I walk around heavy-hearted and sad. We can commence to get ready to start the final meeting of the year of the Budget and Finance Committee. If you're ready to go, Mrs. Cole, maybe you can present your report. And we'll go with item number one after the rest. Terry. Thanks. What I've handed out to you is a draft of our November revenue. Because you all are meeting so much earlier in the month for this meeting, we haven't closed November yet. So there's still, especially on the expenditure side, there's still some work to do. But I did want to go ahead and give you a heads up on the revenue. We also have copies of the October report coming to you, which I think you didn't get because the last budget finance meeting I wasn't on the agenda and we didn't do an October report. But for November, I guess many of you may have seen the article this weekend about the October revenue. And actually, I said when I was speaking to Michelle Koo about that, that November could be very confusing for us. And it is very confusing on a positive note. We are up in employee withholdings, net profits, and insurance. The report you have in front of you shows us down in franchise fees, but we have discovered that there was a timing. A couple big checks came in on December 1 and 2 that were postmarked the 30th, and had they gotten here on time, would have been November 30th. So actually, if you add those checks in, we're ahead in franchise fees also for November. Now, that said, I don't think this means by any form or fashion that we are out of the woods. We've been waiting for some of the timing differences to work themselves out because some of the three payroll issues that we talked about in prior months. But we also have been examining some national indicators against some of our revenue to kind of see where we fall out. And there are some fairly clear indications that we do follow the national indicators. we lag a bit and our declines or flattenings are not nearly as severe as you see in the national numbers. So right now through November you would have to say that we're not in a decline. I don't know what December brings and I wish I had a crystal ball. I wish I could say to you, you know, this is all going to be just fine, but we don't know yet where the bottom is at the national level, and so we don't know how severe things are really going to get there, and therefore we can't even begin to think about what it's going to be for us. Now, what we know, regardless of what happens in 2009, is that we have a problem going into 2010 that is going to be very difficult for us. We've said that before, but I have to tell you, I think in the last couple budgets we've put together, the council and the mayor, we've picked a lot of low-hanging fruit, and there's not much more fruit on that tree to pick. We're down in the number of employees across government. In the 08 budget, we cut back by 10%. We have asked division directors to cut another annualized 5% beginning right now. So we are doing everything we can to manage our way through 2009, and I think we're going to be able to do that. But anything that we can come up with in 2009 softens a bit what we might have to deal with in 2010. In 2010, we're going to be looking at increased contributions to CERS and to CERS hazardous for our employees. We're going to have some added debt service because we will have sold the 2007, 2008, and 2009 bonds that have already been approved by council. So that will be new debt service in 2010. all of that with the police and fire contracts and the corrections contracts. We're looking at an $18 million to $20 million hole, and that assumes that we haven't done anything yet with the police and fire retirement fund, which, as you know, is a huge issue for us. I think you may have already received the message that the mayor put together on that. We are proposing a solution to that problem, but anything we do is going to affect us in 2010. So with that, I guess I'll just ask if there are any questions. What you have before you are the charts, the revenue charts that we've given you before. I think they're a little helpful to kind of see where we stack up against prior years. Not quite sure how much more detail you want. I have a lot more information if you'd like to get into it. Well, it's encouraging to have a little uptick, it looks like. Absolutely. At least it's sustained with our budget predictions. They may not be as bleak. They haven't been as bleak yet as the storm clouds you described for 10. Right. But you said you had a handout for October? Yes, the October ones are here. Maybe we can take a look at that and discuss it while we're on this topic. Right. Well, what you will see in October is not positive, which is why we're a little hesitant about what's happened in November is because in December, if you look at December, I mean in October, October 08 compared to October 07, we're down about 9%. So now that's in all revenue, and all you have before you for November is the big four. So we're not comparing apples to apples here. All we have for you for November right now is the big four, and that's because we keep it in a different way than we keep the rest of the revenue. So you're saying that the October revenue report showed this to be down 9.2 percent? Yes, sir. I guess I read about that in the paper, too. Yes, and I apologize that you didn't get that report. You should have had it before it hit the paper. Well, Michelle usually keeps everything pretty accurate, so. Michelle and I have worked very well together over the last week or so. We've spent a lot of time together talking about these things. But I don't understand if we were 9% down. It looked like we were 15% down with withholding insurance fees and franchises. But now