# Council Budget & Finance Committee - March 23, 2010 > Auto-transcribed civic record · Council · March 23, 2010 - **Permalink**: https://meetings.lexingtonky.news/meeting/1310 - **Source video**: https://lfucg.granicus.com/player/clip/1310?view_id=14&redirect=true - **Date**: 2010-03-23 - **Body**: Council - **Last revised**: June 18, 2026 - **Length**: 19,809 words > ⚠️ **Auto-generated content.** Audio from the official Granicus video was auto-transcribed by OpenAI Whisper-1. Structured facts were extracted with GPT-4o; the narrative summary was written by Anthropic Claude Sonnet. Speaker labels and verbatim wording may contain errors. See [methodology](https://meetings.lexingtonky.news/about/methodology) or [report a correction](mailto:editor@lexingtonky.news). --- ## Meeting Overview The Budget and Finance Committee convened on March 23, 2010, at 1:00 PM, with Kevin Stinnett presiding. The meeting covered three agenda items, all of which were informational in nature, including a review of FY 2010 financials for February 2010, a discussion of bond underwriting strategies, and a discussion of the Lexington Public Library's FY 2010 budget. No votes were taken during the meeting, and no public comments were heard. The session functioned primarily as a briefing and discussion forum, with committee members receiving and reviewing financial and budgetary information across all three agenda items. ## Attendance All members were present at the March 23, 2010 Council meeting. The following ten members attended: - Kevin Stinnett - Ed Lane - Jim Gray - Linda Gorton - Chuck Ellinger - Andrea James - Tom Blues - Julian Beard - George Myers - Peggy Henson No members were recorded as absent or late. ## Contested Items - **Lexington Public Library Funding** [timestamp: N/A] The Council engaged in a heated discussion regarding the funding of the Lexington Public Library. The debate centered on several interconnected issues: how taxpayer dollars allocated to the library are being used, and whether the library should be required to contribute a portion of its funds back to the city's general fund. The discussion also involved competing legal interpretations of the statutes governing library funding, with participants offering differing views on what the law permits or requires in terms of the library's financial obligations to the city. No additional details regarding the specific individuals involved in the debate, the precise legal provisions cited, or the ultimate outcome of the discussion were available in the source materials. ## Review and Discussion of FY 2010 Financials for February, 2010 [timestamp: 08:01] Commissioner Rumpke led the presentation of the FY 2010 financial report for the month of February 2010. The discussion was informational in nature, with no formal action taken by the Council. During the presentation, Commissioner Rumpke highlighted several key points: - **Record U.S. Monthly Deficit:** The presentation noted a record monthly deficit at the federal level, which was raised as a significant economic backdrop for the discussion. - **Unemployment Rates:** Economic indicators related to unemployment were discussed as part of the broader financial context. - **Home Sales:** Current home sales figures were also reviewed as part of the economic overview accompanying the financial report. Bill O'Meara also participated as a key speaker during this agenda item. The discussion appeared to situate the local FY 2010 financials within the wider national economic environment, drawing connections between macroeconomic conditions and the financial picture being presented. The item was presented for informational purposes, and no specific decisions or votes were recorded as an outcome of the discussion. ## Bond Underwriting Strategies [timestamp: 27:56] The committee took up a discussion on bond underwriting strategies, focusing on bond ratings and debt management approaches. Representatives from Hilliard Lyons — **Steve Grossman**, **Chip Sutherland**, and **Greg Phillips** — participated as key speakers in the presentation and discussion. The conversation centered on the relationship between bond ratings and interest rates, examining how the municipality's credit ratings affect borrowing costs. The Hilliard Lyons representatives addressed future debt management strategies and the implications of rating changes on the cost of issuing debt. The item was informational in nature, with no formal vote or binding decision resulting from the discussion. The committee received the presentation as a resource for understanding the financial landscape surrounding the city's bond obligations and future debt planning. ## Discussion of the Lexington Public Library's FY 2010 Budget [timestamp: 1:22:17] The Council took up an informational discussion of the Lexington Public Library's FY 2010 budget, with key speakers Larry Smith and David Porter presenting and addressing questions on the item. The discussion covered several dimensions of the library's financial picture, including: - **Funding sources** — The composition of the library's revenue streams was reviewed, touching on how the library draws from multiple funding channels. - **Expenditures** — Current spending levels and budget allocations were outlined for the Council's consideration. - **State mandates** — The impact of state-level mandates on library funding was raised as a notable concern, with discussion of how those requirements shape the library's budget obligations. - **Community partnership role** — Speakers highlighted the library's function as a community partner, underscoring its broader value beyond core library services. Larry Smith and David Porter were the primary voices in the discussion, presenting information and responding to Council questions on the budget's structure and constraints. No formal action was taken; the item was informational in nature, intended to give the Council a clearer understanding of the library's financial situation heading into the budget cycle. --- ## Full transcript Okay. If we could call the meeting to order, we'll go ahead and get started. It's a little after 1:00 on March the 23rd. This is the Budget and Finance Co- Committee meeting of the Irvin County Council. Welcome our, our guests today. We have a packed agenda, so we'll go ahead and get started with our discussion of the monthly revenue and, and expenditure report. Commissioner Rumpke, take away. Thank you. Good afternoon, everyone. I'm just glad the sun's out today, right? Sunny skies ahead. Uh, just to bring the committee up to date, February saw the largest US monthly deficit on record at $221 billion. And, um, households and businesses, as you all know, are continuing to de-lever. They're, it's resulting in the lowest overall debt growth, which is the government and private sector since 1952. So the supply of debt is down, but overall, the recovery's gonna need some more time to become, you know, more self-reinforcing before we're probably gonna see a drop in US Treasury funding, uh, risk. Um, so some of the things that Bill and I have been looking at that we thought you would be interested in, some of the indicators like capital good shipments, length of workweek, retail sales, all of those indicators are improving faster than prior recessions. Um, and the OEC- OE- OECD, I always get that wrong, leading indicators are still rising. But really the point we need to consider is, in all of the other recessions that we've faced as a nation, we did not have the trillions that is being spent right now in stimulus dollars to jumpstart the economy. So, um, Mike Zimbalist, who is, uh, one of the, uh, uh, economists at JP Morgan, uh, where I used to be employed, he, he likened it to an arthritis patient being treated with physical therapy as compared to those being treated with steroids. The steroid patient got better faster, but given i- the risk involved with the prolonged use, the person who had the physical therapy actually was better off in the long run. So just a little bit of humor this afternoon . Um, we feel like we're gonna be well-positioned for single-digit, um, market equity returns this year, um, giving the risk around the, the stimulus withdrawal. So stay tuned for more information on that. So with that said, let's talk a little bit about unemployment rates. Um, you know, while the firing has slowed, there's little evidence that the pace of hiring is picking up yet. Uh, one potential contributor could be the auto sector. While sales fell, production fell even more, and inventories have been drawn down to an extremely low level. Um, as we look at the numbers, uh, we're also seeing weak payrolls, temporary employment, manufacturing employment, and the workweek are getting just a tiny bit better. Uh, but the potential drag is the minimum wage in real terms, because it's at the highest in 30 years after that, um, increase that we saw in 2007. So if you look at Fayette's numbers for January, uh, we were at 8.5% unemployment, as compared to December at 7.3. The MSA is at 9.1, as compared to 7.9% in December. Kentucky, as a state, uh, 10.7% versus 10.6 in December. And interestingly enough, uh, the national number actually went down, January 9.7%, as compared to 10% in December. There's Fayette County's. So what's going on with our economic indicators? Um, you can see, uh, we just talked about, uh, unemployment. Our employment through January was 138,000. Um, permits issued have gone down in February, uh... However, we think that's weather-related. If we think everything we've been through, we're tired of, we're tired of shoveling snow and getting that salt off the roads, right? So hopefully, we'll see a, a pickup here shortly. Uh, new business license, uh, something positive to focus on. It's the highest since October, uh, and it seems to be, uh, uh, tracking our '09 trends. So, um, while I am, um, encouraged, I'm hopeful that we're gonna keep going up versus tracking to '09, because we saw a, a, a decrease later on in the year. I wanna spend just, uh, a couple minutes on home sales, because I think that's driving a lot of what's happening even here in Fayette County. Um, for Fayette County, home sales were up in February significantly, which is really incredible, because nationally, home sales fell for the str- third straight month, and it was at our, our lowest level since July. There's tremendous concern that the fragile housing, um, situation could, could falter, and that it's gonna m- be harder for the overall economy to recover. Again, we're seeing some nice numbers here, and I'm hopeful that that trend will continue. Previously owned homes, nationally, um, those sales were down about .6% in February, and what we're seeing is a weakness in, um, sales prices. So, uh, overall, nationally down 2%. 165,100 is the national median average home price, um, in the South, and we can only get it by sectors. In the South, the, uh, housing prices are down about 1%, so a little bit less than the overall national economy. So, that was good news. Um, previously owned homes, the inventory jumped nationally 312,000 units, and that pushed the overall supply or inventory up to 8.6 months. And I've read several different, uh, economists, and their concern is that if we get to a 10-month supply nationally, that too could really hurt our rebounding economies regardless of where we live. So, we'll, we'll wanna keep a close eye on that, and Chair, that's why I just wanted to spend an extra minute on that point. The other thing that I wanted to point out, you know, we were quite encouraged that we were seeing foreclosures go down, and I know several of you had asked me questions in previous meetings. Uh, we've seen them tick back up, uh, t- t- two data points that are very important for here in Fayette County. Um, number one, we understand that the foreclosure docket is full for months in advance now. That's not a good sign. And in doing some research, a lot of the, uh, financial institutions that had, um, home buyer programs that helped them stay in the home or they'd, they'd, uh, renegotiated rates, et cetera, now all of these consumers are on new plans, new repayment plans. They're already defaulting on those plans, and so they're now going into foreclosure again, and I don't know that there would be additional opportunities to bail out. So again, we're gonna keep a close eye on that, because it does make our economy fragile obviously if we're having, um, people displaced from their homes. It's not just about the revenues that we talk about in here, it's about, um, Commissioner Helm's presentation two weeks ago and all the social service implications from there. So with that said, I'm going to turn it back over to, uh, Bill O'Meara, and he's gonna talk to you about what our revenue looks like. Bill? Uh, thank you, Commissioner. Uh, the next slide is showing the month of, um, February as compared to budget. And, uh, last month, I was here with positive monthly comparisons saying that one month a trend does not make. Unfortunately, that came out to be true, because our withholdings are 19.9 off of a budget of 20.1, which is, uh, 1.1 below that. The net profits, uh, are equally surprising in the fact that they aren't negative for the month-to-month comparison. Uh, they're slightly ahead of the same amount, uh, uh, that is budgeted for, um, this month. Insurance shows a positive, uh, uh, increase, but the softness in the franchise fees is still showing in the month of February. Uh, year to date, we see that, um, occupational withholdings, our number one revenue source, is at 100 million. The budget is 105, so we're at 5.9 million under-budget. Uh, net profit, 11.9 versus 12.9. That's a million dollar below budget. The insurance is staying ahead of, uh, year-to-date budget, 6.6 versus, uh, 6.1, and franchise fees, that softness we talked about, is there. Um, we did not see an increase, uh, that we hoped due to the inclement weather that may show up in the March payments. As a point of reference, shifting from budget to actual, uh, we started showing you comparing to last October, which is