The Budget and Finance Committee. We have five items on the agenda, and let's go ahead and take care of item number two. On the request from the administration, I think they would like to defer this. Commissioner or Paul, could you give an explanation to the committee, please? I talked to the CAO Maloney this morning, and the administration is planning on doing a presentation to Council about reorganization and transition reports. And they would like the committee to defer this item until that is accomplished. Commissioner, do you have any comment on that? Do you have any further? Okay, with that, let's go ahead and start with the first item on the agenda, the monthly budget report. Commissioner? Thank you. I appreciate that. Good afternoon. I think we want to accomplish several things today. The first is to give you a monthly financial update through January. I know we missed that through December with the change in administration, but these numbers will be an update through January. We also wanted to give you a report on the bond issuance, both the new money and refunding that took place in December as a part of the agenda today, as well as give you an overview of the Finance Advisory Task Force that the mayor announced. and probably most importantly give you an understanding of where we project the current fiscal year results and the initial steps that we are taking to deal with our situation, which is sort of combined in all of these reports. Not surprisingly, I'm going to start off with just sort of an economic overview and then let Bill and Ryan do some of the revenue and expenditure analysis, But not surprisingly, Morgan Keegan's economic commentary of last week indicated that unemployment levels and the housing market condition continue to be the key drivers in our economic recovery. The caveat, however, was that the sort of new Mideast unrest, which is driving up the oil prices, that has real potential for slowing the recovery if those price per barrel oil continue to reach a certain level. At UK's Economic Outlook Conference at the beginning of this month, and some of you were there, I know, a presentation by Federal Reserve Senior Director talked about our economic realities in this way. Household spending is increasing at a moderate pace but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in non-residential business construction continues to be weak. However, and this is key for our economy, employers remain reluctant to add to payrolls. The housing sector continues to be depressed, and longer-term inflation expectations have remained stable. However, the measures of the underlying inflation have continued to trend downward. Unemployment remains significantly above the historic norms for this stage of an economic recovery. I'm sorry, I'm learning the new technology. It's not working. It's an indication that we will take a number of years before unemployment reaches what is more like the historic norms. All to say that improvements are continuing, but a very modest level, and I think this becomes important as we talk about how we handle the current year and we move into next year's budgeting. When you look at the unemployment numbers in our local context, which here's your first slide that you have in your packet, the yellow line, which is a little difficult to see on the screen, is Kentucky's unemployment rate, which reached 10.3 in December. The green line under that is the U.S. rate. It was 9.4 in December and 9.0 in January. The next pink line below that is our MSA, which was 8.1 in December. And then the line before that is 7.5 in Lexington's in December. So, again, if you look at, again, January for the U.S., that decline was 9.4 to 9. If you look at the trend, the three-month moving average follows that same trend. And again, when I talked about what the economists from the Federal Reserve talked about, personal income, if you look at our Kentucky personal income, I'm sorry, you all, I'm learning this new system. I'm used to a computer. We fall right in with that trend, which has been, if you look at 2008, 2008, a dip in Kentucky quarterly personal income. 2009 began a slight increase. And then 2010, at the very tail end of that curve, you see a steady increase. I think you have seen this slide in the past that Bill and Ryan have presented to you, which are just some key economic indicators that, again, show the Fayette County unemployment rate. and employment numbers. The Fayette County permits issued, which again is on a slight uptick from December to January. The Fayette County new business licenses, which is an increase from December, but in line with November's numbers. And then the one number I know that I'd ask a question about is the Fayette County foreclosures. If you look, the number in January is high, but as I understand it, it's a backlog with the master tax commissioner, so it's not where the banks haven't been willing to move on those foreclosures. It's really not a significant change in the trend. Bill is going to talk through the January numbers and then Ryan on the expenditure side, and then I want to address the current year long-term forecast and some steps that we're going to take to balance that budget. Welcome, Bill. Thank you, Commissioner. In January, we had something very nice happen. We tracked the four largest revenue streams, and they all showed positive. So it's been a while since we've been able to report that. I wish I could say one month makes a trend, but I'm not ready to make that prediction yet. So we'll see how well that holds true. If you go to the next slide, it's year-to-date, which is a better trend line. And we start off with a positive in withholdings, which is our most significant revenue, and which is where we want to see that increase. For January year-to-date, for the fiscal year, we're at 82.3 versus a budget of 79.7. We're up 3.3 percent. The offset of that good news is the soft net profit returns. We're still year-to-date 13 percent below budget. And then our year-to-date in insurance is up 15 percent. I think that is a little overstated as to where we truly be. We've got some timing differences in there, but we do see a positive trend in our insurance premium tax. And franchise fees, which started the year below budget, have now migrated to slightly above, and that reflects both increases in rates across all the utilities. So those are the actual numbers. Those are the dollars in the bank. If you try to look at economic trends within those four categories, we've inserted this slide where we take the amnesty dollars out to try to look at what revenues would be in both withholdings and net profits without that one-time event. And you can see that it softens the withholdings down to a 2.8. and makes the net profit hole very large at 21%. Insurance and franchise fee year-to-date numbers are not affected by that. Again, to look at trends, if you look at January through January, just the trailing 13 months, you'll see our withholdings are up 1.2% if you exclude the amnesty dollars, 1.4 