"SPARTANBURG COUNTY, SOUTH CAROLINA FY 200809"
SPARTANBURG COUNTY, SOUTH CAROLINA FY 2008/09 RECOMMENDED OPERATING BUDGET April 21, 2008 Honorable Jeff Horton, Chairman Members, Spartanburg County Council County Administrative Building 366 North Church Street Spartanburg, South Carolina 29303 Dear Members of Council: I am pleased to submit for your consideration my Recommended Fiscal Year (FY) 2008-2009 Operating Budget. As you will note, the FY 2008-2009 document continues our efforts to present financial information to Council and the public in a clear and concise manner. In order to assist you in your consideration of the proposals contained herein, this budget aligns expenditures and revenues according to programmatic effort. This arrangement of information should permit you to efficiently view all resources committed to efforts such as Public Works or Public Safety. The Recommended Operating Budget, along with previously provided recommendations for the Capital Improvement Program (CIP) reflect our best effort to plan for the delivery of public service to our ever growing community. As I have suggested previously when discussing the financial condition of the County, the provisions of State Act 388 and Act 402 deliver to the County a new set of challenges for managing our organization. The constraint on the County’s ability to raise revenue for general fund operating needs is harshly understood as the County grapples with the cost for increased employee health care costs, cost of living wage adjustments, and skyrocketing fuel prices. Paradoxically, State Act 388 virtually insists local governments take those steps necessary to insure we preserve the minimal financial flexibility the Act allows. Failure to adjust annually as permitted by law only serves to further diminish our latitude to address future matters requiring resource based solutions. To that end my recommendation adjusts millage rates for growth in population and change in the Consumer Price Index (CPI), as permitted by the law, for the general operating fund of all those taxing district entities subject to Council millage levy approval. As of the date of this transmittal, County staff has yet to fully quantify the implications of State Act 402 which limits assessments on owner occupied residential real estate to 15% growth during the reassessment cycle. As you are aware, FY 08 is a year of reassessment for the County and for the first time the County is subject to provisions of Act 402. Two important impacts of this legislation are particularly difficult to estimate; the extent to which portions of the owner occupied residential tax base will actually be constrained by the cap and the number of Assessable Transfers of Interest (ATI) that occur during the 2008 Tax Year. We have been conservative in our estimate of tax revenue from FY 2008/09 RECOMMENDED BUDGET OVERVIEW PAGE 9 SPARTANBURG COUNTY, SOUTH CAROLINA FY 2008/09 RECOMMENDED OPERATING BUDGET reappraisal, understanding that these two variables may affect our total collections. We continue to work on these estimates and to refine our understanding of the tax base post-reappraisal. The FY 2008-2009 Recommended Operating Budget continues to place high priority on the County’s ability to attract and retain talented and capable staff able to perform a high level of public service. This budget includes a recommended two percent cost of living increase for all employees to assist with inflationary pressures. While compensation level is only a factor in the motivation of our public employees to achieve, its significance should not be undervalued. This budget recommends the full implementation of actions advised in our recently completed classification and compensation study. Upon implementation, approximately thirty percent of our workforce will realize some measure of compensation change which realigns their pay with the pay of similar positions both inside and outside our organization. In most instances, the proposed adjustment is only a modest change in the employee’s salary. Implementation of revisions to our classification and compensation system insures a lasting and substantive benefit to the organization in the form of equity, fairness, and market competitiveness. At your request, I have had diligently assessed staffing levels in our public safety programs and am prepared to recommend several changes I believe will help mitigate rising staff overtime expenditures. For the upcoming fiscal year, I am recommending the addition of five Sheriff’s Deputy positions for our community. As was noted in the FY 07 year end audit report, overtime expenditures in the Sheriff’s Department have sharply increased in past years, partly as a result of consciously constraining the number of new position creations over the past several years. Our analysis suggests the creation of new positions to be administratively and operationally less expensive to the County taxpayer than requiring existing staff to work and be compensated for overtime hours. It is, however, important to note that greater law enforcement activity and increased Sheriff’s Office staffing has a corresponding