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2005-01-19A January 19, 2005 (Meeting Adjourned from January 12, 2005) (Page 1) An adjourned meeting of the Board of Supervisors of Albemarle County, Virginia, was held on January 19, 2005 at 3:30 p.m., Room 235, County Office Building, McIntire Road, Charlottesville, Virginia. The meeting was adjourned from January 12, 2005. PRESENT: Mr. David P. Bowerman, Mr. Kenneth C. Boyd, Mr. Lindsay G. Dorrier, Jr., Mr. Dennis S. Rooker, Ms. Sally H. Thomas and Mr. David C. Wyant. ABSENT: None. OFFICERS PRESENT: County Executive, Robert W. Tucker, Jr., Assistant County Executive, Roxanne W. White, Assistant County Executive, Thomas Foley, County Attorney, Larry W. Davis, Director of Office of Management and Budget, Melvin A. Breeden, Director of Community Development, Mark Graham and Clerk, Ella W. Carey. Agenda Item No. 1. The meeting was called to order at 3:30 p.m., by the Chairman, Mr. Rooker. _______________ Agenda Item No. 2. Work Session: Business Plan. Prior to the work session on the Business Plan, Mr. Graham began the meeting by identifying on a map the location of the new construction in the Route 29 North area, noting that there was a failure in the sediment trap at the Target site. He explained that the rate of rainfall exceeded the design capacity for storage. Sediment traps are sized for a volume that is for roughly one inch of runoff. The sediment trap can actually handle a lot more rain; a 10-year storm, for example, is six inches of rain and if you break that down, that is a quarter inch per hour. He noted that the rain was falling at over one inch per hour, and the trap gave way and let the sediment seep onto Route 29. Mr. Graham mentioned that there was a storm structure that the developer was trying to modify, but it could not be finished until one section of Route 29 was raised. It basically buried that structure, and the water had no way out, so it just ponded-up until the water went on the road. Mr. Graham said that the developer had the proper permits and the site has been inspected at least once a week and has met regulations. He emphasized that County staff has been very careful with this project because of the amount of disturbance, but the timing of the sediment slide was unfortunate because of the work being done on Route 29. Mr. Rooker mentioned that he had asked Mr. Graham who had to pay for the cleanup, and learned that it is the contractor that assumes that responsibility. Mr. Rooker stated that he also learned it might happen again with that volume of rain. Mr. Graham said that the storm structure would be completed within three months. Mr. Graham pointed out on a map provided which way the water travels when it runs off. He mentioned that the storm exceeded the 10-year, 24-hour rain levels. Mr. Wyant added that ground saturation can also affect stormwater retention. Mr. Rooker noted that in the summertime, there are rain events that bring heavy rains in a short period of time. Mr. Tucker emphasized that this is a 60-acre tract that was wooded, and when you lose that much vegetation, and there is a major rain event, you are going to get a fairly significant runoff. Mr. Rooker commented that the County needs to enlarge the size of the pond. The answer is, in this particular site, the state standards are not adequate. Mr. Graham mentioned that staff looked at the work being done on the airport and the basins there were also near capacity. He added that it gets much more difficult and much more expensive to find room for bigger stormwater facilities. Mr. Graham noted that he cannot recall when this type of overflow situation has occurred in the past, where a road has been affected, but added that every two or three years a sediment trap “blows out.” Mr. Wyant asked how many basins and traps are on the site. Mr. Graham responded that he did not know the total number, and they change weekly as grading occurs. He added that County staff typically prefers large basins, as they are much safer. Mr. Rooker asked if the County had the power to require the developer to do more on this site. He thinks the County should make sure that this does not happen again on this site. Closing 29 for an eight- hour period of time on a weekday is a pretty serious event. Mr. Graham responded that state law indicates that localities have the ability to require more. Ms. Thomas asked if that needs Board action, or if County staff can act administratively. Mr. Rooker asked fellow Board members if they felt the need for more stringent steps for this site. Everyone agreed that Mr. Graham would inform the Board as to what the County can require for this site to prevent future similar incidents. __________ January 19, 2005 (Meeting Adjourned from January 12, 2005) (Page 2) Mr. Tucker stated that he would like for the Board to get into the broader issues today, and discuss the details at future work sessions. He explained that all of the scenarios presented today are based on November revenue projections, not on the updated January revenue reassessment projections. Mr. Tucker reminded the Board that the technical committee is comprised of Mr. Wyant, Mr. Dorrier, a School Board member, a Planning Commission member, a private sector member, and staff. He added that this committee has reviewed the scenarios presented. Ms. White reported that the way this budget is presented represents a change, as