It's one o'clock or one past one and we'll go ahead and get started. Due to the length of our agenda today, I'll ask everyone to try to keep us on target. And I know that the council rules are in place that keep us on target a lot of times and lend us the five-minute comments on each topic. So if we could try to stay on task, if we're going to get through our complete agenda, that would be helpful. First up, as we do every budget and finance meeting, we have the Director, I'm sorry, the Acting Commissioner of Finance, Bill O'Mara, here to give us our revenue updates. So without further ado, I'll let Mr. O'Mara take over. And these are fresh off the press, I understand it. Yes, Chair, thank you very much. And I don't know if you want to – anyway, can you all see that okay? Yes. Okay. Well, I guess I will start since this is the year-end close season. I had this page of disclaimers last month, so I just kept it in there for this month. We are in the process of closing the books. A lot of things go on, and so the numbers I'm giving you are preliminary because of being in the middle of that process. Your first request was an update on June numbers, and this is what we have. It's slightly changed from the numbers that I passed out a month, but the basic position that we're in has not changed. The employee withholdings is just almost flat. It's slightly up. And the one thing that I would point out, and I will comment on this later too, is a significant event happened in FY08, the number we're comparing to. First time in 13 years that we actually had some employers that actually paid 27 payrolls in a fiscal year instead of 26. Not all employers, but such as the Urban County Government was one of those employers where they pay every two weeks and as the cycle goes. So we wound up having 27 weeks of payroll from some people in our 08 numbers that we were running against for FY09. So while we were analyzing those numbers, we kept keeping that in mind. On the net profit side, we were down 2.7%. and insurance was slightly down with franchise fees continuing the trend of being very healthy. So now I wanted to give you, this didn't come out as good as I hoped, but the trend is still there. You can see, let's see, is this the little red button? No? Okay. The yellow is the state of Kentucky, which – and we're tracking unemployment rate here. The light blue line is the United States as a whole. The pinkish number is the Lexington MSA. And then the lowest number – that's the good news – is Fayette County. So in comparison, we have the lowest unemployment rate of these comparisons. That's the good news. The bad news is that we're following the trend as in that it's going up. You can also see that because of all these dips and ducks there is some seasonality to it. So plotting this number, I was afraid of this, can you see the light blue line at the top which is the most significant one? That is Lexington's unemployment rate for the current year and the other lines are plotting comparisons to 08 07 and 06 and so you can see that we did follow the seasonality of a dip in unemployment in April and we also are following the seasonality of the increase in June what is the outstanding question is whether we will see the same trend of a lowering in unemployment rates in the fall which has been the trend in the last three years and whether we see that this year is a open-ended question the other thing I wanted to show was permits issued and we've had volatility in that again the light blue line is the current year we started out the year issuing more permits than the same period last year. Then we dropped below, and now here July, we're slightly above last year's levels. So there is volatility in the permits being issued right now as trying to be a predictor for building. So we have a lot of up and down to try to read into our numbers. So the July preliminary numbers, first blush, wow, that's great. Further blush, not as good as the first impression. We collected $8.8 million this July compared to $7.2 million last July, a 23% increase. In looking at that, however, we discovered that there is some major payments that were paid to us in July of this year that came in the first week of August last year. So I talked about slow pay affecting us, and this is kind of the opposite of that. For comparative purposes, the July 08 does not have $1.6 million that we have already put in the bank. So that's a timing difference that's going to come back to haunt us in August. The same thing is true for franchise fees. We have $295,000 that have been received in July that last year was not received until after July of last year. So even though we have a 23% increase in withholdings and 171% increase in franchise, if you smooth those for those timing differences, our July to July would be down 0.9%. And withholdings, our franchise fees would be down 23. And the total for the four categories, instead of being up 16.2, would be down 0.9. and hence the difficulty of projections when you're doing these month-to-month comparisons. Some of the presentation, just to show you how this is a stack chart, which shows that we were basically flat in payroll withholdings last year compared to the year before. Because of this robust July, we're starting off good. The next one is the same information showing three years so that you see the seasonality. And what I would like to point out to you are a couple of things. If you look at the very first point in July, we have basically started off at about the same place July the last three years. So July is not a predictor on how the whole year is going to come out. Then if you will look at the pinkish line, you'll see that we were up over the prior year some months, below some months, and we started going up and down. And this is where Council Member Lane asked us to do an analysis comparing the first six months of FY09 independent of the second six months. And so I will roll into that analysis. The first six months of FY09, we started off in a negative position, but we expected that because of that extra pay period that was in July of one year versus the other. The next two volatile, the October, November, those are also the differences of when three pay periods were in one month versus the same period last year. So they kind of canceled each other out. So we had August, September, and December to try to draw conclusions from. If you sum those six months together, that shows a trend of being up 2%, which was a pretty good place to be last December. If you go to the second six months, January through June, compared to the same January through June the prior year, the total trend was down 1.3. I've added July on there, which actually puts us in a plus position. Again, if you try to normalize it, that's my term. I don't know if I'm using it properly in economic terms, but taking that 1.6 out, it would show the seven-month average of down 1.1 instead of 1.3. So you have the first six months trending up 2%, the last six months trending down 1 plus percent. So what does that mean in dollars? The FY 2010 budget for withholdings is $156.5 million. We ended last year at $148.9. If we had the whole year at a 2% downtrend, we would be short a budget $10.5 million. And I have shown the impact of the actual projected under that scenario from 2% down to 5% up basically in order to make budget. That's kind of a sensitivity analysis to show what kind of volatility we're looking at in the withholdings for FY 2010. I've done the same thing for net profit. If you want to go through the exercise. I'll take that as a yes. Here's the bar chart which showed that we actually collected less last year in total net profits than the year before. Here is the same information showing you the seasonality of it. It's again showing that we started off July virtually the same the past three years. That's not a major month, so it's not a good predictor. It's more apparent if you see this pink line that it trended above the year before the first half and started trending below the second half and the gross numbers show that. At the end of December last year, the July through December compared to the same six months the year before was up 25.8 percent. And I remember saying that we can't explain it, we're surprised, we don't think it can last. What we didn't predict was how quickly it would change. And so the last six months, January through June, showed a year-over-year total six-month comparison down 14% from the prior year. If you add July to it, the seven-month running rate would be a negative 13.5. I'm sorry, Bill. Yes, sir. Mr. Chairman, can I ask a question? you know you say really important things sometimes and your voice is so calm that sometimes i don't hear it and i think you said something really important just now so could you repeat that part about the net profit receipts from january through july yes let let me go back to the slide before that I was comparing the first six months of physical 09 to the second six months of fiscal 09 for net profits and so in the period July through December 2008 compared to the same six months the year before we had taken in 25.8 percent more in net profits than the same period that six month period the year before if you look at the trend January of 09 through June of 09 this past six months compare it to the same six month period in the year before our net profit revenues were 14 percent less than the same period last year if you add in the seventh month our most recent data July the seven month trend to the same seven months prior year is 13.6 down is that okay Yeah, that's good. So do you have any historical trends or does your gut tell you anything about how the net profits receipts relate to the employee, the payroll withholdings? Yes, and it's buried in this information with the spreadsheet that goes with it. I pass that out to to you all before and I can do it again. It's a real geeky long list of every month for 13 years or whatever. But if you will look, in the 2001 period, it's the fourth bar over from the left, we had an increasing trend in net profits. Then we had two down years and then an acceleration of net profits. Now hold that in mind, this was 2001 had strong and then 02 and 03 had erosion. Does your laser? No, it does not work. I just tried it right here. Okay, he's telling me I'm there but I don't see it. Yes, I just technologically challenged. So what I'm showing is that this year was trending up and then we had two down years and then we started trending up again. And I was going to show you the same period for payroll and it is not the same trend. Okay. Here we had a flattening between 2000 and 2001. Then we started trending up. In net profits, we still had strong net profits at two down years and trended up. Is net profits in there? No, it's just payroll. It's just payroll. So I'm showing you that they move differently. Right. Right. So there's nothing predictive in the declining net profits as that would relate to payroll. The assumption that the interpretation I have drawn from this data is this recession net profits reacted quicker than the last recession. Okay. I don't know that I'm right. So we don't, yeah. Well, I guess my hypothesis, the reason I'm inquiring about that is, and I think you mentioned this or somewhere, you know, heard it, read it, something in the course