we're, with your November report, we're back on schedule. Okay. We are, but let's remember one of the things that we had talked about really since July is that October is a three-pay period month, And we were expecting, especially in employee withholdings, for everything to kind of line up for us with the November withholdings because of the three October pay periods. So that was a timing difference that we were expecting. There were three pay periods in July of 07, three pay periods in October of 07. So it was November before we really are getting a year-to-date that is apples-to-apples in employee withholdings. So you say because of timing, the October report wasn't a true reflection of our evidence. Yeah, and I think that's what we would have said had, and I mean, I began saying that in September, but had I given an October report, it would have been that we had to be really cautious We're cautious because we had that three-pay period month coming up. Okay. Are there questions regarding these? Mr. Ellinger, I think, is first, and Mr. Beard. Thank you, Dr. Stevens. Yeah, I guess I want to first start out saying I was a little disturbed and I'm curious why we didn't receive this, and I have to read about it in the newspaper. I guess that was really – Well, I apologize for that, but I will remind you, too, that I wasn't on the agenda for your November meeting. Well, I guess I would like to have been sent something because when you're a council person and you don't read something in the paper right away and you go out and somebody stops you on the street and says, what's going on here, and they know as much or more about it than you do, then it makes it difficult for us to do our job. I apologize. So I think if you're going to send the Herald leader something. I didn't send it. Let's make sure that we have all the information they're going to have, too, if you don't mind. I'd be happy to, but I need to make it clear that I didn't just send something to the Herald leader. The Herald leader requested the information, and I provided it. I'm sorry. Okay. I apologize. Thank you. And I guess now my question goes to we, I guess, have now been considered we're in a recession nationwide. We usually do lag nationwide. We see what's going on with the state where they've had economists come in and talk about what they're going to do. I guess I'd like to know what our contingencies are. I know you say that we're actually coming in at least November is better than we expected, and we're at least 09, look like I think you used the word that we can manage 09. That's right. What are we looking at, though, because I know the state's got some proposals out there. What are our proposals? I know I read an email from the mayor today on some contingencies, but what do we plan on doing that we can manage for 09 and then for 10? Because I think we have to be proactive here because we don't want to come in. And then December, January, where we come back off a break, and then we find out that it's coming in a lot worse because we are behind a little on the national lag. Because obviously when you look at today, so many, 16,000 jobs are being cut. So every day there's more and more, 533,000 national jobs last month. So obviously when we're based on the payroll tax, there's going to be some effect that's going to happen to Lexington. Where are we and how are we going to be prepared for that? And what do we as a council need to be doing to be prepared for that? How are retirees coming in? Because that was put into this budget. But where are we and what do we need to do to be prepared for this lag that's going to happen that is seeing, when you look at the automakers up there right now on Capitol Hill asking for money, we've got bailouts, what are we doing to make sure that we're going to be ready for when it does hit us? Well, first of all, I would say that we have been carefully reviewing new hires to government over the last, really, 18 months. and we're down about 190 positions across government, full-time positions since December 2006. So we have been very cautious about hiring. And on the personnel side, a freeze is in effect, other than those jobs that the mayor deems to be absolutely necessary. We have asked division directors to begin reducing their budgets by 5%. We're targeting some specific areas in the budget that we know if we need to, we can kind of slow down the spending. There's some money in the budget for debt service that's not going to be needed because of the timing of the sale of our bonds. So there are some mechanisms available to us, assuming just that the bottom doesn't fall out. Now, I can tell you we've looked at any number of different kinds of things, but when you don't know how severe it's going to be, all you can do is kind of talk about these things and be ready and know what the consequences are as you move forward. But in terms of specific things, I would say the freeze and the 5% reduction in operating. And I would remind you that for most divisions, that's on top of a 10% reduction that's already in the 08 budget. So that operating in some places has to be getting just very, very tough. I see in the state when I read about it that they've looked at potential what's going to happen on revenues that are going to be not, I think they said almost a half a billion dollars that are going to be shortfall. Do we know what ours are going to be? Can we calculate that? Have we done any of that to be prepared for that? I'm sorry. I don't understand your question. I think they had – Frankfurt has gone through, had economists looked at what the shortfall is going to be for this fiscal year. Have we done that to think, you know, at forecasting what we – I know we've got what came in November. We're