it considers long- term goals and tries to align resource allocation to help reach goals set forth in the Strategic Plan. She said that the Business Plan represents a link between the Strategic Plan, operating, and capital budgets. Ms. White stated that in November, budget requests are submitted and the Office of Management and Budget works on them; the Technical Committee is also working on the CIP at that time. In December, she explained, the Leadership Council reviews strategic initiatives and prioritizes them. In January, Ms. White said, the work sessions provide an opportunity for the Board to give input on the plans. She added that staff is struggling with how to fund the school CIP, and would like to get some policy direction on that as well as direction on County strategic initiatives. Ms. White stated that staff would also like to demonstrate the five- year forecast at this meeting. Capital Projects Ms. White mentioned that the presentation today would focus on the first five years of the CIP, not the planning phase which is years six through ten. Mr. Breeden reported that the base CIP allocations start with what was funded in the prior year – in this case 2004-05 at $16.5 million; the revenue growth is measured from 2005-06, after deleting the City revenue share expense. Mr. Breeden said the realized growth figure would be 6.5 percent, or $1.0 million to $17.5 million. He explained that the second part of the formula is growth allocation, or taking one-half of one percent of the increase in growth revenues and putting that in the CIP. Mr. Breeden noted that figure was $777,000 for this year, and that amount will increase by $10,000 for next year. He added that based on the November projections that would increase the amount by $133,000, and the total for next year is $19.5 million. Mr. Breeden explained that another major factor in CIP funding is the reserve balances, and currently there is only $611,000 in unallocated reserve, but he is anticipating being able to transfer another $3.0 million to bring that reserve up to $3.6 million. He mentioned that the goal has been to keep the reserve at $1.0 to $2.0 million for contingency funds, emergencies, etc. Mr. Breeden also noted that there has been a general fund policy that says surplus revenues from the prior year are transferred to the CIP, but it was decided to freeze that amount because of concerns about the state personal property tax program. At this point, he said, that seems to have been resolved and should not have a huge impact on the budgeting process. Ms. Thomas asked if all of the CIP revenue has been spent, except for the $600,000. Mr. Breeden responded that all previous reserves and the $18.0 million from the prior year have either been expended or have been allocated. He noted that the money set aside also includes payment of debt service, not just capital projects, adding that that amount has been in the $10.0 million range. Mr. Breeden mentioned that the total debt will not exceed two percent of the real estate fair market value, and the County is well under that amount. He added that Albemarle tries to keep its debt service levels similar to what other AA and AAA localities have. Mr. Breeden continued, explaining that the order of today’s presentation would be budget scenarios if (1) everything requested were funded; (2) projects were revised and moved out based on longer timelines; and (3) revised projects were maintained but school expansions were removed. He noted that in the total projects scenario (1), there was an increase of $74.0 million from the current year; the total debt would increase by $64.0 million, and the total debt at the end of the five years would be $50.0 million more than what the current plan anticipated it would be, and the debt service would increase by $9.0 million what was currently anticipated. Mr. Breeden said that the County would be $23.0 million short of funding this request, plus $64.0 million in additional debt. Mr. Breeden explained that in scenario (2), the County would be able to fund that budget still with a substantial amount of debt service, but would not be short as with the first example. Mr. Rooker commented that the plan originally was $13,747,000 with debt service, and the second scenario would increase it to $21.0 million. Mr. Breeden reported that the AA and AAA localities are in the 6.9 percent range for debt service ratio, and demonstrated how each scenario would impact Albemarle’s debt service over a five-year period. He explained that in the first two years, the County is comparable, but in the third year, Albemarle jumps above that and by the end of the five years, would be two percent above other AAAs. There are some that are higher and some that are lower, but this shows the averages. Mr. Bowerman asked if this takes into account increased revenue. Mr. Breeden responded that it did. January 19, 2005 (Meeting Adjourned from January 12, 2005) (Page 3) Mr. Breeden said that in shifting the timing of funding in scenario (2), libraries are impacted, the ACE program continues as is, the CIP includes the $350,000 funded from tourism, and there will be an effort to fund $1.0 million more to CIP out of general fund surplus, even though it is not accounted for here. Transportation, construction, and urban infrastructure are reduced or postponed, as are parks and recreation facilities funds. In scenario (3), Ms. White