|
BUDGET, FINANCE & INVESTMENT COMMITTEE
March 6, 2003 6:00 P.M. Courthouse
MINUTES:
Members Present: Others Present: Others Present: Others Present: Comm. Bob Bullen Nancy Allen Donna Rowland Mary Schneider Comm. Anthony Johnson Jennifer Henson Tina Jones Lara Hilliard Comm. Will Jordan Lynn Duke Jeff Phillips Deb Partin Comm. Robert Peay Robert Mullins Elaine Cawthon Sue O’Brien Comm. Steve Sandlin Bob Asbury Lisa Nolen Sherry McCullough Comm. Doug Shafer Regina Nelson Jeff Sandvig Tommy Sandford Comm. Joyce Ealy, Chm. Angel McCloud Heather Dungan Jennifer Farish Paul Long Karen Neal Tom McAnulty Tommy Smith Mark Herbison Van Zbinden Other Interested Citizens
Chairman Ealy presided and called the meeting to order with all members being present.
APPROVE MINUTES: The minutes of the February 6, 2003 meeting and the February 12, 2003 meeting were presented for approval. Comm. Jordan moved, seconded by Comm. Shafer to approve the minutes as presented. The motion passed unanimously by acclamation.
REP. DONNA ROWLAND REPORT Rep. Rowland gave the committee her verbal endorsement for a grant program that may assist Rutherford County with flooding problems. She stated that the Letters of Intent must be filed by March 14, 2003. Ms. Rowland offers her support and states that the county will need to match 25% with some other source of funds.
HUMAN RESOURCE DIRECTOR
Comm. Jeff Phillips informed the committee that the HR Director Advisory Committee has narrowed the search from over 100 applicants to one. He introduced Lara Hilliard as the unanimous recommendation of the Advisory Committee as the Human Resource Director for Rutherford County.. Ms. Hilliard summarized her background and projected her eagerness to begin working with Rutherford County. She presented the committee with her plan of action. Comm. Jordan asked when she would be able to begin work, assuming the full Commission approves her appointment. She stated she would be able to begin before the end of the March. Comm. Jordan moved, seconded by Comm. Johnson, to endorse Lara Hilliard as the Human Resource Director for Rutherford County. Motion approved by acclimation.
INVESTMENT REPORT: Ms. Jennifer Henson presented the monthly Investment Report for the information and use of the committee. Ms. Henson advised that there were no investment transactions during the month of February and informed the committee that funds invested at LGIP were earning an interest rate of 1.40%. Ms. Henson informed the committee the Trustee’s Office has collected 81.73% of property taxes, which is more than last year (79.97%) at this time.
March 6, 2003 6:00 P.M. Page 2
Comm. Sandlin moved, seconded by Comm. Peay to approve the Investment Report as presented. The motion passed unanimously by acclamation.
FUND CONDITION REPORT: Ms. Elaine Cawthon, Deputy Finance Director, presented the Fund Condition Report for the month ending February, 2003. Ms. Cawthon advised the Development Tax collections for the month totaled $184,500. The year-to-date collections are $2,417,250, which is ahead of projections. While Development Tax collections have dropped during the month of February, the year-to-date collections are still higher than in any year since the inception of the tax. The total cash balances are $119,856,105 operating funds being $97,844,033 and borrowed funds being $22,012,072. The committee reviewed the fund cash balances. Ms. Cawthon advised the cash balance in the Employee Insurance Fund is $1,080,363. She pointed out that the cash balance is almost 1.24 million less than last year at this time. The balances are equal to or more than they were last year. Ms. Cawthon reminded the committee that this fund still owes the General Fund $2 million and needs to be paid back before June 30, 2003. She explained that she would be speaking to this issue again later in the meeting. Ms. Cawthon reviewed the summary of revenues and expenditures, and the statement of proposed operations through February 28, 2003. Additional information was included for the committee showing the required fund balance for the County General Fund, Debt Service Fund and the General Purpose School Fund. All funds are in compliance with the state and local requirements as of February, 2003. Comm. Sandlin requested additional information regarding the balance of funds left in the technology project. Mr. Sandvig stated that the board of education would probably need those monies for technology for Siegel High School Ms. Cawthon advised there are no other conditions to be reported at this time. Comm. Sandlin moved, seconded by Comm. Peay to approve the Fund Condition Report as presented. The motion passed unanimously by acclamation.
INDUSTRIAL DEVELOPMENT BOARD Mr. Tommy Smith and Mr. Mark Herbison presented a handout explaining how the IBD board goes about recruiting business. Mr. Herbison requested approval of Inducement Agreements for Corporate Capital Development, Inc. to locate a company in Rutherford County. This company expects to employ 1250 employees by the end of 2004, with salaries starting in the mid-twenties and up to sixty thousand dollars. The average wage is approximately $34,000. Full benefits are included in all jobs. Comm. Johnson asked for
a break down of the jobs separating management from other employees. Mr.