including the amnesty dollars. And the next slide does the same thing for net profits. Excluding the amnesty dollars, we're down 12 percent year over year for the 13 months ending January 31, 2010. So to, I guess, to kind of put a bow around it, January was encouraging. We would like to see more months in that vein. The net profits has still not turned around. Whether that will happen in April is the $64-something question, and we'll have to wait and see as the large returns come in in the fourth quarter on whether that continues this negative trend in net profits or whether those returns show a turnaround in the profitability of businesses in Fayette County. Any questions for Mr. Amara? Thank you. Okay, thank you. I'll turn it over to Ryan. Thank you, Bill. So now Bill went through, I guess, some of the details surrounding the large four revenue categories. And we factored in and included the remainder, services and other miscellaneous revenues. Pretty good year-to-date. We're up $6 million. Again, that's year-to-date. We're going to talk about year-end projections later. Coupled that with the expense side of the equation. We've got some good news on that side as well. Personnel expense. We haven't done this, I think, update in a while. So basically the personnel expense is tracking below budget. I think that's wonderful. When you factor in the fact that we're paying for the general fund piece of the health care, that's great. Basically there are some strategic changes and some rationale behind that. Basically corrections has some open employees, fire has some open employees, various openings throughout the government as well as slowing the hiring process have attributed to that positive variance, as well as paying year-to-date the health care expenditures. On the operating expense side, we have some positives there. I think last time we had presented this, we were even better, performing even better at a budget. We had quite a bit of expenditures come in in January, but we are tracking better to budget in that regard as well. Moving down the list, debt service. We had a refunder, which we're going to talk about later. That did save us some money, so we're going to perform better to budget because that was not budgeted at the beginning of the year. Partner agencies. The caveat there is that we have contracts with all these agencies, and really any variance that we've reported on and every time we've taken a look at it, it's really timing variations. So we are a little bit above budget in that particular category, but again, it's always timing variations. The budget was put together based on historical spending trends, not based on a comprehensive review of all the contracts. So we do realize that it will come in around budget at the end of the year. The insurance, although there is some budget there for our general liability and workman's comp, accounting will make those transfers year-end. Bill and I spent some time looking at it, and it looks like we're tracking on budget, but that is accounted for in a separate fund. It's just not showing up there. And then the capital piece, the last piece, basically, we're performing right on budget. So overall, total expenditures, the actual is performing about $1 million to the good. Bill said we have some additional revenue categories. We're a little bit below on our expense side. And then factoring in both the properties and the net transfers, we are performing year-to-date roughly $5.8 million to the good on a budgetary basis. Again, this is original budget numbers, not amended budget numbers. Any questions? Mr. Martin? Thank you, Chair. I've heard a number of speeches which said we had 25 inches of snow and $25 million short. Exactly where does that show up? If we may, we'd like to go to what Jane's going to talk about, year-end projections, and give some numbers behind that. And we do have some codified new revised projections on how we stand this year. If we may, go on, and that would give some detail around that conversation. Any others? Any other questions? Thank you. Commissioner? I think in going towards answering your question, if we look at the next slide, and again, in addition to the month-to-month comparisons, we did want to give you an updated projection through the end of the current year, and then we can talk about some of the pressures for next fiscal year, too, that increase that number. So if you look at this slide entitled 2011 Projected Revenue, if I can bring you back to the budget assumptions just for a moment. When you as a body pass the fiscal 11 budget, your recurring revenue versus your appropriations, there was a structural imbalance of approximately $15.5 million. So we balanced the budget with some nonrecurring revenues for current year. If you'll recall, there was a property sale that was budgeted at $4 million, tax amnesty, which was budgeted at $1 million. There was a draw on the economic contingency fund of approximately $5.8 million, and then there was a general fund reserve of approximately $4.7 million. So we were starting the year with balancing the budget at 15.5 of nonrecurring sources. So if we compare that to what is happening today, if you look at this first slide, it's on revenue, and both Bill and Ryan have made some comments in regards to this. But if you look at the variances, it is a positive variance of approximately 5.5 million. $2.5 million of that $5.5 million, if you look at the services line, which is about halfway down, the original budget was $20.8 million, and it is projected to be approximately $24 million by year end. And so it's a variance of 3.2. Of that, 2.5 million is the excess fees that we receive as a result of the end-of-term settlement from the sheriff and clerk that was not originally budgeted. These are estimates from the sheriff and clerk's budget that we will receive $2.5 million, approximately $1 million from the sheriff and $1.5 million from the clerk as we go through that process. So, again, of the $5.5 million positive variance for the end of the year, $2.5 of that is nonrecurring as well. Could you go back through that? Yeah, we've had some kind of discussion here around the council on that, if you would, please. Just reiterate that point. Every four years at the end of a sheriff and clerk's term, they settle up, if you will, an excess fee. They work with Frankfort. Frankfort does an analysis of excess fees. In other words, over the course of their term, if they had additional revenue over and above their expenditures for the course, again, of their four-year term. And every four years in every county, those excess fees come once, again, it goes through a process in Frankfurt, those excess fees go to the local county jurisdiction. So in their budget assumptions or projections, there is $2.5 million, again, a million from the sheriff, $1.5 from the clerk that we anticipate receiving this fiscal year that was not included in the original budget. Again, when I say non-recurring, it does recur, but it only recurs every four years. So we won't