# Council Budget and Finance - October 22, 2013 > Auto-transcribed civic record · October 22, 2013 - **Permalink**: https://meetings.lexingtonky.news/meeting/3149 - **Source video**: https://lfucg.granicus.com/player/clip/3149?view_id=14&redirect=true - **Date**: 2013-10-22 - **Last revised**: July 15, 2026 - **Length**: 2,885 words > ⚠️ **Auto-generated content.** Audio from the official Granicus video was auto-transcribed with OpenAI's open-source Whisper large-v3-turbo model, run locally by The Lexington Times. Structured facts were extracted with GPT-4o; the narrative summary was written by Anthropic Claude. 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 & Finance Committee met on October 22, 2013, at 1:00 p.m., with Charles Etlinger presiding. The committee addressed five agenda items, including approval of the previous meeting's summary, a monthly financial report, a fund balance discussion, a risk management review, and items referred to the committee. The meeting resulted in three motions and votes, with two items approved and one deferred. The committee heard ten public comments during the meeting. Overall, the committee approved the August 27, 2013 committee summary and the fund balance discussion, received informational presentations on the monthly financial report and risk management review related to general government links, and deferred action on items referred to the committee for further consideration. ## Attendance The following individuals were present at the meeting on October 22, 2013: * Charles Etlinger * Linda Gorton * Kevin Stinnett * Steve Kay * Chris Ford * Julian Beard * Bill Farmer * Jennifer Scutchfield * Jennifer Mossotti * Peggy Henson No members were absent or late. ## Votes and Decisions **Approval of the August 27, 2013 Committee Summary** [timestamp: 00:00:00] A motion to approve the August 27, 2013 Committee Summary was made by Bill Farmer and seconded by Jennifer Scutchfield. The motion passed unanimously with no abstentions. **Motion to Allocate Fund Balance** [timestamp: 00:03:00] A motion to allocate fund balance for economic contingency, litigation reserve, health insurance, pension contribution, and 27th payroll was made by Bill Farmer and seconded by Linda Gorton. The motion passed unanimously with no abstentions. **Friendly Amendment to Fund Balance Allocations** [timestamp: 00:03:00] A friendly amendment was proposed by Kevin Stinnett to add assignments of non-recurring uses of $12,500,000 and unassigned fund balance of $2,467,300. The amendment passed unanimously with no abstentions. ## Budget and Financial Actions The meeting included an appropriation of $12,500,000 for multiple financial purposes. This allocation was designated for: - Economic contingency funds - Litigation reserve - Health insurance costs - Pension contribution - 27th payroll No additional details regarding specific vendors, recipients, or resolution identifiers were provided in the meeting materials. ## Public Comment The meeting included comments from ten speakers addressing fiscal management and fund balance allocation. Council Member Lane [00:03:36] expressed concern that the General Fund has been structurally out of balance for four years due to borrowing, particularly for pension funding, and questioned how a surplus was achieved despite this situation. Jennifer Scutchfield [00:04:45] raised concerns that increasing taxes and franchise fees while maintaining large fund balances sends a poor message about budgeting and fiscal responsibility. Steve Kay [00:05:17] challenged the idea of a surplus, emphasizing unmet needs from prior years and advocating for immediate investment in aging infrastructure like the fleet. He later [00:09:39] proposed a system where each Council Member allocates $100,000 increments across a ranked list to achieve equitable distribution. Kevin Stinnett [00:06:25] suggested raising the fund balance to $4 million and proposed a system to rank and address district-specific infrastructure needs. Diane Lawless [00:07:30] emphasized that the surplus resulted from prudent budgeting and spending, and supported investing in infrastructure projects. Jennifer Mossotti [00:08:00] stated it would be a disservice not to consider projects in her district and defended her interest in funding local improvements. Charles Etlinger [00:08:31] noted that over $50 million in requests were submitted by Council and Administration, and stressed the need for a structured ranking system. Linda Gorton [00:09:02] suggested that requests be rank-ordered to streamline discussion, noting that merging both lists would lead to an excessively long meeting. Harry Clarke [00:10:12] expressed concern that a complete division between Council and Administration in the ranking process could lead to inefficiencies. The comments reflected broader tensions between fiscal conservatism and infrastructure investment priorities, with speakers divided on how to allocate available funds and whether a true surplus existed. ## Contested Items **Fund Balance Allocation and Surplus Perception** Council members disagreed about the nature of the fund balance surplus and how it should be used. Some members argued that the surplus represented true excess funds that should be immediately invested in infrastructure projects. Others took a more cautious approach, contending that the apparent surplus actually reflected underfunded needs from prior