effect on other program services of the County. This budget includes a recommended increase of two 911 Communications positions to support the Sheriff’s Department, Fire Service, EMS Service and ever increasing number of citizen calls to our 911 Communications Center. I am also recommending that four positions in the Solicitor’s Office, funded by grant monies which have now expired, be retained and funded with general fund dollars The audit findings from FY 2007 similarly noted escalating overtime expenditures in the Detention Facility as a financial concern. In this instance, analysis suggests the County currently has a sufficient number of positions allotted to the Detention Facility, but that some 25% of the allotted positions consistently remain vacant. In order to reduce the number of vacant positions and correspondingly minimize the use of employee overtime, I am recommending a pilot Detention Officer Recruitment and Retention Program. This program creates a dual incentive by enhancing position recruitment efforts and encouraging existing employees of the Detention Facility to remain in employment. I am recommending the addition of several new positions outside the Public Safety arena as well. However, for these positions I have identified a corresponding revenue source or operational cost savings that will mitigate the expense of adding the positions. Three years ago, County Council exercised foresight in approving a new Risk Management position in order to combat ever increasing worker’s compensation costs to the County. For FY 2009, we are projecting our worker’s compensation expenses will decrease $200,000 from the prior fiscal year as a result of our efforts to effectively engage a Risk Management effort. With the FY 2009 Operating Budget Recommendation I hope to repeat the successes of our Risk Management program, notably in the areas of Delinquent Tax Collection, Information Technology, and Environmental Enforcement. While we are not and should not function as a business enterprise, we can adopt intelligent business practices that minimize the cost of service delivery to the taxpayer. Strategically adding resources to programmatic areas with high potential for efficiency gain is precisely the type of business practice we should engage. FY 2008/09 RECOMMENDED BUDGET OVERVIEW PAGE 10 SPARTANBURG COUNTY, SOUTH CAROLINA FY 2008/09 RECOMMENDED OPERATING BUDGET This budget also confronts some fundamental issues regarding the environmental sustainability of our community and how, as a community, we will respond to these concerns. This recommendation includes an additional $110,000 simply to provide for increased energy costs associated with our operations and it may be necessary to increase our estimated costs for the next fiscal year. Clearly our capacity to pay for energy is outstripped by skyrocketing price structures driven by higher and higher demand. The obvious solution to this problem is to demand less and to that end I have asked staff to re-commit themselves to determining ways the County might minimize our utilization of limited environmental resources and reduce our long term environmental impact. I am recommending you endorse the creation of an Environmental Program Manager charged with overseeing our County government’s efforts to insure long term sustainability. This position will focus efforts on air quality, water quality, associated land use issues, energy consumption and conservation efforts. The position, in conjunction with the County’s Environmental Responsibility Action Committee (ERAC) will insure we actively engage an effort to conduct our operations with the minimum environmental footprint practical. I am also seeking your endorsement for the first County effort to capture the energy producing potential of our landfill operations. Through a public private partnership with Milliken & Company, I ask that you conceptually endorse the construction and operation of a “green gas” pipeline that will use energy created at the Wellford Landfill to power a nearby Milliken production plant. These efforts, combined with Parks and Recreation Commission initiatives to develop eco-tourist attractions in the County position us to lead the Upstate in environmental awareness and sensitivity. The enhanced fiscal planning practices commenced last year that resulted in substantial replacement of the Sheriff’s Office vehicle fleet is continued this year as we undertake a second round of fleet improvements. My recommendation also provides for those expenses that escalate each year as a matter of course. Employee health insurance and retirement benefits for employees are notable examples. Although unfortunate, it will again be necessary to pass on to the employee a proportional share of the increase in health insurance coverage. A particularly important and fiscally significant issue not addressed in this Operating Budget Recommendation is the County’s future cost for Retiree benefits. As you know, beginning with the Fiscal Year 2009 Comprehensive Annual Financial Report (CAFR), the County is required by the Governmental Accounting Standards Board (GASB) to define and