when all of the financial, uh, implications that we're currently living with started to prevail. Um, October, uh, withholding through, uh, February, we are 2%, uh, actual versus the same, uh, period last month in withholdings and in net profit. That comparison, we're at 7 million versus, uh, uh, 8.2, or a 14% below the same periods last year. So we continue to have pressure on our number one and number two revenue sources, uh, as we had, uh, anticipated and were the basis of us coming forward with that, uh, amended, uh, revenue forecast for, uh, FY10. And I'll let Linda then show how we're doing to that, as well as our financials. So again, we're trying to keep the slides, uh, consistent month to month so you can see the trends. Uh, as Bill has just mentioned, um, withholdings, you can see where we're trending. And if you recall, our assumption was that we were going to be flat, and right now, we're not looking like we're gonna hit that. Uh, net profit, we had assumed that we would be down 7%, and as Bill just presented, it looks like we're turning down more like 14%. Um, with insurance, it looks like we're actually going to, uh, be close to, uh, what we were projecting, so we're, we're glad about that. And again, these are the assumptions based on the revised forecasts in, um, January. Our franchise fee, it looks like, uh, we're gonna be close. Uh, we're gonna be just a little bit under on that. Our license fee, uh, looks like we're gonna come right in on budget, as well as, um, our taxes, and our services , excuse me, the assumption was up 1% and it looks like we will be hitting that number, so overall, to, to Bill's point, we feel like that $12.5 million revenue shortfall is, uh, still a very realistic number given the trends that we're seeing. Let me take you to the next slide. My apologies here, um, I completely missed, uh, getting a couple, uh, lines that we will add to all future slides, and that would be, um, total expenses and a breakout for the debt service. So I'll give you those numbers today, uh, but those will be added to these slides going forward. So as you can see, total revenue, um, actual to budget, we have an unfavorable variance due to license and, uh, and license fees and taxes. Um, our budget, we're at budget with our property taxes and we're ahead of budget for, um, the, uh, charges for services. With personnel expense and operating expense, um, we have, uh, favorable variances across all of government, and that's due to the expense management plan that we have implemented, and we are still managing to that plan. So that's where you can see that showing up. Uh, debt service, uh, is, it, it, which is not on the slide, but I wanted to share with you, our debt service actual is 19.1 versus a budget of 19, so we're only, uh, uh, over by about, um, 100,000, or excuse me, $100 there, 100,000, excuse me. Um, other categories, which it, uh, if you recall, those have the transfers in and out. It has some capital expense, so it's kind of a mishmash of different things there. And you can see our budget was 15.3 and the actual is, is 18.6, so a 3.3 variance. Um, and again, we'll be breaking all that out in the future. So if you, if, again, if you look at total expenses, Chair, um, our total expenses are 163.1 versus a budget of 175.6, and we will have that broken out going forward so that it's easy to, um, to follow. And with that, I know we've talked really fast, but we know we've got a full agenda and I'm happy, and, um, Director Amer is happy to answer any questions you might have this month. Council members, if you have questions, will you please log in on the voting system? And can you repeat the, the net change or the net where we're at with total revenue and, and expenses? Where does that leave us through that last... I, I'm sorry. Ask me that question one more time. Well, what is the net? Where are we at net on the net change up here? Is that 3.7 to the positive on the budget? Is that what you're saying? Just so everyone's clear. I don't think everybody, ev- everyone's clear on your last line. Yeah. So we are, um... I just wanna make sure I've got my numbers here right. I, I think what every- what everyone's confused about is we, we passed a budget of 279. That's correct. Okay. And now we're talking about we're positive 3.7, but we did a budget reduction of 12.5. So how are we- That is correct. Yeah. ... how are we positive 3.7? Based on- And that's what- ... where we are actual to the budget, we have a 3.736 overall savings through- Through expe- through expense manage- ... through expense management. Just wanna make sure. Yeah. Thank you. Yeah. I'm not asking a question. I just want you to make sure we explain it so everyone understands. I don't understand. We're not 3.7 ahead of budget. No. That's not what that means. No. Council members, Vice Mayor Gray. Your thoughts. Yeah, um, I'd, I'd like to drill into that a little bit more and understand it. Is that annualized, projected? What is it? This is February year-to-date. So we're up 3.7 million through February compared to... Which budget? We're doing better, 3.73. Is that to the revised budget or to the original budget? I think that's... 368? This is the- Or three... Yeah. Right. So 368 rep? Or 268, or, or 268. I mean, 268. Yeah. 268. So we're up ... Yeah. Here. Re- Explain the way ... L- L- Let me say the same thing with different words, if I could. Mm-hmm. Uh, February year to date, we were budgeted to be 10.5 million revenue over expenses at this point in time. We expected to be 10.5 revenue over expense at this point in time. The actual revenue over expense through February to date is 14.3 so we know that we have other expenses are gonna happen in the March through June that will exceed revenues that were expected March through June. Our kitty is larger than we had budgeted at this point in time. Does that help? Well, so you're saying it's timing. Yes. Every ... Yeah. Things are all ... Yeah. You're predicting the timing then of these expenditures. We, we did that through the budget with monthly budgets. Okay. First time we've ever had monthly budgets. First time we ever did. First time we've ever had monthly budgets. Prior to this year, we've operated from an annual budget and just tracked what percent have we used up. Okay. So you've annual- annualized it before. Right? We started with a grand total. Yeah. And never broke it down as to when it would occur. So then you just annualized on a month-by-month basis. For this year? No, before. This year, you're timing ... You are predicting on a timing basis. We are. And before you didn't even predict. Hmm. So, so in other words, Bill, l- l- let me phrase it to you, back in other words. At the end of this year, this last column will have 12.5 million in the hoe is what we're predicting. Yes. Okay. So we're gonna make up 15 point- uh, $15 million swing between now and June? No, $9 million swing. Well, you ... It shows you're ahead. It shows revenues are ahead, basically we're ahead of our budget. No, no, no. That- Our revenues are behind. 176.6 million are actual. They were supposed to be 181.9. The parenthesis is an unfavorable variance. You're asking- Right, the net out. The net out, we are ahead 3.7. And what's your predic- At the end of the year that, that'll be? Zero. Okay. At 268. And the reason we're ahead is the expense management or Expense Reduction Management Plan, so we, we, we anticipate that number being zero. If we've, if we've, if we've hit the number on the revenue and we managed to that Expense Reduction Plan, that should be zero in a perfect world. We can work with this slide and maybe- To make it- ... make some changes to it. Yes. We will do that so that it's easier to read. So everyone understands it and who sees it. Councilors, any other questions on the revenue report? Anybody at all? Log in. If not, we'll move on to the next item. We got a packed agenda. I will add that in the month of February, the Federal Government spent one billion dollars in debt interest so our debt numbers aren't too bad compared to- I'm thinking that's pretty good. ... spending $1 billion every 40-hour work week in debt interest, that's, that's pretty good. So thank you. Move right along. And so, um, it's my pleasure today ... Based on our discussions at the Debt Management Committee a couple weeks ago, um, we, I think we all felt it was important to have a, uh, a good understanding of the bonding process and, and quite frankly, the impact of your decisions as to what to bond and how we move forward in managing the overall debt of the urban county government. And in anticipation of, uh, bringing forward to you in a couple weeks our next, uh, bond issue for the pension, uh, contribution that we have to make, as well as opportunities that we found to do some refundings of, uh, previous, uh, bond issues so that we can pick up some interest savings, um, I have invited our friends from Hilliard Lyons to join us today to give you a, a presentation about bond ratings and debt management. So it's, um, just FYI for you, we will be back in front of you with this team, uh, the week after council comes back from break to talk about this, this pension bond issue. Uh, but today we have with us Steve Grossman, Chip Sutherland, Greg Phillips, and Lance, um, Mogdus. And I believe that Chip and Greg are gonna be doing the presentations so without further ado, I'll bring them up. Commissioner, I'll just kindly remind you of our 15 minutes. Yes. And they know that. Thank you. Uh, Lance is, uh, currently passing out the presentation that we have on PowerPoint. I'm Steve Grossman, I reside in Lexington. The other three are in our public finance department, uh, in Louisville. Uh, we were more than, uh, happy to come and make this presentation upon Linda's request, and I want to compliment her and, and Bill for the wonderful work that they're doing in aggressively addressing some of the issues that we're facing here locally. Uh, Chip Sutherland put the program, uh, put the slides together and the numbers, so we're gonna have him do more of the presentation, but I wanna introduce Greg Phillips is our senior banker from Louisville. Hello. Thank you all for having us here. I'm Chip Sutherland. And mics are not my thing, but, uh, I'll go ahead and start with the presentation. Now, the only thing that I could add to this that would, uh, I just want a little bit of levity here. Um, would be to, do you know PowerPoint and municipal bonds. And so that's kind of what ... I'm sorry to make you go through another PowerPoint presentation, but what we wanted to do was kind of give you a ... Instead of talking numbers, give you visuals. And I believe each of you have n- have a copy of what's gonna be on the screen. So, um, today we're gonna talk about the interplay of two things, your bond rating and the management of your debt. Um, I'm gonna kind of shoot through this presentation. If there's time at the end, then we'll, we'll, uh, take some questions. Um, regarding the municipal bond ratings, what is the Metro Government's bond ratings? Why do they matter? What do they tech- what does it technically mean? What does the rating technically mean for Lexington? And what do they really mean from a practical standpoint? And then, finally, what are the criteria for earning those ratings? Uh, Lexington car- currently carries two ratings, from Moody's Investor Services and Standard & Poor's. And so, I get to use the clicker here. All right. So, from left to right, triple A is the highest rating, going all the way down to the right, which is the lowest investment grade rating. And you can see here that Lexington-Fayette Urban County Government garners an A- a double A-2 rating from Moody's, which puts you in rarefied company. You're just a couple of notches from the top rating. Okay? Um, so what does th- what does it, what does it, what does that mean, technically speaking? Well, if you flip to the next page, I kinda circled what a double A rating means. And for today's conversation, uh, we're just gonna reference Moody's, uh, just to simplify things. For all intents and purposes, Standard & Poor's has a similar scale and similar meanings and similar criteria. And you're in the same relative situation. Issuers rated double A demonstrate very strong creditworthiness relative to other unus- u- mu- u- u- U.S. municipal issuers. Okay? What's important about this, this shot is, is when I get to my next point, which is, well, what does it really mean? It has to do with interest rates. These are rating categories. You're a double A-2, and at the bottom of this little sheet here, you can see that there's, there's double A-1, there's double A-2, and double A-3, and then you would fall to the next category, which would be A. Falling from a category is about 20 basis points, or .2% on an interest rate. Now, I'm gonna use an example here shortly to kinda illustrate what that means. But right now, that's a very important thing to keep in that company. So, moving on. Um, recently, in January, we did a finan- we put together a financing package for capital improvement projects, if you all recall. And the interest rate when Lexington-Fayette Urban County Government went to market with a double A-2 rating and a double A+ rating from Standard & Poor's, it was well-received in the marketplace 'cause of your relative strength to other issuers. And the rating that you garnered wa- or the interest rate that you, uh, experienced was 3.15%, very low. Okay? Had another issuer gone to market with $69 million worth of borrowings, just like you all, and their rating was one category below, at an A-rating, their interest rate would've been about a 335. That's the 20 basis points difference I'm talking about. And what would that have meant? That would have meant that Lexington-Fayette Urban County's debt service would've been about $138,000 a year more on an annual basis for 20 years. It's significant, that rating, the double A-rating. Over the life of that loan, it'd been almost two, two and three-quarters million dollars more in just financing costs. So, it matters