Budget Committee

TOWN OF MOUNT PLEASANT, SOUTH CAROLINA BUDGET COMMITTEE Wednesday, March 29, 2017 12:00 p.m. Municipal Complex, Building A, Public Meeting Room 1 100 Ann Edwards Lane Mount Pleasant, SC 29464 Minutes PRESENT: Mayor Linda Page, Joe Bustos, Bob Brimmer, Elton Carrier, Paul Gawrych, Will Haynie, Jim Owens, Gary Santos and Mark Smith STAFF PRESENT: Eric DeMoura, Town Administrator; Marcy Cotov, Chief Financial Officer Mayor Page called the meeting to order at 12:00 p.m., and stated that it is Vietnam Veterans Day and would like everyone to keep this is mind today. 1. Public Comments [None] 2. Budget Overview for FY 2018 Mr. DeMoura stated that this is the first Budget Committee meeting for the next fiscal year 2018, and this is where the Committee is presented with the budget for the first time. Staff will outline some of the highlights of the budget in preparation for the Committee to review the respective departments’ budgets next Monday and Tuesday. He said that before beginning the budget development process, staff discusses strategies, which are listed in the guiding documents of the Town; the Comprehensive Plan, the Strategic Plan and the Town’s Mission Statement: To deliver superior performance in a manner that is distinctive and impactful to each person served and that establishes a standard for quality that endures for generations.  Budget Committee March 29, 2017 Page 2 of 19 He stated that the budget is balanced and a large expenditure will go towards safeguarding public safety to allow for the 8th Police District. There is an emphasis on capital, with a third of the budget goes towards capital; new construction, asset maintenance and repair. He added that few organizations, public or private, have made the decision to focus on capital investments. Mr. DeMoura said that Council made the decision two years ago, because they knew that the Town would not be receiving much assistance from the Federal and State governments. He said that there is the new Town Hall, which will require some additional expenses. There are two new items that will also be saving the Town funds going forward and there is a recommendation for Employee Compensation. He stated that the next illustration is what staff is proposing for next year. He stated that the majority of expenditures is always in the General Fund. It is currently just under $78 million dollars and staff is requesting just over $81 million for FY 2018, which is a five percent increase in the General Fund. He reminded Committee that the TIF (Tax Increment Financing), expires July 1, 2018, so the funding that is being captured  Budget Committee March 29, 2017 Page 3 of 19 currently in the TIF district in that fund from all the participating jurisdictions, goes back to the participating jurisdictions. He stated that the Town’s funding in the TIF district will come back to the Town. If this did not happen, then the increase to the General Fund would only be two percent. Mr. DeMoura explained the slide above. He stated that the Debt Service Fund is decreasing approximately $700,000. The Town has paid off the 2007 General Obligation (GO) bond. Victims’ Advocates has been a regular budget item for many years and has two employees. State Accommodations Tax Fund (ATAX) is proposed to be down as well. The current year’s budget has $500,000 as a one-time allocation to the Memorial Waterfront Park Phase II project that is not in the budget for next year. He said the budget shows all other funds decreasing substantially over the current year from just over $144 million to just under $119 million, which is a 20 percent reduction- almost entirely because of the TIF closeout. All the funding that used to be captured to  Budget Committee March 29, 2017 Page 4 of 19 support the TIF district is now going back to the participating jurisdictions. He stated that Ms. Cotov will review the General Fund Revenues with Committee. Ms. Cotov stated that the revenue portion of the General Fund is increasing 4.6 percent or $3.6 million dollars and that is due to the TIF, which will come back and be included in the local millage.  Budget Committee March 29, 2017 Page 5 of 19 Referencing the slide above, Ms. Cotov explained that there is the overall increase of 4.6 percent. She said that current taxes are up 13 percent and the TIF represents approximately $2 million dollars. Without this it would be approximately 3.3 percent. She said Licenses and Permits looks as though it is increasing, but while the budget is increasing, business licenses is actually flat to current projections and building permits is a decrease from the actual. Uncertain of how the economy will flow, staff was conservative with the numbers. She said when it comes to property taxes, staff looks at actuals and does not forecast out and considers what they know is on the books without making any projections. They prefer to be conservative in the overall estimations. She stated that the Town has State and Federal Grants going to the Capital Fund, because most of the grants are routed as such; however, this inclusion allows the Town to recognize that they do receive some operating grants, particularly the Police Department. Investment Earnings received a 113 percent increase of $45,000 which is interest that is being