reported, all new projects and additions/expansions to expand school capacity are removed. Mr. Rooker asked if this scenario takes out projects already in the CIP. Mr. Breeden responded, yes, in some cases. This would reduce them below the existing plan; it is a scenario. It is not something the staff is necessarily recommending. Ms. White explained that the CIP Technical Committee did not make any recommendations to the requested school projects because they have not wanted to make decisions on specific school projects. She said that the school presented what was prioritized, and the philosophy has been that the Technical Committee did not have the expertise to make decisions on that. She noted that in the past, 60 percent of the CIP went to school projects, but that was at a time where there was enrollment growth. Ms. White emphasized that there is a shift to work on urban infrastructure and local government projects. Ms. White presented information that showed the school had $51.0 million in their CIP previously, and their request this year is for $81.0 million to be funded within that five-year period. She said that new expansion capacity accounts for $12.8 million; there is $7.0 million for renovation and addition projects, and $10.0 million for increased maintenance. Ms. White presented information from the schools on their projected enrollment over the next five years, including current enrollment, future projections, and capacity. She noted that in the projected total, even after the five years, there is more capacity than the number of students. Ms. White said that there may be one school that is over capacity, and one that is under capacity, but staff looks at the overall enrollment and finds that the capacity is there. Mr. Tucker commented that that discrepancy is usually handled through redistricting. Ms. Thomas asked how the capacity figure is deduced. Ms. White replied that the figure is based on the capacity that schools have right now, without looking ahead to what might be added. She expressed concern shared by staff and the CIP Technical Committee about funding additional growth when there does not seem to be any growth. Mr. Boyd mentioned that he expressed concern when he was on the School Board about whether Albemarle was staying in line with other schools, or going to far overboard when addressing capacity. With the level enrollment scenario (3), Ms. White noted that total general government projects without the school projects saves $75.0 million. It cuts out more than they had in their prior CIP. She said that this scenario provides $11 million “to the good,” but that actually ends up being more like $1.5 million, because of money going into reserve at $2.0 million per year. Mr. Breeden said that if in any year that $2.0 million is not spent, that can be added to the $1.5 million. Ms. White said that that amount could be put into general government projects, back into the schools, or debt service reduction. Ms. White presented information on the impact of all three scenarios on debt service. She explained that scenario (1) requires the County to use 8.7 percent of revenues; under scenario (2), the debt service is 8.11 percent; scenario (3) brings it down to 7.5 percent, which is still over the AA/AAA average. Mr. Bowerman said that the revenue projections seem understated. Mr. Breeden responded that the projects over the five years out are much more expensive and a lot higher dollar projects than what the County has seen in the past. He added that the revenue projections have averaged seven percent, and that is what is built in, noting that the revenue sources are property taxes and other local revenues. Ms. Thomas stated that this could be changed if more annual revenue were put into CIP. Mr. Rooker said he would not like to see the County getting above of the AA line, average. Mr. Breeden commented that he is not overly alarmed at 7.4 percent, but the trend of projects being more costly is a concern, and more money is going to debt service. He mentioned that one thing that has helped Albemarle get a favorable bond rating is the County’s ability to pay-as-they-go on projects, and that may be shifting. Ms. White noted that when the financial advisors came in to develop a funding formula for the County, even then they knew the debt service would increase for local government projects because the County could no longer fund the infrastructure needs in the CIP on pay-as-you-go revenues. January 19, 2005 (Meeting Adjourned from January 12, 2005) (Page 4) Mr. Tucker mentioned that if you do more pay-as-you-go projects, as Ms. Thomas had suggested, you must move them out time-wise. Mr. Rooker commented that you would need to move more money into CIP, two percent instead of one percent. Mr. Boyd asked how many local government projects are done pay-as-you-go. Mr. Breeden replied that the County had almost no general government debt, until the 5th Street COB project and juvenile court projects. Ms. White said that the Board needs to give staff direction at this meeting as to whether school projects are to be funded as they have been requested, or if it is time to develop a policy that would allocate revenues between schools and local government for CIP projects. Mr. Dorrier asked how the County arrived at the 60/40 split. Mr. Tucker emphasized that that is operations, not CIP. He noted that there is no standing policy on the