They gave you such a wonderful start I remember when rock was young, me and Susie had so much fun, holding hands and skimming stones. Had an old gold shiver and a blitz of my own, but the biggest kick I ever got was doing a thing called the crocodile rock. While the other kids were rocking around the club, we were hopping and bobbing to the crocodile rock. Well, cry, rockin', a song that shouts when your feet just can't keep still I never knew me about all the time and I guess I never will Oh, Lord and Mama Those fighting nights The Susan Warren Tick them tight And the crowd rockin' From the island Of the side But the years went by And the rock just died Suzy when I left this boss a foreign guy Long nights crying by the record machine Dreaming of the Chevy and my old blue jeans But they never kill the drills we got Burning up to the crocodile rock Learning fast as the weeks went fast Thank you. We have a quorum with the Budget and Finance Committee for August 26th. The first item on the agenda is the March 18th Committee Summary, and that was originally approved in the April 8th of 2014 work session, so this is for information only. The second item is the monthly financial report by Commissioner O'Mara. Commissioner, welcome. Thank you, Chair. As is typical in August, we have the July update. In the same format as we usually follow, the first thing is looking at comparative unemployment rates. It's a little vague up there, but Kentucky for June is sitting at 7.4. The Lexington MSA is at 6.4, with Lexington at 6.3. And the U.S. came in at 6.1 for June. This is the same information, but a three-month rolling average, so that you can see that it did peak earlier in the year and is trending down for both federal, state, local, and the MSA area. In addition, we have some of the key economic indicators that we look at. The Fiat County permits, which is about halfway down the page, is virtually flat. We had 1,692 issued in July of last year and 1,695 same time this year. We are up in new business registrations at 194 this year versus 152 last year. Home sales slightly below the same last year. 107.5 was last year versus 1006 this year. And the one that we always want to see going down is Fayette County foreclosures. And we had 89 this time last year versus 35 in July of 2014. Any questions on those economic indicators? If not, I'll turn it over to Rusty with top four revenues. Thank you. Welcome. Good afternoon, Chair and Committee. As with prior months, I will go over the top four revenue categories, this time before the month of July versus the budget as well as prior year. For July versus budget, we are $2 million below the budget for the first period. That is due to timing differences, and I'll go over those timing differences within the two categories that are providing that. Employee withholding is $1.5 million below budget, which is the top one below, and that is due to how payments come in in the month of July. The due date is July 31, so sometimes payments will come in July or they'll be postmarked July and get in into the month of August. And then insurance is $765,000 below budget, and those typically come in either in the first or the second month of a quarter. So you would see an increase in the month of August. Franchise fees, however, is not a timing difference. So that is a $406,000 positive variance. That is due to one of the utilities having a higher payment for the period than they did previously that was used to create the budget. Looking at a comparison to the prior year, same period, you'll see we're $2.6 million below prior year. Again, with employee withholding, it is $1.8 million below prior year, and that is a timing difference, as mentioned before. And what would happen on that is an organization or organizations would have paid in July last year or would receive their payment in July, but this year that payment was moved over into August. It came at the first of the month. And then the same thing on insurance, $1.2 million below prior year, and that is where more payments come in August versus July when we look at the historical data. from that perspective. And then franchise fees is $450,000 above prior year. And again, that's due to the utility that had a higher payment due to the way the weather was earlier in the summer. And through this point so far, I feel pretty good about the timing differences being corrected in the month of August. The last slide for information purposes, we included the nuisance abatement and lien collections for the month of July for this fiscal year. I'd like to ask you any questions for the month of July revenues. I see none. Thanks a lot. I'll turn it over to Melissa to go through the remaining revenues as well, expenses. All right. Rusty's already talked about the top four revenues, so I'll just skip down to the others. If you look from other licenses and permits down, most of our revenues are right at or right below budget. One month in, like Rusty said, a lot of this has to do with timing. So overall, we're $1.9 million under budget right now for the first month in revenues. And then here's the expense side. You can see we have some positive variants here. We have a positive variance of $1 million in personnel, around $600 in operating. Those are our two big ones. It's one month into the fiscal year. At this point in time, there's not a single division or a single operating account or personnel account that stands out more than others as far as the variance goes. It's spread throughout. If you look back at our revenue, we were $1.9 million off in revenue. Well, we're $1.9 million off in expenses, so that's a wash. So for the month of July, we actually did very well if you take into consideration the revenue and the expense. This slide shows the prior year to current year. You can see we're off a little bit from July to July, but like Rusty said, we had some timing differences when payments were received. And then once again, you can see on the expense side, calendar year to prior year, or current year to prior year. Does anybody have any questions? Any questions from council? Seeing none, I guess the question I would have is this is July. We saw May, but we didn't see June. Are we going to be seeing anything from June? I'll let Commissioner O'Meara handle that one. Thank you, Chair. We are in the process of closing the books and doing year-end accruals, actuarial reports, that type of thing. So as we've discussed in the past, we don't have year-end numbers. We're always trying to have that ready for you in October. Probably the best time to expect that is at the budget and finance meeting in October. And it would be approximately the same approach that we took last year. Okay. Any questions? Seeing none, we'll move on to the next item. Thank you very much. It is the Rupp Arena renovation expenses, and Council Member Stinnett, you put this in. Did you want to start it off here? Thank you, Chair. I'd be glad to. This is a follow-up from our conversations actually back in May. I know we tried to schedule this a couple times, but I don't think the council has had an opportunity to go over the expenses in a committee format and ask questions in regards to how Mr. Butler will be employed going forward. And I think today is just an opportunity to get that information and have any conversation we need to have about it. Okay. And I think Mr. Schoeniger, he put together this spreadsheet, and we can have him talk about the spreadsheet. And I think Mr. Butler is available if we have some questions. Or he's there in the back, just raise his hand. And also I think Jamie Emmons also might be able to answer some questions too. So, Mr. Schoeniger, you want to start, and then we can. I'd be happy to, Council Member. As you're aware, the government set aside $2.5 million during 2013 for this project. And as I understand, and Frank may correct if I'm wrong, Lexington Center Corporation pays the initial bill and then invoices both us and the state, and the state also put $2.5 million into the project. you'll see that at least to date, and this is a little dated, that we had $4.6 plus million worth of expenses and $4.6 million of the revenue. They said that they reimburse, both we and the state reimburse as we are billed. I'd be happy to try to answer