Herbison stated that entry level reps begin at $21-$23 thousand; upper level
reps, top out at $27,000 (amounts do not include benefits)(1100 rep positions);
managers (73 positions) range $34-$37 thousand; senior managers (7 positions)
range $50-$55 thousand; information technology (3 positions) range $45-$50
thousand; and upper managers (3 positions) range $60-$65 thousand per year. Mr.
Smith said they are under a confidentiality agreement and can not disclose who
the company is, but he assured the committee, this company is in the top 400, it
is a quality company with a great track record. Mr. Smith stated that
Rutherford Co. is competing with other localities that are offering no taxes for
20 years. Upon approval of the March 6, 2003 6:00 P.M. Page 3
Rutherford County Commission, the IDB will issue revenue bonds not to exceed $16,000,000 for personal property and $11,000,000 for real property, the principal and interest will be paid by the undisclosed call center company in the form of lease payments. The inducement requested by the IDB is as follows:
Real Property - $11,000,000 Personal Property-$16,000,000 Year Appraised Value (1) 2003 (2) No PILOT pymt required 2004 $1,600,000 No PILOT pymt required 2005 $1,600,000 70% of taxes due 2006 $1,600,000 70% of taxes due 2007 $1,600,000 70% of taxes due 2008 $2,500,000 70% of taxes due 2009 $2,500,000 70% of taxes due 2010 $2,500,000 70% of taxes due 2011 $3,500,000 70% of taxes due 2012 $3,500,000 70% of taxes due 2013 $5,000,000 70% of taxes due
(1) If the tax rate for any year is less than the tax rate for the last year prior to the most recent county-wide reappraisal, the amount of PILOT to be paid shall not be less than the last year prior to the most recent county-wide reappraisal. (2) For that portion of the year 2003 that the lease is in force, the company will make payment in lieu of taxes which shall equal the taxes which would be due if the company owned the project.
Mr. Smith stated that if the company does not reach the levels (employees) the IDB has set for the company, then all the property goes back on the tax books as if it were privately owned, and the IDB will not have ownership. Comm. Shafer requested clarification that if the company does not have 1250 employees by 2004, then they would go back on the tax roll. Mr. Smith stated that that was correct, but he was not sure on the year. Comm. Shafer asked if there was anything in the contract that specifies hiring Rutherford County residents. Mr. Smith explained that the IDB has never have required it. Mr. Herbison stated that they questioned the company’s hiring practice and were told that the company intends to hire through the local career center. Comm. Sandlin inquired why other agreements have been for a term of around 6 years. Mr. Smith stated that all agreements are different; some companies have longer start up periods than others. Also the competition of other localities is taken into consideration. Ms. Cawthon stated that all the inducement agreements have been reviewed by the County Attorney and Property Assessor Tommy Sanford and both were agreeable with changes noted in the revised Exhibit B in the $11,000,000 inducement agreement. Comm. Johnson asked what the appraised value is currently on the tax roll. Mr. Smith stated, currently the appraised value is $2,100,000. Comm. Johnson noted that the salary levels were made a part of other inducement agreements but this one does not have it. Comm. Shafer asked how they arrived at the $1.6 million appraised value. Mr. Smith stated that they try to never go below what has ever been on the tax rolls. About 1 ½ years ago, this property was on the tax rolls at $1.6 million. They take that basic amount and begin negotiations. After discussion, Comm. Sandlin moved, seconded by Comm. Johnson, to approve the $11,000,000 inducement agreement with Corporate Capital & Development, Inc. related to real property.
Comm. Bullen called for the question. Voting Yes – Commissioners Bullen, Jordan, Peay, Sandlin, Shafer and Ealy Voting No - Commissioner Johnson Motion passed.
Comm. Bullen moved, seconded by Comm. Sandlin to approve the $16,000,000 inducement agreement with Corporate Capital & Development, Inc. related to personal property.