kind of hoping that it's trending the same way. But have we been looking at the best-case scenario, middle-case scenario, and the worst-case scenario on what we need to do? And do we have – have we received anything about that? What our policy – that if we have to do some calculating and changing what's going to happen? I guess maybe I misunderstand the process, but yes, internally we have been looking at scenarios for months now. And I assumed that the process would be once we have made a firm calculation of what we think the revenue is going to be, if it's lower than is budgeted, we will be bringing that to you in the form of a budget amendment that would decrease revenue and decrease expenditures. So until we are to the point that we will absolutely say we're not going to make budget, we're going to be doing things internally like cutting back on operating and those kinds of things. So if I'm supposed to be doing something other than that. Well, I think you just see from the national trend, the state trend, it's going to hit us. How long down the cycle is it going to happen? And so I just want to make sure that we're not sitting here thinking, well, it's November, we're still doing well, so we don't have to worry about it. I want to make sure that we have plans in effect that if we have to do something that we're not going to be after the fact saying, well, boy, I wish we had planned on this because I didn't see it coming. Because we all are seeing it coming. Let's make sure we're ahead of the eight ball and behind it at the six months down the row. And I guess I'd like to know from as a council member where we are looking at. Because I read about it from the national level and from the state level. I'm just not seeing as much of it here in the local level, which I would like to know a little more. If we have percentages that we think that if it's not going to come in this, this, and this, this is what our contingencies are going to be for that. I can assure you we will be prepared. Now, I am not prepared to share with you details of everything that we've discussed because, as you know, in government, if somebody utters a word, it becomes gospel. And quite frankly, I don't think we're in a position yet to start assuming that certain things will happen when we don't know how far it's going to be off or when. So what we're looking at right now is trying to position ourselves to end 2009 with a comfortable cushion so that we can buffer a little bit of 2010. That's the plan right now. And some of those things that I just mentioned, the hiring freeze, the reduction in operating expenses, and the debt service that's been identified are those things that we will be pulling the trigger on. Okay. Thank you, Chair. Okay, Mr. Beard. Thank you, Mr. Chairman. A couple of things, Commissioner. This time last year, I guess, or maybe even before, we talked about retirees, anticipated retirees, and we're at a point now where we ought to know who those folks are and how many there are. So what is that? Yes, sir. We had budgeted for 170, and what we have reported to us as of last Friday was 107. Okay. And we have been providing those numbers to council staff. Some council staff. Let me clarify. Not all of council staff. You know, in national elections especially, the major networks take a pretty good guess at who the winner is and what states are going to be carried and that type of thing through exit polls and certain precincts that always perform according to one way or another consistently. Is there any way that we could do a similar thing? Maybe I should be asking Bill this because it's probably going to be Bill and Jim that are doing it. But anyway, where we can pick the ten top employers. and this question about the franchise fee, and do a pseudo pro forma of what it should look like, not what it does look like on a cash basis, but what it should look like. It's not a gospel thing, we understand, but it at least smooths out some of these dips and bubbles that we always, it seems like every other meeting we've got a dip or a bubble, and we're bouncing ourselves around and you're never in a good mood because you never know what to trust. Let me say, as happy as I am by where we are in November, I am incredibly frustrated. And I would expect you all to be frustrated. The mayor's frustrated. We don't, I mean, we just don't know. Now, we are staying in very close touch with some folks at UK who have been incredibly helpful in guiding us to the kinds of indicators that we ought to be looking at and that kind of thing. The problem is that much of the national information is delayed by a few months. Well, a few months, then something drastic could have already happened, and so we're struggling a little bit with timing. But I can assure you that Bill and his staff and Jim Deaton and Mary, the whole crew, I mean, we are meeting more than once a week to sit down and talk about what the possible scenarios could be and timing that we all are aware of, things that might be different. So we are weekly looking out for projections. I'm just trying to maybe slightly formalize that process a little bit more with some swag entries that could be made. and you can do it on the back of an envelope if you want to make it unofficial looking. But it just would make some of us feel maybe a little bit better about how you perceive that we're doing. One other thing which Council Member Ellinger mentioned, and I might point out, when we lag behind the rest of the country on a downturn, that doesn't mean we have to catch up with them at some point before we start up. We'll start up sooner, just like we started down later, and that's a big plus for our economy in central Kentucky, actually. So there was some good news today, whether