or address any question you have about the individual expenses, But I think Mr. Butler would probably be more appropriate to give those questions to. Thank you. Mr. Butler, could you go through the financial expenses here, please, and revenues? Just to expand on what Paul said, as you recall, the total project scope was about $5.5 million, two and a half from the city, two and a half from the state, and additional funds from LCVB and the LCC. To date, we've expended approximately $4.6 million of those funds. there still remains a $312,000 commitment from the state, which we have not requested. And there's another $312,000 of the $2.5 million from the city that hasn't been expended. There's about $625,000 of the initial funding for this project, which I do not anticipate we will be using. We basically have closed out all the contracts with all the folks that we had contracts with. They've all been paid. The basic balance at the LCC for this project is zero at this point. As you can see on the list of, I'm having a hard time reading that, But what we provided basically had a list of all the, of all the, oh, thank you, of all the expenses. Obviously, the majority expense was for architectural services for Rupp and the Convention Center, which was approximately, excuse me, $2.8 million. PC Sports was our program manager. By the way, as a footnote, I would mention that all these folks were acquired by LCC through basically the process that you have with the city. They were all public RFPs. They were in the paper. They were advertised through LCC. They were vetted initially. The responses were vetted initially by the Rep Arts and Entertainment District Subcommittee of LCC. They were then, the final decisions on all these contracts were then referred to the LCC board who voted on approval to proceed with contracting with all these folks. And I don't know that I need to go through each one of these. I think you all are probably familiar with. Urban collage, basically, was the original staff to the project when we were going through the mayor's initial appointment of the task force. CSNL were the folks that we contracted with for financial feasibility study on construction. Our construction managers, Cornette, we hired at the time. we thought we were going to be proceeding with the external fundraising project. Dinsmore is our legal counsel for LCC, which we used on the project as well. CSI is the geotechnical folks that did the work out behind RUP, did the core drillings, etc. CSNL, that $30,000 is probably not accurately reflected there because we sort of combined the billing, but that really reflects the part payment for the study that was done on the Convention Center by CSNL, the feasibility study. And then Commonwealth Economics was the group that we contracted with to assist us in doing the initial TIF calculations, calculations, which we anticipated were going to be a part of the project. As you all probably remember, or maybe you don't, initially we assumed that TIF was going to be part of the financing scheme for Rupp Arena and the Convention Center. We chose not to pursue that as part of the project, funding for the project. But the work that we did basically was looking at the high street lot, and that work is still goods current and can be used as we look at when and if we want to pursue the development of the high street lot so the total area is 4.656 million dollars with about 625,000 still available but but at this point not committed I'll be glad to answer any other questions. Council members, do we have any questions for Mr. Butler? Okay, we have a few. Council member Massadi? Thank you, Mr. Butler. With our contract with you, when does that expire? I'm sorry, I get you? Our contract with you, or your contract with us, I'm sorry, when does that expire? December of 2015. Okay, and so what services will you be providing for us until 2015? I think I outlined those. I sent a copy to the vice mayor. I'm continuing to work on the TIF financing, assuming at some point we will be going ahead with that. I'm going to be working with the businesses down at Rupp. We're looking at refinement of schedule and what might be realistic, because we owe them a sort of a briefing. We haven't done that yet. And at the time, the reason we didn't is because we didn't have any real timeline for the project. But I think now at least we can tell them there won't be anything that will happen until a date certain out in the future. And I'm also looking at what other options we might have on the project, assuming that we might be in some form having this project proceed out in the future. That was a major concern of mine is how the retailers that were currently there were not basically in the conversation. Let's put it this way. That is correct. And that was very dismaying because these people have paid them. Well, very honestly, we didn't have anything to tell them. And they had nothing to go by. You know what I'm saying? I know several of mine, the retailers down there. I've talked to several of them as well. And they're very unhappy. I told them we will get with them and give them a not-to-happen-before date. Right, but they felt like they were involved in the process, and I found that, again, very dismaying because these folks have paid a lot of money in taxes and generated a lot of business for us for a long time, and they were not part of the equation. And now some have left because of that, because they felt there was no certainty in their future, because they were told none. And that was something that, like I said, dismayed me greatly, because we were going to replace them, but we didn't take their input on any of this. So hopefully in the future. Let me clarify that. I think part of the plan, that's still a part of the plan, called for us to look at replacement retail space, not replacement of the retailers. We were looking at a need to create new retail space with frontage on Main Street. You know, one of the complaints that they have, which is legitimate, is that on a non-event day, there's no real reason for anybody to be inside the Rupp Complex. So they don't get any street traffic. They get only the traffic that comes inside. And in talking to a couple of the retailers, we asked them if street front retail would be more attractive to them than simply being inside. And so that is part of the current plan is to look at the potential of replacing the same amount of retail that we have there now with main street frontage retail. I understand it, and I think that's different from what I'm saying, though. I just felt like in the process when we were going forth with the Rupp plan, they were involved in the process, and I found that very disheartening. You are correct. Thank you. Thank you, Council Member Stinnett. Thank you, Chair. So, Frank, on those same lines, do we lose tenants down there right now? I'm not aware. No, there are no tenants that I'm aware of that there may be, but I don't deal directly with the tenants. That's basically the LCC staff. But if we have, I'm not aware of it, but we may. You may have more information than I do. And what date are you giving them now at this point? I haven't given them a date yet because what we're doing is I've asked Hunt Construction. I will add parenthetically at no cost to give us if we were to look at, as the mayor said, the right project at the right time, what would be the earliest that we would be doing anything, and they're currently recalibrating the schedule of the project. Okay. So as soon as we have that, then I'm planning to sit down with them in small groups and say, here's the best information we have at this point, and so nothing will happen until X. On the numbers here that we have before, so there's no cash left? There's no money we've drawn down? There's no cash left in the account. There's still $600,000 out there potentially committed but not asked for. Okay. Okay. And then when is your agreement with Lexington, correct? Not with the city? Yes, not with Lexington. And how long does that agreement last? December of 15th. 15th. Okay. I thought you said 14 earlier, but 2015, right? And it was initially a three-year contract. Okay. Thank you. Thank you, Chair. Thank you. Council Member Henson? Thank you, Chair. I just wanted to verify