have those funds in next fiscal year. Is that? I think so. So it's built into the projections? It is built into the projections. If you look again, and Bill, can you show me how to do the, or can you point? I'm sorry. It's in the services line, which is, original budget was approximately $20.8 million, and it's projected to be $24. Of that, $3.2 million, $2.5 of that is that budget line. Does that answer Council Member's questions on that issue? And I see some questions here. Council Member Beard, did you want to go ahead and ask on something like that? Well, yes, thank you, Chair. Commissioner, I've asked this question now three or four times to the previous administration. involving the sale of property and was told that it was progressing, it was progressing and we've got somebody on the hook and all this type of thing. It would be nice to know if that was accurate, just for my own benefit if nobody else's. I would like to know if we were being spun a little bit or what was going on actually. And if not, why not? I can't speak to the past. I can tell you when going through the revenue estimates, when looking at this particular property sale that was included for $4 million, that determination was made to look at the whole parking garage system in total and that it might not be advantageous to move forward at this point with that sale, but look at the total picture of the parking garages, the future of the parking garages, as we move forward for debt coverage ratios, for revenue streams, comparing the revenue stream to what we would realize from the sale and all those factors. So it is one of the items on my task is to go through and look at that whole parking system in total and make some recommendations that impact the system as opposed to that one sale. Now, that, again, is what's assumed in these numbers. So that's, again, I can't speak to what maybe the council has told in the past. Generalities on sale property and not talking specifics, if we could, probably. It would be the best. Any other questions, Mr. Beard? Just that there should be a file somewhere, maybe not in finance, but in one of the other areas that might shed some light on the accuracy of the information that was told to us on several occasions. I will certainly check on that and get back with you. Thank you, Commissioner. Thank you. Thank you, Chair. Council Member Stennett. Thank you, Chair. Just want to go back to your non-reoccurring revenue response. What is our total non-reoccurring revenue in this picture? Is it the 1.3 in amnesty plus the 2.5? Well, if you define non-recurring as property sales. No, not property, but just total non-reoccurring. Okay. In the slide right here. In the 5.5 million. Oh, okay. I'm sorry. In the slide. We'd have the tax amnesty a little over 1.2, 1.3, a little over 1.2, the 2.5 in the sheriff and clerk, and in the other income, the bottom line, there is some reimbursement from the World Equestrian Games of a little over about $140,000. So roughly we're netting out about $1.5 million. I'm sorry. No, go ahead. There's something to be added. In services, Bill, you want to, it's a smaller amount, but the detention center has some timing differences and some revenue, but it's more a timing difference than what I would consider non-recurring revenue. Of our recurring revenue, we only have about a $1.5 million net at the end of the day increase from what we predicted to have at this time of the year, so to speak. No, this is the end of the year, right? This is the end of the year, so it's through the entire fiscal year. So we're still above the red mark, but we're still not where we need to be because there's a lot of that's non-reoccurring. What about the Medicaid reimbursement? Except on the expenditure side in terms of balancing the budget, The Medicaid reimbursement, we are looking into the new commissioner is looking at that. Per the audit, it was determined that that wasn't a reasonable amount to be included, that there were some questions surrounding whether that was. But is it in the numbers above? No. So you backed it out of our revenue projection. It's in the 265 or 282, our total budget. It's in the 282. Yes, but it's not. That was in the ending fund balance assumptions when you budgeted. So that four, seven. So that's not included? Okay. No, we adjusted that. I mean, the true ending fund balance was a little over two. Okay. Very good. Thank you. Thank you, Chair. At the end of this last fiscal year. Vice Mayor Gorton. Thank you, Mr. Chair. Thank you, Commissioner. I'm still a little foggy on a couple things. When you mentioned the nonrecurring revenues of property sales, tax amnesty, rainy day fund, and the reserve, are those in these numbers? They're in the original budget. So can you show me where the rainy day fund, $5.8 million, is it in services or where is it? Didn't you just say it is in here? It's on the slide 14. Right. So, okay. But it's not in this current original budget projected variance. This is the total. This doesn't include the non-recurring revenues that were put in to balance the budget. Well, there wasn't a general fund balance of $4.7. We didn't realize a $4.7, so we only realized a little over $2 million. And it doesn't reflect the rainy day fund withdrawal? Is that correct? This is just your revenue projection. Okay, I understand that. So it doesn't include any non-recurring revenue that was built into balance? Can I go through the next couple of pages and then maybe it becomes clearer for you? If you look at the next page, again, we did include a WEG reimbursement, I think I mentioned, too, in the other source of income. Ryan went through the projected expenses for 2011. He did indicate that we anticipate there will be some personnel savings. We think that that still may be a little high, but that is the number that we're using at this point. It does cover all of our health insurance expenditures, which again was during the budget process was not included at the total cost to the government for health insurance premiums. We are projecting for this analysis operating at what we originally budgeted. Debt service was slightly different as well as partner agencies. There was an appropriation, I believe, by this body, additional appropriation after the budget that is reflected in the partner agencies. So again, we have, when you look at total projected original budget expenditures to projected budgeted expenditures, we do see a slight savings there. When you do that next time, could you actually add those headings to both of those columns or all three of those columns? Because I had to write them in myself on each one of those, if you wouldn't mind. Thank you. And then the third page, which may, Vice Mayor, help show the answer to your question, the one-time revenue and transfers, which shows, again, in the original budget, the property sale. So just for this analysis, this assumption does not have the property sale and the transfers, which Ryan spoke about earlier, for a net of we're projecting that in the original budget, you