of this last 10 or 12 months, that behavior among companies during recessionary times, private companies especially, behavior is, the inclination is toward retaining your employee base, even during adverse times. And so the likelihood of retaining our ability, our payroll receipts to remain constant, even while net profits are going down, there's some reasoning in that behavioral sort of context. Yes, sir, and historically we see the volatility in payroll not to be as drastic as the volatility in the net profits, which would support your hypothesis. But if this one is going down more – during this period, during this recession, we are going down in – our decline in net profits is at a faster pace than it was before, right? That would be my – That's your takeaway, right? Yes, sir. Okay, so – Now, is the – Are companies quicker on their feet and react quicker? Is it the total base is totally different so that the economics are different? I'm not educated in the science of economics to comment. Well, just my, you know, the gut sense that I get from just talking to people, which is what a lot of our, you know, we as council members do, and communicating with business people is that it's consistent with what you had described earlier in terms of employers are more inclined to retain their employees even during adverse times, even when they're losing money. It's the last thing you do. And so the question is if you see that net profits going down, then it could be a predictor or an indicator that there's a threshold at which employment levels may also decline, that layoffs, more layoffs would occur, and that then the payroll numbers or payroll receipts could also decline. Yes, and this gets into the prognosticating. Yep. Are we at the bottom of the trough? Have we not gotten there yet? Is it going to be a long trough, which is a U recession? Is it going to be quick in our community like a V? Is there going to be an echo effect to make a W? Those are the things that economists talk about. Council Member Lane, you have a question? Would you say that the payroll tax is more of a leading indicator because it's monthly and gives you an indication of the trend, whereas the net profits tax is more of a lagging indicator because it's looking at a whole year and would compute the annual profit where the final amount of tax is based on that. Absolutely. With the one caveat, we had instituted an estimated net profit process years back in hopes that it would help in times like these to be a predictor for net profits, but it doesn't seem to have worked. So the estimated net profits didn't take a sudden slump, and yet they just filed their net profit and asked for a refund for the year. Well, the other thought I was having is that although the economy was starting to turn down last calendar year, it didn't really do the major turn down until maybe the last quarter and the first quarter of this year. Less time to run. So that's not good because, you know, probably people could have made more profit last calendar year because the economy turned down the latter part of the year. But if it continues at a downward or status quo for the balance this year, that could have a more significant impact on our income stream and employment. That's all I got, Mr. Chairman. I think you want to wrap, finish your presentation, Mr. Mayor? I think we've got a couple more slides. Yes, sir. So let's see, where were we? The first six months, 26 up. The last six months, 13 down. If you want to do a variance analysis on what kind of swing impact that would be, if we continued at a 13 or 15 percent below last year, it's a $5 million hit to this year's budget. We would have to show a little over a 3 percent increase in net profits in order to make the 31-5 budget. Insurance, the takeaway I would give here is instead of, we used to have volatility in insurance going up and down, and then we started having year-after-year increases. We now have three years of flat insurance. Now, I'm told part of that is because we didn't have any major risk events in the state, that's no longer true. So rates may go up, which unfortunately benefits our revenue. However, and cash for clunkers will help us too because if you're paying insurance on an old car, you're paying less than if you traded in a new one. So some of the trends may help us in insurance premium, but we've had three years of basically flat. And the last is franchise fees were the one bright spot last year. We exceeded our expectations there. A caveat to that this year, it's been a cool summer, which means high electric demand is down. It has been a dry summer, I mean a wet summer, which means watering lawns demand has been down. So, we really have no control over the seasonality impact on the franchise fee revenues. Thank you, sir. Committee members, am I having any questions for Mr. O'Mara in regards to the revenue numbers? Council Member Ellinger. Thank you, Chair. I guess my concern is where are we headed here because we've put in this budget a 4.2% increase in revenues to balance this budget. Is that not true? I believe the final number was, well, I'll have to go back and look. I have it here to reference. So looking at our percentages, you're saying we're coming in. If July was an anomaly and then you look at August, it actually wasn't going to be up but it was going to be down. So our numbers are coming in less than what we predicted. And looking at overall, what was it last year? Less than 1% growth? Are we at this point looking at different mechanisms or different situations that we're going to be looking at? Because it's getting September here soon. And what's our plan? Our plan is to watch it very closely. There already is tight budgets. You know, we rolled back the operating 10%. We froze a bunch of positions and did not budget them. We're going to have to strategically hire the openings, which does which means there will be disagreement as to what position should be hired first versus second the commissioners are prioritizing that now so we can what I'm calling strategically higher openings and we want to see more than one month and and see if we are at it if there's any good news or if it's continue to be bad news before we implement any major uh so we're in a wait and see mode at this point we are and i relate it to this uh councilman ellinger it you know the storm winds are blowing so when is it that you stand your ground and get through the storm or it's time to take cover And that decision period is where we are right now. By looking at the last year and so far, do you think we'll hit our revenue projections? I think we're challenged. I don't think I would say that, sure, we'll make revenue. It's the range that is the unpredictable amount right now. And when do you think that we finally have to make a decision, we're going to have to do something? Well, as late as possible is one evasive answer. But are we going to see something in October, Christmas, or March? That's kind of the question. And, you know, the cash for clunkers is an interesting thing to analyze because I believe that showed that there is pent-up demand there and that lending capacity has come back. and that people will spend money if the incentive and the price is right. So the question is, when is the public going to start spending again? And that's what we're trying to... But on the converse of that, and that has been a successful program, but they also said now you might see the fall and the winter doldrens because they don't have, they went out and they bought the cars, but now there's really not going to be any incentive to do that. so people are just going to there's lots of I mean housing starts were up in July here I just read that they were down nationally so all of this is a regional type of rebound it's going to rebound quicker or slower in different pockets through the year we can't make an assumption and read the national trend to apply it to our regionalization so we're trying to look at But our local numbers, our local employment, unemployment, housing starts, foreclosures, building permits, new business, I guess it's a potpourri of indicators that we're trying to see what kind of predictions we can get. And frustrating to me, they've been like this. There's no line that says, oh, well, that'll project out easily into the future. So it's a very challenging time to answer your question, when do we pull the trigger to some major readjustments. But I guess, do we have something in the works? We say, well, if it comes in at this point, you know, you said we look at Christmas, we'll look at March. We'll look at, are we kind of coming up with some scenarios? I know I saw where you said if it's at a minus 5%, this is what we're going to have to come up with. If it's a plus 5%, this is what it will be. but all those that was the top one we're still we weren't even at that we weren't hitting our number it didn't look like I don't believe any of those we would have to show I think well I don't remember but it was plus three to five percent in the categories in order to make budget right that sounds like a heck of a turn of a turnaround I guess that's my bottom line and that's my point that seems like a big assumption to hit those numbers at this point we We are challenged. We are going to have to manage day by day, just like we did last year, and to come in with a balanced budget. We ask division directors to look at 15% cuts across the board back in January. We have that list. We can go back and visit that if we need to. We may try to approach it a different way. I guess from that, do you have anything for us if we have to make those cuts in the near future, what they would be and what your advice would be on that? I do not have that now. Is that something you're going to be looking at in the near future? Well, we're looking at it almost weekly, actually. Right. But analyze it very deeply at the close of each month. And I – Because if we have to come to that, I don't want to be just given one day and hear this is what we're going to do. I'd like to be a little informed ahead of time so we can make some decisions. I understand. Thank you. Councilman Beard. Thank you, Mr. Chair. I want to comment, which I heard yesterday, which is a big surprise for all the cash – the clunker folks. and that is that that's going to be considered to be, I understand, taxable income. Really? Yeah. Surprise, surprise. And in the case of Chrysler Corporation, they're matching, so that's $9,000. And people are very happy driving around now with their cars, not knowing that the hammer's going to hit. What about the expense side of the ledger as far as July was concerned? I do not have expenses. We took time out of June close in order to get revenues and so they are working on the expense side now. I don't have that to present to you. Will we get that information sometime in the interim before the next budget and finance meeting or? I can confer with Director of Accounting Mary Pfister and we can see when that information will be available. Okay. Because that's really where the rubber meets the road is to take both of those, the revenues and the expenses, to find out about where we are on the budget. Thank you. Thank you, Chair. Councilor Myers. Thank you, Mr. Chair. we've heard there's a list of 180 people that were in the process of