years rather than genuine excess revenue. This group expressed concern about committing funds without first reviewing audited financial reports. The disagreement resulted in a split vote among council members, indicating the council was divided on whether to proceed with spending the fund balance or to wait for additional financial documentation. **Process for Ranking Fund Balance Requests** A heated discussion emerged regarding the procedural approach to prioritizing fund balance allocation requests. The central dispute concerned whether to combine Council and Administration requests into a single ranked list or to keep them separate. Proponents of merging the lists argued for a unified ranking system, while opponents raised practical and fairness concerns. Specifically, critics worried that consolidating all requests into one list would extend the meeting length considerably and create potential inequities in how requests from different sources would be evaluated and distributed. The debate reflected broader concerns about meeting efficiency and equitable treatment of competing funding priorities. ## Approval of August 27, 2013 Committee Summary [timestamp: 00:00:00] The committee voted to approve the summary from the August 27, 2013 meeting. Bill Farmer moved for approval, and Jennifer Scutchfield seconded the motion. The summary was approved without dissent. ## Monthly Financial Report William O'Mara presented the financial results for the first two months of fiscal year 2013. [timestamp: 00:01:00] **Financial Performance** Year-to-date revenues declined by $1.08 million compared to the prior year period. This decrease was primarily attributable to lower franchise fees and reduced employee withholdings. Expenses for the same period were down $1.45 million, reflecting decreases in both personnel costs and operating expenses. Despite the revenue decline, the net position improved by $402,000 due to the larger reduction in expenses relative to the revenue decrease. **Speakers** The presentation was delivered by William O'Mara, with Melissa Lueker also identified as a key speaker during this agenda item. **Outcome** This item was presented for informational purposes. ## Fund Balance Discussion William O'Mara presented the preliminary fund balance for fiscal year 2013, reporting a $10.4 million surplus resulting from higher revenue collections and lower-than-budgeted spending. [timestamp: 00:03:00] The committee reviewed and approved allocations of the surplus across several designated reserves: - Economic contingency fund - Litigation reserve - Health insurance reserve - Pension obligations - 27th payroll funding Following these allocations, the committee determined that a remaining unassigned balance of $2.47 million would be retained. The discussion included participation from committee members Bill Farmer, Linda Gorton, Kevin Stinnett, Diane Lawless, Jennifer Mossotti, Charles Etlinger, Steve Kay, and Harry Clarke. The fund balance discussion concluded with committee approval of the proposed allocations and the handling of the remaining unassigned balance. ## Risk Management Review — General Government Links Patrick Johnson presented an overview of the Division of Risk Management's services, operations, and financial performance [timestamp: 00:10:12]. **Presentation Content** The presentation covered the division's insurance costs, claims trends, and risk mitigation efforts. Johnson highlighted that claims remained stable across most categories during the review period. He noted exceptions to this stability, including a major fire truck accident and wage and hour claims, which created notable impacts on the claims profile. **Key Findings** The review demonstrated that the division's risk management approach was generally effective, with most insurance categories showing consistent performance. The identification of specific incidents—particularly the fire truck accident—indicated areas where significant claims had occurred despite overall stability in other areas. **Outcome** This agenda item was presented for informational purposes, providing the governing body with an update on the Division of Risk Management's activities and financial status. ## Items Referred to Committee [timestamp: 00:09:02] The committee discussed the process for handling future fund balance requests. Key speakers included Charles Etlinger, Linda Gorton, Steve Kay, and Harry Clarke. The discussion focused on recommendations to rank and prioritize projects from both Council and Administration in order to streamline decision-making on fund balance allocation. The committee examined procedures that would improve how future requests are evaluated and processed. The item was deferred, with no final action taken at this meeting. --- ## Decisions - **Motion** — passed: Approval of the August 27, 2013 Committee Summary - **Motion** — passed: Motion to allocate fund balance for economic contingency, litigation reserve, health insurance, pension contribution, and 27th payroll - **Motion** — passed: Friendly amendment to add assignments of non-recurring uses of $12,500,000 and unassigned fund balance of $2,467,300 --- ## Full transcript Music Thank you. Thank you. Thank you. Thank you. Thank you. The unemployment graph showing Kentucky, the USA, the Lexington metropolitan area, as well as Fayette County, they're all going in the correct direction down. Kentucky, which is