projected to use a little over $5.8 million from the economic contingency draw. And if we don't take any further measures and have these assumptions, then the draw from the Economic Contingency Fund would be $7.2 million. So what was our task in addressing this? We need to address reductions that are sustainable because our issue to Council Member Martin's question is, next year we have a budget with if you don't change any expenditures, you've got the issue of non-recurring revenues that will not be there next year as well as increasing costs. So we need to focus on reductions that are sustainable. we need to focus on building the reserves, and we need to, again, match, if we do have one-time revenues, to match those with one-time expenditures. And so in preparation for next year, we have actually asked the agencies for a, well, we've put a couple of actions in place. One, personnel decisions for the remainder of this fiscal year need to go through an approval process that the CAO has set up. So all hiring is going through an additional scrutiny for the remainder of the fiscal year. Obviously, the bulk of our funds are in personnel, and making those changes or decisions are going to impact money that we can realize between now and the end of the year. We have also asked the agencies to prepare a plan to look at what a 4% reduction in their general fund, what they could do in terms of the remainder of the fiscal year, if they had that amount of general fund, if they had that amount less of general fund. Those responses are due back to us today. Actually, I haven't gotten those yet. But that was the kind of information that we are going to share with you in terms of a plan for further reductions for current year once we have all of that information. I think you have driven a lot of questions. The board lit up here, so if you don't mind, we'll start with some questions. Vice Mayor Gorton, you were first here. Thank you, Chair. Thank you again. So I have a couple questions. So back on page 12, do I understand then that you built in a couple of non-recurring, like the sheriff and the clerk check, but then you didn't build in the other non-recurring, the rainy day fund? We're going to, I guess in terms of being able to display what the financials look like with some policy decisions that need to be made, whether or not we draw from the Economic Development Reserve as a policy decision, we're going to get and receive the sheriff and clerk's end of term. So we will realize those dollars. But then, again, working with you as we work to balance the current year, it's a policy decision whether you draw from the economic contingency reserve. So we took that out and said if you didn't make a draw from the contingency reserve, you need to come up with $7 million plus to balance the budget. And so when does that $2.5 million come in from the sheriff and the clerk? We should get that in March. Okay. Prior to the end of the fiscal year. And then on page 14, in talking about the economic contingency, what is today's balance in that fund? I have a chart. Bear with me. A little over 14. 14.7, but let me find. So has that gone down because of investments? Or what happened to the last year? Last year I thought it was $15 million. The unaudited amount for 2010 of the Economic Contingency Fund is almost $14.5 million. That was the amount of that fund in 2009 as well. Actually, it went up from 2008 to about 13.2. 2009 was almost 14.5, and it remains the same. So for two years straight, it's been the same? For 2009 and 2010, and then it will depend on, again, and the assumption for 2011 to balance current year. And that unaudited balance was of what date? June 30, 2010. Okay. And nothing has been put in it correct for the last two years. Okay. All right. Thank you. Thank you. Thank you. Council Member Farmer? Council Member Farmer? So I guess subtle to this conversation is that you're projecting taking more out of the economic contingency fund than previously thought or previously policyed? What this shows you is if we take no additional expenditure reduction measures, then the amount that would be needed from the economic contingency reserve would be greater than originally budgeted, assuming that there's no property sale as well. All right. So it's based on, obviously, some assumptions. Thank you. Council Member Stinnett? I think it would be smart to go back, though, and let's simplify this a little bit, because this side doesn't give us a good indication of what's happening. What are our total revenue projections? What's our total? $271? Is that the number we project we'll have? That's all revenue, whether it be reoccurring or non-reoccurring. We're projecting at $271. correct? Correct. And what's our expenses projected coming in at? 280.8. Okay, that's approximately $9 million. Where do we get 7.2 in the hoe at? Your transfers. So our net's 2.5? The net is 7.2 if you go to that third page. From the nine, basically get 7 point? Correct. And that includes the health care expense in there? That is correct. It includes the police and fire pension bond? It includes the bonds that have been issued. Okay, been issued, not a new one, because that was a caveat. Correct. So one's been issued, okay, and as soon as we do not sell property of $4 million. Correct. And, again, we just wanted a starting place to talk to you about and the assumptions moving forward on what we need to do to balance the current year. Because it doesn't look as bad as everyone's been claiming. It looks because you don't include in your revenues the $5.8 million from the rainy day fund. Again. That's what we use to balance the budget at 282. Again, you would need 72 instead of that five. I know what we need now, but I'm saying, you know, expenses are down $1.8 million. But it's like we're something we're missing, though. I mean, we keep hearing the numbers $16 million out there, and now you're saying we're in the whole $7.2. I think that the range was $10 to $16, given that we're still, I mean, there are still some outliers. You know, the weather at that point was a question. So there are some additional salt expenditures, et cetera. So what we've been working hard at is controlling expenditures, which, again, that assumption about personnel, labs, and then the other expenditure analysis. But it doesn't negate the fact that we need to have reductions that are sustainable for the future years in terms of nonrecurring. And so your expenses are being reduced. Any overtime in public safety is accounted for. Additional salt is accounted for in these numbers. the consultants that we're hiring or talking about hiring the next couple months are in these numbers? That's what I'm telling you in the operating budget right now. That's at zero. That's the analysis we're going through agency division by division. So then the 7.2 could grow. It could. I mean, we know we have extra salt money we need. If that's not in here already, then we're going to have to add that in, unless you can find another cut somewhere. So none of