trying to hire and I don't know if you if you know whether that's accurate or not I know the council had five positions that it wanted filled I guess the question would be has HR been given any guidance or direction based on these numbers with respect to hiring that 180 people well I don't know if 180 is correct first first answer not based on these numbers but we asked the commissioners we distributed the openings the budgeted openings asked the commissioners to to work with HR generalist about the priority HR is working on priority a1 plus and so their plate is full just with that first wave and then we will roll down from there and of course as revenues go will determine how far down you roll down that list. How, excuse me, how soon will there be a connect between the revenue discussion and how far we go down that list? I mean it seems like with what we already have in front of us that we would be looking at putting the breaks on the majority of that list even now well the reality is it takes a while to hire someone so there's a break already on in just the processing of hiring people so that in itself incorporates some time okay that's a different answer than when the council is trying to get five people hired there was a big crisis on hiring five people but now you're saying since there's a break in the amount of time it takes to hire that we should go on with the 180. Oh, no, sir. I didn't say we should go on with 180. I said we asked for priorities. They're working on their A1 plus list. And so we will look and see what our pressures are as we decide to work that list down, the priorities per commissioner. Okay. It just seems with these numbers we would already be looking at putting a halt on most of that list at this point. Well, and that's why I use the word strategic hiring. And there are some positions that are felt that are critical and need to be filled. And that dynamic of deciding which one of those are is where you get a room full of people and you don't have a consensus of who's first, who's second, who's third. I guess for next month meeting, could you bring an update on that list and what the critical hires are? and what that number would be. I can give you an update on our hiring of open positions. Is that your request? But I'd like you to go a little deeper than that and look at the critical hires, what's been determined as critical hires and what that number is. I realize depending on who you ask, you're going to get a different number on what's critical and what's not, but the administration's position. Councilor Morris, are you looking at that in relation to how much money we're saving or are you looking at that in relation to the hiring process? The hiring process. That would belong in Intergov. Because that process actually is an item in Intergov that may be better suited and that committee here meets next week. Well, I'm thinking based on revenue. So it really needs to come here so we can hear the revenue numbers on what it's going to cost to hire those people. I just want to clarify for Mr. O'Mara what he needs to be prepared to talk about. If we're going to get into the details of the financial, then it would belong here. But if not, it would belong in Intergov. if we're going to talk about the actual process. Well, I didn't ask about the process. I asked him to bring back the number of people and the dollar amount it would take to hire those people. And so that's budget and finance that would be here. Are you clear, Mr. Mayor, on the request? Can I restate the request a different way? Sure. Councilman Meyer, I think what you're trying to do is to compare what a new updated projected total personnel cost for 2010 at the next budget meeting. Isn't that the critical nature rather than a position by position you're trying to look at we have $190 million budgeted for personnel in the 2010 budget. What is our updated projection of that next month? Is that financially what you're trying to get to? Right, and that's why I asked for the critical. The ones that the administration believes are critical to hire because those are the ones we probably should go ahead and hire. So that number is essentially what the update would be, I would think. And if they're not critical, then... Let me give you the projection and the assumptions that go into that projection for next month. Okay. Thank you. Anyone else has any questions for Mr. O'Mara on the revenue report? Anything? I did have one comment, Mr. O'Mara, is can we get an update on the expenditure side of the house next meeting in terms of what we're doing to save other expenditures besides the payroll and where we're tracking on those? In other words, are we saving on building maintenance costs in terms of what would have been budgeted? Are you all tracking that monthly? I don't know if our software allows us to do that yet, but are you projecting it? We can try to give you the monthly financial statements by category. If you want analysis within the category, I don't know that I can have that ready for you. Just more broad, where we're tracking on expenditures. Large. Right. Right, large. Okay. Because all we're doing today is talking about revenues. and you know if revenues are down or up expenditures still matter in that whole equation big time so we're we have competing demands for closing the books as well as closing current month and so we will come back with some expenditure you know give me a free instance council members felt last year I know we budgeted 273 million but we came in at a year in expenditure number of 167 and change and so council members were curious of how come you know where do we saved that six million dollars so I think an update as we go along will kind of help with where we're saving money and I I think that one page legal size very busy but it's revenues and expenses was tracking actuals to budget and would would help clarify that question very good thank you item number two on our agenda is a presentation on the urban services fund and Mr. O'Meara I I assume Commissioner Taylor will be giving this presentation. So would you like to go ahead and give us the presentation on the landfill since you're already up here? Are you going to do that one as well? Since you're here, that may make more sense if that's okay with the committee. If we can go ahead and hear the information on the landfill user fee and then we'll get into the Urban Services Fund. Just to save a little transition time here. All right. This one should be a lot shorter. That's four slides. The landfill, major revenue source is the user fee and it's found in Chapter 16-16-1 of the ordinance book. And that is monthly charges for individual containers or the Herbie container and then there's a sliding scale for the dumpsters which depending on the size, 4, 6, 8, has a different rate to it. They're invoiced, the Herbie containers which are the residential are invoiced and collected on the water bill. The dumpsters are invoiced and collected through the Division of Revenue. The fund is also charged with financing the closure of the landfill and a refuge disposal. The FY08 revenues were $8.55 million with operating expenses of $7.25. The operating income for FY08 was $1.3 and the total change in assets was $1.6 million. The fund balance at FY08 was $25.5 million. That was comprised of $21.7 million in capital assets and unrestricted fund balance of $3.7 million. There is also a reserve of $17.5 million for landfill closure and that is related to the Haley and Old Frankfort Pike landfills and I believe, is there a third one at Raven Run? And there's some operating for Raven Run. There are water quality issues that are being addressed at those landfills and capital expenses required to manage and mitigate that. In addition, there is a new Government Accounting Standards Bulletin 49 Pollution Remediation Obligation Reserve, which the Division of Accounting is going through the process to calculate the requirements and the FY 2009 books will reflect compliance with GASB 49. What impact that will have on the current 17.5 million reserve is the open question for us closing this year's books. The 2010 budget has $7.9 million in service fees, $180,000 investment income. We have $1 million in other income, which is the 10-year contract renewal payment. For total revenue of 2010 anticipated of 9.1, operating of 6.3 and a transfer of that to the general fund of a million for total operating expenses of 7.3 and there's 1.7 million budgeted for that capital expenditures for managing the the two landfills for total expenditures budgeted in 2010 of 9.135 million against total revenues budgeted of 9.142. Council Member Lane, do you want to start off with questions? Bill, just a couple of questions. The operating expense, could you sort of go for an overview what that relates to? Operating expense, $7.25 million. Tipping charge, is that the term? I really would rather defer to operational to explain that. Okay. It's not my expertise. No, I don't have a problem with that. Let me just ask another question on the fund balance. Yes, sir. You're showing $25.545 million. I take it that's cash. No, sir. It's made up of $21.765 million of capital and $3.78 million of cash. Okay. But in addition, there is $17.5 reserved for landfill closure. We don't know whether that is sufficient or insufficient to meet GASB 49 requirements. Okay. Does that help? No, that's fine. I'll ask the operating question later. Thank you. Okay. Any other committee members have a question in regards to the landfill user fee? Bill, I did have one question. When will we know about whether or not the 17.5, what's our plan to figure out whether or not that's enough to close the landfills? We're trying to have financials for 2008 completed 20-something of September to be handed over to our auditors to begin their review. So I think the plan is to have all those calculations, regardless whether it's this fund or other funds, completed by then. I see the segues being made to Commissioner Taylor here so that I know she has some good comments on the landfill user fund. But I guess for the purpose of this committee and a lot of people that have asked, do we still need a $4.50 landfill user fee? And if so, if we still need that $4.50 a month, what are we going to use it for going forward? because we see these numbers, we see what we have in reserve. And I think you may have some comments on that, on what we're currently using that $4.50 for and what we will need going forward. I don't have studied comments on that. Our focus has been on the Urban Services Fund first, and it's taken some time to dive into that. We've just begun to look at the landfill user fee and have some idea, I mean, I can explain where the operating goes right now and talk a little bit about some opportunities we have. But we haven't really dug into the details of that one yet. I guess it'll be the next one on the radar screen, though, certainly. Okay. Does anybody have any questions on this before we move into the Urban Services Fund? Councilman Beard. Commissioner Taylor, what has to happen to you, just Cliff Notes version, on old Frankfurt Pike because there have been stages of closure out there for some time and we at one time were entertaining the idea of leasing that land to someone with the assumption that it was closed now. It isn't