Voting Yes – Commissioners Bullen, Jordan, Peay, Sandlin, Shafer and Ealy Voting No - Commissioner Johnson Motion passed. Mr. Tommy Smith and Mr. Mark Herbison requested approval of an Inducement Agreement with Estes Express Lines, Inc. to assist them in developing 150 bay truck terminal with separate maintenance facilities in addition to parking located upon 42.16 acres in the Town of Smyrna. Within 2 years the company will be employing 300-325 employees. Long-haul drivers would earn an average of $67,500/year, local drivers-average of $42,500/year, mechanics - average of $41,700/ year, dock workers - average of $34,500/year, office and clerical – average of $28,750/year. Employee benefits include 401k matching up to 2.7%, comprehensive medical benefit, including dental & vision, paid vacation and sick leave, long-term and short-term disability. Mr. Herbison stated upon approval of the Rutherford County Commission, The IDB will issue revenue bonds not to exceed $10,000,000 for real property, the principal and interest will be paid by the Estes Express in the form of lease payments. The inducement requested by the IDB is as follows: Payment in lieu of taxes will be made on the property based on the schedule below:
Year 2003 PILOT in on land only 2004 PILOT in on land only 2005 PILOT based on 50% of the taxes otherwise due 2006 PILOT based on 75% of the taxes otherwise due 2007 PILOT based on 100% of the taxes otherwise due
Mr. Jordan questioned if we were approving this inducement after the fact since the company has already purchased the property. Ms. Smith stated that they had a meeting with Estes Express and that Estes Express mistakenly thought that meeting was a formal one. Therefore they moved on and purchased the property. The IDB was going to give the company two years of what ever the tax rate was on the existing property at that time. Since the company has already invested $2 million for the property, the agreement is to pay PILOT as if they were on the tax roll for the first two years. Mr. Herbison stated that they have a letter from Mayor Spivey addressing traffic issues. Ms. Cawthon pointed out a provision in the agreement that states if during a reappraisal year, should the appraisal of the property in the community increase causing lowering of the tax rate, the effective tax rate for the company would not decrease and the taxes paid would not be less than the amount of taxes paid in the prior year unless the net effect of the reappraisal rate decrease reflects a lower tax amount to be paid. After discussion, Comm. Bullen moved, seconded by Comm. Johnson, to approve the $10,000,000 inducement agreement with Estes Express Lines, Inc. The motion passed unanimously by roll call vote. Comm. Johnson requested having access to any inducement agreements before the meeting. Comm. Ealy stated that Ms. Cawthon received the agreements on the previous Friday and gave them to the County Attorney on Monday. Ms. Allen stated that the IDB is negotiating up to the last moment, but she is trying to figure out a way to expedite the process. She said she will meet again with Mr. Smith and Mr. Herbison. Comm. Jordan suggested that the IDB send each commissioner directly a copy of the agreements when they are approved. GENERAL FUND BUDGET AMENDMENTS
ARCHIVES Van Zbinden of the Archives Department requested approval of the following Budget Amendment to allow for the purchase of a scanner for outreach purposes. The cost of the scanner does not meet the capitalization threshold for capital purchases, and therefore needs to be purchased from a supply line item: March 6, 2003 6:00 P.M. Page 5
From: 101-51910-709 – Data Processing Equipment - $500 To: 101-51910-499 – Other Supplies/Materials - $500
Comm. Peay moved, seconded by Comm. Sandlin to approve the budget transfers totaling $500.00 as presented. The motion passed unanimously by roll call vote.
PROPERTY ASSESSOR
Mr. Tommy Sanford, Property Assessor requested approval of the following budget transfers to provide adequate funding for the Reappraisal Communications Account for the remainder of the year and to requested monies from Undesignated Fund Balance to purchase a computer printer for Reappraisal:
From: 101-52300-307 – Communications - $350 To: 101-52310-307 – Communications - $350
From: 101-39000 – Undesignated Fund Balance - $2,500 To: 101-52310-709 – Data Processing Equipment - $2,500
Comm. Sandlin moved, seconded by Comm. Jordan to approve the budget amendment as presented.
The motion passed unanimously by roll call vote.
YOUTH SERVICES
The Youth Services Director requested approval of the following budget amendment to recognize revenue from the Tennessee Juvenile Court Services Association and various sponsors to help in the funding for hosting their spring conference:
Increase Revenue: 101-48990 – Other - $1,200 Increase Expend.: 101-53910-599 – Other Charges - $1,200
Ms. McCloud also requested approval of the following budget amendment to reallocate monies from the JAIBG due to the fact that the Assistant District Attorney was not hired until January, and the grant funds need to be spent this year. This grant money was split among the Youth Services Department, District Attorney General and Juvenile Detention:
From: 101-53600-103 – Assistants - $6,871
To: 101-53600-709 – Data Processing Equip. - $2,200 101-53600-317 – Data Processing Svc. - 1,200 101-53600-435 – Office Supplies - 971 101-54240-709 – Data Processing Equip. - 900 101-54240-317 – Data Processing Svc. - 1,600
Comm. Peay moved, seconded by Comm. Johnson to approve the budget amendment as presented. The motion passed unanimously by roll call vote.
DRUG COURT Ms. Mary Schneider, Drug Court Coordinator, requested approval of the following budget transfers to allow for the replacement of a printer that cannot be repaired and to also allow for the purchase of a computer. The transfer will also provide adequate funding for the Communications Account for the remainder of the year:
From: 101-53200-719 – Office Equipment - $478 To: 101-53200-411 – Data Processing Supplies - $478
From: 101-53200-399 – Other Contracted Services - $2,000 To: 101-53200-307 – Communications - $1,500 101-53200-709 – Data Processing Equip. - 500
Comm. Peay moved, seconded by Comm. Johnson to approve the budget amendment as presented. The motion passed unanimously by roll call vote.