those things are in there. Do we have a list of those things we're looking for out there, like salt money, overtime money, et cetera? That's all in what we will bring to you is showing you the reductions in each agency, the additions and reductions, if you will, increase in salt, reduction in other things. And when will we get that? We've asked the commissioners to give us that information today, and we're going to be going through that analysis. When will we get it, though, the council? When will we hear about it? As soon as we have the information. We'll schedule time to present to you. Again, I don't want to paint too negative of a picture, but 7.2 is much different than it could be. 10, 11, it could still be higher, correct? Well, it can always be higher. But in terms of, again, some of the steps that we've taken, we're assuming some personnel savings, the health insurance, to appropriately budget for that next year. If you've got pressures of the health industry anyway, we're going to have increases in those costs. We've got the pressure of collective bargaining. I'm just thinking more in terms of next year. So we have to have a structurally balanced budget, in my opinion. We're not there yet to have some work to get this budget structurally balanced and then move forward with all the additional pressures that we have for fiscal 12. Yeah, I'm just trying to get us through this year and see what our game plan is to end the year on an even note before we even begin next year. So as soon as you can get us what that real number will be, the better. Thank you. I guess just to follow up with Council Member Sten and Sandy, you had a lot of good points in there. Our revenues are up. Our expenses are down. in some ways in that we are if we had the transfer sales then we would be better off than what our projections would have been but because it's not then we're going to have to add more to our contingency fund than we had originally hoped for we're going to have to use that more but I guess what Council Member Stendent was saying and what I'd like to know too is when are you going to get some of the projections that we know there are going to be some extra costs like the salt and those to get to us because is that put into these projections or not? Or we're just playing on with the projections that we're going to be taken away from something else to be able to meet that number? That is the plan that you would propose to reduce expenditures in order to structurally balance the budget. That is the plan. Okay, thank you. Some more questions. Council Member Lane? It's a lot of fun, isn't it? I love it. I do. I was going to take a different approach, and I know we've been looking at the negatives, because that's what we're paid to do, but let's look at a couple of positives. If you were able to sell the property between now and the end of the year, how much would we have to draw out of the Economic Intentancy Fund under that condition? Under this scenario, it would be $4 million less, so $3.2 million. Okay. And then based on your estimates, if we are able to reduce the operating costs of the government enough to cover some of the increases we've had, things like salt and overtime, et cetera, then you might be able to bring it down even more so than the $3 million, too, that we'd have to draw on economic contingency. Do you feel like there's a chance you can bring that down? I mean, I know you're new here and trying to get your hands and arms around all these numbers, but are you feeling fairly good about it, or are you really concerned? What's your outlook? You know, again, from my perspective, I think we don't want to lose the big picture that we are. When you think about balancing a budget from year to year, the long-term financial implications of using these one-time revenues for recurring expenses, then even if you balance a current year, you dig yourself a deeper hole for the next year. So I would just say from my perspective, structurally balancing the budget is a goal. And we've got a lot of long-term pressures, pension, health insurance, et cetera. So I feel good about the analysis that the agencies are going through in terms of how we might look at delivering services differently or cutting expenses. I feel good about that analysis, but I don't have the results for you. But I do think we need to look at, again, looking at reductions that are sustainable and looking at balancing the budget. And I know we can get through the current – we will make assumptions to get through the current year, but I think it's important to think about how we budget for future years. And, you know, I don't want us to lose sight of that and be direct about how I think financially we ought to prepare for future years. And, yes, we're getting close to balancing the budget. And if you make certain assumptions, we get closer. but it doesn't negate, again, those fiscal pressures. And I think when Ryan goes through the analysis from the last bond issue, you'll see we were downgraded. Well, why were we downgraded? We were downgraded because when the credit rating agencies go through, they look at how we balance the budget and if we're using nonrecurring expenditures and those kinds of things. So I think, again, I look at it very globally and want to give you information that you can make those good decisions, you know, moving forward. So I feel like the agencies are assessing their budgets. I can't, you know, I don't have that information back. But they did go through the exercise of reductions for next fiscal year in their budget reduction. But our workshop that we talked about that the chair presented to you, you know, we'll be going through all of those pressures as well. All right. Well, to – so maybe I could resummarize what you said. It said you're concerned about, you know, paying the bills and having a balanced budget for the end of this fiscal year, but you're more concerned about the long-term structural balance of the income and expenses where the ongoing regular income is greater than the ongoing expenses so that we have more revenue than expenses on an ongoing basis when not having to borrow money from here or there in order to get a balanced budget. All right, I have just one more question. I think she actually wanted to respond. I was going to say that's exactly it. And in addition to that, when we talk about all of our capital needs and long-term capital planning, you know, again, you're able to better plan for those types of expenditures as well as you move this direction. Okay. The last question I have is we have not received the CAFRA for the fiscal year ending June 30th of 10. I know that's somewhere around the mill out there, but I think that would be a really valuable document for us to have. You know, since we're getting ready to go into budgeting, do you have an update on what the status on that is? I would certainly agree with you. It is the one to ask. I hate to interrupt you. We actually asked for that this time, and we weren't able to get it on this, but I