account for future costs associated with retiree benefits. We are currently awaiting the results of an actuarial study which will direct us in how we might proceed with this required reporting and whether or not revisions to current policies may be required. When the study is complete and reviewed, I will schedule a full presentation of this issue for Council. I offer the FY 2008-2009 Operating Budget Recommendation to you for your consideration, review, and endorsement as appropriate. I suggest that the recommendations contained in this document reflect to the extent possible, Council’s direction for cost efficient and highly effective public service delivery. I also suggest that these budget recommendations offer a fiscal equilibrium which is alternately conscious of our tax payer’s burden and our community’s need to grow and develop responsibly. As noted, the Recommended Operating Budget is arranged to more clearly associate revenues and expenditures with program services provided by the County. An Executive Summary is provided below, followed by notable changes to program efforts and their relevant fiscal consequence. Executive Summary For FY 08-09, the recommended spending total for all funds is $157,226,466, a $4.03 million dollar (2.6%) increase from the prior fiscal year. Included in the overall budget amount is a $5.7 million dollar (6.7%) increase in the tax supported general fund portion of the budget, the addition of approximately $2.4 million in new monies associated with Hospitality Tax Fund, an additional $1 million (20.2%) FY 2008/09 RECOMMENDED BUDGET OVERVIEW PAGE 11 SPARTANBURG COUNTY, SOUTH CAROLINA FY 2008/09 RECOMMENDED OPERATING BUDGET increase in Road Maintenance Fee fund spending and $1.4 million in increased spending (48.5%) in the Special Revenue (Grant) Fund. Increases in these funds are offset by reductions to the Solid Waste Enterprise Fund $3.9 million (-33%), $2.6 million (-81%) in Capital Project Reserve Fund spending, and a $390,000 reduction (-68.8%) in the Palmetto Landfill Fund. For the County General Fund and the general operating funds of all taxing districts of the County subject to the provisions of State Act 388, the Recommended Operating Budget includes increased revenue resulting from millages adjusted to reflect CPI and population growth. For Spartanburg Community College, in addition to increased millage per State Act 388, the recommendation includes preservation of the one mil increase for capital efforts endorsed by Council in the prior fiscal year. The recommended budget includes a two percent increase in compensation for County employees, full implementation of revisions to the County classification and compensation system, a 10% increase in employee health insurance costs, and additional expense associated with required contributions to the State pension system. Public safety efforts are paramount in this proposal and the recommendation includes the creation of five new Sheriff’s Deputy positions, tax supported funding for four Circuit Solicitors positions, the addition of two 911 Communications Operators and the establishment of a Detention Employee Recruitment and Retention program. Creating A Safe and Secure Community - Program Services For FY 2009, the Recommended Operating Budget includes a total of $59,692,532 million to provide for the safety and security of our community. This proposed level of investment reflects an increase of $3.06 million (5.4%) from the prior fiscal year. Monies derived from the tax supported general fund provide $57.24 million (96%) of the revenue necessary to support these services. The remaining $2.45 million in proceeds for this program are primarily received from grants and monies collected from surcharges on telephone service. Major departmental expenditures in this program occur in the Sheriff’s Office, Detention Facility, Emergency Communications Department, EMS, Clerk of Court, Circuit Solicitor, Magisterial Court, Probate Court, and Public Defender. Substantive changes in the program from the prior fiscal year include the addition of five new Deputy Sheriff positions to improve operational services and reduce dependence on overtime staffing ($640,000), increased salary and benefits for Sheriff’s Department employees receiving mid-year proficiency promotions ($86,000), improved life insurance benefits for all sworn public safety personnel of the County ($60,000), an increase of $640,500 for overtime expenditures in the Sheriff’s and Detention Facility operations to more closely align the budget with actual expenses and mitigate an audit finding of “significant deficiency”, and two additional 911 Communications staff ($77,200) to accommodate increased public safety staffing and higher numbers of calls for service. The proposed budget for this program also includes an incentive program for the recruitment and retention of Detention Officers ($225,000) to reduce reliance on overtime staffing and decrease on-going issues with position vacancy. Several new positions added to this program are without impact to the tax supported general fund. Staffing for the Home Detention Program is increased