earned through the Town’s current investments. Other revenues are decreasing by 19 percent such as Loss Control and Insurance Reimbursements. Transfers In of special revenues are the special revenues that come in and continue to support  Budget Committee March 29, 2017 Page 6 of 19 certain positions, such as Stormwater and Public Safety, but this increase is also attributable to some of the operating expenditures that are associated with those, which will also be coming to the Operating Fund. Because staff proposes not to have all these different funds, the funds needed to be either Capital or Operating, which is part of the increase. Ms. Cotov stated that Use of Fund Balance decreases 31 percent, which is staff’s projection of three components. $1.3 million, which is operating millage which goes to Transportation. Based on the Town’s Fund Balance policy, there is a split between Transportation and Stormwater. Those are the components in the Fund Balance. Mr. DeMoura stated he stated that he will now discuss expenditures. The next illustration indicates the departments and how the expenditures are broken out. It shows the current budget and what is being proposed. He stated that a decrease to the General Government is being proposed. He stated that there is a slight increase to the Municipal Court, which has to do with the new Town Hall, where there are two court rooms and only one court reporter; therefore, one reporter needs to be added. He stated that the second court room will allow the Town to be more efficient and staff will be requesting funding in the budget for a part-time solicitor to assist Mr. Grossman. Woven throughout every budget, except for Non- departmental, is the State mandated increase in retirement, which is a $600,000 expenditure that the Town must absorb. He mentioned earlier about debt that the Town paid off the 2007 GO bond, which released approximately $600,000 to $700,000 which will now be paying for the retirement mandate.  Budget Committee March 29, 2017 Page 7 of 19 Mr. DeMoura stated that the big expenditure in the General Fund will be in the Police Department for $1 million, which will go towards outfitting the twelve new police officers needed for the 8th district. Fire Department increase is due mostly to retirement contributions. HE noted slight increases in the Public Services, Transportation, and Recreation budgets. Transfers Out, which is the funding that falls into Fund Balance and through Council’s policy, goes towards infrastructure. Referencing the next slide, Mr. DeMoura reviewed the areas mentioned earlier.  Budget Committee March 29, 2017 Page 8 of 19 He stated that he is recommending the hiring of an Emergency Manager. Seemingly, there will be more storms and too often, the Town is having to weather these storms through the experience, talent and grit of staff. This creates a slowdown in all Town operations in order to begin logistical planning for the cleanup process. It then takes months to return to normal operations. He stated that there needs to be a greater focus on logistical planning and it will take a great deal of responsibility and work off the departments, because this is not their core function. Additionally, the Town events (Christmas Parade, Blessing of the Fleet, Bridge Run, Children’s Day), are growing and there is more exposure and risk involved. There needs to be a greater direct focus on these events. He mentioned that there will be almost $40 million dollars going towards capital, new projects, maintenance and asset repair. Additionally, staff is requesting the hiring of another position in Transportation. The Town is taking on more transportation projects and more projects will come, depending on the results of Council’s deliberation on impact fees. Although the half-cent sales tax that passed at the County level will be  Budget Committee March 29, 2017 Page 9 of 19 directly managed by the County, it will require a great deal of collaboration by the Transportation department. He stated that the Town has the talent, but not the capability to manage all these projects properly. Two additional stormwater infrastructure equipment operators represents an expanded investment in stormwater. He stated that with the transition into the new Town Hall, he mentioned a new Court Clerk and Assistant Solicitor, as well as a security contract. The new Town Hall will have security equipment upon entry into the new building. Staff is proposing a private security firm, not sworn police officers for this function. He stated that staff is very excited about the Continued Fiscal Sustainability. He stated that the Town will be moving forward in the future with fully automated garbage packers. This allows the garbage trucks to be operated by one individual. He stated that it used to take three staff members to operate the trucks, but with labor costs and new technology, will only require one staff member. He stated that Public Services Department is never without a need for manpower and as the Town incorporates the fully automated packers, the individuals that are working in sanitation that are no longer required to work on the sanitation trucks, will be redeployed in the Public Services department to meet other needs. Mr. Gawrych asked if the Emergency Manager will