that since July 14th, the date on this expense and revenue report, there have been no other expenses other than your contract, which is being paid for by the Lexington Center. That is correct. And the $600,000 most likely will not be requested. There's no plan at this point to request it, no. Thank you. Let me say parenthetically, if something were to happen and a decision was made for the project to move ahead at some point, then I think there would be a basis to come back and ask for it, but there are no plans at this point. But most all of these expenses were like a one-time? These were all one-time expenses except for me. And so we would have everything set in place if we chose to move forward in the future? Yes, ma'am. Thank you. Council Member Ford. Thank you, Mr. Chair. Thank you, Frank. So the question is, there's $600,000 remaining in the planning design phase of the project. We have not closed out the grant. We're just at this time. We've zeroed out all of our expenses and draws for reimbursements to date. And the reason I raise that is because back in April, and I'm looking at my file here, back in April, the administration requested for us, and we approved an extension in the period of performance with that grant through June 2016. So as we stand here now, we have an open grant project. We have an extension, hopefully, that the state has extended through June 2016. And we're just at zero right now. Is that correct? Correct. Since the issue that I raised of concern pertaining to the request to extend the period of performance pertained to the $2.5 million matching grant in the last hours of the General Assembly. It was House Bill 301, which called for Lexington to repay the $2.5 million prior to April of 15. which is this coming spring. My understanding, and please confirm if I understood the news reports correct, Governor Beshear line item vetoed that provision that required Lexington to repay that money by April 15. Is that correct? To the best of my knowledge, yes. There's probably somebody here that can more accurately, Jamie or Bill. Thank you, Frank. That was a question I had, too. Is that $2.5 million on our commitment to the state? Yes, I have a copy of the veto message from line item veto from the mayor. He did remove that due date, and so there is not an April 15 due date for payback. Right now, it's sitting at $2.17 million that we've drawn from the state. Well, let me say veto. Who do you say? Veto, mayor, or governor? Governor. If I said mayor, I apologize. It's signed by Stephen Beshear. He's our governor. Right. Okay. Mr. Chair, what I would ask for is at the appropriate time, if we can be shared that letter of that veto letter from the governor. I'll get it to you today. That would be great. Our understanding is to review is that the planning phase, and Frank, stay close because I really want to get a handle of the planning phase of the project in earnest going forward to the true development. We've suspended the planning phase, which is roughly done. That's the schematic design phase is complete. It's done, and we haven't moved forward to the construction or development phase. Realizing that not all plans proceed to development, and particularly not right away, Help me understand our agreement on the planning phase, and this is what caused my concern back in April. The planning phase, the budget was projected at $5.5 million, and I think these numbers are close. 2.5 from the state, 2.5 from the city, and roughly half a million from LCC. Is that about correct? And I think also Convention's Visibility Bureau put in money, too. Yeah, and tourism, that's exactly correct. But at question was, and we've put up our 2.5, we authorized that as a council, and that's an expenditure we planned for. The question that I raised, and what brings into light the veto and the last-minute General Assembly action, is that we were being required to go above the 2.5 we committed to and budgeted, and we were told we had to repay back even the state portion of that. and the governor, thankfully, line item vetoed that date. The question, though, is my understanding, and we have the Commissioner of Finance and our law department here, can the action of the governor be interpreted to mean that he simply line item the requirement that it be repaid by April 15th, but not necessarily the requirement that we have to repay? Hey, let me ask that question first, Mr. Chair, and then I have a follow-up on that. I think it might be clearer when we provide the entire statement to you. It looks like his intent was that it would be repaid at a certain point in time, but not a date certain. And I think the intent of the governor, by reading through his statement, was the idea would be if and when this project goes forward, you all would pay us back the $2.5 million. My understanding is the part of this was driven by the coal tax issue. That's where the money originally came from. My understanding is the state has paid itself back on that end. So the coal tax fund has been repaid. Okay. So I believe the way this would work is, you know, the governor says there's a promise to repay this when the project goes forward. when the project goes forward, we would roll $2.5 into the cost of the project and pay the state back. What if the project doesn't go forward? Well, I think that that would probably require potentially an additional action by the state, or we would be obligated to repay it at that point in time. Thank you, David. But, David, when is that time specific? I don't think there is one right now. That's the whole issue. You know, right now I think the intent would be when we do this project, we give them $2.5 million. Arguably, in order to make us repay it at this point in time, there might have to be another action taken by the state. But you can argue about that point. Well, thankfully, we have one of our representatives here from the state who might be able to answer this. I don't know. I know she wanted to speak, so we'll let her come to the microphone. Welcome, State Representative Kelly Flood. Thank you so much for your time and for this moment to come forward, and I appreciate your question. I believe that you've gotten accurate information all the way around, that the governor's intent was to make sure that the city not be in any position to immediately pay back on this project's being put on pause, as I would put it. This is to allow for time for all sides to discern what's the smartest way to move forward for everyone who's a stakeholder. So I think that we are very safe in saying that the spirit of the law was not to penalize the city, but in a sense to honor that there had been an assumption of moving forward on a project that now was in question. So that's how we hold ourselves accountable to the people's money. That said, I did make a call to the local government contact that we have with the governor's administration, Mr. Wilder, and he assured me that, to date, the city is in very good stead, that we have, in fact, paid our portion. The governor's decision, line item decision, gave us great flexibility. Options are available for how we choose to move forward. And that, as far as the city and state were in concern, there were no pressing issues that needed to be managed right now. So that I think we still have some time on our side. Should state action be required down the way, I'm happy to help navigate those conversations and in relationship with my colleagues for the Bluegrass region. Thank you. Any questions you have of me? Any questions? I don't think I have any question for you, Representative Flood, but I do have a question for how we got to this point that we owe the $2.5 million. because I don't think the council ever agreed to do that. And we agreed to the first 2.5, and the state was going to match that 2.5, but now it seems that we owe the whole balance, and that's where I think the council is kind of wondering how that came about because we have never made that agreement. The agreement for your process I will leave in capable hands for here. Exactly. I will say this, though. in terms of most accurate information, I do believe that the coal severance originally coming, the line for Rupp's schematics coming from coal severance was something that was a real contentious issue