the top line, had 8.4% in August compared to 8.5% in July. The U.S. was sitting at 7.4% compared to 7.3% in July. The metropolitan area was at 6.2% for August compared to 6.6% in July. and Fayette County itself was at 6.1%, and that's compared to 6.4 in August. The next slide shows a little bit of the three-month running average, and the next is the selected economic indicators. As has become the case, we have mixed results. The Fayette County unemployment is going down, and that's a good thing. The Fayette County permits issued are going back and forth, but for the month of September, they increased over the same period of the prior year. The Fayette County new business license, however, is lower for the last two months than the same two months in the prior year. And then home sales are continuing to be positive year over year. We have four months, five, six months in a row where that's happened. And then last is foreclosures. And we had a spike in the month of August, but September, excuse me, in July, but in September and August they have been below and more in line with what our running rate was prior to all the foreclosures. For the month of September, which isn't much of a glimpse, one month you see the numbers are kind of all over the place. A better comparison is the first three months of the year. This is the end of the first quarter. And we see that we're over budget in employee withholdings by $605,000. That's 1.5%. That's slightly ahead of budget. That is our main driver. so that is good news. Unfortunately, the same thing we saw at this time last year where net profits were soft. We're seeing that again in the first quarter of this year. We're 15% below our budget. Insurance has continued its positive trend year over year with a 3.8% three-month positive over budget. And our franchise fees are below. and as I explained the last two months, part of that is a transition to monthly payments from all of our franchisees. Some of them were paying us quarterly. Now they're paying us monthly. But those monthly payments are not coming in on a regular basis. Some months we have none. Some months we have two. So we don't have a smoothing yet. The other part is an actual less money compared to last year from the same franchisee, so usage is down. That's probably due to the moderate weather we've had for the first three months of the fiscal year. Any questions on the top four? I see none. We'll move on. All right. The other two are compared to last year, and we're plussing over last year, but we expected that. The budget reflects our expectations in order to meet our total budget. The next thing is nuisance and abatements. Just want to present that to you for reference. And then we take a look at total revenues. I'll have Budget Director Melissa Luker. Okay. Bill's talked about the big four so then I'll hit the highlights with the other revenues you can see our other licenses and permits we have a favorable variance of around 200,000 this is due to D tax fees and if you saw a few slides ago the home sales have gone up year over year so that's a result of that the services that $700,000 favorable variance that is detention center fees bed fees and other from out there. And then at the bottom you see other income, a $500,000 variance, and that is due to mainly penalties and interest and miscellaneous revenue, so just various smaller revenues that the government collects. And so our revenues have a favorable variance year to date for the first three months of the fiscal year of $818,730. So we'll move to the expense side. On our expenses, we have a slightly favorable variance in personnel, around $600,000. That's about a 1.5% variance, so we're pretty close with budget there. Operating, we have a $2 million variance year-to-date. This is due, we have variances in operating supplies and expenses, vehicle equipment and fuel, and then landline phones and some utility accounts. So it's various of our operating accounts. The difference in the partner agencies and the operating capital expenditures, those are just timing differences with the partner agencies on when payments were made to the partner agencies according to their PSAs. And then the timing difference is just people are spending their capital sooner than what we had anticipated, but it's still on track with the budget. So our expenses, we have a favorable variance of $2.3 million. If you take that and include our favorable variance in revenue, we have a favorable variance right now of $3.3 million. The next two slides are just reference. They are where we are calendar year to the prior year. So those are just included for reference. So if anybody has any questions, I'd be happy to take any. Do we have any questions? Council Member Lane? Yeah, on the last exhibit on 13, debt service was down $1.8 million, if I read that correctly. That's an increase of $1.8 million. It's calendar year to prior year, so it could be a timing difference on when payments were made, and that just could be timing. Okay, and on page 10, the services were about $700,000 ahead of budget. What component of services was up? It's mainly due to detention center bed fees. Those are up currently around $600,000, so that makes up the biggest part of that variance. Okay. Thank you very much. You're welcome. Any further questions? Seeing none, we'll move to the next item. And Patrick Johnson is going to talk about the