CORRECTIONAL WORK CENTER
Ms. Nancy Allen requested approval of the following budget transfer for the Correctional Work Center to provide adequate funding for the Drugs and Medical Supplies Account due to the increased number of inmates receiving Psychotropic medications:
From: 101-54220-340 – Medical & Dental Services - $20,000 To: 101-54220-413 – Drugs & Medical Supplies - $20,000
Comm. Sandlin moved, seconded by Comm. Jordan to approve the budget amendment as presented. The motion passed unanimously by roll call vote.
AMBULANCE Ms. Nancy Allen requested approval for the Ambulance Service of the following budget transfer to increase the amount for the Office Supply Account. Last fiscal year, line items were reclassified, office supplies were underestimated, and expenses for printing, stationery and forms were overestimated:
From: 101-55130-349 – Printing, Stationery & Forms - $7,000 To: 101-55130-435 – Office Supplies - $7,000
Comm. Johnson moved, seconded by Comm. Shafer to approve the budget amendment as presented. The motion passed unanimously by roll call vote. Ms. Allen requested approval of the following budget transfer to purchase a radio for the new supervisor’s vehicle. The radio is over the capitalization threshold and must be purchased from a capital line item:
From: 101-55130-499 – Other Supplies/Materials - $2,400 To: 101-55130-708 – Communications Equipment - $2,400
Comm. Peay questioned the request for the radio and the cost. He wanted to know what type of radio the Ambulance department intended to purchase. Ms. Allen called Mr. Nunley to determine this information. Ms. Allen explained to the committee that Mr. Nunley would take this request back through the committee process. MISCELLANOUS Ms. Cawthon explained to the committee that she has received an invoice from our insurance carrier that adds new vehicles for the Sheriff’s Department to the county’s insurance coverage. She requested approval the following budget amendment:
March 6, 2003 6:00 P.M. Page 7
From: 101-58900-502 – Building & Contents Insurance - $2,190 To: 101-58900-506 – Liability Insurance - $2,190 Comm. Sandlin moved, seconded by Comm. Johnson to approve the budget amendment as presented. The motion passed unanimously by roll call vote.
ANIMAL SERVICES At the February Commission meeting, the resolution approving the Lane Agri-Park as the site for the new Animal Shelter was amended to add donations that have been received in the amount of $21,652.56 to the project. Ms. Allen requested approval of the following budget amendment to comply with commission action:
From: 101-35120 – Purpose 2 – Animal Shelter - $17,950 Increase Revenue: 101-44570 – Contributions & Gifts - 3,702 To: 101-99100-590 – Transfers to Other Funds - $21,652
Ms. Cawthon explained that the amount from employees had increased by $2,413 since the above amendment had first been approved. Ms. Cawthon requested approval to revise the budget amendment to include all contributions received. Comm. Peay moved, seconded by Comm. Shafer to approve the budget amendment as corrected by Ms. Cawthon. The motion passed unanimously by roll call vote. Comm. Jordan requested additional information on Gary Chapman’s offer for excavation services and wanted to know who will oversee their work. Ms. Allen stated that the PBA will oversee and a contract will be signed with Gary Chapman’s company.
CHANCERY COURT Ms. Allen requested approval of the following budget amendment to provide adequate funding for the Employee Insurance Account for Chancery Court. An employee who was not previously on the County’s health insurance has elected to participate:
From: 101-58600-205 – Employee Benefits - $4,470 To: 101-53400-205 – Chancery Court/Employee Insurance - $4,470
Comm. Sandlin moved, seconded by Comm. Johnson to approve the budget amendment as presented.
The motion passed unanimously by roll call vote.
SHERIFF DEPARTMENT Ms. Regina Nelson requested approval of the following budget amendments to provide additional funding for next month’s utilities. Gas estimated @ $26,000, electricity @ $15,000 and water @ $17,000. Ms. Nelson reminded the committee of the increase in the gas bill as a result of new meters.
From: 101-39000 – Undesignated Fund Balance - $60,000 To: 101-54210-452 – Utilities - $60,000
Ms. Nelson also requested approval of the following budget amendment to appropriate insurance proceeds for wrecked vehicles to the Maintenance/Repair Account:
Increase Revenue: 101-44520 – Insurance Recoveries - $13,528
Increase Expend.: 101-54110-338 –
Maint./Repair Vehicles - $13,528 March 6, 2003 6:00 P.M. Page 8
Comm. Sandlin moved, seconded by Comm. Peay to approve the budget amendments as presented. The motion passed unanimously by roll call vote. The Sheriff’s department receives a percentage of the telephone commission on the inmate telephone system from Evercom. Ms. Nelson requesting approval of the following budget amendment to appropriate $10,000 from Evercom, the inmate telephone system, so that they could purchase cameras in the booking area cells and for suicide watch:
Increase Revenue: 101-43370 – Telephone Commissions - $10,000 Increase Expend.: 101-54210-707 – Building Improvements - $10,000
Comm. Sandlin moved, seconded by Comm. Johnson to approve the budget amendments as presented. The motion passed unanimously by roll call vote.