agree with you, and I think she'll answer that. Hopefully we'll get it in the next budget meeting, but we might not, but we certainly want it. Certainly. When I arrived here, I asked for the CAFR. It wasn't complete yet. We've gone through a process of making that a priority to complete that. I actually talked to the auditor this morning about a couple of notes, footnotes, that we are finalizing, and that should be on the way to you and to GFOA. Our goal is Monday, February 28th. So, but that is something that wasn't complete that, you know, I've been working on as a priority. So we will be able to put that on the 22nd of March? It is my goal, certainly. By the 22nd of March, yes, whether we finish it Monday or a few days later. But, yes, for the 22nd of March, we'll put that on the agenda. I just have one more follow-up on that question. And have we been able to determine what our surplus was for that fiscal year? Because that would technically be the number we would use to finalize the carry forward money for this fiscal year. That's included in this analysis. It was a little over 2.1. That's why I said that 4.7 or whatever. It was not realized. It was a little over $2 million. All right. Thank you very much. Council Member Beard. Thank you, Chair. A couple of issues which we've kind of talked about previously. The health insurance shortfall. It was my understanding that we looked at the first quarter and then extrapolated it out over the next year. We now have four more months. Is that amount, that projection, holding true, or has it changed? In which way has it changed? It is included in this personnel number that we have projected, and it was running. I'm not sure what the projections originally showed, Ryan. Basically, we're running a little bit better. The original budget, if you remember that presentation we gave several months ago, we had budgeted $34 million, all funds for medical. It's tracking more to be about $33 million. So that's part of the reason our year-end projections and personnel, we are a little bit down there. We are getting some analysis from the consultants that HR hired to do some actuarial analysis to get very detailed projections other than the pure extrapolation that you had mentioned. But basically, health insurance is tracking below budget. Closer to budget, in other words. Well, about a million dollars below budget is the way it's tracking right now. And then the second question involves the World Equestrian Games, and it's a two-part question. One is, were the expenses that we incurred put in the budget originally for 2011? And I think at one time we were told that we were due $800,000, and you say we've received $130,000. Is that all we're going to get, or is there any further discussions with the World Equestrian Games folks? I can't answer the first question about budgeted. I do know there's continuing negotiations with them for additional funds, But we were doing an analysis of those expenditures, which we'll make sure when it's complete that it gets to you. Council Member Stendon, I think, would like to respond to this. It wasn't budgeted. We just authorized a reimbursement agreement, and we only billed them for the hours we actually worked. Right. So when fire instance, we got a check for $212,000. That's all we billed them for. We didn't bill them for the full 383. who are waiting on police to be reimbursed, but was never budgeted in the budget. Okay. Thank you. That's all I needed. Thank you. Council Member Martin. Thank you, Chair. The shortfall, I think, has sort of become more and more known, and we've known more about it for a couple months. As Mr. O'Mara can probably tell you from previous years, you know, we've taken a try to get as long a run at this as we can. And does anybody recall what we cut last year starting in January? Bill, do you remember that number? The 12 range? I think the forecast was 12.5. I don't think the cuts equaled that. Obviously we came in 2.5 million less than what we predicted, but the goal was 12.5. So sort of since the time that we first knew about the particularly insurance issue, I guess we're three months into that. I think we've had time to try to tackle these shortfall issues and to address budget cuts and current expenditure cuts in order to meet this. And I'm trying to gauge at what – I guess whether the administration just sort of assumes we're going to clean this up by dipping into the rainy day fund or whether we're going to see the same level of effort to try to cut the $7 million out of the budget. Because I think it's far preferable to leave the economic contingency fund where it is and to see some serious efforts to cut the $7.2 million out of current expenditures. because, you know, we're not through this yet, and I think we've got some more long days ahead of us. And so I guess I'm trying to find out from you, are we going to cut this, or are we going to dip into the contingency fund to do this? Our goal, and again, this was for hopefully made that clear display purposes, is to reduce expenditures. Thank you, Chair. Thank you. Any other questions at this point? Okay, Commissioner, continue, please. Well, that was the last slide. You were ahead of the questions slide, so I didn't know if there were any additional questions. But I can talk about the advisory task force if – Well, is there any further questions on this topic? Seeing none, we'll move over to the third item on gender, the financial advisory group update, if you would, please. Sure. As you know, and I believe in your packet, there is some information about the public press conference that the mayor had naming a financial advisory group. But just for the public's purpose, I'll go through the members, if that's okay, and then talk about we did have an organizational meeting on February 17th. and I can go through what information we covered in that meeting. The members are John Kubine, who I know most of you are familiar with from his time here in Lexington, has a lot of state and other levels of experience. experience myself, Bill Farmer, the Bill Farmer of United Way, the CEO of United Way here in Lexington, Mary Pfister, who is currently the Director of Fiscal Effectiveness at Eastern Kentucky University, but she was, as you all know, the Accounting Director for a period of time at this government, so offer some expertise, historical perspective. Chris Frost, who was the chairman of the transition team. Merle Hackbar, who you know from the University of Kentucky, professor. Jeff Reed, who is the senior advisor for policy and government relations for the mayor, of the mayor's office. and Dr. David Stevens, who is retired and was a long-serving member of this council and, as I understand, was involved in this committee during his stint at the Urban County Council. So we did meet on February 17th. We talked about a financial overview, which, again, went through information much like we did today with the committee members, talked about the similar issues, and they had access to things like the pension actuarial