risk management review, and that came out of the general government links. And Mr. Schoeninger, if you could give us a quick brief update on why this was put in there from the links, I'd appreciate it. Thank you, Mayor. Thank you, Council Member. Back in the spring during the general government links meetings, Mr. Johnson, during his budget request or budget explanation, he expressed some concern about the management accounting and how many dollars we're replacing in the risk funds. And you can see that that's reflected on pages 34 through 39, the changes over time. And from that discussion, the General Government Links Committee made a recommendation that this item be brought to budget finance, and that was done. Thank you. In the convenience of time, if you could keep it to about 12 minutes, that would be perfect. I know that's kind of stretching it, but I'm sorry. Not a problem. I'll try to move right along. Good afternoon, Council members, Vice Mayor. Basically, I want to just go quickly over our mission here, and that's to provide the LFUCG departments and divisions with our services that protect their productive resources, reduce their risk costs, and promote their image among citizens and visitors to Lexington. The Division of Risk Management currently is staffed with a director, safety and loss control manager, risk management analyst, and industrial hygiene and loss control specialist. This is the type of risk that we're typically looking at across the board from a business standpoint. We have strategic, financial, operational, and hazards risk. I won't go over each one of them, but that kind of gives you a good vision of the realm of risk that we're dealing with. The Division of Risk Management typically operates mostly within the operational risk and hazards risk, but will assist with other areas as necessary. The Division of Risk Management, our service is provided. You can read that there for yourself. Mostly helping with the property and casualty insurance marketing and procurement with a broker that we use. We perform risk assessments. We do the identification of operational hazards risk and do a lot of other consulting and work with other people. So just a brief overview of what we do there. Our self-insurance program for council members that are not familiar with it was established on Ordinance 2-7. The self-insurance policy pretty much mirrors our excess insurance policies. It does add a few extra benefits along the way. It was approved in 1987. It does list who all is insured by it. There's various types of coverage, auto liability, general liability, property, workers' comp. There's certainly exclusions. There's limits, and then risk management has certain responsibilities within that policy. Our excess insurance is procured through a broker that we do an RFP on every three years, and they're basically brokering for our aviation liability, auto liability, general liability, public officials, the international, when appropriate. This year we didn't buy international because nobody was traveling internationally. We have property and bore machinery, workers' compensation, and bonds. The costs are allocated back out to each one of the divisions. And I need to move ahead with my slides. The excess insurance premiums for about the past four or five years has been running anywhere between $1.2 and $1.3 million. The majority of our excess insurance premiums cost is in the general liability, auto liability, and public officials liability arena. This past year was about $560,000. due to several large claims that we've had in that area. The workers' self-insurance taxes and the workers' compensation premiums make up the next bulk of premiums, right around $300,000 to $350,000 per year. It did go down by about $24,000 this past year, and because of the way we worked our policies last year, there was a premium certain. Now we're doing a premium that's audible by the excess carriers, and we're getting back about $35,000 in excess premiums for what comes. So we're pretty pleased with that. Otherwise, you have the property premiums. It's going up steadily. As you can see by the graph, it's the yellow column, and that's just due to the value of our property and also the vehicles that we're insuring are more valuable. So anytime they're involved in an accident, it does cost more money. The basic loss trends that we're seeing right now, we'll go to the next slide here. For all lines going back 10 years, you can see from 2004 all the way to 2013, we stayed fairly below the $8 million. And when you do a benchmark based on our total budget and compare us to other public entities across the United States, it's about 2% or less of our total budget. So we do benchmark fairly well across the board. You'll see some outliers in 2006 and 2007 and 2010. I'll explain that in the next couple slides. For the autophysical damage outlier that you see in 2013, we had a severe fire truck accident back in December 2012 on the interstate during a very icy period of weather there. and so that escalated our auto physical damage. For the most part, we've kept our auto physical damage below between the $300,000 and $500,000 range per year. For auto liability, again, the outliers in 2004. We had a vehicle-on-vehicle with police, which raised that sum quite substantially. In 2007, we had another police vehicle versus a pedestrian. And then in 2013, we had a fire