and was resolved legislatively in this way. And then it also, I went and saw that the The Speaker and others made sure to pay back the coal severance. So we have paid that back, and now that puts some pressure off of the system, allows us to figure out if the city needs to be repaying this, and if so, how we go about doing that. Thank you. Thank you. Oh, and one piece of accurate information. I did learn that, remember when there was a gap of about $90,000 in the last fiscal years, the state was winding up, that the governor did in fact close through a number of steps, one of which was to, quote-unquote, sweep up some revenue dollars not yet spent. And 312 of the $600,000, your $300,000 plus, our state's $300,000 plus, is currently not- You said $90,000. I thought you meant $90 million, didn't you? Forgive me. I sure did. Okay. Thank you so much. Correct. We're just missing some decimal points today. Yes, thank you so much. In the work to close that gap, that was one of the pots that was swept up. I think the statement was made, again, accurately, that that commitment is still there. but I wanted you to know that currently the dollars are not for now. But again, I did not anticipate that that was an issue at this point in time. Thank you. Thank you so much for coming down. Do we have any? I think Council Member Stenet might. Do you have a question? I do. I just actually have a comment, and I appreciate you being here, Representative Flood. And I know you know as well as we do, being part of a legislative branch, you like to be involved in the process. And I would ask that going forward, this council is made more part of the process, especially from the state end. I know, Mr. Butler, this is to you, too. We want to be part of the process, and I don't feel, and maybe my colleagues may not share this, but I don't feel we were beforehand, and now we're left having to pick up the pieces financially, possibly on that 2.5. So whatever you can do, I know you appreciate that balance, but help us stay part of the process so that as we move forward, this can be a joint project and a project that benefits all of us, and we all have input. I appreciate you saying that directly, and will assure you that from my end, you will be completely informed and we will be in conversation in the days ahead. Thank you. And I hope your colleagues at the state level share the same. I believe they do. I believe they do. Thank you, Chair. Thank you. Thank you. And then I have that question still pending about the $2.5 million that that was the coal severance, I think that the governor had committed. And then somehow we then became liable for that 2.5 that was vetoed this time, but how did we become that obligator? Hi, everybody. I'll take a first stab at that. But I guess I go back to my civics lesson, and federal trumps state, and state trumps local, and local is what's the feet on the ground. And so one legislature allocated money. Another legislature changed that allocation. Now, there's a lot of layers to that as to which bucket it was coming from in the state's budget. It had a whole lot to do with that conversation. And I would just go with the accurate statement that it's 2.17, not 2.5. I appreciate the civics lesson. It's the best I have. But I guess my question is, I thought we came with an agreement that we were both going to be two participants in this process, and we were going to do 2.5 and the state was going to do 2.5. I don't disagree with you. In 2013, that was the agreement. At the close of the session in 2014, it changed. That's my reason. I think the chief of staff might have some comments. Thank you, Commissioner. Well, I think what you said, partners, that's important because we asked the state for a $65 million contribution in the beginning of the legislative session, and that's a significant contribution to the project. The $2.5 million originally, when we made that commitment to reduce the amount from the 65, would have come from, excuse me, the $2.5 would have come from the 65. Now it's a repayment option. It's what we're talking about today. Not sure that that's accurate exactly. I think the governor's veto gave us options. I think we have the option of whether if the project moves forward, we could reduce that 2.1 from whatever amount the state gives us at some point. Or there are other financing options that we could roll it into the cost of the project and it would become an LCC expense at some point. But to the point of, you know, how the commitment was made to the state government, it became an issue that was volatile, that was giving leadership some trouble supporting the project, and I believe that we felt that it was worth the commitment to keep the project moving forward to say that the coal severance money would be repaid. That said, you know, that's the mayor's position, and like all budgets, he proposes budgets, and the council either approves them or not. So if the council didn't agree, we would have to find an alternative plan. But it's clear that the coal severance dollars have to be paid back in some form or fashion, whether from the local government or at the local level. Okay. Thank you. Council Member Ford, did you have a question? Yes, sir. Thank you, Mr. Chair. I want to first acknowledge and thank Representative Flood for being here and for being definitely our voice down in Frankfort. I do want to acknowledge what Jamie just mentioned. As it relates to the coal severance tax, I can understand, I think all of us on this council can understand how the representatives in those areas impacted areas that rely on that funding source so very much would have had contention with that being the source. I want to just, if I may, Mr. Chair, recite a paragraph in my letter to council. I know I have my file, you guys don't, of that April letter that I sent you guys. And this is basically what it boils down to on a 2.5. In my words, I say, secondly, it has been disclosed that the funding source of the state's matching grant or loan was the coal severance tax. This detail was not disclosed to Council prior to our action to approve the $2.5 million in matching local dollars. I think it's easy to assume that we all agree that these limited state funds should be dedicated to its legislatively intended purpose for reinvestment in coal impacted geographic areas throughout the Commonwealth. There is no contention there on my part. And I'm almost certain that that's the part of the council, that cold severance dollars should have went to cold severance areas. My background in grants says that a grant is a grant, particularly when you have an agreement. And the law department, if you guys can help us here, we have an agreement with the state. if the project goes forward, and it seems that the administration, the mayor and administration, made the pledge to state officials to repay the 2.5 under the assumption that the project goes forward, understanding that the only way the project goes forward is if we have great level of support financially and otherwise from our state government. My only concern as we sit here today is what if the project does not go forward? Would it then still be required and assumed that we have to pay back monies for a grant agreement that we entered into in good faith and we comply with all the conditions? Again, we did not know that the monies were cold severance dollars. We did not know that. And the real question is the question would be at this point, and I guess I will lean Jamie and ask for guidance from the administration. What is the position of the administration if the project does not go forward and whether or not Lexington has to or Lexington should repay back that $2.5 million? I can understand in negotiating and in deal-making and advocating for the project, and I'm not going to say it was convenient, but I can understand the mayor attesting and committing to the legislators that we'll repay the 2.5. But I hope that the position of the administration is that if the project does not go forward, that the letter of the law via the grant agreement that we signed should uphold and we should not be punished to have to pay the 2.5. Because at the end of the day, a planning agreement is a planning agreement, and we've done the planning, Frank. You and your