CIP for schools. Mr. Rooker asked why the schools have expenditures for increased capacity in their CIP budget, when their own enrollment figures do not support an increase in enrollment. Ms. White responded that the schools are not looking at it as a total they are looking at specific schools that are either over or under capacity. Ms. Thomas stated that this is a by-product of not redistricting. Mr. Boyd said he believes that revisiting the formula for the CIP and the operating budget is long overdue, adding that times have changed since that formula was originally developed. This needs to be revenue-driven, not spending driven. The Board needs to look at the revenues it is going to have and then see what will be available for the funding formula and CIP formula. Mr. Rooker commented that the schools CIP request bears no relationship to revenues. Ms. Thomas said that cities always put more into non-school items, and Albemarle is now having to deal with the pressures of urbanization and population growth, which many cities do not. Mr. Breeden noted that school growth has been flat, but special education, changes in classroom sizes, and other school requirements have taken up school capacity. Mr. Rooker emphasized the need to meet with the School Board so that they can understand the genesis of any policy change. Mr. Wyant commented that the schools need to understand that there are many factors that influence the budget allocations and they are not just done randomly. Ms. Thomas noted that there are many mandates that schools are under, and they need to be considered. Mr. Rooker said that the Board is committed to maintaining excellent schools that respond to growth and mandates, but does not want to plan on projects that are not necessary and may in fact never get built. Mr. Breeden stated that staff only presented the scenarios as a framework for the Board to deal with as they move forward with their budgets and planning. Mr. Bowerman noted that Dr. Castner has been appreciative of the schools’ physical plant in the County. Mr. Tucker commented that the Board has been very generous with the school system. Strategic Initiatives Ms. White noted that the requested operations initiatives total almost $3.5 million, and much like the CIP, there must be some priority and ranking. She reported that the Leadership Council met in December and ranked the projects, and divided them into thirds. Ms. White pointed out the top five priorities from the Council, which total $700,000 versus the $1.9 to fund the top third. Ms. White reported that continuing the Family Support Program would cost $155,000, anticipating that the other half would hopefully be provided from the schools. She noted that the schools did agree to fund the program to the end of the year. Mr. Bowerman commented that he thinks it is important to keep the program running. Mr. Tucker asked if the schools had included that in their budget. Ms. White responded that she did not know, but they might recommend to fund it with one-time monies and see what happens in the next year. Mr. Rooker noted that the Bright Stars program had demonstrated statistical success, and he was surprised to see the Family Support program ranked above it. Mr. Breeden pointed out that it is an expansion of Bright Stars versus maintenance of Family Support. January 19, 2005 (Meeting Adjourned from January 12, 2005) (Page 5) Ms. White added that the state put additional money into the 4-year-old program this year, from 90 percent to 100 percent, so there is additional state money to fund a seventh Bright Stars program. She confirmed that the Family Support funding is just to keep the program going. Ms. White said that the Stormwater Master Plan implementation is the only Natural and Historic Resources item to make the top third. Mr. Rooker mentioned that the Board had made a policy decision on how to deal with stormwater services provided, and discussed creating a service utility district which would take it out. Mr. Foley said that the Board decided on the County-wide level of service, and reviewed alternatives with staff. He explained that if a service district were done, a tax rate would be set for that, and there are other options discussed that would be regular budgeted items. Mr. Boyd asked if a service district would require state legislative approval. Mr. Tucker responded that the Board could act alone to form it, and would be discussing it again with staff in the near future. Mr. Wyant asked who set the priorities for the top third. Mr. Tucker explained that the Leadership Council and all of the County department heads considered the items and ranked them, even items out of their area in order to provide an unbiased view of the overall needs of the County. Ms. White presented the criteria of evaluation for the ranked items, including how the items relate to department goals and objectives, how it relates to health and safety, feasibility of completion on time, the benefit to internal customers, and whether or not it is revenue generating. Ms. Thomas noted that the health and safety criteria seemed to make police and law enforcement items get weighted more heavily. Ms. White mentioned that the term public safety hazard was used. Ms. Thomas responded that all the people in the room for those discussions were amateurs, except for the person representing the police department, and did not want to appear to not