be in the Police Department. Mr. DeMoura stated that this position will be located in the Executive Office. He said in order to be effective, this individual will need the weight of the Administrator’s Office. He stated that the Town also proposes to bring in-house, a Risk Manager for Worker’s Compensations, and have it operate similar to the Town’s Health Insurance. Staff believes that this move will save the Town over $1 million dollars over five years. Compensation for Employees, staff is recommending three percent to 4 percent, based on merit/scores for Pay for Performance. He stated that the Town is doing very well this year on Health Insurance, which is a big number, and has had to be managed very closely. He stated that they are only anticipating a one percent increase in the Town’s Health Insurance  Budget Committee March 29, 2017 Page 10 of 19 Plan for July 1st. He stated that staff is requesting that this increase not be passed on to employees in the form of premiums. He stated that there are the Pension mandates, an indirect benefit to employees is the Town’s two percent required contribution going into July 1st next year, which amounts to $600,000. Mr. DeMoura stated that on the Capital Fund Expenditures, there are a handful of changes to the Capital Improvement Plan (CIP) since Council members deliberated over it and considered it at the Council Retreat in January. Referencing the slide above, Mr. DeMoura stated that Committee is aware that this amount is close to $27 million. The $26,490,505; $8,926,619 and $5,550,597 is that $40 million dollars that is going towards Capital Repair. He stated on the next slide, he will show where the funding will be going.  Budget Committee March 29, 2017 Page 11 of 19 Referencing the CIP, he said the funding is for large transportation projects that are primarily new projects. Almost half of the CIP funding is for Transportation projects and 40 percent will go towards Stormwater. Approximately 90 percent of the funding going into CIP is for transportation and stormwater. He stated that there is also the Comprehensive Maintenance Plan (CMP) which is for maintenance projects. The $2.5 million listed for Transportation in the CMP is for road resurfacing. He said for Stormwater, there is $3.5 million for slip lining and ditch maintenance. The Facilities and Vehicle maintenance is for First Vehicle Services for vehicle maintenance at the Six Mile location. He said Asset Replacement Plan is an estimated $4.1 million dollars for technology (hardware/software), rollout carts- mostly associated with the new move to the fully automated garbage packers, and vehicles and equipment. On vehicles and equipment, the big items proposed in the budget is a new garbage packer and two fully automated garbage packers for Public Services, in addition to forty-eight vehicles for the Police Department for replacement and to equip the new officers for the 8th  Budget Committee March 29, 2017 Page 12 of 19 Police District. Then there are the Reserves and Transfers Out based on debt policy and other items. He stated that there were some specific changes to the CIP coming out of the Council Retreat in January, which Ms. Cotov will explain. Ms. Cotov stated that when staff reviewed the CIP, they took a strong look at the Special Permit Revenue and realized that the Darby Building repairs that were delayed, presented the perfect opportunity to use some of these funds. She stated that they will not be able to fund approximately half of this project in the current year. For the Royall Avenue Tennis Courts, Recreation was able to obtain a grant, which is fully matched and fully funded, so it no longer needs to be in the CIP for next year. Regarding the Long Point Road Realignment and Extension, part of the directive that came from the January Council Retreat, was to look at a way to do the Park West Boulevard widening, so staff was able to change some of the funding sources and because of Boone Hall, it  Budget Committee March 29, 2017 Page 13 of 19 made sense to direct some Accommodations Tax funding there, and made adjustments. Staff was able to put $1 million dollars towards the Park West Boulevard Widening. There is a placeholder in this budget for the Coleman/Patriots Point/Magrath Darby Intersection that anticipates a municipal improvement district of $3.1 million. At midyear, there was $2 million allocated for the $5.1 million dollar project and this budget anticipates this happening in those pieces if it does. If it does not, they will un-fund it, but the intent is to cover Council for whatever decision they make. In looking at Other Funds, staff has reviewed the General Fund and the Capital Fund. On the Debt Service Fund, the Town made their final payment on the 2007 GO bond and also completed two other lease purchases. Staff is proposing a three-year lease purchase for a Pumper Engine for the Fire Department and through this fund, the Town is anticipating the State Revolving Fund $9.9 Million and the Municipal Improvement District beginning to make those payments back. If this happens, the Town will have in place the structure to begin making the payments back on those. For the Victims Advocate Fund, this is the $25 fee on criminal and DUI’s and funds the two positions. She stated that