because a city of this size is gonna have other needs in the future, and it is gonna be in and out of the capital markets on an ongoing basis. So, going to capital markets with the best rating that you can get is very important from this standpoint, from, from an interest rate standpoint. I apologize for shooting right through this. The, um, the criteria. What are the criteria for the rat- for, for getting a rating? Well, they're, they, they focus on four areas, primarily economic strength, financial strength, management, and debt profile. And as you can see, about 40% of the rating is dependent on the, uh, socioeconomic demographics of Lexington. And when you, when you look at this, uh, when you look at that category, what you, what I want you to think of is the University of Kentucky is based here, the horse industry, Lexmark, Toyota's nearby, an affluent population, population growth. All of those things that play in your favor. And it makes up a bulk of the rating. Something significant happens there, you can, you can bet it's gonna impact your rating. Um, about 30% of the rating is on the balance sheet. And what, what they really care about when they look at your balance sheet and the operating flexibility of the Metro Government is, what's your savings account level look like? What are your reserves? What's your cushion? Okay. Um, and then, ther- there's, they, there's about 30% of merit put to the, the general governance of the, of the, of Metro Government, the management team that's in place, and then the actual debt that we're talking about. So, moving along, where is, where, where are the rating agencies focusing on today with regards to the credit ratings of Metro Government? Well, they're looking at the balance sheet, and they're looking at what's gonna come down the pike, what come down the pike, as far as future debt, because they know the needs, and they know that how you structure your debt in the future is gonna dictate the, um, the operating flexibility of the government. It's gonna, it can impact your reserves depending on how you handle this, projects that you have to do in the future. So, this part is affecting this part. And that's kind of where their focus is right now. So, just pulling a few comments from the most recent ratings that, uh, Lexington-Fayette Urban County Government got from, um, Moody's, uh, and S&P, some of the rationale. You can see here that, uh, the, they garnered a double A-2 rating because of historically sound financial position, an affluent tax base, all the things that I mentioned, the socioeconomic. ... uh, data on, on Lexington, but it's continuing to be pressured by economic, uh, pressures. No different than any other city and county, uh, state government we work with. Um, maintenance of strong combined reserves is important to the city, Moodys. Um, future rating analysis will factor the city's ability to take on these other projects that we're, you're considering in the future, while maintaining a satisfactory historic- a satisfactory financial position. So, now I'm gonna talk about debt manage, since I've just kinda blasted through a ratings discussion. So, this is a visual representation of your debt. Instead of throwing numbers up here, it's a visual representation. So, let me explain a little bit about at what you're looking. And you, you can probably see it more clearly on your sheet. Okay, this is your debt profile as of June 30th, 2008. A snapshot in time. So, if we go back a couple years to June 30th, 2008, this is, this is what your principal and interest payments out of the general fund, uh, supported debt was gonna look like. In 2008, you were gonna make a principal interest payment of close to $25 million. And then, by 2012, it had dropped to $10 million. You can see how, if you did no debt from June, 2008 on down, your payments were gonna get a lot easier. That's typical, okay, for, for issuers having, um, uh, debt outstanding. So, let me tell you a little bit about the green spot. We're talking about general fund supported debt only. And the general fund revenues are in the 240, 250, 260 range. To, and I, and I talked about, I talked about the, the need when you, when you, when you structure debt, or when you, when you, when you set up a, a bond issue and you have to make payments on it, if the payments are a lot, it's gonna have to come from somewhere. And so to, to keep the, uh, operating flexibility of the government, this shows, okay, you've got 240, 250, $260 million in general fund revenues, 15% of that is what can be used right now to, to, to operate and to satisfy all your future debt in the future. So, that's what that green is. Okay? I, I don't know if I explained that very clearly, but this is our free area for new, layering on of new debt. Bless you. So, if we go to the next page, flash forward to 2000, June 30th, 2009. Again, a snapshot in time. You see our debt is here from 2008. The blue was a pension bond issue that was, was put in place in about April of '09. Okay, so that, that's the principle and interest on the, on the, uh, pension debt. So, it's layered on top of what you already had. And then also, uh, before June 30th, 2009, there was some capital improvement projects put on top of that. So, now you can see in 2013, your payments are gonna be close to $20 million. 2025, they'll drop down to 10, but you can see the layering. All right. The, um, this is what it looks like today. February two s- this is as of February 17th, 2010. And that's because that's the last, uh, transaction that the, that the Lexington-Fayette County Government has, has, has completed. And you see the pension debt is still there. This is the 2009 debt, and then this is the, the most recent debt. And incidentally, we did it, we refunded some old debt, or refinanced it for lower interest rate savings. So, that, that, that amount actually went down, and then we did $69 million, and so it went up. So, you can, that's what it looks like today. So, you see this, now the green space is a little squeezed, but that's, that's where we have room for other projects. So, the, let me say a couple things about what we're looking at here. The, this next, this, the rest of this discussion, this is very important. These aren't our recommendations of what you can do. These aren't our recommendations of what you cannot do, and we're not telling you what your, quote-unquote, bonding capacity is. This is to show two scenarios, where your debt is today, if you entertain one of, either one of these scenarios, what it would look like if you financed it the way you have historically financed it. Okay. The only difference here is this scenario shows all the pension debt, planned pension, planned pension debt issuance. This one does as well. This one says, well, what if we do $60 million worth of capital improvement projects this year, under budget year 2011? And this one says we do none, okay? That's gonna be the two differences. Again, keep in contact, context what's important to Moodys, maintaining cash reserves and operating flexibility. So, here's what it would look like. Your existing debt, what we have in place now is this orange right here, okay? That's what's in place right now. The blue is what's the rest of the planned pension issuance. Okay? And you see how it chewed up some of the green. That's what you have left for capital improvement projects. If you have, if we put together, if we, if we finance all of the, uh, pension in here that, that's in that scenario, and then you also do a $60 million issue in 20, 2011, and then a 10, 20, uh, 30, 30, like we laid out in that first scenario- And we finance it over 20 years, like all the other bond issues, or most of all the other bond issues that the city has financed, it's gonna, it's gonna push through right here. And what that means is, if we only wanna t- use, at this point in time, 15% of the general fund's revenues to go towards debt service, we're compromised right there. That's gonna have to come from somewhere. That's kinda, that's th- the point of the visual, is to show, lum, what the impact of that wou- would have, have on it. This is the second scenario. Again, thes- this isn't to tell you what you can do and what you can't do. It's just to kinda show you, if you financed the projects the way w- we have historically financed them, this is what the impact th- it's gonna have. $60 million out, if we don't finance 60 million in 2011, and we just do the, the 10, 20, 30, 30 in the subsequent years, it, it is, it just falls below the green there. And that, in a nutshell, is a, is a discussion on ratings, what they really care about, why they should matter to you, and then just a discussion of a couple scenarios. Is there questions, or ... Yeah. We havas a, we have s- of, several council members signed up, but, uh, before we ask the questions, just to clarify, you're just talking general obligation debt, right, not revenue debt? Correct. Okay. Just make sure everyone understands that. Council Member, uh, Gordon is up first. Thank you, Mr. Chair. Thank you very much for your presentation. Um, you touched on a couple of things that I have questions about. And I know that in several meetings we've had in the past, when we talked about our bond rating, um, various council members asked if our dedicated revenue funds are considered when, when LFUCG is considered for its bond ratings. Do y- are, are the s- for example, the sanitary sewer fund, the water quality fee that we now have fund, uh, all those dedicated revenues which can't be used in the general fund, are they, um, discussed in terms of our rating? Or is it only what is coming into the general fund? Council member, uh, what the rating agencies typically look at is those revenues that are available for debt service. For example, you mentioned sewer. Uh, those revenues would be looked at in terms of your sewer financings, because they're dedicated for sewer, but not your general fund, uh, bonded debts. So, uh, effectively, revenues that are free to be used to service debt, i.e., General Fund revenues, is typically what the rating agencies look at. An- and if there a- are other funds that are not designated, then those can be looked at as well, but if it, they're restricted or designated, typically, uh, they're not looked at as, as possible ways to pay general fund debt. Okay. Um, and then, this, um, your, your visuals were very good. I'm a visual person, so I liked seeing those, uh, mountains. Um, so, r- if one were to look at these last two visuals that you presented, where the one full CIP breaks through the green area, just to put it simply, and then the next one, where it does not, and we stay within that, um, I, I know that you said that you aren't recommending what we do and what we not do, but it would seem that the last, the one where it breaks through would be looked upon negatively. I mean, is that a fair assumption? Let me just make a quick comment on that. Uh, uh, obviously, the, the 15% revenue is a constraint that, that, that the staff and the council have determined to be a reasonable amount of, of budgeting. There are strategies that, that any, uh, that, that the staff can undertake to still do this debt, but they come at a cost. For example, uh, we could probably do some of this debt where it wouldn't, as you say, bust through the, the, the green by maybe going out a little bit longer on the debt, 25 years versus 20, amortizing the principal a little more on the back end. But there's a cost to doing that. And that means that there's extra interest costs to the Irving County government. So, there's strategies that can be employed, but we just wanna make sure everyone knows that there's a cost to those strategies. Well, one of the things that you, um, m- mention- you mentioned the 15%, and someplace in here, I think, in the rating discussion, one of the things that Moody's liked was our, um, our, our strong, not only our strong creditworthiness, but our conservative-ish spending. And we've bumped that up a good bit. So, um, I know that several council members in various meetings this year have had questions about that. And a l- I know, for myself, a l- tad bit of nervousness in bumping it up. And, um, but, but I also know that we've a- talked about the long view and bringing it back down. So, would you see that as a, an okay thing? I- am I making sense? Well, the, I mean- ... it's not the absolute, it's not the absolute numbers. It's more about structural balance. Take in a dollar revenue on a year, then try not to spend more than a dollar. There's years where you may have to do that, right? Um, but you have to have a savings account. I'm putting it in very, very basic terms, but in the grand scheme of things, this is what the rating agencies care about is, do you have a structurally sound bou- uh, budget? If you don't, how long is it gonna be not balanced and what kinda draw will it have on your cash reserves? Does that, does that kinda help a little bit? It's not so much the numbers, as much as- Right. ... it is, is the balanced budget and the cash reserves. And the- and the broad look at what we're planning. And, and, and that is one of the reasons, on the one slide, we s- you, Council Member, you, you just talked about the areas that- Mm-hmm. ... that they have voiced concerns about to, to staff, in terms of you all's rating. So, and, and obviously, you all are not... you're undergoing, you know, something here that, uh, just about everyone else in the country is, is how do you balance, uh, an appropriate use of debt versus keeping your reserves healthy and keeping a structural balance? And, uh, Moody's is, is, and S&P for that matter, is looking, uh, at that in terms of, of, of urban counties rating, but also all ratings across the country. Okay. Thank you very much. I just wanted... one other point I wanted to make to you, um, on your, on your previous question. Uh, Moody's and S&P, th- they're gonna rate a G.O., a general obligation bond issue, and then they're gonna put a separate rating on your sewer bond issue. So when you sit down with them