closed. I guess when I first came into this role a little over a year and a half ago, I thought it was closed as well. But it is not closed because the water system, the leachate collection system in that landfill, is not in compliance at this point. We're working on that right now. We have water problems at both landfills. The year prior to my starting this job, the landfill at Haley Pike had received 84 notices of violation for water quality violations. So a lot of what we're focusing on, first on Old Frankfort, is to get that leachate system in good shape. We have a couple of capital projects planned. I have a list of those in here. To get that in compliance and get that closed. We have to be able to assure the state when we close it that the water is in good condition and that we're going to monitor that for – we have to monitor for 30 years. So we don't want to close until we get it in compliance. So that's the last step on that one. The Haley Pike, of course, right now we still have an active construction and demolition debris landfill going out there. We certainly have other operations, compost and horse muck and some other groups that we actually either lease or contract to run those operations. So it's still active. We do have very aggressive plans. That's being managed by Susan Bush to get the water in compliance. Two wet cells have been added and planted in the last year. and a new pump that you all approved just before break is going in to help take water from the compost and pump it into a treatment area so that we can get it in compliance. Thank you. Thank you, Chair. Anyone else on the landfill user fee? Well, we appreciate you. I know you've had a lot of work on the Urban Services Fund here lately, but when we get to that landfill user fee, I'm sure you'll have some good information on that as well. So speaking of urban services fund, you want to go ahead and talk about those three different accounts. well learning from the presentation we did the other day the majority of these handouts are so small that we didn't put them on a slide because it would be an eye strain but the first page of the handout really just gives you once again the same information we covered the other day which is the big picture of how much money is in the urban services fund projected for the fiscal year that just ended and then that splits into three funds if you might recall from the other day the lion's share of it is in waste management the 24 million 968 and change and then street cleaning and street lights each gets a portion of that so that pretty much gives you just a visual of where the fund goes and how those are managed now what we have focused on in the last couple weeks in preparing for this discussion is on the waste portion of that we turn to the second page of the handout that is historical information really that was initiated by councilmember Lane's request to kind of give you a ten-year snapshot of what our spending has been and what our revenue has been in the waste management portion of the urban services fund you can see on also on the 2010 projected budget or proposed budget that has a we've already included that 10% waste tax cut in that number so that doesn't match what was budgeted it matches what we're proposing for the next year it's a lot of data to absorb so I don't want to run over you I find it easier with visuals so the third page of the handout is a visual representation of all that data on the previous page it shows you breaks out for you over 10 years how much have we spent on personnel operating capital and other program expenditures other program expenditures each one of these items certainly has a lot more detail behind it other program expenditures includes a range of areas Lex call insurance debt service law support finance administration CIO office and it also includes our office the environmental quality the commissioner's office and the division of environmental policy which is Susan Bush's group so So that all had been attached into that other program expenditures category. So we have some opportunities there. And you can see that based on the visual that capital were certainly making up ground in 2009 and 10 and that we also in 2009 saw other program expenditures expand a little more than historical. page talks about the funded positions these are the numbers that are in the budget office what the budget shows you can see over about a five-year span fairly consistent staffing that did increase in 2008 and that's with the addition of the offices of environmental quality we still operate at a pretty high vacancy rate and frankly the number changes almost daily but that number the The proposed budget includes waste, it includes environmental quality and policy, and temp positions that are LFUCG payroll temp positions. So there's several of those in there. Right now we have across the three groups 210 filled positions. And then the final page, and one that probably takes a little bit more discussion is where are we going from here? It gives you a little bit of history, a couple of years leading into 2009, and then it's a projection out to 2015 and some data and some assumptions on why we think that the mayor's proposed tax cut is viable. Anything that we do five years into the future, as Bill delicately puts it, is really prognostication. My background and the background I came from was continually challenged year after year to come up with better, smarter ways to do things to deliver better customer products at a lower cost. That's what I did most of my career. So for me this is pretty normal business as usual. What we want to do is provide improved customer service at a better value. We made a number of assumptions in putting this forecast together that helps explain the rationale. and those are noted below. If, as proposed, we included a 10% and another 10% cut in the waste portion of the property tax, those would be the numbers that you would use, and those have been calculated in from 2010 on out. We did estimate, and this is the part that you have to have data to base this on, but it's an estimate, is that our recycling revenue will increase significantly over the next five years the the immediate reason that that could happen is that we are definitely increasing our capacity to run recycling materials through the existing MRF the the future MRF is a different topic of discussion but at our existing MRF we were given authority to spend 3.8 million dollars and we are in the process the equipment's been ordered but we will be updating that line and we will triple the capacity throughput of the existing center and we'll add significant storage on site which gives us room to add a lot more material and create a lot more revenue. This year even in a down year it was a fairly productive revenue year and we're already seeing some of those markets rebound and this is the draft waste study that we just got back a few weeks ago that indicates we have a number of materials that are marketable that we currently do not market so I think we have a decent database to help us move forward in assuming that our recycling revenue will increase whether we add the new MRF or not we also assumed in this model a three-year lag and rebound and property assessments the budget office actually put a forecast out, a baseline forecast, and they showed a pretty slow growth pattern over the next three years. For fiscal year 2010, they estimated a 1.6% growth, 2011 2.8%, 2012 3.2%, 2013 5.1%, and then it rebounds back to more historical levels in 2014, which is 7.5%. So we think we're being reasonably conservative, although we are certainly predicting that we will rebound and so that assumption is built in there as well the debt service this was something that we discussed last week and we didn't include at that time what we did is in the 2010 excuse me 2011 you can see under a bond revenue we popped in 20 million dollars on a bond revenue with the expectation that building a new Murph on old Frankfort Pike is a good business investment. I think that what we need to do, I'm very supportive of the idea, gut feel, I think it's a great investment, but what I need to be able to do is not use gut feel. I need to be able to give you data to indicate that if the city invests 20, 25 million dollars in a new facility, you're going to get a return on your investment that is at least revenue neutral. We want to provide great service but we want to do that smartly so what we're trying to do is get the data together to support that but we did include that as a line item in 2011 so that you could see the impact of that debt and that debt service on the numbers let's see indirect costs oh excuse me debt service figures begin in fiscal year 2013 so you can see that as well indirect cost as I mentioned I I think we have opportunities in indirect costs. There are a number of items. Each one of those line items needs to be analyzed for what it costs, what we get for that investment, and can we conserve. One example is our office and the Division of Environmental Policy are currently funded fully out of the Urban Services Fund. And those of you that participated in the water quality management fee discussion know that as we begin to collect those fees the plan is to move a portion of that 50 percent over to the water side of the house so there's opportunities in some areas to put charges in places where they appropriately belong long term and i think that we still have a lot of in depth work to do to make recommendations about that but i do think there is opportunity there so The indirect costs, what we are proposing is that we hold them to historical levels with a 3.5% increase over time. Same that we're doing for operating. We're going to try to hold our operating to historical levels with a small increase over time to offset inflation. And that was this 3.5% increase. okay we also estimated a 1.4 million dollar savings beginning in fiscal year 11 because of the new recycling equipment that we're putting in the existing Murph on Thompson Road that we expect to save significantly in labor we will reduce about almost a third the number of people it takes to run that center and what it takes us now to run in 10 hours we'll be able to run in four so we predict savings there regarding labor costs certainly injuries and other savings that we'll see by being able to single stream as we spend nearly sixty thousand dollars a year as a city on glass inserts in the roses we won't need those anymore so some of those savings are outlined in a separate report but that's where that number came from we also estimate as you've heard one of our complaints is that we're going to have to change some of these trucks they're over 10 years old we're having high maintenance costs and in order to move to a single stream system we're going to in the next two years do heavy vehicle replacement so you'll see the impact of that capital investment in the next couple of years and then we have a schedule from that point forward to replace vehicles on a predictable pattern you'll get spikes as large groups of them age but but we'll be able to predict that over the course of the next several years. And I guess one other thing I'll mention that I didn't write down there is we were asked about the fuel costs. We got numbers from fleet services