versus a pedestrian. So those types of claims have a tendency to be rather large, especially when you're at fault for it. General liability incurred costs. Across the board, the outliers in 2006 and 2007, we had wage and hour claims, which took those up. And then in 2010, I think we had a death in the prison, which took that year up. But generally, though, we're keeping most of these claims below $1 million per year. Property damage incurred costs. Normally, across the board, about anywhere between $300,000 and $500,000. In 2007, the outlier there was we had floods. In September of 2006, we had a sanitary sewer equipment in Jessamine County that got severely damaged. So that was the outlier that occurred there. For workers' compensation, across the board, we kept it pretty much below $3.5 million per year. We implemented a managed care program back in 2000, actually December 2006, but it didn't become fully active until 2007. We realized some really good results with the managed care, nurse case management, bill reviews. and in 2008, midway through 2008, that was discontinued as a result of the last administration. Our workers' comp over the next couple of years has accelerated exponentially and has resulted change in TPAs in 2011. It came down some. We still haven't realized the full growth of these workers' comp claims yet, so we'll have to wait another couple of years before we see how 2011, 12, and 13 matured. From a risk mitigation standpoint, we get out and do risk assessments. Qualitatively, we do them with surveys, questionnaires, and we interview a lot of employees when we're out in the field. We look at a lot of the operations. Quantitatively, our risk assessments deal with we have a risk management information system. It provides us with a lot of statistics and feedback, and so we use that to help do our assessments and determine where we need to focus our attention. The training that the Division of Risk Management provides is for new employees orientation, the Supervisors Academy. We do a defensive driver course every three months. We work very closely with our emergency preparedness group and coordinate there. We provide ergonomic studies. We do specialized training either on confined space entry, et cetera. The accountability for all this, obviously, is within management down to the employees. We do daily monitoring of the accidents. I receive every claim that comes into the government. It comes across my desktop. I have a risk management information system that alerts me when a claim has been filed. If we feel like we need to get out and investigate right away, we get out there and take a look at it. There's an accident review committee that I'm chair of, and then we have accident reconstruction specialists from police. We have fire, fleet services, a representative from the mayor's office, and we meet every two weeks over all the vehicle accidents and property damage accidents, and then we assign whether it's at fault or not at fault, and then we send it back to the director to initiate the appropriate discipline. The tip line is another source where we receive some information for accountability. Fortunately, I think I've only investigated two events since tip line has come open, And so that's good news from a safety and health standpoint. And that's pretty much it. Is that under 12 minutes? Thank you. You did very well. Any questions? Did you have any recommendations that you wanted to bring to us that we need to be doing, or is this more information only? This was more information only to show you where the dollars were being spent across the different lines and to let you know where the excess premium dollars were being spent as well. And the one thing you brought up was the workman's comp. You said we don't know that yet because there are still cases pending. That's correct. Each year the actuary will look at the trends, and then they'll factor in those trends to see how much growth is developed. In some of the work comp claims, they typically try to rehabilitate the employees and provide them with good medical attention. But some employees don't rehabilitate and will require an indemnity payment, partial disability or full disability over the rest of their lifetime. So that depends a lot on how much the growth of those claims will be. Thank you. Any questions for Mr. Johnson? Seeing none, thank you. You did a very good job getting in your time squeezed there. The next item was I put in just for the links discussion, and we'll move that on to the next budget and finance. But in the interim, is there some issues, ideas that you would like to have us look at for the fiscal year 15 budget links? I'd like to get those in because that's going to be coming around the corner here pretty soon. And we talk about getting ahead of the curveball on that, so not wait until March or April. So, Vice Mayor Gorton. I just wanted to affirm, or maybe not, that we're going to keep the same links. You know, we switched last year so that we could get new people shuffled and served on new links, and I think our idea was to stay on the same link for two years. So I didn't know if that was in the works or not. That's my plan, unless there was a council decision otherwise. Okay. Council Member Ford. Any further? Do I have a motion to adjourn? We have a motion and a second. All those in favor say aye. Aye. All those opposed? We're adjourned.