support law enforcement. Mr. Rooker indicated that the Board had discussed and agreed that the first item on that list – addition of law enforcement officers – was necessary. Mr. Breeden said that he has struggled with whether that is a new initiative, or one that is already known. Mr. Tucker commented that historically, the Board has made education and public safety top priorities. Mr. Dorrier said that the goal was to have one police officer for every 1500 citizens. Ms. Thomas stated that she made a chart of which requests got into the top one-third, and the police got as many in as Community Development, and three times as many as Social Services even though those departments had more requests. Ms. White said that in the Quality of Life area, the biggest category in the top one-third is public safety, which comes in at $1.0 million. Mr. Tucker noted that staff did not approach this as if they were developing a budget, and there are still staffing items to be resolved. He added that the Leadership Council said they need more information in order to make decisions about specific priorities. Mr. Boyd asked how much the County supplements transit. Ms. White replied that any new line is 100 percent funded by the County. Mr. Tucker explained that the County contracts with the CTS. Mr. Foley mentioned that they are planning to have more discussions about public transportation, and again, more information is needed. Ms. White said that County staff is trying to assess what the need is, especially in light of the County office building move to 5th Street. This is just to give Board members an idea of what those requests are; they do need a lot of fine tuning. Ms. Thomas mentioned a letter from a podiatrist who moved his office to that area, and was upset at the lack of transit to the area. Mr. Tucker stated that staff is working to develop data on how transit is used in that and other areas. He said that a small number of people are using public transit based on information they currently have, and those going to Social Services often use taxis instead. Mr. Rooker suggested contracting with JAUNT, so that smaller vehicles are used. There is a big difference between providing regular transit service and taking care of people who need rides. Ms. Thomas said the goal is access, not necessarily mass mobility. Mr. Tucker commented that they have to have access to a bus to even get there. Mr. Bowerman commented that there is really no difference between where Social Services is now in terms of our citizens. Mr. Rooker added that in a lot of ways Social Services is more accessible because it is located right January 19, 2005 (Meeting Adjourned from January 12, 2005) (Page 6) off of I-64. Ms. White moved onto Effective Services and the requested initiatives that were in the top one-third of that category, noting that these are strategies that staff is proposing to make services more efficient and customer responsive. She noted that these items total $300,000. Ms. White explained that if the County were to fund just the top five strategic initiatives, the total cost is almost $700,000. She emphasized that those projects need to be looked at more closely, as some may need just one-time funds, etc. Ms. White said that staff is looking for direction from the Board as to whether the priorities are ranked appropriately, which are missing, and which should not be considered imperative. Ms. Thomas said that she had trail development, 5th Street transit, stormwater, and Family Support program funding in the top, along with police officers. Mr. Boyd suggested having the Board use the same rating system as the Leadership Council did in evaluating these priorities. Ms. Thomas asked for some clarification on how much of Social Services’ budget would need to be funded by the County, as she had always felt that federal and state funding would accompany mandates. Mr. Tucker responded that federal and state funding for these mandates was steady, but is now starting to erode. Ms. White commented that state funding has been flat, and caseloads have increased. She added that the same is true for rent. Mr. Rooker noted that there is money saved for the rent being paid for Social Services, and added that the Family Support program is not mandated. Mr. Bowerman added that Bright Stars and the Family Support program save the community money in the long run. Mr. Rooker agreed, adding that what bothers him is when the County assumes a program where they are paying 20 percent, and that proportion gradually increases until the County is paying the lion’s share. Mr. Tucker said that more work needs to be done on the priorities, but the Board’s input from this meeting does give staff some direction at this point. Mr. Rooker noted that he does not feel that public transit to 5th Street would be in his top five. Ms. Thomas commented that the area where the COB is located is a pocket of poverty, and people have come to the MPO meetings and requested transit service to that area. Mr. Rooker stated that he wants the Board to find the most efficient way to meet the needs, and that may not be the CTS buses. He said that there may be other options, such as smaller vans, for transit. 