showing roughly that we spent a million dollars for fuel in this past fiscal year that just ended, as compared to, say, fiscal year 05, where we spent three-quarters of a million, but then compared to fiscal year 08, we spent a million five. So last year was somewhere in the middle of those two. For this forecast, we included fuel costs, and they're embedded in an overall assumed rise in operating expenses that we would attempt certainly to offset with efficiency savings that we expect with the new GPS, GIS-based routing system that we're going to bring forward. That's the same assumption that we make across government. And police and public works and any group that drives a lot of vehicles are assuming the same level. So we do have that built in. But as you can see, based on the assumptions you make, that model is going to shift. And what we show out to 2015 is by that point in time, we'll have essentially a system that takes in what it spends. And that was the goal we were really shooting for in making this proposal. So that's a quick overview. Lots of data in there. We are still researching the details. For example, I mentioned other program expenditures. I know what they are. I know where the money goes. What I haven't had time to do yet is dig into the details of those 20 items to make sure that that's appropriate. And that's going to take, as I mentioned last week, a few more months. We're working through that now. So if there are any questions, I'd be happy to try to answer them. Council members, okay. Councilor Blues. Thank you, Mr. Chairman. In trying to get my thoughts straight on a reduction in the user fee, and we'd be saving the taxpayer, I think, first year $24. That was the estimate for a homeowner who owns a $150,000 home. And then twice that, the second year and so forth. And I'd like to have a better notion of what we might otherwise invest these surpluses fund balance in that might be at least a, you know, a beneficial alternative use of that money. And just one example, the new MIRF. Mm-hmm. That's certainly an option. Now that, yeah, and you're predicating what, a 20 million dollar bond in 2011 as opposed to let's say using the funds that we now have available instead of paying cash in effect and saving all that that service and not in not risking changing our rating and so on. And I'm also wondering whether any of the – I'm not sure whether we can use any of these funds for, let's say, street cleaning, which is an urgent need throughout the city. I know we have a study of that, but we're not going to be, even under the best scenario, we're not going to be able to increase street cleaning for several years. So maybe I'm putting this awkwardly, but that's my dilemma here. whether for the rollback for individual property owners, whether that's adequate compensation for the entire community for what we might otherwise do with this money on environmentally important projects? I think that's a choice. And based on the assumptions and the model that we brought forward to you today, it demonstrates that the cuts are possible and the cuts can be managed. I think that the choices that you've suggested are certainly other options. We are suggesting in this model that the MRF be done on a bond basis. I was always brought up in my corporate background that when you have the cash, you spend the cash. You don't borrow. However, in this case, with this particular project, we really do need to do a good job as a community to make a decision about how much we want to invest and what the return on investment is going to be. And a good project should stand on its own merit. And I'm convinced enough that this project, based especially on the data that you haven't had a chance to see the details of, is a project that will stand on its own merit. So I think it's a choice. And this is what we're bringing forward as a proposal and the assumptions that we made but as a community it's a choice you know how do we want to use those funds and what's the best investment well one of the things that concerns me too is that we know we we have the money for the new recycling center we know that the new recycling center is is an absolutely vital need and that the present location is not viable over time we're on shaky ground there and in in many ways and presumably we would next year go forward with that bondage but maybe we wouldn't maybe there would be some contingency that would prevent us from from doing that and further slow you know delay the project and that it seems to me it's a concern that we're all going to have to weigh in and consider in in thinking about this decision so I appreciate this information it's it's very helpful to me but it doesn't solve my you know the problem that I just to articulate it. Council Member Beard. Thank you, Mr. Chairman. Again, Commissioner, we do have a long, lengthy, sizable list of capital projects on our horizon over the next several years. There's no reason at all why we couldn't take half of the money and bond half of the money. It doesn't have to be an all or nothing type of thing, does it? I don't think so. I wouldn't think so. Default to the expert here. Oh, I understand. He said no, it doesn't have to be that much. Well, I was pretty sure it didn't. And that may be a solution to a quandary we may have and we could maybe help the citizens a little bit and still leave our bonding capacity help that also a little bit. Thank you. Thank you, Chair. Councilman Gordon. Thank you, Mr. Chair. We're glad to see you. Sorry I was late. No problem at all. Thank you, Commissioner. I had a couple of questions. Of course, we haven't heard the, unless I missed it, the bonding and debt presentation. I didn't miss it in a half hour, did I? So I'll be interested to see that in relation to this discussion. I'd like to echo some of the skittishness. Maybe it wasn't skittishness. Council Member Blues is never skittish. But some of your concerns. And also, Councilmember Beard mentioned, we have a list of capital needs in this government that is overwhelming. If you all who were here remember Commissioner Coase, those workshops we had. And it was very overwhelming to me that we cannot even afford things like chillers and roofs on buildings and that sort of thing. So putting it in context of our overall needs, I'm going to need to be pretty heavily convinced that we have to bond this. I did have a couple comments on the bar graph page. it looks like we have been, except for two years, fiscal year 07 and fiscal year 08, we have been putting a good chunk into capital improvement from waste management. Fiscal year 07 looks like there was maybe none. none and then fiscal year 08 was very small but other than those years we have put a fair amount of money into capital improvements from the look of this graph i had thought after last week that we hadn't been and so i'm glad to see this um i wanted to ask uh council member blues brought up the street sweeping study. In the spring, when the water quality management fee presentation was made, the council passed a motion to request a study of our street sweeping because of the close connection between clean streets and clean water going into the sewer system. And I wondered if you can tell me how far along that is just to kind of add that in here to the discussion. Have we gotten that going? Are we? The study was commissioned, but I don't know where they are in that because it's being managed out of public works. But I don't know. No, I'm sorry. That's okay. We can ask Commissioner Webb. If it's being managed in public works, maybe we can get an update from him. The street cleaning, you know this, and street lights, both those chunks of the pie on that first page, those areas are managed under public works and development. Well, I appreciate this information. I only had one more question, and that was on your page where you list the funded positions in the Division of Environmental Quality. How many temps are we using in waste management specifically? Of these positions listed. I got a complete listing of temp positions, but what it didn't sort for me was which ones were temp with LSVCG and which ones were temp through a labor contract. I believe it's approximately 30, but I'm not positive that that's accurate. In waste management? 60 temps overall, but what I can't tell you is the split between all are from temp services. So there are 60 overall. So if I look at the adopted budget for fiscal year 10, where it says under waste management, 248, 202 of which are filled, are 60 of those temps? Can you go to the microphone, please? Thank you. The handout only references people on our payroll, not through a temp contract with a private organization. So these don't include any temps? Some of our positions are temporary classification that are on our payroll. But they're not a temp agency. They're not contracted out. Correct. Exactly. Okay. That's the confusion. We're trying to split between those two characteristics. so these 202 field positions in waste management in fiscal year 10 are all lfucg employees yes yes some are temps they're temporary i'm sorry i understand they're not classified which are folks that work for us for example we have a part-time project manager right now who's managing the pump installation at haley pike we also have a person who is a temp who is taking the place of our landfill inspector who's retiring september 1st and she's filling in the gap but i don't what i don't know is how many okay that's okay i but they're not contracted out no as temporary we do have other folks who are contracted out and we use those a lot of waste collection and you said So there's about 60 of those. So I assume you're going to be talking about 30 to 30. Okay, that's what I thought. We use about 30 to 32 people a day at the recycling center, and all of those folks are temporary agency under contract. And we use about 25 to 30 a day in waste collection or recycling collection. Okay. Well, I'll look forward to the bonding presentation. Thank you very much. Council Member Myers. Thank you, Mr. Chair. Thank you, Commissioner. I just have one question. Can you take this model, can this model be used to run an analysis on what it would come out to be for a flat fee for solid waste collection? Well, that would require being able to make direct relationships between expenditures expenditures in the particular line items that we have on that model. A model could be developed, but it's also an analysis unto itself. And as part of the recommendations from back in 2006, that was one option that was suggested. We have a rough idea of what it costs to pick up materials at households service-wise. We did a comparison between Lexington, Madison, Wisconsin, in Green Bar, North Carolina, and tried to do an apples-to-apples and have a rough idea. But it would need some refining before it would be a model that we would put out, I think, to make predictions from. How much work would that take with what you have done to complete that model and run the analysis? To go to a fee-based system? Pretty extensive work. I suspect we would have to look at Bill a little bit, but I suspect we'd have to bring in someone to help us with that. That would be pretty in-depth analysis. We don't have services right now accounted for by service. So it's a fundamental shift to go from where