report. In fact, Council Member Martin sent them some additional information. They had links. We had sent them to prepare for the meeting links to the budgets and previous annual financial reports and other financial information that has been made public. We had sent to them prior to the meeting. We sent them the transition team reports, the link to the reports. And so we did an introduction. We talked about the financial goals or financial overview. We talked about the transition team recommendations, and then we talked about the committee goals. And those committee goals were twofold. One, to assist us more short-term in talking about some of the very issues we're talking about today in terms of balancing the current year budget and preparing for fiscal year 12, information, again, that we can share with you as we move forward. And then something that I think will be very helpful to us is strategizing for longer-term issues, incorporating much of the work. I know the council has done on some policy issues, long-term planning, et cetera, so that, again, the goal for the group is twofold. And then we talked about maybe how we would work. and I think came to the conclusion that for the short term we'd have some meetings to talk to, again, offer their external view of how we go through this process of balancing the current year and next year's budget. And then for the longer term, really, they will work in a committee structure to, again, address particular issues as they move forward. So, again, we went through how we do fund accounting. We talked about revenue trends. We went through the same analysis of how the current budget was structured. We talked about personnel numbers, kind of a historical perspective in terms of the budget. We talked about in terms of reductions, how much of the budget, you know, kind of the components of the budget, how much is personnel versus operating, et cetera. We talked to them about the health care expense and where we were with that current year, and talked about some current year pressures like fire, overtime, and road salt, for example. Then we gave them an analysis of the ending fund reserves and the history of that, and then talked about our debt and our ratings from the agency. So we went through that kind of information, again, all public information, with the exception of this most recent analysis that we just went through with you. And then really talked about next steps and the pressures for 2012. So it was more informational. They gave some feedback on how the committee might work best and what their areas of expertise may offer us as a government. and how we might better engage them as we move forward with this task force. So that's really, there are no results from, no recommendations yet. They've had their organizational meeting, and we'll be meeting a little more often, short term and then probably, you know, monthly, longer term. We'll have you continually give us updates on how your progression is. I think we have some questions. Council Member Martin, did you from last time? Council Member Beard. Thank you again. I'm just curious about one little piece of that, and that is that three members of the transition team are on this committee. So are they going to say anything differently than they said in the report from the transition committee? And I know you don't know the answer to that. I'm just putting it out there for fun, I guess, for lack of a better term. I guess that means you don't want to answer that. You don't even need to say a thing. I think that answers that question. Now moving on to the fourth item was the bond series sale update. And Ryan's going to do that for us. Ryan, I think you're going to give us that update. Thank you for giving me the opportunity to talk about something I'm pretty passionate about. I wanted to touch base. We haven't had an opportunity. We sold a lot of paper in December, and I wanted to update you on how that went. We did three series of bonds. We did the 2010 FG&H. The F&G were new money pieces, funding new projects. It was kind of interesting, actually, the way we structured it. From the government side, we did a general fund, about $8 million in projects, and urban fund, about $7 million in projects. And we took advantage of two different pieces of the Recovery Act, the Build America Bonds piece, which the urban county government is very familiar with. We've done some of those recently. And we also did some recovery zones. Basically, the Build America have a 35% interest subsidy. Now you have to sell taxable bonds. Normally we sell tax exempt bonds, but the government basically comps you 35% of your interest. So for every $100, they give us $35 back. Recover zone is a little bit more lucrative. We get 45% of that back. And then we also did a refunding. The key piece and more of the focus of the discussion today is on a ratings downgrade. We just went through a lot of conversation about our financial health, and both rating agencies, the two of the ones that we use, Moody's and S&P, recognized and actually downgraded us. It's not a good thing. I remember kind of outside the Irving County government thinking, you know, hey, I was thinking through this job. There's a potential to make some changes there for while S&P rated us higher than Moody's. Unfortunately, given some of the criteria that they looked at, they actually downgraded us from what's the highest AA category, which puts us right at the top of credit ratings in the state. They moved us down one notch to the middle categories of the AA. We're still better than most local governments in the state, but this does have repercussions on the financial side that we'll talk about in the next slide. They gave us some reasons for this. I don't think it's any surprise. We've talked about this many times in this room. The structural imbalance significantly reduces the financial reserves. That is one that is concerning. I know we've all talked about it. I think in terms of a metric, basically our budget, if we draw the $7.2 million that the Commissioner just talked about taking out of the economic contingency reserve, if we take our economic contingency, which I always refer to as our savings account, and we take our general fund balance, which the Commissioner referred to came in at $2.1 million, we add those two together and we look at it as a percentage of our operating expenses. Basically, we would have 10 to 15 days of cash on hand. So if bills revenue collection breaks, we would be able to prop up urban county government for 10 to 15 days. We can make one payroll, and we can pay our bills for a week and a half, roughly. The rating agency recognized that, specifically called it out, and it was one of the considerations in the downgrade. They also commented that, you know, hey, you have fiscal pressures in 11. You're referring on these one-time revenue and your contingency reserves to get it through. But you have long-term problems, such as your pension. We're all very aware of that, and they picked up that on as