2005 Real Estate Assessments Mr. Tucker presented a graph that shows reassessment trends on a biennial basis since 1983, noting that the peak came in 1991 at 22.48 percent, then decreased 50 percent every two years, bottoming out in 1997 and gradually increasing again. On an annual basis, he said, the average for the last year would be about five percent, and a penny tax increase would result in about $52,000. He mentioned options for use of the reserve, noting that tax rate reduction, funding the CIP, additional funding to general government and school operations are all possibilities. Mr. Rooker said he would like to see the increase from the November projections put aside. The Board saw today that there is a huge gap in CIP funding, potentially. The Board is going to have initiatives perhaps that it will decide later it wants to include. The Board may want to do a rate reduction when it looks at the budget and see how much property taxes are increasing with the assessments. He added that it would be wise to look at the budget based upon the November projections, and then look at how to deal with the increase. Mr. Bowerman commented that the amount is four cents. Mr. Tucker responded that it is actually 3.3 cents. Using their computerized projection model, staff could run a scenario where a penny were added and subtracted from operations, CIP, etc. Mr. Boyd stated that he agrees with Mr. Rooker that the funds should be set aside before making decisions on allocation. He asked if the School Board was using November or December figures in making their budget. Mr. Tucker replied that everyone is using the November figures, because the new information has not been released yet. Mr. Dorrier said that he agrees with Mr. Rooker also to set the money aside, and then consider tax rate reductions, CIP funds, etc. Mr. Breeden added that he thinks we need to be careful when talking about setting aside this $4.0 million, an amount that is over and above what staff thought it was going to be. But even with that, we are January 19, 2005 (Meeting Adjourned from January 12, 2005) (Page 7) still looking at a 17 percent increase from where we were. He mentioned that the advertisement that typically shows the equivalent tax rate is going to be seven or eight percent higher. Mr. Boyd commented that the consumers are going to be faced with a 25 to 27 percent increase in the amount of taxes they pay, and that is the reality of what the Board is going to hear. Mr. Bowerman said the Board heard it in 1991, when there was a 22 percent. Mr. Rooker said it is a little bit premature to do this until we look at the budget. Mr. Tucker explained that the reason the revenue figures differ from November to January is because of the new computerized system, noting that staff can now go back and correct items that have been sold, which generates a new figure. Board members agreed that assessments have not been able to keep up with sales figures, as the real estate market has escalated. Mr. Rooker noted that the big increases have been in price of raw land. Mr. Tucker mentioned that tax assessment change notices would be mailed at the end of the week, adding that a press release went out earlier in the day. He added that appraisers in other localities have seen similar rises in real estate sales values and assessments. Mr. Rooker reported that he had recently attended a transportation meeting where Butch Davies, of the Commonwealth Transportation Board, mentioned that the communities that get money are the ones that are going to find creative ways to come up with local money that the state can match. Mr. Rooker added that if the County decides to go with a service transportation district, they are not enabled to levy a gas tax. There is not clear indication that we will obtain enabling legislation to do that, even though it may be the unanimous recommendation of the committee. We may have broad-based community support, but we may not be able to get it done at the legislature. He added that through our CIP or operating funds, we need to keep in mind that if we are going to tap into those leveraged resources that may be made available, we are going to have to find some local way to contribute toward transportation. Mr. Bowerman commented that the Board needs to take a look at its resources. Mr. Tucker said that he is worried that this is an effort to shift more to localities, when it is really the state’s responsibility to step up for maintenance and building of roads. Mr. Bowerman said the price of gasoline moves enough in one week that if that change was put into a gasoline tax, it would probably be enough to finance the type of construction we’re talking about. Mr. Tucker commented that that is true if the legislature gives us that authority. Mr. Rooker noted that there is no guarantee how much would be kept locally. Mr. Boyd asked what would happen if there were a local tax, suggesting that people might buy gas in neighboring localities instead. Mr. Bowerman responded that people are not really paying attention because of the prices at the pumps. Mr. Tucker said the meals tax has not deterred people from eating in local establishments. Mr. Rooker noted that there are differences of five or six cents or more just in local stations. He added that under the current funding formulas, there will not be funds any time soon to build the Meadow Creek Parkway, the Southern Connector, the Eastern Connector, Hillsdale, etc. If we can at some point come up with a bondable stream of revenue, we may be able to build some of these projects in a timely basis as opposed to sitting here waiting