one part time position, however the cost ($25,000) is offset with program participant fees. One additional staff person is provided for expanded Environmental Enforcement of property maintenance issues and mitigation of blight ($43,000). The cost of this position is offset by higher fee collections from mobile home permits and administrative fees charges delinquent tax accounts. At the request of the Criminal Justice Coordinating Committee (CJCC) four new positions are recommended for the Clerk of Court to implement a Criminal Docket Management program ($175,000), thereby relieving the Circuit Solicitor of this responsibility. The cost of this effort is substantially offset by increased fees and fine revenues from the Magisterial Court. Recommended funds for the Public Defender include the addition of two new Attorney positions, endorsed by Council mid-year FY 08, and offset by increased State revenue distributions for the provision of Public Defender services. FY 2008/09 RECOMMENDED BUDGET OVERVIEW PAGE 12 SPARTANBURG COUNTY, SOUTH CAROLINA FY 2008/09 RECOMMENDED OPERATING BUDGET Excelling at Customer Service – Program Services The FY 2009, Recommended Operating Budget includes a total of $22,433,136 million to provide for the administrative infrastructure required for our government’s service operations. The proposed funding level reflects an increase of $3.28 million (17.1%) from the prior fiscal year. Monies derived from the tax supported general fund provide $21.62 million (96%) of the revenue necessary to support operations. The remaining $810,000 in proceeds for this program is received from fees for service. Major departmental expenditures in this program occur in the County Administration, County Attorney, Assessor, Treasurer, Auditor, Delinquent Tax, Register of Deeds, Finance, Information Technologies, and Facilities Maintenance departments. In addition to Departmental expenditures included under this effort, non-departmental monies are included as part of the total program recommendation. Non- departmental monies are for general government purposes and not appropriately included as part of any one specific department budget. For example, monies to provide for a recommended two percent cost of living adjustment ($1,218,500) are included within this program at the time of budget recommendation. Subsequent to Council review and approval of the budget, these monies will be distributed as appropriate to departmental budgets. In addition to funding for employee cost of living adjustments, the non-departmental account holds appropriation for other notable expenses including the implementation of classification and compensation changes ($1,374,580), liability and property insurance premiums ($1,150,500), and County payment of retiree health plan benefits ($1,500,000). In addition to the previously mentioned initiatives reflected in the Non-Departmental account, a number of other funding efforts are included in this program. An Accountant position ($92,600) is included in the Delinquent Tax Office to improve the collection of outstanding delinquent taxes owed the County. The cost of this new position is entirely offset by increased delinquent tax revenues expected to be derived from improved financial administration of the office. Funding is increased for Information Technology to take full advantage of efficiencies the use of technology affords our public service operations. Two Information Technician positions are recommended for funding ($88,000), and additional monies are provided for maintenance and licensing agreements associated with the new Courthouse Case Management system, e-government services of the Building Department, and other service related software enhancements ($101,600). The addition of staffing to this department permits the County to avoid the cost of contractual and consultant programming, minimizes department “down- time” resulting from software and hardware failures, and reduces the use of in-house programming staff for technical problem solving. Preserving the Community Infrastructure – Program Services The FY 2009, Recommended Operating Budget includes a total of $23,887,427 million to provide for the maintenance, preservation, and improvement of the County’s infrastructure. The proposed funding level reflects a decrease of $1.75 million (-6.8%) from the prior fiscal year. Monies derived from the tax supported General Fund and tax supported Storm Water fund provide $7.53 million (31.53%) of the revenue necessary to support operations. The remaining $16.36 million in revenue for this program is received from fees, State “C” fund contributions, and federal grant proceeds. Major departmental expenditures in this program occur in the Public Works, Solid Waste, Storm Water Management, and Planning Departments. For FY 09, the recommended reduction in this program results from the elimination of funds previously necessary to complete Cell 6 expansion at the Wellford Landfill Facility. Fund transfers from the Solid Waste Fund to the Capital Improvement Fund are reduced in FY 09 by approximately $4.37 million dollars, resulting in an overall reduction to