we are today to that point. And then you'd have to do a lot of estimating about who would need what services and which services would they purchase if that was an option. because we pick up certainly waste and recycle. We have compost. We have mattresses. We have white goods, appliances. Those types of services, not everybody necessarily would buy into. There are also some impacts in those kinds of services. If someone chose not to use that service, from my time at the state, what I saw happen in many communities is there was a huge increase in illegal dumping. So you have to decide what are you going to require as service versus what's a choice. And so there are a lot of policy calls we'd have to make to really give you a good number. But we have discussed what would it take to get us from where we are today to a per-service rate, and I think that's going to be a pretty involved look. It takes some time and some study with some expertise in order to do that. Okay. Well, someone said make a motion to do that, so I guess I'll do that. I guess I just move for our committee to go ahead and run that analysis and put together whatever you need to do that. So moved. We have a motion and a second to go ahead and ask the administration to conduct a waste management analysis in terms of fee structure. Is that sufficient, Councilman Myers? That's it. and I assume we're talking a year or longer to get that done or less. Well, I'm always interested in less. Thank you. That's probably a generous time frame, but again it's a matter of how many resources can we bring to bear on that question. If you could report out back to us in terms of a game plan, a time frame, after you've had a chance to talk about it with your folks. Then I can give you a more educated answer. Okay. We have a motion on the table. Any discussion? Councilor Lane. I would like for us, if we need to, to bring an outside consultant, use some of our surplus funding to pay for that, if I would help you any. I think it would help tremendously, yes. That's all, Mr. Chairman. Any other comments from anyone else? Okay. All in favor say aye. Aye. Any opposed? Nay. Okay. That passes. Any other questions for Commissioner Taylor? Is it possible to maybe come back in our October meeting with kind of an update on where you guys would be heading with that? Oh, sure. October meeting? Yeah. Okay. Thank you. That's no problem. Anyone else? Any other questions? I do have a couple of myself, Commissioner. One, on your analysis and your projection forward five years, I don't see anything in there about personnel and making up the vacancy deficit. Is there a plan to make up those vacancies in the budget? I don't see the personnel really jumping. Also to fill the new MRF. I assume we'll need new personnel if we expand the operation out there. Well, and this is, it's a balance. Steve, of course, has been pretty aggressive about as we move to the single stream system with the current MRF, we have an opportunity there to drop the number of people that it takes to service certain routes. So we're hoping to reduce the total number of public service workers but increase the number of more skilled workers. So that essentially will drop some, add some. That could be a wash. Can you come through the microphone? Sorry, thank you. I guess my concern is, just so you all can. address my concern is give 58 vacancies are we going to make up 58 vacancies or our plays our plan only to make up half of those and do we need to make those up yeah well this particular model assumes that we're going to fill up to our personnel complement so all 58 we plan on hiring in that model means we're allowed basically well that yeah yeah yeah so yeah whatever the proposed budget is 268 right now is the number of right authorized positions yeah so how soon are we gonna fill those this year we're gonna do it over a couple years three years we like everyone else had a priority list of hires and I turned the list in for our department last week to HR we have 17 positions on the most critical list right now and we have about and that's for the department not just waste and we have several other seven or eight that are already in in process this weekend if you noticed in the Herald there was an ad for drivers we had public service workers and equipment operator senior so that was our number one most critical need in the department and that one of course we're trying to fill but hopefully over the course of the next year our most critical positions would be filled and as Steve evaluates as we go forward it's It's been his plan to try to increase the skill level but reduce the overall number. But we're moving forward with a plan to try to maintain what we've been budgeted for, not to ask for additional, and to reduce where possible. We're certainly going to reduce the total number of people at the existing MRF because we don't need as many people to run the equipment. It's more automated than in the old days. And the trucks, like I mentioned before, won't need as much labor because you won't have to get out of the truck and dump the glass. Different sorts of things will be automated. So we're hoping to reduce the overall need. And then as we have any volume increase, we'll put people back in those spots. So it ought to come out even. Well, you know, my main concern, too, is, you know, with over a 20% vacancy rate, you know, the current manpower and the workload they're handling right now, you know, if you're not feeling this position, I mean, someone's having to do some of those jobs in a lot of cases. So, you know, it's hurting them, too, and their morale. So the quicker, the sooner, the better if we have already budgeted that in your model. Well, we did budget it, and it was the number one rated request for our entire department. We have over 75 vacancies in our department total, so not quite half of the total city vacancies are there. Okay. But we put our number one vacancy is in waste, and that was to get people out on trucks. When you're looking at your analysis going forward as well, you estimate about $6,000 a year in dumpster fees. coming in as a revenue stream. Have we calculated how much it really costs to pick those dumpsters up? Because I'm sure it costs a lot more than the $6,000 we're getting. And while we're still doing it, if we're going to pay, I mean, say half a million dollars to pick those up, it just doesn't seem the math works to why we would stay in that business to keep picking them up and only make $6,000. Well, right now, those fees are set by ordinance, but we're starting to take a look at what does it really cost us to do that, and we can have a recommendation, I think, to propose to council to make a change. It does definitely cost us a lot more to pick up the material than what we charge. I guess I don't have the rationale from the background. Maybe Steve can chime in. But I think probably part of the rationale for keeping that low cost is to encourage people to use them as opposed to, say, dumping it on the curb or in some other location that we have to go after and clean up. But frankly, it is going to cost us quite a bit more to haul that dumpster than we charge. And I assume those are the commercial dumpsters at location, not the loan-in-boxes. These are the commercial ones, right? Oh, you're talking about that. Yeah, I'm sorry. I thought you meant the other. No, I just want to make sure we're not confusing the two. The loan-in-box that we charge $30-something for. Yeah, those are all of the dumpsters in all of the programs. We do not charge what it actually costs us to pick it up. So I'm sorry about that. But really, that applies to both groups. Okay. And last but not least, the comment on the surplus, the current surplus of $24 million. Obviously, you know, anytime you have a surplus, you have two things at work. Either you had mismanagement in terms of not spending all your revenue, or you had too much revenue that you collected in form of a tax. And my concern is not necessarily with the $24 million. I hope you have a good plan on spending, and I'd like to be a part of that discussion on how we spend that, of course. But my main concern is are we going to keep adding to that surplus? And going forward, that's what I hope to see out of the reduced taxes. We're not going to add to a surplus anymore. We're going to spend what we collect and manage the system efficiently and properly based on the money we're collecting from residents. And I assume your model, if something were to happen next year, that we did not reduce it again, that we determined that based on after a year on the belt, have you prepared that situation in your modeling here, the five-year plan forward, if we did not reduce or two years in a row what would happen if we just did it one year? No, but that could be done easily. We were focused on what happens if we do two in a row, and that's kind of the way the model shows. If that didn't happen and you chose to make one cut, for example, or no cuts, fundamentally it's our goal to provide the best service at the lowest cost that we can possibly do. So we're moving forward with the same assumptions and projects to deliver the best service at the lowest cost. If the cuts do not happen, I think that you have flexibility or options to make decisions about other ideas. For example, Council Member Blues mentioned perhaps you would not want to bond that MRF. You would want to use a surplus in that project or other projects that seem appropriate. But we can predict that however you want. It's a model that we worked with budget's original numbers and then Brad developed for us that we can use to predict surpluses. Our goal, as you can see from the 2015, was to come out even. We're trying to take in what we need to provide the service that we need to provide. So then what's happened the last two years? I mean, it's jumped $13 million of surplus. Have we had a freeze on hiring, a freeze on capital expenditures? I mean, I'm just curious of what's happened the last two fiscal years to get that up double the amount it was in 06. Well, and I looked at it back several years previously. I think historically, if you went back, I want to say 2003, a little over half of the surplus was in waste. And then recently, only over three quarters of the surplus is in waste. And one explanation would be not investing in capital. and even though we did do a little bit in 2008, we essentially had two years there where several million dollars accumulated because we bought no new trucks. And whose decision was that? Well, at the time, it was before I actually got here, we went through a period where we didn't have a director. We had an acting director, but we also had some issues around 2006 and 2007 with fuel emissions changes and engines, And I think that the decision was made by the director from two years ago to hold up and wait to see what happened with those emissions standards so that we could buy the most current trucks. So I think Kevin's nodding because he was here and I was. That's why we're lying there. But my understanding was at that time the decision was made to wait because they were afraid if they purchased trucks then we'd have to go back and retrofit later and it would cost more money. So we kind of had a two-year span there where we didn't invest in equipment and our vacancy