as a city government, they're gonna look at everything. Okay? That's, that causes some confusion at times, but, um, I just wanna let you know that too. Okay. Thank you. Thanks, Chair. Thank you for the presentation. Um, since my time on council, I've been learning a lot about economies and really enjoying learning about it. Um, and through the economic downturn, some of the information that I saw, um, you know, discussed Moody's and the ratings. Um, and they've been around... how long has Moody's been in existence? Oh, geez. Uh, probably- Do you know any? ... around the turn of the century. Okay. Or, or older. Okay. So long time. When, when I say turn of the century, I mean the, the last one, not this one. Okay. Oh, yeah, you gotta clarify that nowadays. Um, but I, I think... I guess, what I'm looking for is why should we give any... what, how, why should we give any weight to Moody's ratings when, obviously, they've been giving some economic advice for a, a while, and there are probably even some folks that believe some of their advice added to economic downturn? And so I'm wondering, the things that they're saying, that we, we look at our risk, are, are they basing that... are, are they in, are they involved with any of the other regulatory systems that would maybe cause them to sway one way or the other? And on a local level, um, serving people as opposed to running a business, why would we prefer to take the advice of someone that probably gave maybe some not-so-good advice before? Uh, well, Council Member, that's a very good question. It, it, if, uh... and what you're alluding to, I think, is the fact that, uh, as a result of the, um, of the severe economic, um, downturn in 2008, uh, uh, the government, uh, the federal government is taking a look at, at Wall Street in general, and Moody's and the rating agencies are part of Wall Street. Um, they were called before Congress to answer several questions in terms of, of not so much, obviously, municipal issuers, but some of the ratings that they were giving some corporate, uh, issuers, uh, AIG, those types, that ended up dragging a lot of people down when they went under. Um, so, so they recognize that they need to do a better job. Um, for better or for worse though, this is the system we have in place. And, and when underwriters and traders go to offer, uh, a, a bid for, for your bonds or anyone el- or anyone else's bonds, for that matter, they take into account the ratings. Uh, it's not a perfect system. In fact, um, uh, Moody's and, and the rating agencies are going through a change in their rating system right now as we talk. It should be coming out here in the next, uh, month or so. But, um, the folks that make, make the bids for your bonds, uh, they take the, the ratings into account, i- in large part, as, as Chip had indicated, by that difference of 20 basis points. So I mean, that, that's, that's real. Uh, and again, I think everyone does recognize that the rating agencies have room for improvement, but they're still a very, very important part of, of, of, of y- of the interest rate that you and everyone else in the country ends up paying, uh, in the marketplace. Well, and I, and I think you're right. They are a component of what we need to be doing as part of our plan, and I think that's discussion I would like to have with the committee members, is that this is a strategy and this is a, an angle, but we need to be looking at our revenues and what other risk, um... because if we're... if... I'm thinking that the charts that we've seen are assuming, um, an ex- the existing sources of revenue and the existing streams of revenues, and we have repeatedly, month after month, when Commissioner Rumpke comes forward, we've said, "There's something wrong with our revenues. We're not really dealing with our revenues," as we're seeing that, the ratio kind of off. But we're not doing anything new with revenues. We just keep talking about how we can't do certain projects because of that. So I think it's important, and I appreciate the information that you've brought forward, um, but I think highlighting the fact that even the federal government sees something wrong with the rating agencies has to open our eyes a little bit about how much favor should we, on a local level, be giving, um, the ratings. Thank you. Thanks, Chair. Councilman Ehlinger. Thank you, Chair. I've been here long enough that when I first came on, 10% was supposed to be the max. And they said, "Never go above 10%." Well, we went through that, and now we're at 15. And I'm trying to go through your scenarios here. And could you go back through the mapping and just kind of re, re-go through those again, if you don't mind? 'Cause I'm trying to... Where, what have we agreed to at, at this point with the maps that you have, and what we've agreed to do, and what we're looking at potentially further doing when we go through the, the green area there? Do you mind saying that question again? I... Well, I'm trying to look through where we stand and what we've actually agreed to do- Okay. ... and what we're looking at. Right. Because we've agreed to do the pension of the 35 and the 31. All right, go back one more. One more. One more. That one is where you are right now, right? Okay. That's where we're at presently? Yes, sir. Okay. Could you take us from that to the next ones and just kind of run through those again, if you don't mind? Yeah. Well, what the next graphs represent? Yes. And this is where we stay, if we go back to that one, that's where we're at presently if we don't do anything else? If you don't do anything from here on out, that's what your debt profile looks like. And that's if you're in, looking at the green, the green is at 15% all the way through, and that's if your revenues don't increase at all. So we're not- After 2016, what it shows, right, actually is there's a slight decrease in revenue, and then it goes up 3%, then it flatlines in 2016. For the next? For, for- And we have to hope that eventually that revenues are gonna have an increase. I mean, that's been over time and has been increasing revenues. Yeah, I mean, the way, the way you would compartmentalize this is, okay, that's your revenue, right? And here's your expenses, the debt. And then two, if you don't add any more debt, you get here. More of the green means that you put it to your operating budget and you're putting less towards debt. That's all that means. Right. But I guess you missed my point is- Yeah. ... I, I, I, you, which I didn't agree with this year, and I voted against it because I thought it was irresponsible. We had our, our revenue increased at 3% and actually increased it up to 4.2%. When I knew the economy was going down, it wasn't going to happen. But that not being the point, when the economy turns around, you hope that your, eventually your revenues are going to continue over time. And if you look at our last 20 years, it's gone, it has consistently gone up. And you hope by the year 2035, it's going to be more than where that green is there. You're hoping your revenues are going to be a slow revenue increase, would it not? Councilmember, you're, you're exactly right. I think obviously though, looking out past four or five years to be on the, as someone said before, the conservative side. There's none of you more fiscally conservative than me, so I agree with you there. That's probably the rationale that, that, that staff was using when they projected the revenues. But it also does show the short-term effect of where we are right now. And that's the reason why it's, it's going down. But we are projecting, or the staff is projecting, that it will go up. And again, at some point, because obviously projections more than five years in the future are probably not terribly accurate anyway, again, just to be conservative, it was just flat-lined after that. Okay, that's, I'm running out of time. So if you would just go to these other quick graphs, please. That one? Yes, sir. Just run through those real fast, if you would. What that represents, what it represents is where your debt is today, which is the orange. And then if you issued $31 million of pension in 2011, 34 million in 2012, 37 in 2013, 40 million in 2014, that was it for the pension, okay? That's the principal and interest of the pension layered on top of what you already owe, of the debt that is in place. Okay. All right. The next slide shows the pension debt on top of the debt you already have in place as of today, and then it shows the baby blue or teal is capital improvement projects to include- Scenario one- ... 60, exactly. Yes, yes. 60 million, then the numbers- And you're not saying that this is what you recommend, because- Right. ... if we do this, then we have pretty much have told the councils in the next 10 years what they're going to be doing and our, our debt service is going to be taken care of for the next 10-plus years. The reason the 60 is up there, if you looked at what was on our plate that was approved that we talked about last fall, we had about, you know, 100, 106 million, somewhere around there, and we added a few more million for road resurfacing or, you know, those other projects. So we did 60, and then this was looking at everything else that was still out there. I see my time has expired, so I'll come back and ask you a couple questions when others are done. Thank you. Vice Mayor Gray. Thank you, Chairman. Thank you, Mr. Chair. Chip and Greg, my, my question is, really ties the increase in the anticipated capital improvement projects and pension number with the current budget. And it kinda, I guess it kinda includes Bill's crystal ball too. So I'm looking out, I'm looking at the graph that shows... ... numbers here, so I was ... The one that says, "What LFUCG's debt profile will look like if it issues pension and full CIP." Okay, that's this one. There you go. Yeah. All right. Okay. So, okay, right now our debt service is an absolute nu- absolute dollars, roughly 29 million, 29 and a half. Is that correct? Right in here. Right? 29 and a half million? Uh, that's about right, yeah, today. Including the newest, the latest CIP? I- The latest and greatest is in there. So that's roughly ... This one, this year's 61 milli, we're paying roughly one, 1.8 million debt service on that 60 million, right? Yeah. Something like that. Well, we will then next year. But it's, it, it, it, you can see it factored in over there. That's okay. That's bumping up. All right. So when you dial it out two years and you add all this in there, that's a, that's a del- that's a new number of like eight million dollars. Right here? Between the dark blue, yeah, the wildcat blue and the, and the other blue. Right. Right? Right. Okay. So Bill, how do we do, how do we manage that? That's, that represents like three, four percent of our current total. If I had the answer, I probably would be retired. Yeah. Um- Me too. Yeah. It, y- yeah, I always look at it from a checkbook standpoint. Can I, can I increase my earnings or do I have to cut my expenses? So if your mortgage payment is going up, I have to cut how much I spend at the grocery store or on gasoline or on ... So in other words, it's, if we're committed to paying more of the same amount of pie to debt service, we have to cut back on personnel, operating, partner agencies, the other components of our expense allocation. Okay. All right. So- And, and of course, the other op- the other option would be to, to effectively do these, but to lay them out, uh, by a number of years. Because you see, eventually even in this, in, in the, in the highest scenario, you can see that your debt service obviously dips back below- Okay, I'm, but I'm, I'm still struggling to get to the number, to the, to that eight million or whatever that delta is between today's 29, 30 million and two years out. 'Cause if we're adding, in two years we're adding 30, 40, 50, 60, 60, 70, 80, we're adding a hundred and, a hundred and some million. If you're continuing to get the same, hypothetically, you're can get, continuing to get the same rate, because we're such a good rating- Mm-hmm. ... and that'd be a 3% number, I don't ... How do we come up with eight million more? Well- In, in debt, annual debt service. Okay. In 2010 is the beginning, right? Right. And by this time period here, in say 2014, you will have issued $177 million worth of pension. Okay, so then you're- 60 million of capital improvement projects in 2011, 10 million again in 2012, 30 million, 30 million in subsequent years, so that's almost, you know, 150, $320 million worth of debt that you will- All right. ... start having to make those payments on. Okay, all right. Does that make sense? I understand. I was getting my lines maybe cr- I was, when I was going vertically at 2012, I was hitting an eight million dollar premium. And I don't think that's what you're talking about, 'cause you're, you're what ... To get to that number, you're going out to 2015. 2016, 2017. 2016, all right. Okay. So ... All right. Now, um, on this future borrowing scenarios, what happens here when you take it, the planned CIP issuance down to zero? How did you ... Maybe you told me and I didn't hear it. Or you told us and we didn't hear it. What does it look like if you do that? Yeah. Well, how did that hypothetical come up to going to zero? Just hypothetical? Hypothetically just to say 60 million or zero. Just to kind of give you a, a visual. It's really, it was not so much more about the numbers as it was about- Yeah. ... the visual. Okay. Thank you. Councilman Myers. Thank you, Mr. Chair. I guess I'll start with Commissioner, if I could ask you a question. This assumes that at about 2014 or 2016, that we get up to the 260 million or the, up to the 45 or the, the 46 million or so in, in revenue. W- what ... And I know you can't project out that far, but I guess my question is sort of what Councilman, Council Member James was saying, we're not doing anything different with revenue. Right. I mean, that would assume that there were no tax increases, that we hadn't identified other sources of revenue, which we talked about as a committee, as possibilities out there. So there, there just had to be some assumptions to, to be able to put the graph together, Council Member. Right. And I, I understand that, but I guess for those watching at home, you know, I would recommend we look at this as like it's my family budget. And if I don't have any reasonable expectation of raising any revenue, then that's really gonna make it pretty easy- That's right. ... for me to make decisions here. And, you know, it seems to me that, that other 60 million in CIP or 60,000 or- 60 million. ... 