the funding levels of the program. However, the overall commitment to the maintenance and improvement of our infrastructure remains high. Investment in road resurfacing and transportation safety improvements made possible by the Road Maintenance Fee are increased in the Recommended Operating Budget to FY 2008/09 RECOMMENDED BUDGET OVERVIEW PAGE 13 SPARTANBURG COUNTY, SOUTH CAROLINA FY 2008/09 RECOMMENDED OPERATING BUDGET $6.4 million, slightly more than $1 million more than the prior year. Program services for the elimination of dirt roads, bridge maintenance, storm water outfall mapping, and routine maintenance of our road network are preserved at current spending levels. The FY 09 Recommendation includes the creation of a new Environmental Program Manager charged with elevating the County’s role in insuring our operations meet the challenge of environmental sustainability. Funds for this effort are substantially offset by the anticipated receipt of grant funds. It is also expected the County will realize substantial efficiency savings from enhanced efforts to create and manage conservation programs. Efforts to further explore and develop the County’s next generation land use planning models are currently underway and although the FY 09 Operating Budget Recommendation does not contain significant new spending for this effort, these efforts may result in some internal reorganizations in the coming months. Land use planning and likely revisions to how the community’s infrastructure is conceptualized and developed will impact future operating and capital budgets significantly. Enhancing the Quality of Life in Our Community – Program Services For FY 2009, Quality of Life program services which provide for education, recreation and care of County citizens constitute a total of $40,819,858 of total budgeted expenditures. The proposed funding level reflects an increase of $3.15 million (8.4%) from the prior fiscal year. Monies derived from the tax supported General Fund provide $3.24 million (7.9%) of the revenue necessary to support operations. Other tax supported monies including proceeds from the Hospitality Fund, Parks and Recreation Fund, Community College Fund, Charles Lea Fund, and Public Library Fund. Collectively these sources of monies provide $25.3 million (62.0%) of the program’s resources. The remaining $12.24 million in revenue for this program is received from federal and State grants and State Aid to Local Subdivisions. Major departmental expenditures in this program occur in the Parks and Recreation Commission, Spartanburg Alcohol and Drug Abuse Commission (SADAC), Community Development, Indigent Care, Workforce Investment Board, Spartanburg Community College, Charles Lea Center, and the Spartanburg County Public Library System. For FY 09, those departments and agencies included in this program that derive their monies from the levy of a special purpose tax or tax district are recommended to increase by the by the State permitted growth in consumer price index and population. Funding to the Spartanburg Community College is increased an estimated $544,000 (11.8%) from the prior fiscal year as a result of increasing the millage levy by the provisions of State Act 388. Similarly, the Parks and Recreation Commission is increased in this budget recommendation by $523,500 (11%) from the prior fiscal year, and the Charles Lea Center is increased $172,180 (16.4%). Funding for the County Library is decreased $338,760 (-2.9%) as a result of the elimination of one time monies for capital improvements provided in FY 08. The County’s efforts to attract and retain quality business to our community are preserved in this recommendation and $232,800 in funding is provided the newly formed Economic Futures Group for this purpose. Medical services for the indigent are provided at a total cost of $934,970. County funding to the broad array of non-profit organizations that support the health and human services of our population and protect our most at-risk citizens is recommended at $1.25 million. The Arts Partnership and Regional Museum are recommended at their current funding level of $266,000. Funding for job training and employment services through the federally funded Workforce Investment Board is included in this program at a total appropriation of $5.7 million. Hospitality Tax expenditures are recommended at $2.4 million with the majority of proceeds to be transferred to the Capital Program for development of the County’s enhanced recreational infrastructure. Two administrative positions ($77,000) are recommended for funding with Hospitality Tax proceeds to insure the proper administration of the tax. The Community Development program which utilizes federal Community Development Block Grant and HOME funds for assistance to low and moderate income families is recommended at $2.1 million FY 2008/09 RECOMMENDED BUDGET OVERVIEW PAGE 14 SPARTANBURG COUNTY, SOUTH CAROLINA FY 2008/09 RECOMMENDED OPERATING BUDGET dollars. This amount is nearly $500,000 less than the prior year and reflects continued scaling back at the federal level of funding for this important community effort. Debt Service