JUVENILE DETENTION Ms. Lynn Duke requested approval for an employee to buy down 120 hours of compensatory time from the Overtime Account. The Employee Handbook was amended in June, 1997 to provide that when an employee has reached the maximum level of compensatory time accrual, the department head may request that the employee be paid for up to one half their balances. This request must be approved through the normal committee process, and will be considered payment for overtime for accounting purposes. Ms. Duke stated she has does not need a budget amendment because there is enough funds in her Overtime Account to pay this out.
Comm. Peay moved, seconded by Comm. Johnson to approve the payment of compensatory time. The motion passed unanimously by roll call vote.
DISCUSSION FOR FUNDING FOR SENIOR CITIZENS Comm. Ealy reminded the committee of Comm. Bullen’s request to briefly discuss possibly funding Senior Citizens Services by dedicating part of the tax rate for Senior Citizens. Ms. Sue O’Brien reported to the committee that she could not state that all seniors in the county are being served from the six different agencies in the community (Retired Senior Volunteer Program, Mid-Cumberland Human Resource Agency Nutrition Program, Mid-Cumberland Human Resource Transportation Program, St. Clair Senior Citizen Center, Smyrna Senior Citizens, LaVergne Senior Citizens). But she does know that there are seniors in the county that are receiving services from these agencies. She stated that the Murfreesboro center has served 33 seniors from the Rockvale/Eagleville, 2 from Fosterville area, 24 from LaVergne area, 11 from Milton, 17 from Readyville, and 116 from Smyrna. The LaVergne Senior Citizens served 189 seniors, of which 71 reside outside the LaVergne city limits. The Smyrna Senior Citizens served 345 seniors, of which 86 reside outside the Smyrna city limits. Mid-Cumberland Nutrition Program delivers meals to 54 seniors outside city limits. The RSVP currently has 137 volunteers serving in the Rutherford Co. area. Ms. Deb Partin informed the committee that 55% of the clients served by the Transportation program are 60 years and older. 45 new clients were added in February, 2003. In the past year, her program provided 11,292 trips for people who were over the age of 60. 694 of those trips were for county residents. Ms. Partin has a need for additional vans.
DOMESTIC VIOLENCE Ms. Heather Dungan, Domestic Violence Coordinator, requested approval of the following budget transfers to provide funding in the Travel Account for the new director to attend a
conference in Duluth, MN, and to increase Office Supplies to purchase videos for the courtroom and supplies for victims:
From: 121-53110-348 – Postal Charges - $530 121-53110-790 – Other Equipment - 149
To: 121-53110-196 – In-Service Training - $225 121-53110-355 – Travel - 305 121-53110-435 – Office Supplies - 149
Comm. Peay moved, seconded by Comm. Jordan to approve the budget amendments as presented. The motion passed unanimously by roll call vote. Ms. Dungan also requested the committee’s approval for her to reapply for a STOP grant for the Domestic Violence Program. Comm. Sandlin moved, seconded by Comm. Johnson to authorize Ms. Dungan to reapply for the STOP grant and for the county executive to sign all related grant documents. The motion passed unanimously by roll call vote.
FINANCE DIRECTOR SEARCH Ms. Sherry McCullough with Holland Employment, Inc. reported on their progress in searching for the next Rutherford County Finance Director. Questionnaires were sent to 10 potential applicants. Applicants have until Friday, March 7, to return their questionnaires. As of this date, she has received six. One applicant has requested his application not to be considered. Ms. McCullough explained her next step would be to conduct telephone interviews. She anticipated having the telephone interviews completed before March 21 and would be ready to meet with the committee on March 21 with the results of her review of the questionnaires and telephone interviews. The committee will meet at 5:00 pm on March 21 to determine which applicants they will conduct personal interview.