60 million, can't happen. I know we're not here to make that decision today, but if you look at this like your family budget, unless we know something down the road, there's gonna be more revenue generated somehow- And -- and that was the purpose of -- of bringing all of this to the table, because we -- we want to make sure, as you all are considering the impacts of the decisions you're making around certain capital expenditures- Mm-hmm. ... what the far-reaching effects are, to -- to, uh, Director O'Mara's point as well. So you are absolutely reading it that way. Now, again, you know, revenues may rise. We may have opportunities for additional expense days. And -- and to Greg's point, there are other ways to put financing together, and, um, you know, we d- we hate to utter the word balloon payments, you know, you don't want to mortgage your future, and we've talked about that. But there are other strategies in the interim that you can use to smooth your cash flow a little bit. But the overall debt, and that's -- that's what we've been trying to talk about since I came onboard in October- Right. ... is what's the impact of that overall debt. Right. And then- Does that help? Yes. And the problem with those other strategies is still that, without some type of understanding that there's gonna be revenue coming in that we don't know about, that just hurts us, that just pushes the can down the street. Just pushes it out. So, um, and what I'm gonna say is that, and I'm just gonna, uh, give up the microphone, that, to me, what we need to look at as a council and as an -- as an administration is the dollars that we do have coming in, the dollars that we know are gonna be coming in, and how they're best being utilized and looking at every one of those dollars and seeing if it's the best and highest use of that dollar. And I'll leave it there and wait for the next topic to come up 'cause that's why they're here. Thank you. And we have one... I think Council Member Ehlinger's back up on the mic. Before we do, Bill, can you tell us what the, or -- or Commissioner Roemke, what our revenue projections are going forward? Are we projecting the same at 268 the next several years? You had that number on our last meeting. Just to put the point on emphasis of a flat revenue stream, because I think we've had three years of declining revenues in a row, which we've never had in Fayette County. W- we do not see next year as the turnaround year. We see the following year- Uh-huh. ... to be the turnaround year. So if you will look back, you'll see those revenue projections. There's a slight dip. You can see it at 2011, 2012. So we feel that we've still got 12-plus months of challenge on revenues before we start to increase again. And then, to help them with this, we -- we said, "Look at increasing... increases that -- that grew from year to year." You have 2%, then you have 3%, that type of thing, for us to get back toward the glo- the glowing 20 years that we've experienced this past 20 years, where it was a great ride. Well, based on that, it looks like 2014 will finally be back to 2008 numbers. Something like that. That's correct. That's hopeful. Thank you. Council Member Ehlinger. Thank you, Chair. Just a couple other questions. O-one of the issues we talked about at the beginning was our bond rating, and as we increase this, uh, are we gonna be able to keep our Aa2 rating by doing this? Will this affect that? Because I -- I think you made the statement earlier how important it was that we kept and had a low rating. Yeah. And especially, I think as Chip indicated, um, stay within the rating category. Theoret- theoretically, we all could be downgraded from Aa to Aa3. I'm not suggesting that's gonna happen, but just from- ... a theo- a theoretical standpoint. And that -- and that wouldn't cost you much. Um- Well, I thought we had that discussion and said how much it saved us, and that was the big end 'cause it was 20 basis points that it saved us. No, no, no, no, no, no. That was based on a totally different rating category, A1, okay? If- if- if... there... your- your largest- your largest difference between interest costs occurs when you- when you go fall out of a rating category altogether to a different rating category, the AA range to the A range. So the- the transition, if- if we had a bad situation, would be, you're currently at Aa2. The next lower rating would be Aa3, but you'd still be in the AA category. If you fell from there, you would be A1, and that's the sort of, uh, challenge that Chip was attempting to show in his graphs. Uh- And by looking at those graphs, and w- and as Council Member Myers and James said, we're spending revenues that... above, uh, it looks like our expectations are gonna be. How is that gonna affect, then, our- our rating? Yeah, I think that, you know, and I think that, you know, these- these sorts of statements certainly have been- have been indicated. Uh, but, um, I think the rating agencies are looking at- at a lot of people, and they're looking at- at- at the Irving County government, and those two issues, uh, the amount of- of potential debt and the structural balance of the general fund is certainly, Council Member, something that they're looking at very hard right now. And, uh, you know, obviously, you know, we- we- we're certainly doing our best to con- convince them, as the staff is, that the Aa2 is where, um, the city should- should maintain itself, but I don't think anyone can make any promises. Uh, you know, uh, it- it's hard to... uh, it's very hard to, uh, tell the rating agencies what to do. They tend to have a mind of their own, if you will. So. But we do have some control over that, so I think we need to be con- We do have control- we do have control over how much debt we issue. Obviously, I think we're going to, um, um, you know, at the very least, obviously, issue the new pension bonds, which are just over 35 million, um, and then the ex- or the other re- refinance or the other financing is a refunding of sewer bonds where it's actually gonna save you all money. So that- that's what we'll tell the rating agencies that we're doing right now. Uh, I- I think we've always told the rating agencies that these future projects are subject to obviously having sufficient revenues to- to- to balance those projects, uh, in terms of the- of the general fund and so forth. Thank you. Thank you, Chair. Council Member Lane. So sort of reading between the lines of your comments, I've got the impression that one of your su- sub-implied suggestions, we might be beneficial to maybe delay one of the bonds for the pension fund, maybe for a year or two, so that we don't, you know, go over our 15%, uh, of our gross revenue in the general fund expenditures. Um, you know, if we've already put 70 million in and we're targeting 35 million, I believe this year, is that correct? And 31 million next year. That's, uh, you know, quite a bit of, uh, funding for the pension fund at a time when we really have other needs for capital improvements too. Plus it's gonna run our... could run our bond rating up near... Uh, you know, for the benefit of the people and the, uh, watching maybe on TV, the 40, uh, the 40 million for the full ch- uh, CIP line, uh, I guess that's on your, your chart, with pension plus full, uh, CIP. Could you put that back up? Yeah, a- any one of those, that's fine. In other words, what, what you're, I think... I believe what you're showing is currently if our budget is around 265 million, 15% of that would be about 40 million a year. Right. If we go up to maybe 300 million in revenue, 15% of that would be about 45 million a year. Right. We'd be staying within the... So now one of the things that could happen is our... if our revenues of the economy rebounds, goes up, uh, robustly, then we might work out of the problem. But on the short term, we are gonna be squeezed. Uh, so anyway, let me go back. Would you all suggest that maybe we delay one of the bonds for the pension fund for a year or so in order to make the transition through this gap here, where we're gonna be going over our 15% debt? Um, well, again, uh, I wanna make it clear, we're not recommending one, one option over the other. Right. But, uh, o- obviously to the degree that you issue less debt- Mm-hmm. ... the rating agencies obviously looked at that and, and a number of other different factors as well. So, uh, you know, going back to the one, uh, page where they look at the, and they weigh different sorts of factors- Mm-hmm. ... I think obviously the, the amount of debt burden that you have is one thing they look at. Yeah. All right. Uh, with regard to the pension fund, uh, you know, the stock market has gone up quite a bit in the last year, and we have made a $70 million or $75 million... a $70 million, um, deposit in that. Do we have any new actuarial data indicating how we're doing, uh, with the balance in there? Are we doing, uh, well enough that we could delay a year or so or do we not... do we not know yet on that? I don't have... Council Member Lane, I don't have the numbers right off the top of my head, but we do have some actuarial analysis that I can bring back to the committee. Okay. Or I can get with you. That's good. Okay. I think that's all I've got, Mr. Chairman. Thank you all very much. Appreciate your comment. Well, just that I know from March of '09 till this February, the stock market's... the S&P was up 68.4%. So big jump in those investments. Let's hope that our investment advisors did a good job for the pension fund. Council Member Beard. Th- thank you, Mr. Chairman. Um, I guess this is a question again for commissioner. Just off the top of your head, and I'm... you, you almost had... had the same question asked by, uh, Council Member Lane. Wh- what is our aggregate unfunded liability at this point on the police and fire piece? Yeah. That's what I'm trying to remember. So we've got 70... I think we've still got 100 and- You, you know, to the, to the closest 10 million or whatever. Yeah. That, that... Yeah. I, I think we still have 140, 150. 258. 258 million total. Is the- Yeah. 258 is the total, so we've already put 70 plus million in, so- Right. ... that's what we still have outstanding is the- And we still don't know what exactly what... where we stand or do you have some snapshot of- As far as, as- As far as, as what the, the market has done to help, uh- I, I don't have it off the top of my head, but we do have that information. Do have it. And I can get that out. I can email it out to the council if you'd like that. Because conversely, um, the more money we can pa- pay into the fund earlier- They'll earn. ... the better off we are. Mm-hmm. So maybe if we're going to defer bonding, we would defer- Of course. ... other types of, uh, capital projects as opposed to the, uh, the police and fire pension fund. That's one of the scenarios we've been looking at, is investing early and what are the effects of that versus putting the dollars in later. And I mean, it's a delicate balance because you also have capital improvement items that we have to do to move the government forward, so. Well, I understand, but- Just, it's a delicate balance. It's a question between wants and needs. Correct. Yeah. Thank you. But we can, we can get you that information and I'll... in fact, I'll try to do it before work session. Fine. Thank you. Thank you. Thank you, Mr. Chairman. Any other... council members have questions? I do have one question though on the pension bond. What, why... Commissioner Rumpey, why wouldn't we use a strategy of bonding all of it at the, the today's historic low interest rates and putting it all in there now, setting up a, a payment structure extended out further than we would our other general obligation bonds and, and using the balloon effect? I know we hate to use that word, but this gets it off our back at a historic low interest rate. Well -- Have we looked at that? ... that's something that we can certainly look at. Uh, and, and, I mean, there is a theory. Now, remember though, the, the, the rates are low, but those bonds have to be issued as taxable, uh, debt. So your interest rate is not going to be as low as the 315, for example. Okay. But, but, but you're right, and that's certainly an option that, uh, that we can explore. Uh, the, the, the options that we've looked at so far is based on, on, on a staggered approach, but certainly, uh, you know, s- some would say that's a, a legitimate strategy. Well, you could, you could also forecast the rates over that staggered approach and see if a flat rate today versus the incremental rates would be probably cheaper today to do it in the long run. And we would still obviously have to factor in ... We have to make debt service payments on that. Sure. So we'd have to take a look at that and could we afford it and what would that look like as you layered that other piece on. Well, the other thing that Council Member Lane alluded to too, if the market returns a little more favorable over the next 24 months- Right. ... we've hit it on the head pretty quick. Right. And, and, and again, the, the, uh, on this, as you say, balloon approach, um, obviously by doing that, whether it be just trying to, to defer principal in the, in the next three or four years while your budget is still under pressure or actually extending the life. Um, obviously, rates are low, but you're still paying overall more interest costs by doing that. So that, it, uh, that's the, the offside to, to ballooning or deferring. Okay. Council