team have done the planning, even if the project does not go forward. First, I would say I'd have to go back and look at dates, but I do believe that originally the governor proposed the $2.5 million. It was actually north of $2.5 million when he proposed it, but we landed on $2.5. After he proposed, I believe it was either a general obligation bond to pay for this or some other economic development fund. But in the end, the legislature changed it and it ended up in coal severance money. So when that agreement came to you, we would not have had the knowledge that it was going to be coal severance either. As to whether or not the project moved forward in your legal question, I think it's too early to answer that question. I think there, you know, as Frank has talked about, there are many unknowns today about where the project might go and the shape that might take I think we would have to cross that bridge when we came to it I know that's not the answer you were hoping for but that's the that's the honest answer at this point Thank You Jamie thank you mr. chair thank you councilmember Beard thank you chair actually this is a commissioner omara's question for him if he and i i'm attempting to dig back in my my mind over time did we not receive coal severance tax money in maybe every year prior to this year I know we have a mineral tax, which is primarily the question. Council member, I would have to research to answer that question properly. We get map funds, we get coal severance, I think we get mineral severance, which go to a specific fund. So I think the answer is yes every year, and we can get with budgeting and make sure that that's a correct answer. And nobody's called us up and said, hey, King's X, send it back east. I believe the purpose of the coal severance money that we get on an annual basis is called coal impact county money. So that would be for counties that coal is transported through and things of that nature. And it's a small amount of money, though. I mean, in the grand scheme of things, it's probably around $100,000 or less. Oh, I know it's smaller. I understand that, but it's a principle type of thing, and it has been a line item called coal severance tax in our accounting system for some time. But no, to answer your question, though, I don't believe anyone has called asking for that money. I didn't think so. Thank you. Thank you, Chair. Council Member Mazzani. Thank you, Chair. I guess I just want to put my two cents in. I just have a concern that the mayor committed to repayment of this $2.1 million without council approval. And that's the rub I have with the whole deal. So that's my. Any further questions? I do have somebody in the audience that signed up. Mark Fallon. And if you could give your name and your address. And you have three minutes. I'll try to do it in one. Is that better yet? My name is Mark Fallon. I'm from 2583 Observatory Avenue in Cincinnati. Please don't let the Cincinnati address scare you a little bit. Most recently, I've been in charge of the redevelopment of the Lexington Green Project and also managing partner owner of Victorian Square. So we have a lot committed in it, and specifically this block that we're talking about here, too. We're putting about $15 million into the redo of Lexington Square, and hopefully you guys are pleased with what you see that we're doing. And I just wanted to sit there and say one of the other projects that we worked on back in Cincinnati was I was in charge of leasing for the banks. And you might know about our banks project, too. And so I would just remember when you're going through this, Cincinnati went through a lot of the same situation. There's a lot of us who are stakeholders who are spending our own real money on this downtown, on this project, and on the future of what we can see it as. We're very excited about what's going to happen, hopefully, with Rupp and with the convention center. We have just about all of the space in what we're renaming the square downtown leased already. In fact, today as we speak, there's a three-level retailer that's signing a lease that I'm supposed to be at, so let's hope that they're signing it. but I wanted to come down and speak to you guys and let you know that one way or the other, we're really excited about getting through this. We think that, as proven in other projects, Rupp and a better convention center can continue to help all boats rise. I think the connection of the square and continuing down Short Street and everything else that's planned on the other side of Rupp, including the theater and all, you'll find will be an amazing growth period for that. So I just want to encourage you, as someone who's putting in a lot of money into your city, please keep fighting the good fight because that's one of the reasons why we're bringing in so many businesses who are looking to go forward here so that's it thank you thank you for coming anybody else who'd like to speak on this topic seeing none we will move forward thank you all for being here thank you representative for being here the next item is the aoc courthouse reimbursement policy that was brought forward from the general government link. I think we have Commissioner Reed is here. I think he can start off for us. I think my issue might be a little simpler. Yes, sir. I wanted to bring to your all's attention an issue that's been developing over a period of time involving the state's reimbursement to Lexington for the use of the new courthouse. This issue came up in April and I brought it to the LINCS committee's attention during the budget process that we might be getting reimbursed at a lesser level for our expenses associated with the state's operation, our operation of the state court system. This in no way is a criticism of what the state's doing or what the Administrative Office of the Courts is doing policy-wise. I think it's important to bring this to your attention, and I may have to revisit this issue with you as we go forward, but I wanted to bring you all in and appreciate the opportunity on the front end of this discussion that we're having with the state about what level of financial support we receive from them for the operation of the new courthouses, the district and the circuit court buildings right across the street. With no intention of a history lesson, I do think it's important, even for those aware of the history, to kind of understand where we've been and where we've gotten to at this point. In 1976, a judicial article was passed in a constitutional amendment, which basically changed how our courts operate. In 1978, the district court system was created, a state court system which took the place of county-run courts, police courts, juvenile courts. And as a result, the state legislature and the Supreme Court determined it was important to reimburse the counties for their expense associated with operating the new court system. a facilities fund was set up. And basically what that facilities fund did and this reimbursement program was, as you go through a year and provide operating money, janitorial expenses, utility expenses, for the operation of your courthouse, the state reimburses you for the portion of the building that is occupied by the state courts. that system has worked very well over time. It has been a very generous interpretation that the state has made as to what they reimburse the counties, and there were several reasons for that. A lot of counties weren't really excited about the judicial article, about losing control of the county court system, about the loss of fees that were coming to the state. So it's been a generous program that's gone on for the last 30 years. I'm aware of how generous it was because I helped administer it for about 12 years. And we helped a lot of counties and provided a lot of counties with money to help their operations. But I think those days are in the process of changing. And as a result of those days changing, we're going to have to make decisions on our level as to how we're going to operate and the choices we're going to make going forward. And I think this is the first step. I'm going to talk just about one facet of what the state does as far as helping and reimbursing counties for their expenses. And that deals just with the operation cost