FINANCIAL ADVISOR’S PRESENTATION
Mr. Tom McAnulty and Mr. Paul Long presented the committee with information comparing and contrasting interest and issuance costs between fixed and variable cost rates. Mr. McAnulty explained when local governments issue bonds or notes at a fixed interest rate, the rate will remain the same until the obligation is paid off or is redeemed. The total interest costs and any other costs are determined at the time the obligation is issued with no future changes by the local government or the investors purchasing the securities. Under Variable rate issues, the interest rate varies for each period. The rate can be adjusted daily, every 7 days, 28 days, 35 days, quarterly, semi-annually or annually. The most common rate adjustments are the daily, 7-day, or 35 day with flexibility to switch rate periods while the obligation is still outstanding. Local governments cannot issue variable rate obligations directly like fixed rate debt. They may issue variable rate obligations under TCA 12-10-101 (through a public building authority). Other factors/risks relating to variable rate issues that have costs associated with them are as follows: liquidity provider and liquidity agreement, letter of credit provider, remarketing agent, trustee, registration & paying agent and the unknown market risks associated with variable rate obligations. Mr. Long reviewed the comparisons made by the Tennessee County Services Loan Program on three notes/bonds issued by Rutherford County to show the effects if Rutherford County had issued variable rate securities through the TCSLP. Mr. Long pointed out that their initial interest calculations on the three issues were incorrect, they did not take into account accrued interest received at closing, nor interest earned during construction. With variable rate debt, the local government must spend the monies first, and then request monies from TCSLP. Also, their
March 6, 2003 6:00 P.M. Page 10
schedule did not present recurring expenses of variable rate debt for the life of the bond issue (administration fee, and credit facility fee). Mr. McAnulty explained that purchasing a cap or a collar for the variable rate is another alternative for local governments. With a cap, you are stating you agree to a maximum rate of interest charged. Once the rates reach and exceed that cap, the provider of the cap would be responsible for paying the excess rate. Most of the caps are at 6.5%. Anything less than that wouldn’t be cost effective. The caps are only good for a specific time period and not the life of the issue, generally about 3-5 years and are subject to change. It is not an automatic renewal at the previous price. Mr. McAnulty advised to stay in the fixed rate market. Comm. Peay brought up the risk involved in being part of a pool. Mr. McAnulty stated there is some potential liability outside of the payment of principal and interest. After discussion, Comm. Bullen moved, seconded by Peay, that the county only authorize the issuance of fixed rate securities on long-term debt until the commission votes otherwise. Comm. Peay called for the question. The motion passed unanimously by roll call vote. Mr. Long and Mr. McAnulty presented the committee with information regarding the effects of refunding and reissuing some of the county’s existing debt. They recommend the committee authorize refunding and restructuring the $13,190,000 note issued 11/1/97, $35,015,000 bond issued 3/1/98, and the $30,610,000 bond issued 10/1/01. Mr. McAnulty recommends that the county refinance the balance of the capital outlay note at the same time bonds are issued for the $22.5 million for capital projects. The other two issues could be refinanced at a later date once more information is known regarding the state and local economies. Comm. Shafer asked how much it would actually cost the county to refinance the debt. Mr. McAnulty stated that there is a cost associated with the refinancing, but they have allowed for that cost and have still projected a savings to the county. Mr. McAnulty explained that the new money borrowed is for $22.5 million and the refinancing of the capital outlay notes is $7.395 million for a total of at least $29,895,000. He will offer it to the bidders as one package. As part of the bid, he is considering .05% as a discount. They have the option to take the .05% discount or they can bid a premium and that will offset it. There will be some cost of issuance above that. The county will have to pay Moody’s and Standard and Poor’s credit rating agencies, the official statement will have to be prepared, QUSIPs registration paying agent, advertise in the Bond Buyer of New York and the local paper, bond council, financial advisor fee, for a total approximate cost of $75-80 thousand dollars. It doesn’t cost nearly that much to add it to the issue for the new money as it would be if you tried to market the refinancing alone. Based on their plan, they propose paying the principal of the refinancing portion during 2008 and 2009. The interest cost would be about the same; however with there would be a present value savings of about $450,000. After discussion, Comm. Bullen moved, seconded by Comm. Johnson, to approve the resolutions authorizing the refunding and restructuring of the $13,190,000 capital outlay notes (outstanding balance of $7,395,000) to be included in the next bond issue, and to authorize the refunding and restructuring of the other two issues (combined outstanding balance of $17,590,000) , but the authorization for issuance is subject to the approval of the budget committee. The motion passed unanimously by roll call vote.
Mr. Long presented the committee with information showing the current
debt fund requirements and the debt service fund revenue projections. The
committee reviewed the listing of capital improvement projects under
consideration. The projects include School renovations & construction,
city/county road projects and projects listed within the facility master plan.
The borrowing schedule is as follows, but could change after the first year.
Mr. McAnulty stated that March 6, 2003 6:00 P.M. Page 11
his goal in preparing the financial plan was to not raise taxes for debt service. Because there are some unknowns (e.g., regarding the impact of the BEP distribution for teacher salaries, state’s payment of jail costs, and the state’s plan to withhold state shared revenues) a conservative approach was used in preparing the financial plan.