and Other Transfers The Debt Service Fund collectively represents the County’s principal and interest payments required to retire debt obligations. These include General Obligation Bonds, Special Revenue Bonds, Refunding Bonds, Voter-Approved Bonds and lease obligations. The FY 09 Recommended Operating Budget observes County policy of adjusting the annual millage levy for debt according to debt service requirements. Consequently, a General Fund transfer of money to support the debt service budget is not included in this year’s recommendation. For Fiscal Year 2009, I am recommending a Debt Service budget of $7,901,455, virtually unchanged from the prior fiscal year. Significant outstanding debt included in this fund includes obligations for the Memorial Auditorium which is expected to retire in 2018, and a Debt Refinancing issuance, expected to retire in 2020. Other debt service includes the remaining long-term debt obligations for the Court House, Jail, Library, University of South Carolina Upstate, County Administration Building, and miscellaneous renovations. Portions of these issues have been refunded as well, and the various issues retire in 2009 through 2019. As part of the FY 2009-13 Capital Improvement Plan, Council is requested to consider issuing debt to fund the expansion of the County’s Detention Facility. Cost estimates for this effort are currently being finalized. Upon Council’s approval a general obligation bond will be issued for costs associated with the facilities expansion. The first principal and interest payment is not expected to be due until FY 2010 and therefore is not reflected in this recommendation. Fund Balance (Reserves) For Fiscal Year 2009 I am recommending the appropriation of $494,350 to undesignated reserves in order to increase our fund balance. As previously noted, the importance of fund balance given the revenue constraining environment we must operate in cannot be overstated. As noted in the FY 07 Audit Report to Council, the past few years have seen the County’s increased reliance on the use of fund balance to provide for routine operational expenses. Fund balance levels must be raised to a minimum of 15% in accord with County fiscal policy and in appreciation of our bond rating. The FY 09 Budget does not presume to use any fund balance reserves to pay for budgeted expenditures in the upcoming fiscal year. Future Outlook At the writing of the transmittal letter for the FY 2008 Operating Budget Recommendation, I noted that the “specific affect on the County revenue stream that results from State Act 388 and the voter approved limitation on property tax assessments is not entirely known…”. One year later, we have a much clearer understanding of what the State legislature intended with Act 388 and we have positioned this budget recommendation to both meet the requirements of the law and maximize the remaining financial flexibility we have available to us. The implications of Act 402, however, remain unclear as we progress through property re-appraisal and attempt to determine the implications of the 15% assessment cap. Further, continued discussions and potential revisions to statutory language regarding Assessable Transfers of Interest (ATI) make already cloudy waters considerably muddier. Regardless, it is a reasonably safe prediction to observe that our government organization will continue to be challenged by ever increasing public demands for service, responsiveness and accountability. It is also reasonably safe to suggest that we will respond to these challenges without the discretion to act that was once enjoyed and that our financial structures must now accommodate the changed environment of local government operation. FY 2008/09 RECOMMENDED BUDGET OVERVIEW PAGE 15 SPARTANBURG COUNTY, SOUTH CAROLINA FY 2008/09 RECOMMENDED OPERATING BUDGET With the FY 09 Operating Budget Recommendation I am re-casting our presentation of financial information to at least in part, make clearer the priorities and objectives of the County government as expressed through the allocation of resources. I welcome discussion on both the form and content of this presentation. I envision future changes to the document which will have us speak with even greater clarity of the programs provided by County government, the relative effectiveness of those programs, and the resources necessary to yield for our citizens the services they seek. The staff of Spartanburg County Government is working diligently on these fronts and others. I am thankful to them for their service to our community and I invite you to support the efforts of staff by evaluating the thoughtful and considered proposals put forth in this budget document. In conclusion, Section 4-9-630(4) of the 1976 Code of Laws of the State of South Carolina, as amended, requires the County Administrator to prepare this document for Council’s review and consideration. I am pleased and honored to present the Fiscal Year 2008-2009 budget to you for your consideration and I look forward to working with you on its adoption. Sincerely, D. Glenn Breed County Administrator FY 2008/09 RECOMMENDED BUDGET OVERVIEW PAGE 16