Member Lane, you have a follow-up? Just a little follow-up thought is that if once we get the actuarial study, it was the market conditions in that pension fund investments, we might be pleasantly surprised that we have more value in there than when the last study was done. That would also maybe reduce our total bonding requirement. Cross your fingers. Any other questions? Thank you, gentlemen. We appreciate you all being here. Thank you all for the opportunity to, uh, to talk to you all today. Thank you. All right, next on our agenda is our discussion on the library's, uh, fiscal year 2010 budget and, um, Mr. Smith, I assume you'll be taking us, uh, the lead on this one to start us off. Yes, Mr. Chairman. And then, Council Member Myers, before, uh, Mr. Smith begins, do you have any questions for us or do you want to give any context to the discussion before we start? Sure. Thank you, Mr. Chair. I guess the context is that, um, exactly what I stated earlier, and that is that we have limited revenue coming in. We don't have a way unless, uh, Frankfurt would give us enabling legislation to change our tax structure and the way we bring money in. So it's imperative that we look at what we do have coming in and use it to the best and highest use. It's, it's my position that, um, when this court case was settled, I think there's some things that are, that are unclear as to what really was, was done at that time, the options that are in front of us. And, um, after they present their budget, I guess I just have some questions about some of the things in their budget, some of the ways that they've spent money, which has sort of hamstrung them going forward. But then as we look at, uh, the 21st Century Library, what is that? What does that look like? And is the plan that they have, um, the right plan for our city? And is this particular five cents out of every eight cents on property tax going to the best and highest use? Mr. Smith, welcome. Thank you, Mr. Chairman. Um, thank you for having us here today representing the board of the, the library and welcome the opportunity to meet with you, discuss the library's budget and the fiscal situation that the entire community faces. Uh, let me begin by saying that it was the neglect of local governments to properly fund libraries that led the State General Assembly to pass legislation in 1944 that basically took politics out of library funding. Yet even after that law was passed, it took local citizens in Lexington to go to court to force the predecessors of this council to comply with that law. Turning back the clock would be bad for this community and for the tens of thousands of citizens who depend on the library. There are a number of misconceptions about the library and the funding that I would like to address. First and foremost is the misconception that the library has more money than it needs. Um, we have a, a series of benchmark cities that we compare ourselves against, uh, cities of similar size. And we are in the lower half of library funding compared to that list. We are reducing our operating budget in this fiscal year by 5.4%. We are looking at a 2.5% reduction for next year. Those are total cuts in the two years will be more than $1 million. Uh, if we complied with the mayor's request to contribute $342,000 to the general fund, that would raise that amount to over $1.4 million in reductions. Second mis- misconception, the library can give back money to the urban county government. The funds requested did not come out of the LFUCG general fund, so therefore, we can't give it back. Any money that we did give would be a donation from the library. Uh, as I've said previously, we've already reduced our budget by 5.4% and we look at, uh, additional reductions next year. And we only have one major source of revenue, and that's the dedicated property tax. Uh, third misconception, the library is not sacrificing as departments of local government are. But we have reduced our service hours by about 3%, we have 14 unfilled positions, uh, we have cut our material budget, which, which is basically what we use to buy, purchase books and CDs and so forth, and we've delayed a number of capital projects indefinitely. Uh, another misconception, the library is not a good community partner. We've got over 204... 50 partnerships and they're in that packet that I sent to you. Just to highlight a couple, the Carnegie Center, uh, at the end of next year, we will have given the Carnegie Center, the library will have given the Carnegie Center $465,000 in cash. Uh, we also give them free rent. We own the building there. And that amounts to about $150,000 a year in in-kind donations. Uh, the Gainesway Community Center, um, yo- it was started by the city, but it was unfunded. Uh, we have taken on a, uh, an part-time employee that we've placed there, provide library services to the people in that community. Uh, the Fayette County Schools, we have a program called KinderCard, where every family that registers their child for kindergarten receives a packet. Included in that packet is a, uh, library card application, a n- a book, a list of 50 books that children should read before the first grade. That cost us about $20,000 a year. So there are, you know, 247 others besides that, that are on the list. And so I submit to you, ladies and gentlemen, that contrary to some misconceptions being circulated by those who would like to raid the library's budget in order to balance the city's budget, we do not have plenty of money. Furthermore, we are making the same sacrifices as are being made by agencies of local government, and in some cases, more so. Even while we are keeping staffing levels as low as possible, limiting the amount of books we buy, cutting back on hours of operation, and delaying capital projects, we are continuing to be the good community partner we have always been. Uh, I promise you that the Lexington Public Library is doing everything we possibly can to maintain the quality of service the citizens of this community deserve, even in the face of already-implemented budget cuts and additional cuts we anticipate next year. Thank you. Thank you, sir. Council members, if you have questions or comments, you can log in on our voting system. Do I have anyone that has any questions or comments for Mr. Smith or any of the library members here? Councilman Lane. Thanks for coming down, Mr. Chairman. Thank you. Um, I, I would like to just get a, um, like an overview of where you see the library going in the next decade and, you know, what changes you're gonna make or how you're addressing the technology, uh, that's, you know, available, uh, in our community around the world. You know, what, what are the, what are gonna be the changes?' 'Cause I don't think you're just gonna keep building, you know, library buildings and putting books in. I think you're gonna go to technology- Now, in terms of, uh, bricks and mortar, we're probably looking at one more branch that we would like to build in the next five to seven years. Um, perhaps further down, there might be a second one or second part of the county that would need a location. Uh, technology-wise, we are keeping up with it, uh, as much as our budget would allow. We're going to self-check in most of the branches. It's not, it's in, implemented in most of them. It'll be coming to the downtown library shortly. That frees up our staff to help people with, uh, more of the, you know, it's the high tech, but it'll freeze up our staff for more of the high touch kind of operation, where they can work one on one with our patrons. Uh, we have seen, in the last two years, a increased reliance on the library by the citizens of this community. Uh, when, when there, when the household budgets are cut, the library provide, is a free place for entertainment. You can get books, you can get music, you can get videos. Uh, you can bring the children to, to programs. Uh, and then also, we have seen an increased need and increased use in the library of computer services. People that their last job they got was 20 years ago, and they've been laid off, they don't know how to fill, apply for a job now because everything's online. If you want to be a dishwasher at the Hyatt, you have to apply online. Uh, so we are offering services along those lines to help people deal with that. Um, you know, books are go- you know, the books are still very popular, you know. All the things with the Kindles and the, the, the internet, books are still our number one thing. Children's books are still very well used. And we are looking to the technology and the situation, I'm sure our Interim Director Martha White could deal with this more than I can, but, uh, you know, we are prepared to keep our library on the cutting edge in terms of technology. D- do you, do you envision in the future where somebody could just go online and get information from the library without even going there in person? Yes. Well, I think you can do some of that now. All right. You can log on if you need to re- if you want to renew your book, you know, you've got a, a bestseller and it's due in, in tomorrow, you can renew it unless somebody else is in line for that book. Then you don't get to do that. But things of that nature are coming. Um, I saw today somebody was reading a Kindle, and my wife and I were talking that, uh, probably at some point in the future, you'll be able to download a book from the library to your Kindle or whatever the technology instrument might be. At this time, there's, of course, copy- copyright, uh, situations involved there. But, uh, yes, I think it will be changing, no doubt. Do y'all have a, like somebody to, chief technology- Yes, we do. ... person for the library that handles that? Yes. And as a result of the city audit, we are looking at our entire, uh, policies and procedures regarding technology, and we found that we were about 80% of where we needed to be, and we've put a committee of the board together along with staff to address those issues, and we will have those, uh, implemented probably in the next two or three months. All right. Well, as you may be aware, I serve on the airport board, and we got audited, and I know that, uh, y'all got audited too. Do you feel, um, after all the audit's over and you've been able to sort of do a reevaluation of your operations, that you're in really good shape and you're moving forward in the right direction? Yeah, I think we are moving forward, uh, and we're in, I would say based on the city audit, we've probably accomplished 90% of what it, what it took us. ... of where we needed to be, and the other 10% we'll get to almost all of it in the next couple of months. Okay. Thank you for your input today. Thank you. And thanks for coming down, I appreciate- Happy to be here. ... you appearing here in person. Thank you. Okay, thank you. Any other council members have questions? I do have a couple myself. I'll ... While you're thinking about your questions. First, I ... Has everyone had board member training? Speaking of the audit. Yes. You've completed that? Yes. And what is your current total operating budget, just so people understand the scope? Uh ... $14.1 million. And 100% of that revenue comes from the dedicated tax? 13 million comes from the dedicated tax. And the rest of it comes from fundraising or ... Uh, fines on the books. Uh, when my daughter was seven years old, we were standing in the main library and she ... We had to pay a dime 'cause a book was overdue and she said, "Can they run the library on, you know, these ten cents at a time?" I said, "No, they can't." But that's one category of funding. Uh, we get some grants from the state, uh, from time to time. We have what we call an enterprise fund where people that make copies and so forth pay a, a fee. And so that constitutes the other million dollars. Okay. And, and what about employee raises? Did you have employee raises in your, in your budget this fiscal year? Uh, we did last year, yes. But not the FY10? Uh, moving ... FY10, but we're not planning on any for FY11. Okay. And then wha- what about any budget surpluses? Was there ... In your last audited budget, was there a budget surplus in there? We had a small surplus. Fund balance. Fund balance? Yes. We have reserves of about $3 million. That's two to three months' operating expenses, which is the timeframe that's recommended by, by most of the auditing firms and so forth. So generally, we try, just like the city, to end up, you know, spend a little less than we take in. Okay, so that, that, that, that is earmarked, those 2 to $3 million is earmarked for operating? It's a reserve, right. Not capital? Right, it's not capital. And just curiosity, what is your debt service ratio? I mean, do you try to keep within 10% of your operating budget or ... 