Expected date of Issuance Amount borrowed for Cap. Projects Spring 2003 $22,500,000 Spring 2004 $25,700,000 Spring 2005 $30,000,000 Spring 2006 $30,000,000 Spring 2007 $30,000,000 Spring 2008 $30,000,000
Mr. Long noted that this schedule does not include all monies requested by Jeff Sandvig for the schools, and that the Board of Education is in the process of updating their 10-year capital improvement plan. Mr. Long presented schedules showing the effect on the tax rate for the Debt Service fund with borrowing at the amounts listed above. Mr. McAnulty believes the county would obtain a very low interest rate, in the low 4% range. He also showed the effect on ending fund balance with issuing debt by delaying principal payments, refunding capital notes, and the loss of the cities’ share of sales tax dedicated for school construction. Comm. Jordan questioned the schools board’s plan and the amount of funds allocated for Roy Waldron. Mr. Sandvig stated that the Board of Education has not formally approved all changes proposed for the school. Mr. Long stated the resolutions would be worded in a way that would allow the monies to be used generically for school construction and improvement. The commissioners then could allocate to specific projects later. Ms. Allen reminded the committee of the last bond issue in which the funding for the school stadiums was pulled before the bonds were issued and suggested that this could be done again. After additional discussion, Comm. Bullen moved, seconded by Comm. Johnson to accept the initial and final resolutions authorizing the issuance of general obligation school and public improvement bonds in the aggregate principal amount of not to exceed $22,500,000. The motion passed unanimously by roll call vote.
INSURANCE COMMITTEE Mr. Bob Shupe informed the Insurance Committee that the county currently has one million dollars in terrorism coverage. The current property carrier has agreed to increase coverage to $200 million for an additional premium of approximately $7,000. This would provide the additional coverage through June, 2003. Mr. Shupe explained that after Sept. 11, many of the insurance companies pulled their coverage for terrorism. The federal government agreed to help cover the insurance companies’ liability if they offered terrorism coverage, at a cost, to their clients. This coverage does not cover acts of vandalism. For coverage, the damage to property must meet the definition of an “act of terrorism” which means any act that can be certified by the Sec. of Treasury, with the concurrence of the Sec. of State and the Attorney General of the United States to be an act of terrorism. After discussion, Comm. Sandlin moved, seconded by Shafer, to not approve the purchase of additional coverage for acts of terrorism. The motion passed unanimously by acclimation. Mr. Shupe explained that the County’s policy does not provide for comprehensive coverage on vehicles over 5 years old. However, the county owns several large vehicles in the Solid Waste Department. The Mack garbage trucks cost about $103,000 and are not fully insured because they are over five years of age. The sanitation department has experienced two major accidents in the past 18 months resulting in a great loss. Mr. Shupe estimated it would cost an additional $1,000 per vehicle, per year to add full coverage, with a $2,000 deductible, to the older trucks,
and would cost about $1,180 for coverage on all three vehicles from March 13, 2003 thru the end of the current fiscal year. Ms. Cawthon stated that the Solid Waste’s Budget would have to be amended, but she could have the amendment ready by the full commission meeting. Comm. Jordan requested a listing of all vehicles whose replacement value is over an amount determined by the insurance committee and requested the committee review and determine if coverage needs to be increased. After discussion, Comm. Peay moved, seconded by Comm. Jordan, to obtain comprehensive coverage for the three solid waste trucks through the end of the current fiscal year at a cost of $1,180. The motion passed unanimously by roll call vote. Mr. Shupe explained changes regarding HIPAA Privacy Regulations that must be implemented by April 14, 2003, if a company’s claims totaled over $5 million last year. Rutherford County’s claims totaled approximately $12 million last year. These federal regulations cover personal and identifiable health issues. Two consultant companies that provide HIPAA privacy and compliance services were contacted. Ms. Allen stated that one company would charge a set fee of $15,500 and the other company would charge an assessment fee of $12,500. Mr. Shupe’s web site provides a checklist to help counties comply with all of the requirements. Mr. Shupe provided a boiler-plate step that the county must do. The county must amend the plan document to say that the county is complying with the new regulations. The employer (county general, school, highway dept., etc) must be separate from the plan. The employer has absolutely no right to see any health plan identifiable information. A plan sponsor must be identified. Mr. Shupe recommends that the current insurance committee be the plan sponsor and be the recommending body for any changes. The amendment proposed by Mr. Shupe sets out what the county is already doing. The plan sponsor is further broken down by the departments that would have a need to know on a daily basis. Mr. Shupe recommends that that be the county’s insurance department and the finance department. Mr. Shupe offers amendments to the plan document for compliance with the HIPPA Privacy regulations. Comm. Bullen moved, seconded by Comm. Peay, to accept the amendments to the Rutherford County Employee Benefit plan, as prepared and presented by Mr. Shupe which includes requirements meeting HIPAA guidelines. The motion passed unanimously by roll call vote. Ms. Cawthon presented information to the committee regarding a possible funding method for the Employee Insurance Fund relative to paying back the $2 million loan to the General Fund before June 30, 2003. She informed the committee that the insurance fund has received $9,078,370 from the various departments and agencies. However, expenses of the fund total $11,962,409. Current revenues will not allow the repayment of the loan to the general fund. Based on the number of contracts per fund, a certain percentage was applied to the outstanding balance of $2,000,000 as shown in the following table:
Fund % of Contract Share of Repayment General Fund 22.1% $ 442,000 GP Schools 71.3% 1,426,000 Road & Bridge 2.5% 50,000 Solid Waste .7% 14,000 Airport Authority .3% 6,000 Community Care 3.1% 62,000 Total $2,000,000
Ms. Cawthon stated she has already spoken to all the departments affected. She notes that on average, the insurance fund experiences a loss of over $360,000 per month. Ms. Allen noted that the only fund that is really affected is the General Purpose School Fund. She reminded the committee that last year the general fund paid ½ the burden owed by the schools. Ms. Cawthon
March 6, 2003 6:00 P.M. Page 13
stated that payment of the school’s portion of the loan will adversely affect the GPS fund balance and that they may go below the 3% required fund balance. Mr. Shupe stated that he is re-bidding the insurance, but he does not believe that will solve our problems. From his review of activity, claims have increased by $3,000,000, which is about a 15% increase. Part of the reason is growth, but the other part is utilization. People are using more health care and more drugs. He stated that Rutherford County is not unique or an isolated case. All his other clients are experiencing the same problems. Continuing on this trend, he estimates that insurance costs will exceed $21 million next fiscal year. Revenues are currently set to produce about $15 million. Comm. Sandlin asked if there was anything the county could do to control utilization, perhaps educating employees. Mr. Shupe stated that that was the key. Employees need to know why their insurance costs are so much. The employee needs to be brought back into purchasing process. They need to know that medications do not cost just $10, that doctor visits don’t cost only $20, that their total health care is not limited to the deductible. The county has in essence given employees a blank check for the health care. Disease management is another education topic that should be discussed with employees. Another choice is to offer two plans. Some companies are offering cash to employees to obtain their own insurance. Other private businesses are requiring working spouses to obtain insurance at their place of work. Mr. Shupe stated that every decision should be based on reducing costs, not shift costs. The only way to reduce costs in the current plan is to use less or be healthier. After discussion, Comm. Peay moved, seconded by Comm. Shafer, to approve the loan repayment schedule as prepared by Ms. Cawthon. The motion passed unanimously by roll call vote. Ms. Cawthon provided information regarding the possibility of increasing the employer share of insurance premiums to provide additional revenue during the current fiscal period in an attempt to keep the Employee Insurance Fund solvent. The county can’t increase the employee’s share until next January. She requested the committee’s approval of an additional appropriation for the departments of the general fund and solid waste department due to the increase in health insurance rates effective April 1, 2003.
GENERAL FUND AMENDMENT: From: 101-39000 – Undesignated Fund Balance - $77,428 101-58600-205 – Employee Benefits 5,677
To: 101-51300-205 – Co. Executive $ 2,584 101-51400-205 – County Attorney 965 101-51750-205 – Environmental 375 101-51760-205 – Geo. Inform. System 215 101-51800-205 – County Buildings 1,740 101-51900-205 – Community Learning 785 101-51920-205 – Risk Management 2,935 101-52300-205 – Property Assessor 8,900 101-53300-205 – General Sessions 3,480 101-53400-205 – Chancery Court 2,505 101-54110-205 – Sheriff’s Depart. 21,330 101-54140-205 – Wheel Tax 371 101-54210-205 – Jail 15,225 101-54510-205 – Building Codes 2,740 101-55160-205 – Dental 215 101-55130-205 – Ambulance Service 15,700 101-57100-205 – Agriculture Ext. 1,860 101-57500-205 – Soil Conservation 370 101-58400-205 – Garage 810
March 6, 2003 6:00 P.M. Page 14
SOLID WASTE/SANITATION FUND AMENDMENT: From: 116-39000 – Undesignated Fund Balance - $ 5,170
To: 116-55720-205 – Litter Grant - $ 260 116-55732-205 – Convenience Centers 4,910
Mr. Sandvig stated this is a heavy hit for the school board. After discussion, Comm. Sandlin moved, seconded by Comm. Jordan, to approve the 25% increase in the county’s insurance premiums effective April 1, 2003 and to approve the budget amendments as presented. Voting Yes: Commissioners Johnson, Jordan, Peay, Sandlin, Shafer, and Ealy Voting No: Comm. Bullen The motion passed by roll call vote. Mr. Shupe offered to give a presentation of the cost of insurance to employees to department heads. Mr. Jordan suggested the HR director conduct these meeting with the rest of the employees. Ms. Tune at the school board could educate school employees.
SOLID WASTE/SANITATION Ms. Cawthon requested approval of the following budget amendment for the Solid Waste/Sanitation Fund to add a Mack Truck to the county’s insurance coverage:
|