for state allocations. Mr. Breeden presented a long-range budget impact model, but cautioned Board members not to focus too much on the 2010 budget year. He thinks these assumptions that are made can change significantly. He explained that based on current assumptions, the revenues for 2006 would exceed the expenditures by $795,000; we would have that surplus. He clarified that this is all based on November figures at this point. Mr. Breeden explained that expenditures on salaries increase by 7.4 percent, taking into account new positions, merit and pool increases. Mr. Tucker clarified that 7.4 percent is not just salary increases, but takes into account new positions and scale adjustments as well as employee raises. Mr. Breeden said that for the other four years projected, he only included the four percent increase. He is sure that will move around some too, based on things that change each one of those years. Mr. Breeden reported that the baseline general government operating expenses are assumed to be increasing by three percent over the five years. The numbers that have been requested are substantially above those there; currently they are without a doubt more than that. Mr. Bowerman asked how these projections were built. Mr. Breeden explained that Davenport helps develop this model. Mr. Breeden explained that these assumptions are based on a tax rate that remains 76 cents, and reassessments are based on the November projections of 17 percent. He added that one-half of that (to cover two years) plus new construction yields the working figure of 12.98 percent. Mr. Breeden said that for benefits, the FICA, VRS, Workmen’s Compensation, Health & Dental are included. He mentioned that they have built in a 15 percent annual increase for healthcare. Mr. Rooker commented that nationally, the healthcare numbers are starting to trend downward. Mr. Breeden acknowledged that fact, and indicated that staff would be meeting later in January to discuss January 19, 2005 (Meeting Adjourned from January 12, 2005) (Page 8) the impact of falling costs on the budget. Mr. Breeden noted that there are no CIP operating expenses reflected in the budget, adding that there are also no strategic initiatives included. Mr. Breeden said that he would like to put a figure in for those expenses for the revised scenario as presented earlier – revised general government, full funding of schools. He explained that the first year would result in a change of $81,800; over the ten years, that figure would be $5.6 million. Mr. Breeden stated that much of that is related to public safety/fire and rescue. We’re going to have some of those expenses. Mr. Breeden said that the reassessment increase would provide 18.1 percent annualized growth. Mr. Rooker asked how the years without reassessment would be factored in. Mr. Breeden responded that the projections are based on how reassessments should perform based on historical patterns – taking half of the biennial reassessment and adding four or five percent for new construction. Mr. Wyant asked if this was averaging the biennial over each year. Mr. Breeden confirmed this. It is going to stay pretty constant. He said that if that 18 percent is compounded, it would have a huge impact on the CIP and the ten-year figures. Presenting figures on the effect of reducing the tax rate by one cent, he explained that there would still be a surplus in 2006. When we put one assumption in here, it is pretty easy to see the impact; when you start accumulating those impacts, it gets real difficult to see which factors impact the net result. Mr. Tucker mentioned that the 60/40 split is taken into account also. Mr. Breeden said that general government figures go down to $489,000 if the tax is reduced, and schools and general government allocation is less because the one cent goes to the CIP and is taken off of the 60/40 split. He stated that to include the top one-third of the strategic initiatives, it has a very drastic effect over the five-year period, and causes a $691,000 deficit in 2006, which continues to escalate. Board members asked Mr. Breeden to use the model to demonstrate what would happen if the tax rate were reduced. They reviewed several scenarios. Mr. Tucker said that there is another work session scheduled in February to follow up on this one, and based on what direction the Board gives today, staff will know what to bring back for any future sessions. ________________ Agenda Item No. 3. Matters Not Listed on the Agenda From the Board. Ms. Thomas reported that two historic preservation statewide organizations, now joined into one, give out awards each year, and the Planning District Commission and the Albemarle Convention and Visitors Bureau received an award for a project they have been working on for several years – the Heritage Tourism Map and Tour Kit. __________ Mr. Tucker reminded the Board that tomorrow is the last public forum for the water supply initiatives, this one on the Ragged Mountain initiatives. He said the Board’s next regular meeting would be February 2nd, and Tom Frederick would be presenting information to the Board. __________ Mr. Breeden acknowledged his staff for their work on the budget models. ________________ Agenda Item No. 3. Adjourn. There being no further business, the meeting was adjourned at 5:50 p.m. ________________________________________ Chairman Approved by Board Date: 06/08/2005 Initials: DBM