rate went very high And so I think that's probably contributed to the surplus in both areas and I'm sure other circumstances that I could probably offer. I don't think you read out the surpluses in the streetlight or street cleaning fee I don't think you read that out on the mic. No, I didn't I can do that for us and we'll wrap it up. Yeah The street light surplus currently is $2,896,913. And in street cleaning, it's $2,160,470. Very good. And, of course, that's compared to almost $25 million for waste. Anybody else have any other questions before we move on? Councilman Lane. Yeah with regard to the employment standards what type of shifts do our collectors work now? They're on like four or ten hour shifts or are they how does that set up? Yeah four ten hour shifts. Okay do we still pay under time compensation? Do you want to explain the pay, please? Let me make sure that we give you current. There's been a lot of work done in the last year to improve that situation. Last year, an internal audit was done to follow up on, I think, the 2006 audit. And we can come back and share that with you. but they did note in an internal audit that while we still have under time, our incentive system with waste management pickup will always allow for some level of under time because when they get their job finished, they go home. We don't want them hanging around. So they're always there for eight hours at least, and oftentimes more than eight hours, but when they get done they will still be able to actually go home. But the level of under time has decreased dramatically. Okay, because that was one of the major problems we had five years ago where we had a lot of under time, a lot of over time. Do you actually keep a running track cost for over time and under time? Do you have a handle on it so you know you're within a reasonable range of expenditure there? Yeah, we can always look at now that we have the automated timekeeping systems, those numbers are easily accessible. We can always pull those up fairly easily. Thank you. Anyone else? Okay, we'll move on to our next agenda item. We have about 30 minutes left and two items. Hopefully, I'm not sure if we can get through both items. They're both pretty lengthy discussions. Is there any feeling as to which one we want to try first today? We have the bond update and the business occupational license discussion. Is there any sentiment as to which one you want to tackle first? All right, we'll go ahead and proceed with the bond since it's on the screen. How's that? Mr. O'Mara, once again, welcome. Hi. I have an accountant's dream here. It's tremendously small and very busy with lots of information. It's the exercise we went to in order to give you two-slide update. There's a lot of history here, but let me give you the – I made this summary just before I came. And I was answering the question – hopefully I'm answering the correct question. I'm looking at general fund debt because it kind of explodes when you try to look at all fund debt. So I concentrated on general fund, and that's what I'm presenting here today. And just to give you a how to read the spreadsheet, the first page is listed by year from current June 30 of 2009 going all the way out to 2016, and it lists all of the bond issues that we are currently obligated, and it shows when they roll off as well as the lower portion is showing you anticipated or predicted bond amounts. The second page turns the exact same information into debt service payments. So first page is total bond debt outstanding. Second page is debt service to support those bonds. But to recap, our current obligations are at $229,143,000 and our annual debt service is $19.98 million. This year we have planned a GO capital expenditure issue in the fall of 2009 of about $50 million. it will be less than that. We have a pension and fire, I mean police and fire pension issue of $35 million. And then we have Eastern State Hospital bond anticipation notes which are not supposed to cost us anything but we're the financing conduit for that construction phase of Eastern State Hospital. We did the first one this June with another one next June and then the third year would be the final bonding with the anticipated opening of the facility. In order to predict out the bonding, we had to come up with some assumptions. And so the assumptions that we have used is that there would be a $35 million issue in 2011, a $20 million in 2012, and then $15 million in each of the years, 13, 14, 15, and 16. And then in addition to that, the police and fire pension, there would be an additional 31 million in 11, 34 million in 12, 37 million in 13, and 40 million in 2014. And if you layer in those assumptions, given the debt obligations that we have as of today, It results in a 2016 balance of $382 million with a debt service of $52.5 million per year. That's 15.12% of revenue. That includes over the course of this past year as well as through 2016, $247 million going toward the police and fire pension. And by 2016, if you exclude the police and fire pension debt, our bonding is at 10.25% of revenue, but including all obligated debt, it would be 15.12. And there's lots of detail in here that gets us from point A to point Z. Mr. Mayor, thank you. I know we have some questions. Council Member Lane. Council Member Lane. Just a quick question on the police and firefighter pension fund bond. We're getting an offset in that we've reduced our actual payment into that fund. So is there an offset on that that helps us limit on our numbers there? Let me make sure I use the right words. We avoided an increase rather than getting an offset. But your point is well taken. If we were not making this debt service for these bonds, then our actual salary expense in operating would be going way up and probably equivalent to or greater than the bond payment. That's all I have, Mr. Chairman. Anyone else have any questions? I have one myself. We're talking about general fund bond debt as opposed to we also have urban services fund debt. When the ready agencies look at our bonds and our ability to go to market, are they looking at both funds together or government as a whole versus in particular? Well, as you know, I don't have a whole lot of experience here, but I think they look at everything with the questions that they ask so councilman Gordon brought up earlier about you know going to market with the 20 million dollar bond for solid waste that would be an urban services bond or if we do on the stormwater coming up they're gonna be all looked at under LFUCG umbrella well let me make sure I answer this correctly they look at everything about our government but when it's a revenue based bond such as stormwater stormwater sewer or or urban service they're going to look at that fund specifically then look at the overall health of the urban county government because if that specific fund fails it's going to look to the general fund to make it whole. But it has a track record of revenue generation and rates that are already in and they know what kind of collection rate you have and they have a history of the predictability of that dedicated revenue when they're looking at a revenue bond issue. The GO, they're looking at the general fund and what is available and predictable within the general fund. Does that help clarify? It does, but I guess you kind of let me to my next point is we don't have any revenue bonds right now. I think we do. Okay. I think there are some sewer. Right, besides the sewer. My question was on some. There wouldn't be in GO. Right. I know in the GO. Government of the general obligation. But on like the solid waste MRF, would that be a revenue bond? I would think it would be, yes, because it's dedicated property taxes. On your numbers, projecting the debt out five years in, I want to say I appreciate you working on this. I know you got this assignment at about 7 o'clock last Tuesday in getting this to us, but I think this gives us a good snapshot and it was critically needed to kind of allow us to – thought processes going forward on the capital, your projection out over the next five years, that kind of gives us like a benchmark as to how much we can really afford to bond. Is that what you're saying when you projected this out? Or hoping we would stay within? I'm just projecting. Smart answer. But, you know, in essence, though, anything above that or below that, we either add or hurt is even worse than 15.12% of our revenue. To answer your question, look at the assumptions that I used. Police and fire pension, annual CIP, EEOC, replacement for this building. That's what I was getting to. None of that is in here. That's correct. So anything else we do is going to blow that 15.12% revenue number out of the water. And if you'll see, it actually peaks in 2015 and then slightly tapers in 2016. And here's where I need to put in my usual disclaimer whenever I'm talking to you. We've used assumptions here, and we're looking out five years. What interest rates will be and the structure of the debt in each issue will vary this projection to what actually happens. but this is our best projection at this point in time well i just want to make sure committee members know this doesn't include those those big ticket items and this is just a 15 million cip annual project list and that's not a lot of money when you start talking about eocs for 50 million and new government center for 50 close to 50 million so this gives us a lot a lot of information to chew on i see you have a couple more council members here councilman gordon thank you mr chair um well you've highlighted something that concerns me and i really um i i don't remember bill maybe you remember or maybe jerry southers or mr chair when we had the workshops on capital uh back with commissioner co we had a number of capital needs and how What was that? Does anybody remember? I don't remember off the top of my head, but it was humongous. Was it $200 million or $300 million? And so what you said about, I realize that the waste management is a separate fund with separate revenues, revenues but if they look at the big picture for bonding and we go up to fifteen point one two percent of our revenue which as i recall not maybe ever been that high we've always been very conservative and tried to stay around ten percent or less right that's my understanding if we look at the whole big picture and we bond in the waste management fund and up that debt service, an outstanding principal, and then we go up to the 15.2.1 percent of revenue, and we haven't put in a new government center. We haven't put in an EOC. We haven't put in a lot of the needs that we have. It gives me great concern. and, you know, just it might actually be too soon to make the decision to lower the waste management fee because of the big picture. And if they're going to look at the big picture, the bond rating entities, and we're projecting going up this high in our debt service and really haven't covered some of the major needs, it gives me great concern. And my thinking now is, and I'm wondering if maybe next year's the year, to look at it once the task force that's doing the government center has progressed and once we've got some other pieces in place. I mean, that's kind of what I'm thinking. So just I appreciate all your good work. I know we've asked for a ton of