and maintenance cost associated with the courthouses. To operate and manage the courthouses, we use Meridian Management Company. We chose not to use our own employees several years ago. We felt it was more economical to contract, put out for competitive bids a contract, These folks provide services, and the costs included are listed up there. Cost included, the services that Meridian provides includes custodial materials and repair and maintenance, and small repairs under $5,000. And again, historically, the courts through the facilities fund, the administrative office of the courts, the administrative arm of the Supreme Court, reimburses our government based upon 93.5% of the actual operating expenses. Those actual operating expenses, the 93.5% represents the state's use of the courthouse. The sheriff occupies the other 6.5% of the courthouse, and those costs are borne by the county by statute. Each year, an audit is performed by the AOC. They go through what we've done, what we've expended, and there's reconciliations that occur. The past few years, they've been very small, slight in favor of the state. In April, we received notification from the Administrative Office of the Courts that basically they were going to cap the rate that we could receive for reimbursement of expenses at $4 a square foot. And that was a ceiling that the Administrative Office of the Courts determined was appropriate for what should be paid for maintenance, utilities, small repairs. We'd never had a ceiling before. This came up in April, and we are now in the process of determining what adjustments have to be made to accommodate that ceiling. I've included the statute that we've been operating under, and I initially didn't understand how a $4 ceiling could be interpreted that you could implement that, but I quickly caught myself because it's a very bad idea to attempt to interpret the law to the administrative arm of the Supreme Court. You're very rarely going to get a favorable decision. They're rarely going to decide, well, yeah, you make a lot of sense. I'm familiar with dealing with justices of the Supreme Court as well. The AOC recommendation of this $4 a square foot impacts 20 counties. In other words, 20 counties, including Fayette, in fiscal year 2013 operated higher than the $4 a square foot. Total impact on all the state courthouses would be about $864,000. Here's a listing in very small print of the counties that would be impacted by this new $4 ceiling if you assume 2013 is your base. They include, obviously, Fayette, who's at one of the higher dollar figures, because we're one of the largest courthouses. But we also have Woodford, Jesmond. I can't see, and so I can't recall, but there's a couple of others, Anderson, in central Kentucky, that are impacted as a result of this new $4 a square foot ceiling. Our facilities here in Lexington occupy 221,000 square feet of total space. In 2013, which is the last year that's been audited and agreed to, our total cost was $1,030,000. $93.5% of that is what we get reimbursed for because that's what the state occupies, was $963,000 of that total cost. You put the $4 cap in and do the same calculation, you come up with the maximum we would receive would be $828,000, $827,963, or $135,000 less than what we received under the old system. So what are we going to do? So far we have corresponded with AOC since April on several occasions discussing this. Jumping and hollering doesn't seem to be effective. I've asked the question, how does the $4 a square foot, how did that number, how has that number arrived at? I've discussed the issue with our local chief circuit and district judge. I had an excellent conversation yesterday with Sheriff Witt, who occupies 6.5% of the building. We have asked for guidance from the administrative office of the courts as to how they want us to live with this. What we're basically paying right now is $4.66 a square foot. So we have to get down to that $4 level. So we're going to have to make changes. We have corresponded back with AOC. There's also side issues going on regarding the parking garage. I think there's some long-term maintenance issues that have to be discussed. But right now my immediate concern is how do we cope with getting into that $4 a square foot cap for maintenance and operating. The AOC has given us a meeting date in early September that John Sheet and Ricky will be going to where AOC is supposed to provide us some guidance as to where they think we can cut our current contract with Meridian, still provide the same quality of services, and get down to that level. I'm anxious to hear their input. I appreciate their willingness to work with us. What do we do next? Well, we have that meeting, and we continue to communicate with you all, potentially with the legislature, and start making those adjustments in how we meet this new $4 a square foot maximum that's been placed upon us. I think I'll be back visiting with you in the future about several issues associated with the operation and the long-term maintenance of the two new facilities. But I'm sure you'll be hearing about this issue in the short run. And again, thank you for letting me bring this up. Thank you. I have a couple of council members who have questions. Council Member Lane. Welcome to property management. Oh, yes. Glad to be here. The first question I had, the $4.66 a square foot, does that include utilities and janitorial services and some type of routine maintenance? Routine maintenance. Yes, sir. How long has it been since you competitively bid for the property management, for the maintenance portion? It's been two or three years ago. Two years ago we made this. It was a five-year agreement that can be tweaked as we go. Do you feel that your accounting information you have on the operation of the building is real accurate? Does somebody else do it, or does the Irvin County government maintain the numbers on that? Both AOC maintains it from their end and their audit. We also maintain it on our end and here locally. All right. What is the amount that is currently charged for janitorial service for the building per square foot? Do you have a number on that? I have a number, John Shug. For our building maintenance. The numbers we got, they're not separating the janitorial and maintenance. It's a blended rate is what we've got. and as a matter of fact, the whole contract is on a lump sum basis for a list of activities and services that's spelled out in the contract. All right. Okay. Well, I mean, that may be one of your options is to bid those items separately and maybe open it up for competitive bidding. Does our contract with the state allow them to set the rate? How can they just request the rate change? the reimbursement rate, the $4 a square foot? Yes, sir. I think that's an issue that deserves the attention of the legislature. Again, it is extremely unwise to say that the Supreme Court is wrong on something or the administrative arm, and they very well may have that authority. I don't know why it wasn't $4.25 or $3.75. I'd like to know where the $4 came from. And it's something that we can get to and achieve, but the argument and the issue is what impact does it have on services? And, you know, you can argue about what's in, what's out, what's included in cost, what you've done in the past. It makes no difference. It's what's going forward and what we're going to have to do to get to that level. You're cleaning. People are in there every day. Yes, sir. So you could maybe go to three days a week or be another option. There are several options. It is a contract that our local judges and clerks have been extremely pleased with, extremely pleased with the level of service. And we've never been confronted with the need to do it cheaper. So it's quite possible that we can continue a high level of service and do it at the reduced price. Okay. Well, you know, I don't think it's really fair to ask the local government to, being in Lexington, to subsidize the maintenance of the building. so it seems like we've got to come up with a plan where we can maybe reduce our costs maybe reduce the level of service and maybe that be a compromise that everybody would be happy with well good luck on that thanks for bringing that to our attention today yes sir thank you