they are using some Fund Balance for those positions, which they are monitoring to continue that funding. State Accommodations Tax is $1.2 million and with this, there has been a change to the funding contributions. Their recommendations were previously made on a quarterly basis, but now will be made twice a year. Included in this budget is the Accommodations Tax Advisory Committee’s (ATAC) recommendation for July 1st and December 31st, those projects and in the fall/winter, they will bring their recommendations for funding the second half of the fiscal year. There are also some budget reserves, which allows this Committee to make those decisions that happen during the year. Mr. DeMoura stated that the budget has a strong focus on Public Safety and Capital, with no tax increase proposed and aside from some new ideas that staff is excited about, the budget is lean and tight and staff is proud. He stated that the next steps of the budget process include: Committee reviews of departmental budgets on April 3rd and 4th and a Public Hearing, scheduled for April 11th , which is accomplished every  Budget Committee March 29, 2017 Page 14 of 19 year to receive the public’s input long before Council reaches final reading. He stated that at the April Committee Meetings there is something new this year based on Council’s policy for Community Investment. At Finance Committee, they will review what was requested in the Community Investment Policy. The policy states that Finance Committee goes so far as to make sure what was received is in order and may be considered that it has met the policy guidelines. But the decisions as to what the funding level should be does not happen in Finance Committee. They have the job of providing Council confirmation of all those that met the qualifications. The meeting when Community Investment levels are determined, happens at the second Budget Committee meeting. He stated that the hope is that the budget will be completed at the May 9th Council meeting. Mayor Paged thanked staff for a great presentation and looks forward to the Committee meetings.  Budget Committee March 29, 2017 Page 15 of 19 Mr. Carrier stated that going back to the CIP, is this what is established currently. Mr. DeMoura stated that the CIP is a large process, which is why it is addressed at the Council Retreat. At that meeting, Council decided what the CIP would be for the next year, acknowledging that it could be adjusted all the way up until the budget process. He stated that staff left that meeting with requests from Council to try to identify funding for things such as Park West Boulevard. He said what was presented today are just the changes that were made to the CIP since Council last saw it at the Retreat. He said that Council members have up until final reading of the budget to make adjustments. Mr. Carrier asked what the real timing of the McGrath/Coleman/Patriots Point intersection is and is this funding necessary for this budget or can it be pushed out and this funding be allocated to other projects. Mr. DeMoura stated that this is predominantly TIF money, so delaying it hurts the spirit of making sure that money was budgeted before the expiration of the TIF. Secondly, it is important to have a number for this project, because in order to reach the remaining amount of the $5 million plus for the project, staff will be asking Council to impose a Metropolitan Improvement District (MID), which would tax through a fee, those private properties to obtain the remaining amount of funding, which is allowable by state law. He stated that they would not know how much to set up the MID for if we did not know how much to ask for. Mr. Carrier asked how much the total cost of the Long Point realignment project. Mr. DeMoura stated that this project needs more review, because there will be phasing options with it. He explained that it is approximately one mile from the Recreation Center to the larger roundabout at Park West where the structure is. Council may choose to add additional funding to reach that first phase and then focus on other priorities.  Budget Committee March 29, 2017 Page 16 of 19 Mr. Haynie asked what the $1 million dollars will be used for in reference to Park West widening. He stated that the total cost was $5 million and asked if the $1 million was a down payment. Mr. DeMoura stated that it is a small amount towards construction. He stated that Council asked staff to see what they could come up with to help with this project. Mayor Page stated that if Council wanted to reconsider that investment and begin the most burdensome portion of the parkway, which would be from the roundabout to the Recreation Center, this could likely be attained for $2 million dollars. She stated that she had great concerns about widening as a whole, because it will create a cut through from US 17 to Highway 41. However, if this is the portion that Mr. Brimmer would like to have considered, the committee needs clarification. Mr. Brimmer stated that the rest of Park West Boulevard is already 4 lanes and is already a cut through, and with the addition of a stadium and Costco, there needs to be more than two lanes. Mr. DeMoura stated that if the cost was $2 million, there is already $1 million identified and there may be some design