing if they do.

Are you asking staff to recommend a 1.7 million cut to the budget?

I'm asking to see if the board has any interest in seeing what that would look like.

I understand Liz is asking what it would look like if we did that, how staff would deal with that if the board made a recommendation of taking a penny out.

I don't think it's scary.

That they might not.

That would be reconstructing a whole new budget.

But that really gets difficult.

Because we're going to disagree on all those things, it'd be easy to get up to 1.4 million.

If people have things that we've talked about already in the last three weeks where they didn't want to spend that money, I do hope you will say that now.

I think we're putting a lot of the money to make our reserves stronger.

That are liable to just disappear.

Most of that's in the schools, too.

So it's the school and general government.

This might be something you'd look at and get back to us after this cycle that we're in, although if we were gonna do something about it, we'd need to know, I guess, during the budget cycle.

We can sort of talk about that and see if we can't bring back for the board's information some clarity around where that non-local money in the form of grants, pass-through money, comes from.

What our exposure would be.

You heard Phyllis Savitas, Director of Social Services, talk very specifically about her sense of how that might and what the impact could be.

Because I think every day we're reading a little bit more about what the plans look like and what's going to go away.

I don't think we should have too dark a view of this.

I'm saying we don't need to panic, but I'd like to know what our future is.

There is not a single jurisdiction in the entire United States that is in stronger financial position than we are.

And we have a lot of room, and I understand that.

Oh my god.

And then all of a sudden we had to figure out how to cover that grant.

That's right.

And it was a big deal at the time.

So that, we'll take a look at that.

I think these other grants we can pretty well manage.

I'm just curious.

During the recession, the worst of the recession did very many

And what came to a halt was hiring the new police officers who were in our budget and the DSS people who were in our budget.

That puts us right back in the hole.

Is there kind of a direct relationship that we had to hire more people for the school?

I mean, that's when the revenues went down, everything had to be shrunk.

Right.

I'm glad you called today because we're going to be discussing this.

And it's often out the Garth Road area and the urban ring.

We also need to rely on the good planning we've had so far and try to get cracking.

And is there something else you'd like on the federal, not within that model?

No, don't put the two together.

So one version.

It's the same as what's presented right here.

That's what I was over at the CIP.

You're saying taking it.

You were talking about operations, I thought.

You're either adding $1.68 million and what programs do we want to add or do we want to save it?

It's a little different.

So what you've said is fine and if we decide that we don't want to raise a penny, then we can look and see what we want to put into a contingency if we choose to do that.

I'm just trying to be, I'm not scared, I'm trying to be watchful, prudent and concerned.

That's good because I'm scared.

I'm really concerned.

Are we done?

We do.

So where are we right now?

Matters not listed on the agenda from the board.

The St. George Cottage stuff that was sent around, I'm trying to get some feedback to see if there are any others who would like us to find a time on the agenda to talk about this in May.

I'm happy to talk about it in May.

I haven't had a chance to read it yet, but I'm fine with it.

Yes, that's great.

Thank you.

Are these cottages all to go in around Ragged Mountain?

It's just a concept.

And anybody else?

This is based on something in Crozet, but it's a concept to consider.

Okay.

How about County Executive?

then I will entertain a motion to adjourn us to March the 7th at 3 o'clock in room 241 yes yes hi yes all right