vice mayor gordon thank you mr chair thank you commissioner how many square feet does the sheriff occupy do you know not exactly it's a lot what would you guess 20 is it six percent of 12 12 in the neighborhood of 14 000 okay And are we mandated to give them free space? We're mandated to give them free space somewhere. There is a logic to giving them space in the courthouse because they provide security in the courthouse. They watch the courthouse after hours. They, again, provide security for the judges, for the clerks, for the building. That's totally in their purview. So their presence in the courthouse is a benefit to the community. So they can't be required to pay their portion of the fee? Okay. All right. Well, I'll look forward to your next steps. Thank you. Thank you, Mr. Chair. Thank you. Council Member Henson. Thank you, Chair. Jeff, do we know what the average rate is for the services we offer? what the industry rate is, I guess. What would we be paying here for square foot? A lot of factors go into it, regional factors, availability of the services, and so forth. We feel like what we've got here in mid-fours is pretty much in line with what's being promoted. Now, our list that we utilize to spell out exactly the extent of the services and how often is based on BOMA and IFMA standards. We are in the process of examining what the AOC actually is recommending to make a comparison to see, be willing to bet that we probably providing a higher level of services on day-to-day basis than what they consider to be standards. So that might be an area we might see some opportunities for reduction in cost. Okay. And once we get those recommendations from the administrative office of the courts, I think it's important we meet with the judges and clerks here and the sheriff, get their suggestions of what they think can be done to contain cost, what they can live with, and what they can't. And between the three entities, reach some agreement as to how we go forward. So we're required to offer or to perform the maintenance and the custodial work on the courthouses, correct? Yes. And then they're going to set the rate of what they're going to pay, and it's not like we are a contract company and we could just say we're not going to do it for that, right? Right. That's my concern, and you've hit right on the issue. For the first time since the creation of this fund, these type of parameters are being placed upon the counties. and I think moving forward we have to keep that in mind and the possibility that those parameters can be tightened, they can be loosened, but the impact of how you deal with it or whether you spend local money falls totally to the county and that is a new task that has to be undertaken. Thank you. Thank you. Council Member Clark. Thank you, Chair. Jeff, I'm not a member of this committee, but since it came from the budget link, I'm familiar with it. And I guess I'm wondering, there are 20 counties that are in some jeopardy here, but that means there are 100 counties that are not. And so I guess I'm wondering how those 100 counties have been able to deal with this prior to this announcement and not have that problem. And I think maybe Council Member Henson's question may touch to that. But it seems like to me if 100 counties have been doing that already, why these 20 counties are having problems. And I think our meeting with AOC, we can determine that. I think there's a lot of issues that go into that. I think the location of the courthouses, you know, obviously it's cheaper probably in some more rural areas to get labor, et cetera, than it is in an urban area. But we are more expensive than Kenton County. That was the example that was given. Our services may be at a higher level. I'm not concerned about getting to the $4 a square foot. What I am concerned about is I've been told to get to $4 a square foot, and how do we go about dealing with this going forward and the expenses associated with the operation of the courthouse. Remember, we've been audited annually. Our expenses, we were told, were in order. So this is a policy change. It's not that we've been doing something wrong. Yes, I understand that. That's good. Thank you very much. Thank you, Chair. Thank you. Council Member Akers. Thank you, Chair. Thanks, Jeff. So what other offices besides the sheriff are located in the courthouse? The only ones I know of are the district court, the circuit court, the circuit and district clerk's offices, and the sheriff's office. Okay, so the county judge is not located there. Okay. And so our sheriff's department provides free security for judges in exchange for the free rent? Is that sort of, I mean. One of their statutory responsibilities is to provide bailiffs for the court and provide security for the courts from which they are reimbursed an amount from the state. They also are providing security for the building as a whole. They operate the metal detectors and do services associated with the internal security of the building. They also monitor the building after hours and keep the building secure when it's closed. Now, the sheriff has a lot of other statutory responsibilities, serving orders, things like that. But those are the ones specific to the function of the courthouse itself. And as far as court costs go that the AOC generally sets to fund itself, basically, do local governments have any jurisdiction to... Increase fees, decrease fees. Yes, charge a fee to make up our 66 cents on the dollar. Yes. In 2001, statutes were passed that would enable us to increase some of the court costs and filing fees to offset and deal with some of these major maintenance costs and other costs. Local government has chosen here not to go in that direction because things were functioning well. We were getting good reimbursement rates from the county, from the state, and they chose to absorb whatever cost might come up that the state wasn't covered through local dollars. but the option does exist to increase fees, set up an account, and have a set-aside account for major maintenance costs associated with new courthouses. Okay, I guess that's one option. And then you mentioned, like, Kenton County not being on this list, and I noticed Jefferson County and Louisville are also not on this list of 20 counties. And do you know why their costs are below the $4? No, again, I'm going to find out. I think in Jefferson County you could have a situation because the jail is contained underneath the court operation that there's costs that get blended in between the county and state. Some counties have chosen to use their own employees to provide maintenance. Some have chosen a hybrid of their employees plus a limited contract. I think there are costs associated long-term with using your own employees that wouldn't be included in this square foot calculation. There's 100 variables that we can argue about, but what we've got to be focused on is getting this down to $4 a square foot. Okay. Thank you very much. Thank you, Chair. Thank you. I guess just to reiterate what you said earlier, what's the time frame on this to get back with us? I need to be back with you in November and talk to you about what has gone on as far as our meetings, what steps, not only our meetings with AOC, but our meetings with the judges and clerks and sheriff, what steps we propose to take, and I will do that prior to any implementation of any changes. Okay. We do have a further question. Council Member Beard. Thank you, Chair. Commissioner? These 20, are they all exactly $4? No. No, there's Rock Castle's the highest. It's like $7.69. They all vary in what they are getting as far as reimbursement per square foot. We're probably within those 20 toward the bottom at our 4.66. That could be included in that chart, and I'd be happy to get that to you, as what other counties are getting per square foot. Well, I've seen the Leslie County facility, and I can't imagine it being anything near what, I would think, $3 in Leslie County, and everybody would be happy to get it. To tell you the truth, somebody will come here and shoot me by saying that, It is what it is. Again, there is a history with this fund. This fund was set up in part as a result of the new court system taking the fees and the operation of local courts out of their hands. And