6%. Very good. Very good. I see Vice Mayor Gray has chimed in. Yeah. Thank you, Mr. Chairman. Uh, thank you, Mr. Smith, for joining us today. You know, as ... I hadn't thought about it that much until, uh, y'all were here, but y'all don't spend a lot of money on art and things like that, do you? That big clock down there in the library. That was donated by the Lucille Little Foundation. That, that was a donation? Yes, sir. Yeah, okay. Because I, I, I guess I hadn't thought of that. Actually, it was don- It was donated by Lucille Little before selling it to us. Yeah, well I see it swinging, it, it's a pretty amazing piece of work. But I did, I did remember that it was donated, I thought. So that illustrates that you just don't go out and buy things extravagantly, I guess. And, um, because it ... If we're needing money, and we are, of course, um, I've heard rumors that ... And I've heard that there's a pretty nice piece of art in the lobby of the airport now. It's ... I'm told that it's in the floor, and that it may have cost something like 200,000 or $250,000. I don't know, Mr. Lane, do you know anything about that? You don't know. But in that case, we, we might still be able to go back to the airport and get a little help. I do want to see that, that piece of art. I know people who buy and sell art and it ... Usually art, if it's got a value, you can pick it up and move it. So I'm interested in seeing if we can get a quarter of a million dollars for that when we, when we're desperate and need it. Thank y'all for coming and joining us today. Thank you, Vice Mayor. Council Member Lane. That does bring up a good question. I was at the library just the other day, and your pendulum is not moving. Uh, what's the status on that? I, I feel ... Actually, I thought it was a, a beautiful, uh, thing to have in the middle of the library, and I know there's been some issue about getting it repaired, but could you- Right. ... give us an update on that while you're at it? Just a moment. Okay. Mar- This is Martha White, who's the director of the library, and she's, she knows more about the, the pendulum than I do. Uh, there was some damage done to the pendulum about three weeks ago, and we're waiting for some replacement pieces, and then we'll have Adeline Whitman come and, and paint the repairs. So, it's under repair. Yeah, one of the things, you know, unintended consequences when Mrs. Little gave us that, that we didn't set aside ... There was no maintenance fund set aside, so we're having a, uh, a ... There- There's a library foundation, which is a separate organization, and they're in the midst of raising some funds to update our theater and to provide a, a fund for maintenance of the, the pendulum and the clock. Unfortunately, uh, Chairman Smith, we have the same issue here. We don't have enough, uh, repair and maintenance budgets either, so I ... Correct. I do agree with that. I under- I understand. So, thank you. Anybody else on council have a question or comment? Council Member Meyers. Thank you, Mr. Chair. Um, I guess if we'll start back when you talked about the Carnegie Center. Um, I think the, the lawsuit, in this lawsuit, um, you're required actually to provide the funding for the Carnegie Center. No, that's not correct. It's not? Nope. Do you have a copy of this? Do you have a copy of the packet today? No, we don't, probably don't have that with us. The way the funding came about for the Carnegie Center was, uh, about five years ago, uh, they approached, uh, Ambassador Farish and, and we spoke with ... We met with Ambassador Farish. And Ambassador Farish, the library, and the city agreed to provide $100,000 a year to the Carnegie Center. The cities, most of that was in, uh, in kind, maintenance, uh, cutting the grass, so forth. That went on for three years, at which time the Carnegie Center was supposed to be self-sufficient. The Carnegie Center came back and said they were more self-sufficient, but weren't quite there. Um, and I had a little problem with the more self-sufficient, you either are or you aren't. Uh, but we agreed again with Con- with Ambassador Farish, we agreed to give $65,000, th- th- ambassador and the library last year, $55,000 this year, $45,000 next year, and then we're done. Right. Um, sir, can you- can- Okay. David Porter's our counsel with Skyes & Harbeson. Okay. If you could look at page 63 of the packet. I'm sorry wait a minute. Yeah. Page 66. I'm sorry. Number six down there at the bottom, can you, can you take a second to read that, and then maybe help me understand why this doesn't say that you're supposed to take care of that funding of the Carnegie Center? Okay, let, uh, could, I think I can give you a little background that would make this, um, um, clearer about this agreement. Um, the lawsuit, uh, that was filed, the circuit court, uh, ruled that the, uh, old city council, uh, had not properly funded the library for three cents versus five cents. Um, and the judgment, uh, was for the tax, the taxpayer prevailed, and the Irvin County Government appealed it to the, uh, Court of Appeals. The Court of Appeals upheld it, and also, uh, in the appeal, the issue wa- was cross-appealed. Um, additional issue came in as to, uh, whether or not, uh, there was an ir- uh, Irvin County owed an arrearage for the years that it had underpaid, and, um, and the Court of Appeals, uh, confirmed that. So, um, at the end of the day, the Supreme Court, uh, was petitioned by Irvin County government and they, uh, they declined to take up the issue. So the judgment was in favor of the, uh, tax rate for the library. Uh, but then the problem and what happened as to this agreement was in collection of the judgment, because Irvin County, uh, I believe the arrearage was over two million dollars, um, and they didn't have the cash at that time, um, so this agreement was struck in a way to, um, satisfy the judgment. And the library owned the old, uh, Carnegie Library building, and was, uh, planning to build a new library that's now here. And so, uh, this was during may- May- uh, Mayor Basler's term. Uh, the library agreed to lease the building to Irvin County government for a dollar a year, maybe it was ten dollars a year, can't remember. And, um, the, uh, library, uh, the Irvin County government would, um, spearhead, um, the Carnegie Center as it is today. And the library would contribute future funds, um, to help... Uh, the Irvin County government basically would renovate the building, and, uh, the library would, uh, and the Irvin County government would, uh, have contributions each year from funds for the operation of the library. And, um, so that, that is part of this agreement. That this agreement was really an agreement to enable the parties to satisfy the judgment and the money that was owed to the library. It wasn't a settlement of the lawsuit, it was a settlement on the collection of the judgment, really. So when it says, "The library agrees to pay 24 cents or 24% of all sums paid to it by the government pursuant number, number paragraph two above shall expend for the maintenance and operation of, of the literacy center," which is the Carnegie Center, "and branch library at the Carnegie ce- Carnegie Library in Gratz Park, so long as the literacy center, Literacy Center is operated." Right. So, that seems to me to say that the library is the one that's responsible for paying that 24%. That was the, that was the amount at that point in time. But the library has since then undertaken, uh, to pay an excess of that amount, because the Irvin County government has reduced its amount under the agreement. I think that's happened twice last 10 years. So who pays the maintenance on that building? Uh, my understanding now is, uh, as of now, uh, the Irvin County government had, had paid the, the maintenance. And I think, uh, there was an amendment of the last funding agreement on the Carnegie Center, and I believe, uh, Irvin County government agreed to provide personnel for maintenance and the Carnegie Center itself is supposed to pay some of the other costs of maintenance. And there's still library funds going in that are probably going indirectly for that. Okay. Um, are, are you the attorney for the library? Yes. Okay. I don't know if, if they want you to answer questions or if someone else is gonna answer questions. So I'll just pose a question, whoever you'd like to answer. I think I might have to call on somebody to answer, a certain one I might not know much about. You're up. Okay, well- Then we'll bring him up. While... Okay, while you're up here, sir, um, the issue of, of the library paying bonuses with taxpayer dollars has come up. Mm-hmm. And I know that our law department, um, is in disagreement with you on whether or not that is a legal practice. What's your position on, on the bonuses, and can you tell the, tell the citizens how much you guys paid in bonuses each year? Um, I, I don't have that information about the amounts. I think you've got that covered. Yes. Um, when we introduced the vary, what we call a variable pay, uh, and it's part of each employee's compensation, and it's based on their performance. Uh, at the end of the, at the end of each year, they're evaluated by their supervisor, uh, and there's a, a sliding scale, and they're rated on a number of, uh, attributes. And based on their total score, they qualify for variable pay, which might be up to 3% of their... What's the maximum? 3 or 4%. Um, and so that has amounted to, over the last few years, uh, oh, about $200,000 a year plus each year. We instituted that because prior to that, all employees were getting a lockstep raise. Everybody got 5%, everybody got 7%. Uh, we went to this because we felt this was a much more effective way of compensating our employees, of rewarding good behavior. And we got rul- a couple of rulings when we instituted the program that this did not constitute an emolument, which is the legal term which I've come to learn. Um, it was my word of the day for several days earlier this year. Uh, and so we are, we are operating on that. We have asked, uh... I know that our council and, and, uh, the city council are working on that. Uh, we had agreed as a result of the city audit to, uh, to seek an, a- opinion from the attorney general. And what we understand is because this is not a high priority item for the attorney general's office, it might be a couple of years before we hear from them. Uh, so the city law department and our council are continuing to discuss this. Okay. Mr. Haske, the commissioner is coming up. Let me, uh, address that briefly, if I might. First of all, I don't know that we have a disagreement about it. What we did when we were advising internal audit about this practice was with that we thought it might be an emolument. And it was out of that that the internal audit board decided that it might be best to get an attorney general's opinion on that issue. Since that time, uh, we have been in conversation with, uh, Mr. Porter and Mr. Ashley Ward of his law firm that also represents the library about maybe a declaratory judgment action or some other way to resolve it that might be a little more effective than attorney general's opinion. Uh, we've been waiting on some additional information from their insurance carrier before deciding which course to take. So, uh, that, that is in process, as Mr. Smith just indicated. Okay. Thank you. Logan, while you're up here, another question that's come up is whether or not this is a dedicated fund or whether this is a, a, um, appropriation. Mm-hmm. On page se- page 21 of the packet, um, it talks about, about a third of the way down the page, um, it says, "Because the rollback statute applied on levies but not appropriations, the crucial issue in Lexington Public Library was whether the funding statute called for a levy or an appropriation." It says, "The court found that the funding statute called for an appropriation rather than a levy, and therefore its five cents per $100 rate could not be rolled back." Um, could you speak a little bit about this whole idea of whether or not the funding that they're getting is appropriation or if it is a dedicated tax? Well, first of all, let me tell you, I have not done any exhaustive research on this issue, and this litigation went on for years and years, as you know. Uh, I believe it's a mandatory appropriation. We have the right to set up a tax district where there's a specific tax levy for library purposes, but the court of appeals' opinion also says the Lexington Public Library is not maintained by tax levy, but by appropriation of funds from the local government. So, uh, I believe it's, uh, it's more in the nature of a mandatory appropriation, as opposed to a tax levy. Okay. And then further in this agreement, it's my understanding, and I acknowledge I'm not an attorney, that the State Department of Library Archives and the Lexington Library Board and LFUCG could enter into an agreement by which, um, the funding could change without this having to go back to court, without having to have state statute changed. I- is that... The statute does provide for that, uh, KRS 173.360, and the court of appeals' opinion specifically references that. Now, Mr. Porter and I have had further discussions today about this. We've kinda gone back and forth about it a little bit, but, uh, it seems to me that based on the statute, the wording of the statute, it appears to me that if the local government, the library, and the state, through the Department of Library and Archives, agree- ... that there could be an amount less than the minimum amount set forth in the statute. Now, Mr. Porter and I have a disagreement about that, but that's what the statute appears to me to say, and that was what was referenced in the Court of Appeals decision with respect to the rollback provisions. But, uh, e- there's- there's- even if that interpretation is correct, there's no provision for what happens if the parties don't agree. So, you know, there's nothing in there that says the parties have to agree and so, you know, that's- the- the statute is not really definitive as- as what happens in that instant. It seems to me, in the absence of an agreement, we're back to that minimum amount. The way the statute's currently written. Okay. Um, I guess the next couple of things I'd like to say is that, my hope in all of this was that we get to that point, because at the end of the day, to me, the biggest issue here is that, and I grant that- that previous councils, previous administrations didn't properly fund our libraries in- in Lexington, um, and that's why the- the lawsuit was filed. However, we look across the state, we look at, for example, Louisville, and Louisville, um, doesn't have to operate under the same practice that Lexington has to operate under. Um, at the end of the day for me, it comes down to this, the library gets five cents out of every eight cents, and then the city's left with the three to manage its budget. And every other outside agency or partner agency with government funds, every department division inside of government has taken a hit, because the economy's had a downturn. The library though, the position that you're taking seems to me to say that you believe this is a higher and a better use than anything else that the government has to do, therefore you're not willing to budge on that five cents. And part of the reason I say that is because although you read a litany of things that the library does, since I've been back on the council- since I've been on the council, I've chaired the- the partner agency outside, um, Oversight Committee, and one of the things that we asked every year was that the library take on a $15,000 fund, uh, funding of Operation Read, and it never could do that with the $14 million that it's getting from this- this tax. It couldn't pick up the $15,000 for something that most of us would seem to think falls under your charter, in terms of literacy. We- we do fund Operation Read. Well, actually, Operation Read, I think, now is a part of, uh, KCTCS, but there were several years that we asked you guys to pick up that $15,000 and you refused to. Um, the $36,000 that the city gives to Carnegie Center seems to me that- that- that is something that the library could pick up out of that $14 million, but it doesn't want to do that. You know, we look at, um, and- and here's another- another point that I'll make, is that if- if you were to argue that it is a dedicated fund, it's not an appropriation, then it would seem to me that the 4% rule on property tax would come into effect, and if that were the case, then you would be capped at the five cents, not be able to get whatever that increase is. And if- if you don't understand the- the 4% rule- I underst- I know what the 4% rule is. Okay. You gave me a look like I didn't- I thought you understood. But the law says the minimum is five cents, the maximum is 15 cents, so we are getting the bare minimum. The law would allow us to get up to 15 cents per $100 valuation. But if this were truly considered a dedicated fund, then that would take over and the 15% wouldn't be there. You'd have a cap based on that 4% rule. I'm just reading the law. And I'm in agreement with you on what the law says, and that is that wh- when that 4% rule comes into effect, that you would end up having a cap there. Um, so I look at, you know, things like the- the parking garage. You guys spent three... How much did you spend for the parking garage? $3 million. 