well. In addition, I think that's somewhat intertwined with the moderate debt levels that are expected to increase to solve long-term issues. At least that was the original plan, and it's currently under evaluation. So just quickly to give you the metrics on the two series, the Series F was a short piece. It was the Build America piece with the lower subsidy amount. Basically, we borrowed money, roughly a four-year life at 1.7%. It's very, very, very cheap money. The Series G piece was a little bit longer. We backloaded the higher-paying federal subsidy, and we roughly borrowed at 2.6%. And the refunder, which is the tax-exempt piece, you weren't allowed to use those subsidy programs for just refunding old money. And basically that was about a seven-year deal, just under 3.2%. Ryan, could you send us what each series, what projects these were for, if you don't mind? Yes. Yes. Thank you. Will do. So commenting on the downgrade side of the bond sale, we tried to give an assessment of how much this cost. We're borrowing money pretty cheap now. but to still put a caveat around that what we did is we went out to a state that happened to issue the Commonwealth of Pennsylvania happened to issue and be in the market the same day we were so we adjusted for fluctuations daily interest rate fluctuations and they were the AA1 which is our previous credit rating so again we took what they sold at for that day at a AA1 and we sold at a AA2 Moody's and basically spread the, it's kind of hard to see on that, but spread our yields to the state of Pennsylvania yields. And you can kind of see on the beginning, we're about 0.56% off on our rates, and it kind of tightens on the back end. Basically, we're looking at a 27 basis point or 0.27% difference. So we assumed, okay, given their credit rating, what we were, we borrowed money at .27%. So we said we routinely do roughly $20 million type of deals. Most of the stuff that we do issue now, these were a little shorter because they were shorter-term projects. But if we just took a vanilla transaction at 20 years, basically that would be about a half a million dollars over 20 years. It doesn't seem like a lot of money, but when you figure that we are a frequent issuer, we're in the market every year, our capital plan is over $20 million a year for the next five years but that would be maintaining the current credit rating every time we issue debt in the market we now borrow at a higher rate so there is a compounding effect there every time we issue we do now have a lower credit rate. Really that's all I had. Is there any questions? Any questions? uh council member martin thank you chair um i passed out to the uh members of the council i don't know whether you got it the article in the new york times about that moody's was going to factor pension gaps in state ratings have you read this i've read a lot of articles on that yes um how is this going to affect us or has it already affected us well the way moody's and s&p run their calculations, it's based on your peer group. So if we're worse than our peer group in terms of adding in these accrued liabilities, it'll affect us negatively, vice versa, it'll affect us positively. It's hard for me to say, since there's no good data around the true pension liabilities. They're even talking about, Council Member, you would talk to the actuaries about the investment rate. They're even talking about normalizing investment rates and say everybody needs to use this rate of return and all that. There's no real good comparison data, so it would be hard for me to say right now how it is going to affect us. We do have a large liability, in my opinion, in our police and fire pension, but it's hard to figure out how we're going to adjust to other peer groups. What is the likelihood? the Government Accounting Standards Board is looking at a proposed rule to include the long-term liabilities in our balance sheets. You know where that is and what the possibility, what that's going to do to us if it happens and the likelihood of it happening? I do not. Do you? We talked about this in our meeting this morning. I sit on the Governmental Accounting Standards Board Advisory Committee, and it's been the main topic of conversation in the last two meetings. I'm actually scheduled to go to a meeting in a couple of weeks, and they're supposed to have an update on that. But a lot of discussion, a lot of pushback, obviously, from municipalities, and a lot of pushback the other way from readers and users of financial statements that want that information. So I'm not sure how the GASB board is going to come down on that, but it's pretty serious. The wheels are on the track, and it's probably moving at least for more disclosure, maybe not to the extent that some of the articles have been written about. Could we be looking at additional rating adjustments? Should we be required to report those? Well, again, I think Ryan's analysis of all the factors that go into a rating, it certainly would be one of them. Thank you, Chair. Thank you. Any other issues on this topic? The last one on our agenda is items referred to committing. Paul, could you go through and tell us where we are in each of these, please? I'd be happy to, Council Member. If I could start on the second part of this, the items that were transferred in from another committee, the local vendor preference, the minority and women business recruitment process, the purchasing, procurement, and professional services selection process, I believe these all three are being handled by this procurement and purchasing task force I think you're sharing. Right, and we're going to be meeting our first meeting next Monday at 3 o'clock. I think, and I believe those are the only three items that were transferred into budget and finance from existing committees. And the only item, Lisa, that I've been able to find that you have just been referred to this committee is a solid waste cost and tax structure issue that was put in committee by Council Member Gorton, was really from questions from Councilmember Martin and Stennett, I believe, at a council meeting earlier this month. That will be presented to you folks, or the administration's response to those questions was presented at the March 22nd meeting. But in addition to those items, you also have, just on a regular ongoing basis, you have the monthly financial report that you initially had, And you also have the audit and the management letter that should also be in the March committee as well. Thank you. Any other questions for Mr. Schoeniger? I'll entertain a motion to adjourn. Oh, Mr. Martin. Sorry, Chair. I don't serve on this committee, but I made the motion and the council approved my request to refer to this committee the issuance of bonds for repaving. And so I guess at some point I would hope that the committee would take that up as well. Thank you, Chair. Thank you. Any others? I'll entertain a motion to adjourn. We have a motion and a second. All those in favor? Aye. All those opposed, we are adjourned. Thank you.