it was a reimbursement to those counties for lost revenue as well as the operation of the system in some ways. It's unspoken, but it's true. Well, I've got you here. what is the story with the fountains at this point? I saw the non-traditional fountain, I guess is what you would call it, and they were working on it a few days ago. We are examining those, see if there is a short-term fix. Long-term, you provided money for assessing what a long-term fix would cost and take, and we're in the process of starting that. There are electrical issues with those fountains. A lot of the jets are in disrepair. I know they are on that one near Main Street. And we are in the process of evaluating that, and then we will proceed with a fix. Okay, and that has absolutely nothing to do with the courthouses per se. The square itself is totally our responsibility. I figured that was the case. Okay, thank you very much. Thank you, sir. Thank you, and thank you, Commissioner. I think that leads us to the last item on the agenda, which is items referred to committee. Mr. Schoeniger, could you go through there and see if there's some items that we could make a motion to remove? You could make a motion to remove all of them. I've got a few. Okay. We'll go ahead with the Vice Mayor, and then we can go back to Mr. Schoeniger. If you want, do you go through and see where they stand? Thank you, Mr. Chair. So I believe there are two items I have in here that could be taken out. One is the affordable housing report, which we've discussed quite a bit. We have a motion. Second. And a second by Council Member Farmer to remove. Any discussion? All those in favor say aye. Aye. All those opposed, we will remove that one. And then the other one is the, and Mr. Clark isn't on the committee, but I think we've got the pilot for the Downtown Arts Center going, and I don't think now this exchange for the reduce, eliminate LexArts financial support in exchange for allowing DAC to keep the program revenue is something we can take out. I have so moved. We have a motion. As second by Council Member Massadi, any discussion? All those in favor say aye. Aye. All those opposed? We will remove that. And then the other one, Mr. Stenet has left, but I don't know that we need the Rupp Arena district expenditures in here since we've got a closed out report. Move to remove. We have a motion. Second. Any second? Council Member Farmer, any discussion? Council Member Siding? What do they decide to reignite the process? They'll bring it back. Somebody will put it back. Okay. Okay. Yes, we'll try. Any further discussion? All those in favor, say aye. Aye. All those opposed, we'll remove that one. Thank you. And now, Mr. Schoeniger, if you want to go from the top to bottom, see if there's any others that we can. I'd be happy to, Council Member. The first item, the solid waste tech structure, really relates to the Waste Management Task Force that I believe is... We got close at one point. It's not suspended. How do I... What's the word? I think they're waiting on some additional information, but I don't want to speak for our Council Member. Vice Mayor? Well, I'm on that task force, and we have not met for months and months, and it was my understanding that we were going to be brought something in time for setting the tax rates, and it never came. So I'm not sure where this is. Okay. Well, in the interim between the next meeting, we'll have Mr. Schoeninger talk to, I think, Council Member Stinnett has, I think he chairs that, and we'll find out where that is. Okay. Mr. Schoeniger? The next two really relate, as I recall, relate to the procurement task force, which has finished its work, the local vendor preference that the vice mayor put in and the minority women business recruitment effort that Council Member Stenet put in. And I'm going to let those folks speak for... I know Mr. Slayton came and reported out that last time, and he said if he had anything further to do, then he would come back to us. So I think we probably can take these out. So do I have a motion to remove those two? Move to remove. And we have a motion and a second. Any discussion? All those in favor say aye. Aye. All those opposed, we'll move those two. Councilman Lane is here. He probably better speak to the activity-based costing and the financial efficiency issue that he's had in here. Councilman Lane? It's definitely an issue that hasn't gone away. Whether we want to leave it on there or not, I don't know. Thank you. Well, we heard a report on that, and what will we hear in the future on it? Councilmember Lang? Well, we do have a new CIO, and we may have some upgrades in our software. This may become a more up-to-date issue in the near future. Okay, in the interim-tween meetings, if we could meet Mr. Schonegger and see what we have for discussions on that one. Thank you. The next item is the financial implications of the mayor's homeless commission. Some people might argue that this has already been really implemented. I don't want to make that assumption. We have a couple of people that chimed in. Mr. Farmer, is it on this issue? I was going to make a motion to remove it because I think we've dealt with it in all capacities personally, so I would move to remove. Second. And we have a second. Any discussion? All those in favor say aye. Aye. All those opposed, we will remove that one. Thank you. Council Member of the Senate might want to discuss this next on the refunding of the urban services property tax. And there were really two issues, I believe, Council Member. One, I think the administration made a commitment not to issue refunds because of the way they would provide the service in the future. And then it also related to whether we could stick to the schedule of streetlight installation. But I'm going to let you address this item. Yeah, I'll make a motion to remove it for now. We have a motion sent by Vice Mayor Gorton. Any discussion? All those in favor say aye. Aye. All those opposed? We will remove that one. Let's keep it up. The Economic Development Partners agencies, I don't know if anybody really paid attention, but at the last Economic Development Committee of the Whole meeting, the new partner agency reporting system, and I think that's what Council Member Scotchfield was interested in, was introduced into the committee. We didn't get time to hear that because of the other discussion about the other items. but it can stay in it. It can come out. It can be talked about in that committee, you know, whatever your all's pleasure is. Well, I guess in the interim, we can talk to Council Member Scutchfield and then we can figure out if we would need to remove this one and be in that other committee. The wellness center and lease that was put in by Council Member Stenet, there was a discussion about this and I believe the council agreed to renew the lease for one year or six months or one year. I think it was. But this needs to stay in committee because they did RSP for proposals. We'll keep this in committee. The AOC reimbursement policy you just heard, and it'll come back in a couple months. The last three are from the facilities and fleet professional, or the last three are from the general services link, and Council Member Lane or Vice Member Gordon might want to speak to these, but the facilities and fleet professional service increase, This is related to an increase in professional services in facilities and fleet. I've also talked to Commissioner about this item. And this item in the Lyric and Charles Young maintenance budgets, they're willing or able to come back in the next couple months about these two items, probably one at a time. I don't know if. Let's schedule these in the next two months in these two. in the not quaint yeah and then i want to go back to the first one councilmember stendon we talked about the solid waste and where we stand on that on the task force i know there is something there was an issue that came up and where do we stand on that we're going to reconvene here shortly the task force now we have a new director and a new commissioner okay sounds good uh i think that takes care of all the items in committee do i have a motion to adjourn And a second. Second. All those in favor, aye. Aye. All those opposed, we stand adjourned. Thank you.