the stock market reacts to it or not, but supposedly last month the foreclosures in the United States bottomed out, and they're starting to lessen, and that doesn't mean that there aren't still foreclosures, however. Right. Thank you very much. Thank you. Mr. Ed Lane. Thank you, Mr. Chairman. First thing I wanted to mention is I'm an advocate of monthly budgeting. And I know that we've been discussing this ongoing. I know you're working towards trying to do that next year. But if we did monthly budgeting of revenues as well as expenses, you know, we could make some estimates like when we have three payroll in one month versus two payrolls, and we'd be able to make some calculations about revenues. This would take some of the question marks out of the revenue fluctuation. Well, in fact, what's in front of you does have a monthly budget. I beg your pardon? No, no, but I understand, but I'm just saying for, we do our budget for the entire year, we would estimate revenues on a monthly basis and maybe adjust it for the number of pay cycles within each month. We've done that. Okay. We have done that. I know, but you haven't given me those numbers. It's on this report right here, budget. Well, I understand, but I'm talking about for the whole year. You know, you can continue month by month. Okay, I'm sorry. It would be helpful to see it on an annualized basis. Oh, okay. I'd be happy to give you that. We have that. You know, for our budgeting, and then we could put those into our annual plan. Sure. I just wanted to mention that. However, I wanted to say something positive about our economy, and I think we should feel very lucky. First off, I reviewed the employment levels in Fayette County for September of this year versus last year, and we're somewhere around 500 more people working in Fayette County versus, say, in Jefferson County, which has had a 4,800 job decline, if I recall these numbers accurately. So we are very fortunate that we have created more jobs. Also, we have the lowest unemployment rate in the state right now, which means people are working and they're paying their payroll taxes. The other thing that we have going is we have a lot of capital improvements being made in our general central Kentucky area. In just a few of them, the U.K. Med Center is $532 million investment. The pharmacy school is around $135 million. We're expanding the live animal diagnostic center up on Newtown Pike. I think that's about $20 million. Kentucky American Water Company is running their pipeline and building their plant. Some of that's outside of central Kentucky, our immediate area. That's $168 million investment. The center point is a $250 million development in downtown. The horse park is building two arenas, which I believe have a combined capital expenditure of around $60 million. And then there's been a number of roads that have been constructed in the last year or so. Plus, we're doing a lot of improvements around the horse park on the interstates, which is also bringing capital investment in. And then finally, we are working on our emergency operations center, which if that goes under construction next year, that will be something the urban county government is doing. All of those are creating jobs, and they're injecting money into our economy. So I think in a way we're sort of fortunate to have a lot of investment coming into our community. And the construction jobs that are being created, Dr. Karf was telling me that probably 700 jobs in construction were being created just by building a medical center. And so hopefully all these people are paying their payroll taxes in DeFayette County. And then the additional other good news is that the World Games will start running trials next year, and that will be bringing more visitors and people spending money in our community. And, of course, 2010 is not that far out. That will be $150 million maybe going into the local economy. So we should be thankful. We may not be having the increases in revenues that we want, but I think we're very lucky to be where we are today. Okay. And I think the next 24 months, although they're scary, I think we're in a lot better shape than most of the communities in our state. Now, having said all that, I would like to ask Mr. Romero a couple of questions if it would be okay. What I was hoping is that I've had a number of people contact me, and there's been some confusion about the $100 licensing fee. And I wonder just for the general public if you could just maybe cover that briefly so that anybody that is confused would understand, you know, that it's, you know, how it's structured and what the purpose is and how I think the most important thing is that you get a credit back when you send in your occupational tax end of the year for the $100 fee. But could you touch on that for a second, please? I'd be glad to. Thank you, Council Member. In June, an ordinance was passed to create what we're calling a minimum license fee, which is the net profit fee, which has been in effect since the 1950s, and it's been administered by paying after the fact. So when you file your federal return April 15th following the end of a calendar year, then you calculate and pay the net profit that is due. The change is a timing difference and a minimum. Effective this January, we're asking everyone to pay a minimum $100 at the beginning of the calendar year. So every January 1st, all businesses start off on an even keel. they're contributing a minimum $100 to the basic services of the government in the general fund. Then when you file for that calendar year taxes, which is the April 15th following the end, you have a non-refundable $100 credit against any net profit tax that you owe. So if your calculation comes out to be you owe $1,200 