3.3 or 3 million? Point one, or... 3.1? The parking garage was valued at, I've got one appraisal here for 1.3 million, I've got another one for 1.1 million. There's a half million dollars in repairs that had to be made to the garage. Um, the proforma showed that the park- the garage would not make a profit. You guys came to the city, asked the city to float the bonds. They looked at all the recommendations out there that said the library would not make a profit, it's a bad deal, don't do it. They refused to do the bonding. You went to KLC and got the bonding done. That, I think, is part of the reason, um, you increased the number of- of parking places that you, um, pay for in the parking garage after you bought it. I think that was basically to take money out of the- out of the library fund to burst- to boost up the numbers that the parking garage was making, because it's losing money. That's another $30,000 a year that you're putting into the parking garage, because you're buying more spaces than you were before you owned the parking garage. What I would hope to see happen is that you would come to an agreement with us to do something different than the 5% or the five cents. I think you've made it clear here that you're not gonna do that, so I'm not sure what the next steps are. As- as our commissioner said, the law doesn't say what happens next unless we go back to court on it. So I guess, again, my position is that the library is not the highest and- and best use of taxpayer dollars. It's- it's one that's important, but when we have a government that is closing down fire stations one day a week, everybody I've talked to have asked a simple question, "Would you rather see the fire station in your neighborhood close one day a week, or would you rather see the library in your neighborhood close one day a week?" Not one single person say, "Close the fire station." Okay, I'm in the marketing research business what I do for a living. I ask people what they think, and every person I've asked said it's apples and oranges, that we're talking two separate things. Councilman Meyers, will you wrap up? We got a couple more council members that would like to speak, too. I- I'll wrap up on that. And the other thing is we don't feel this is a higher calling than anything else. Uh, the law says here in, in .2, "These funds shall be not used... shall not be used for any but library purposes." So if we, as the board, agreed to give the city some money, we would subject ourselves to a lawsuit from citizens of this county. Council Member Feigel, you're up next. Thank you, Chair. Um, and my commit... Uh, my question is really for Commissioner Eskew. Sure. Thank you. I'm just trying to understand the process that has- Is your microphone on? It is. Oh. Mm-hmm. I'm just trying to understand the process that, that, uh, that our, our community went through to get to this point. Um, this happened long before, I mean, it looks like maybe when I was graduating from high school, so, uh, long before I was ever interested. Let me ask this: If... My understanding is that a group of, uh, a group of, uh, citizens from Lexington went to court to say that the city was not funding the library appropriately. There was one person. One person. As I understand. And so this law was passed so that we would fund it to some level, certain level. Actually, Council Member, uh, the, the law preceded the lawsuit. And as I understand the history, there was an agreement that was reached between the library and the city to fund at three cents for every $100 of assessed value. And Mr. Porter, I think, was involved in this. No, I wasn't involved in that. Okay. I was in high- I'm sorry, I wasn't trying to age you, David, I was... ............................ But what happened is after merged government, uh, the plaintiff, a private citizen, sued the city and the library claiming that that agreement was of no effect, and that the library could not agree to, and the city, with a lesser amount than provided for in the statute. And so that's what was the subject to the challenge in the lawsuit. I'm just trying to understand how the state can actually mandate to the city how we spend our resources. Well- And, and if this is... if my understanding of this is correct, is it possible then for citizens to come forward and go through the same process to mandate that we spend a certain amount of money in parks or in the fire department or any other area of government? In this particular case, the way our library was formed, there are funding levels that are mandated by statute. A library tax is a possibility. It's my understanding that they've... have one in Louisville. Um, I know, for instance, in my home community of Christian County, Kentucky, there was a discussion of a library tax which did not get enacted, but a way to fund the library. But the way that we have funded the library under this statute, those requirements, as I understand, are, uh, imposed on us. And Mr. Smith is right, it is five cents up to 15 cents is the range. So the state has imposed that mandate on us. And not as a result of our inappropriate funding? That is correct. The statute from, and I've got a copy of it here, was initially enacted in 1944, and it was last amended in 1964. So it's a rather old, a rather old statute. And Mr. Porter has done quite a bit of research on this, and I know there's some, uh, legislative history. And I can try to put that together for you. It might be helpful for me to do that, if you all want to look into this a little further. Uh, I, I really am just curious about how they have the authority to tell us how to spend our... Well, actually, the state has authorities over, uh, local government and can pretty much decide how local governments are going to operate. Okay. Thank you. If you'll get that to us. We will. Council Member Lane, and then we got about five minutes left. All right. All right. I'm gonna take just a minute or so. Uh, I, I would like to say, first, I feel, uh, Council Member Myers' pain and that we do have a lot of outside, uh, uh, entities that are funded by the Irwin County government. We've had to cut all their budgets. And so I see where he would ask that we also reduce the budget for the library so it'd be a shared pain everywhere. But on the other hand, I'm inclined to agree that your contract says what it says, and if you're not voluntarily want to reduce that, I don't think you're obligated to do so. The other thought I would like to, uh, mention is that I don't, um, necessarily concur with his comment about, um, you know, the appraised value of the garage. I believe that the value of the garage was based on an income approach. And with regard to the library, this would actually be a replacement cost value you would be looking at, because that is, um, used in the operation of your library downtown. So I think that's of an apples versus oranges issue there. So, just a couple of thoughts in closing. Okay. If you want to say something- I have, I have one comment on that. Uh, we are not losing that much money. We are at about a break-even position. If we did not own that library and had to pay for the parking for our patrons and the employees, we would be about where we are right now. ... but by owning the library, we've made sure that it's safe, it's secure, it's well-maintained, and we have the potential for increased revenue when the economy turns, if there are more monthly parkers that wanna use the facility. A- are you, uh ... If somebody wanted to park in your garage now, would you take renters in there? Yes. Okay. Thank you very much. Thank you. Okay. We h- we have three minutes left. Councilman Meyers has another question. Um, I, I'll say to Mr. Lane, I've got both appraisals here on the value of the library. That, that wasn't from me. That's from the two people that appraised it. And the third appraisal would be to appraise it the way that you said. If you look at it, we can talk after this, but it still comes out to about a million one. Um, he's putting up something on the overhead. I don't know if you can see that or not. No. Can you, can you make that ... What this is, is it, it shows the, um, appropriation that the library has received since 1999. And it started out at $7 million dollars and it went to seven and a half, 8.3, 8.7, uh, 9.4, 9.8, 11 point ... I don't have '05 for some reason on this. It skips to '06 and it's 11.3, then 11.7. Skips '08, and it goes to 13 million, and then 13.4 million. And I think that, that part of the problem that we have here, when you look at buying the, the parking garage for, you know, twice what it was worth, um, and some of the other things here, um, is that, once again, we have a culture where you get money that comes unchecked and with no real accountability to it. And we end up in a situation where our money's not well spent. I still think that the library, um, it would be nice if they'd sit down and talk with us. I guess it depends on h- how you interpret the law. We've got one attorney that says that the law is interpreted one way where you wouldn't be under a lawsuit if you negotiated out a different price. So, you know, I guess, don't interrupt me, sir. Compliment on that, don't interrupt you. Let me finish. Um, so I guess the last thing I'm gonna say to you is that I hope that you would reconsider that. And, um, maybe if we get the Attorney General's opinion or the other avenue that you guys were talking about getting a result back as to which way the law really is interpreted. Um, and if it's interpreted in that you would not be under the threat of a lawsuit if you sat down and renegotiated the price, that you would do so in, in, uh- We're, we're talking different things here. The Attorney Generals, uh, that we were talking about was only for the issue of variable pay. Okay. The other one says that we can change it if the library board, the city, and the Department of Libraries and Archives. We have talked to the Department of Libraries and Archives and they said that they would never support that because that would set a, a bad precedent for libraries across this state. So then it has nothing to do with the lawsuit. It just has a bad precedent for libraries. That's the truth then? That's what the State Department of Libraries and Archives is saying. Okay, which is very different than saying that you couldn't do it because it's a threat of a lawsuit. Well, th- there, there was one out. You know, if we did it without that, going through those steps, then we would be subject to a lawsuit. Okay. Okay. Thank you. Thank you. Mr. Smith and everyone from the library, thank you all for coming before us today. We appreciate your, your opportunity to be here. Thank you so much. Committee me- Council Member James. I was gonna ask you, I know we don't have time to go to the next item, but do we have a date set for the Committee of the Hall discussion of budget lengths? You know, we- We'll talk about you on your retreat. ... we were talking a little bit about that. The retreat. No, we don't. Okay. But I'm gonna hold this calendar till next Tuesday's report out. It was more for information only, the calendars in our packet. Okay. To go through. If there's any changes or modifications we wanna make, we can do it during the report out. And I have ... I know, I'm sorry, we're wrapping up, but I have the, um, summary of the legislation related to budgeting that was part of the council link. By council link, um, I don't know, report out or whatever it was. And I, I'm gonna pass these out to council members. Oh yeah. It's every state statute, every local ordinance, every policy that relates to our budget as we move ahead looking at the budget. Excellent. Thank you. Okay. So for our next meeting, we'll meet on, on April 27th. It'll be, be half budget, half a continuance of our committee. Uh, keep in mind we'll have a business occupational license fee discussion. Motion to adjourn. So moved. All in favor, say, "Aye." Aye. We're adjourned.