funding, but he is unsure. He stated that if they are able to get within $1 million or so, the Fund Balance could be used to one-time project funding could be allocated from the Fund Balance. Mr. Gawrych said that he gets asked from time to time to show where the three (3) mil increase through a tax increase, went towards Capital Improvements. Where it is going, how it can be tracked, etc. Mr. DeMoura stated that it is always in the budget and is represented in the numbers shown in the Transfer Out section. It is made up of several different items: the fund balance that is left over that, by policy, must be allocated to Stormwater and Transportation, and it is made up of the $1.3 million that represents the three (3) mil tax increase. It is shown in the budget and staff keeps track of it every year. Mayor Page stated that it took a lot to raise taxes for the first time in 20+ years.  Budget Committee March 29, 2017 Page 17 of 19 Mr. Haynie stated that in January, Council asked staff about the possibility of looking at bonding money, because rates are going up. He asked where the Town may look to use bonded money for and what is staff’s input from a budget standpoint and how this would affect the budget and where Council would like to see this go. He suggested Park West Boulevard. Mr. DeMoura stated that what he would recommend to Council is to look at the General Fund Debt. He explained that some debt will be expired with the new budget coming online. The problem is that the operating pressures are taking this up. The budget is not getting the $600,000 a year from State Aid and now there is the $600,000 added to pension requirements. It is all those mandates that take up that newly freed funding. He would recommend, if Council chooses to move forward with impact fees, this would be the revenue source to float the bigger bond to start designing and constructing projects more quickly. Ms. Cotov stated that she will be meeting with Moody’s Investment Services tomorrow so that they can look at the Town’s upcoming budget. Mr. Haynie stated that for this budget, were Impact Fees budget where they currently are. Mr. DeMoura responded in the affirmative. Mr. Smith stated that best practices of the Town’s AAA bond rating, debt to cash flow ratio, percentage wise, not that we have a retired debt, the additional expenses that were discussed are essentially going to replace those and use up the available cash. Is the Town still in the percentage range for best practices? Mr. DeMoura stated that with the $26 million in fund balance and you add almost 30 percent of reserves if a catastrophe happens or the economy goes bad, the Town can soften the impact on the services that the citizens receive with this funding until the economy turns around. Ms. Cotov stated that we are being in capacity with the eight percent GO bond with this retirement of debt.  Budget Committee March 29, 2017 Page 18 of 19 Mr. Smith asked, at what point, percentage wise does it jeopardize the AAA Bond rating ratios, to keep the Town in the safe zone. Ms. Cotov stated that this is one of the discussions she will be having with Moody’s and will advise Council. Mr. Santos asked that in reference Recreation, the $720,153 in FY 17 for Carolina Park, is this for the complete Carolina Park. Mr. DeMoura stated that it may be to meet the bathrooms and extension. Ms. Cotov stated that the new budget includes portions of the beginning of Phase III but does not fully fund Phase III. Mr. DeMoura stated that the Town is looking at building out Carolina Park more to meet the recreation needs assessment. It is not fully funded, but there is additional money to start going beyond the water, sewer and bathrooms. Mr. Santos stated that the recreation needs are critical and he is hoping to get this resolved, because more and more residents are using the fields. He is hoping that the Town can begin working on the other field off Rifle Range Road and asked if there is any funding that will be going towards fixing that field. Mr. DeMoura replied in the negative. He stated that staff listed all those items at the Council Retreat, showing what funding was available, as well as the projects and priorities. While Recreation is important, almost every time, Transportation and Stormwater projects took precedence. Mayor Page asked where Aid to Outside Agencies is shown in the budget. Ms. Cotov stated that it is under Non Departmental and there is a separate section behind it that looked at the request and is for the Finance Committee to use as their tool in reviewing those requests. Mr. Carrier asked if the Town is able to make Coleman/Patriots Point/Magrath a TIF district.  Budget Committee March 29, 2017 Page 19 of 19 Mr. DeMoura stated that there are two ways to accomplish this. He stated that the Town could either do this on their own or try to make the argument to convince the participating entities to join the Town, one of which would be the school district, which brings in the most money. He believes this would be an uphill battle. He stated that another item he would like to bring to Council’s attention is that we expect gasoline to go up next year. 3. Adjourn There being no further business, meeting adjourned at 12:36 p.m. Respectfully submitted, Barbara Ashe March 29, 2015