in local taxes, you've already paid $100. You subtract that, you pay the difference of $1,100. If your calculation is that you owe $95 in local taxes, you have paid the $100 minimum, and nothing else is owed. If you're working for a company and they're withholding, you don't need to file any reports whatsoever. This would only be for businesses or sole proprietorships, whether you're an LLC or corporation. That is correct. This is what we call the business tax. The withholding tax is unchanged, and it is being administered, as it always has been, the employer withholds from the employee's paycheck based on the first dollar. So whether you've made $1,000 or $100,000, the withholding of your .025 percent is withheld and remitted to us by your employer. If somebody has received an invoice and they're a little bit confused about it or have a question, is there a number that you could direct them to in the government so they could respond? Yes, they can call 258-3040, and also there is a link on our website under the Division of Revenue where you can e-mail us. We've received either one, or calling LexCall, and LexCall has frequently asked questions or can forward the call to us. Okay. Now I have just one more follow-up question regarding employment created in Fayette County. and the construction companies that are working on these many projects that are under construction here, they're required to pay payroll tax if they're working in Fayette County. Could you maybe just touch on that short, you know, in a brief way as to how we enforce that and how we collect the money on that? Sure. That's a service, and services are taxed where the service is performed. And so we actually go to the construction site and ask to get from the general contractor a list of the subcontractors. And we contact them and inform them if they are not already knowledgeable of the liability of the net profit tax for the job that they're performing in Fayette County. We have a good relationship with a lot of contractors. They know to do this anyway. They don't wait. But we do have two licensed fee inspectors now, and they actually go out in the field, visit construction sites, as well as high turnover and part-time locations, Christmas tree, Fourth of July, firework sales, those type of things. Also, we visit the malls for their itinerant, the people that come in just for certain seasons, and work with the different venues that have what we call itinerant activity and work with them to get them informed so that they will pay their license fee as well. Have you noticed a lot of new, I mean, are you all registering a lot of new people because of all the construction? Can you comment on the volume of new applications? We're averaging between 250 and 300 new business licenses per month, and that is partly because of incorporations in Fayette County but also because of construction. That's down from a year ago, but it's still hundreds per month that we have new businesses registered here in Lexington. Thank you very much. I appreciate all the input on that. Thanks to you, Bill, and to Mr. Lane. Mr. Don Blevins. Thank you, Chair. Bill, before you sit down, there's another one we ought to do publicly. This morning we spoke about the change to insurance reporting requirements. Would you just repeat your comments from this morning for the public, please? Sure. The question was, as far as everyone notices with their insurance premium from their insurance companies about their insurance premium, the state legislature passed an informational requirement in the past legislature that requires the insurance companies to notify all of their premium payers before the end of December of this year that there is a local premium tax in Kentucky, that it is on their bill, and that if the person feels that they are being assessed incorrectly, that they should contact the insurance company to investigate. The insurance premium tax has been on the books for, I think, since the 1950s. It's not a new tax. We have not raised the rate. What is different is that the insurance companies are now required to separate out on the bill the amount that is for the local insurance premium tax and notify the premium holder that it's on the bill. Beautiful. Thank you. Commissioner Coe, we can return. I want to make sure that I've heard you correctly today. What I think I heard in your discussions with Council Member Ellinger and Mr. Beard was that the administration feels like, given the current level of information we have in income and expense, we think we can manage our way through this fiscal year's budget. One of the steps you've taken to be proactive, just to make sure that that's the case, is that you're asking your division directors to go ahead and take another 5% off operating expenses for this fiscal year. That's right. Okay. If I also understood correctly, there are some known items that will be new to the budget next year, or increased at least, to the tune of, I believe, $43 million. Now that includes $25 million for the police and fire pension. Should that stay? I hear you. But even if that's gone, we're 20-something million dollars short. Right. We are roughly six months from that new fiscal year. At what point would you or the administration be ready to start taking proactive measures to help alleviate next year's problem, or are you there already? Well, I think we have on the operating side, I think we are being proactive right now. And in addition to the 5%, we also are identifying some additional reductions that we might be able to. And, for example, we are now requiring our divisions, other than police, fire, and corrections for their regular uniforms, to use the state price contract for uniforms. The state realized a savings of 35% when