stuff from you, and I thank you so much. So I appreciate it. Thank you, Chair. Council Member Beard. Thank you, Chair. Council Member Gordon, you forgot four fire stations, I believe, also. And equipment, attendant equipment. And that was what I was referencing last time I spoke. I'm curious about something. the Tates Creek Library bonds? Yes, sir. If you will look on the second page, you'll see an income that makes that cost to the government zero. Okay. But it is underwritten by LFUCG, so I think it's considered one of our obligations. If I'm... Okay. This is my understanding and proper presentation. Next question. When you referenced the KU building, You were talking about Phoenix Building, I assume. I said government building. I didn't mean to say KU Building. I said that there – oh, okay, in here? Yeah. Probably. This is in 2000 before I was active in bonding, so. I'm assuming that's what it was. We didn't build the building for them down the street, so I don't think. Well, we may have them one way or another, but anyway, we didn't bond it. Thank you, Bill. Sure. Anyone else have any other questions on this topic? I just have one final comment and caution as well to add to Councilman Gordon's comments. On your general fund, those are projections as well. They are. And I assume you just took a sort of modest growth rate on each year, 3% to 5%. It's down at the bottom, and we tried to agonize on what is appropriate. and so we're showing taking all the way through 2011 before we start to see significant and then a few years before we return to normal growth if we rebound quicker it will make the comparisons look better but in seven years you're saying we're going to grow the government general fund by 80 million dollars it's a big number to grow our community anybody else well thank you bill we appreciate your comments on the bond summary the last item on our agenda is the business occupational license fee councilman bearded originally asked us to be placed into committee for discussion I think there's a lot of people just kind of frame what the concerns are that are doing business in Fayette County ie Realtors insurance people umpires referees that don't necessarily live in Fayette County that may only be doing business one day a year or one hour a year I think there's some concern is you may need to be paying the business occupational license fee and sort of give a updated of the ordinance that we passed back in budget of 09 as to who should be paying this fee so mr. O'Meara you want to take over all right I think my slide may be insufficient because I say all business activity in Fayette County that's the second bullet the the ordinance was passed it went into effect January 1st or December 31st of this year excuse me and it provided for a minimum annual license fee of $100 on all business activity in Fayette County due January of each year and it's a flat applied as a non-refundable credit on the following year's net profit return. So for a calendar year, a person who started business in, who has business in January 1 of 2009, they are to pay $100 January 1 of 2009. April 15th of next year, which is when they file their tax return, that's when they also file a net profit return for their business activity for calendar year 2009. And so the two examples there are showing what a non-refundable credit means. So if after they did their taxes they had a total net profit occupational tax due of $130, they get to take credit for that $100 minimum license fee that they paid January 1 of 2009 and remit to us the additional payment of $30. If however their tax return showed that their total amount due was $90, they have already paid the minimum which is a hundred and so no more taxes are due when they file their April 15th tax return so in each January if they are going to be conducting business in Fayette County then they would owe the hundred dollars the point of discussion is what we call 1099 or contract activity and the business license fee is on all business activity. So if you are someone who comes in and is here for a short amount of time or a long amount of time and you generate a whole lot of revenue or a small amount of revenue, your business activity footprint has been established in Fayette County and we have a minimum business license fee due of $100. And so I think it's that minimum level that has brought up the discussion. I have statistics of the first year if you want them, but if that's not germane to your conversation today, we... Okay. All right. We had a total number of active accounts of $33,755. And one of the benefits of rolling this out is we cleaned our database. We had a lot of people we had been sending notices, you haven't filed, you haven't filed. Well, they went out of business, so they deep-sixed the notice. We kept that active because we did not know. So anyway, we had 5,800 people come forward and say, I've closed my business. I'm not active. So we cleansed the database down to 27.9. As of last month, $19,458 had paid, and we had collected $1.9 million in the minimum license fee. Very good. Councilman Gordon, I believe you have questions to start off. Thank you. I have a quick question, Bill. When this first went into effect, I know there were a lot of phone calls and questions and beehive activity among businesses, particularly very small businesses and some of the hairdressers and some of the people who, you know, have little businesses. So I just wondered if those have continued or if this has evened out to where you feel like people understand or will we get this flurry again next time? I only have one season to experience and it's not yet over. So I'm not sure that I can put historical perspective. In my world, it has blips depending on when someone in a certain business segment becomes aware of it, starts talking to other people in that business segment. And so whether it's at – my mind's gone blank as to home-based businesses or out-of-county entering in. And so things had calmed down until this summer and Bluegrass State Games came in and part-time referees coming into the county for a single event or for a short amount of time. found out about it and everyone's been sharing their opinions. Okay. Within that segment. With you. With anybody who will listen. A lot of people, yes. Okay. Well, now, do we, is there a pretty good system right now to alert people who are opening a new business about this? When they come in and register, if they're required to have a certificate of occupancy, there is a direct link between building inspection and us. And we have a packet of information that explains it. We're looking to get them on our rolls at that time. We have an enforcement section who goes through Sunday papers and corporations and advertisements and street corners and that type of thing. And our approach is education first, enforcement second. Local taxation in Kentucky is unique to Kentucky. And it has free choice by local government and lots of people decide to do it different ways. so there is a lot of education and and people knowing about the local government taxes okay thank you councilman blues you know where does the money go the hundred dollars net the the net profit occupational tax line which is the second item in my revenue I talk about withholdings that I talk about net profit it goes to that second net profit line it's general fund money but does it pay for some necessary process or it is general fund money whether it's if you want to say what did that the first 1.9 million of budget pay for whether it's street lights whether it's police fire the utilities on this building it is not earmarked so it's not for some special function within government and some some sort of processing fee that's not its point well no sir it's not but let me before we had a hundred dollar minimum license fee we had a $25 registration fee for when you come and first time identify yourself in in lexington and that was an administrative fee for us to process you put us on the books and know that you have activity here we send all the forms to you that kind of thing so the hundred dollar minimum replaced that so we no longer charge the administration first time administration thank you sir okay so councilman beard Thank you, Mr. Chairman. Explain to me a little bit about the difference between the net active accounts and the accounts paid. What, that's a 30 percent difference. It's, well, it is, we have a total on our rolls of people who have in the past said that I have activity in Fayette County that's the 27,900 are they truly active we started out at 33,700 and 5,800 said I haven't been active for last year or this year or whatever so that is our total population of potential accounts 19,500 is how many have paid us as of last month. Do we do anything aggressive to get them to pay or to move them into the closed account column or how are we going to address that? Because it could be just a protest of the $100. It could be and so when they file April 15th they'll owe $125 instead of $100. So there's a penalty for that protest. If you're not paying it, it doesn't make a difference that way. However, we sent second notices. We waited until April 15th since this was the first year. We sent second notices, or I think we did April 1st. Anyway, people were processing taxes. They got educated. We got a great response for that second notice. We sent out first notices the 1st of December or in November. I don't remember exactly when. And so now our charge is to come up with third notice program at this point. Okay. Do you have any feel, though, about how many of these might be just a protest as opposed to… No, I don't. I mean, this is our first experience. Nobody's called you up and said, see, I haven't paid my hundred. How do you like it? Not personally, no. Really? Okay. Well, I just wondered. Thank you. I got one final question. We'll wrap up the mini bill. Yes, sir. Is there not an opportunity to have businesses pay this on their net profits return rather than doing a separate mailing out at the beginning of each year? Have we looked at that? Because that would probably save us some postage dollars and just collect it up on the return. Well, it's due the year before your return is due. So are you talking about adding it so that this is what you owe for last year, here's what you owe for next year? Then instead of it being due January 1st, it would be due April 15th of each year. Right. Just administratively just add to our net profits form and either pay it in arrears or pay it forward either way. It would make it a lot simpler I think for you all and for business owners having to cut a $100 check on a separate whole piece of paper if they forget to do it. We can certainly do that. If you postpone it a year, there's a loss of revenue for waiting to get it. If you postpone it from January 1 to April 15, it's just a four and half month, three and a half month delay and still in the same fiscal year. We can talk about that. Yes, we can. Okay. Anybody else? Anything else? I want to thank Bill. Thank you for getting today's materials together for this meeting. It's been a long meeting. I want to thank Mary Pfister as well and Commissioner Taylor for all the work they did in getting here and getting their folks here and I appreciate all the information and we stand adjourned. Thank you.