they moved to this contract from a contract that was similar to the one that we have right now. So we're hoping to be able to pick up some savings in uniforms by moving to the state price contract. And we have the folks in the Division of Purchasing reviewing lots of different areas like that of are there opportunities for us to not diminish the level of service that we give or diminish any level of benefit to the employee, but in the long run save some money. But I think the question was, I think what I'm hearing from you is when might we pull a bigger trigger. Is that? Yep, pretty much. We will have to make that decision when we have December numbers. So by the time you get back from break, we're going to have to make a decision about how aggressive we need to be in 2009. Okay, that's what I was looking for. All right, thank you. Thank you. How about the audit report for 2008? Oh, I'm sorry, I didn't see you there. Thank you, sir. I don't see how I could overlook you, but Mr. Stenet would like to say something. You know, obviously, I wish you were bringing us a different kind of Christmas gift, but I think it's important that we're talking about this today, And Councilman Blevins kind of drives home the fact that he's looking for the magic answer that we don't have yet. I hope that you all, when you look at this during December in terms of the administration, I know I mentioned this yesterday at our council retreat, but there can be no sacred cows in this next 2010 budget. Everything has got to be on the table because it's not just a one-department problem. It's not just a one-group problem. It's an everybody problem. and it's a national problem, but yet we have to, on a local level, understand that things are going to get tough the next 12 months. And I do appreciate what you're trying to do, and Mary and everyone on your team, because it's not going to be an easy task. I know when we come back from break we may be hit with some very difficult news to swallow, but I think, you know, I don't want to speak for all my colleagues, but I think all of us going forward are going to have to make some tough decisions, and we're willing to do so. But I just want to say that because I don't envy what you have to do the next 30 days. And I know we all support doing the right thing. But I certainly hope the administration looks at every stone, every organization, everybody we're giving money to, and is able to make a fair assessment of what needs to be reduced going into 2010. Thanks. Thank you. Thank you. And I would add, too, that I'll be happy to forego any salary next year. how about the audit for 2008 i'm going to turn that over to mary i think mary tackett the director of our division of account mr fister i'm sorry actually i'm one of those women that hyphenate so i'm actually fister hyphen tucker so that's what causes the confusion i apologize for that does everybody have a copy of the um 2008 caffra another there's i don't believe anybody that wasn't there this morning has come councilman beard do you have a okay this is the christmas gift that we brought to council today um we have before you the um I knew I was going to do that. The comprehensive annual report for the fiscal year ended June 30, 2008. And the comprehensive annual report is really just a detailed and thorough presentation of all our activity for the year and our fund balances where they ended up for the year. We're real excited. And if you notice on page 10, we received the Certificate of Excellence Reporting in 2007. And this is the 14th consecutive year that we've received this Certificate of Excellence Reporting. It's really the highest honor a government can receive for doing the extra steps to produce a comprehensive annual report that gives the citizens and the council and management all the relevant information by which to make decisions by. So we're real pleased with that. But as you all know and are well aware, we had some challenges in 2007 with relation to the implementation of our new computer module. So that's, I think, what really makes that award so special and more special than it has been in previous years. I wanted to talk just briefly about the CAFR and what it is and what it contains. There's three main sections to the CAFR, the first of which is the introductory section. It contains two letters of transmittal, one from the mayor and one from Commissioner Cole. It also has with it the organizational structures and a council map for the viewers at home. um this document will be available on the website for those of you at home um sometime later this week so we have not officially issued the report we just wanted to get it to you guys before you went on break um but it the content will not change at all the only thing that may change is spacing and you know things like that um the second section is the financial section. And the financial section begins with the statement from our external auditors on page 13. And I just wanted to point out a couple of things in the report from them. First, with which they conduct their audit in accordance with generally accepted accounting standards that are accepted federally for the entire United States. And they're governed by the Office of the Comptroller for the United States government. And we were successful in receiving what we consider a clean opinion. And basically that means that the auditors, after assessing our internal controls and all the ending balances, felt that this financial statement represents fairly fairly the financial condition in all material aspects of our government. The audit, just to give you some information as far as the timing and how it worked this year, as you know, we did not issue the June statement for 2007 until June 5th of 2008 because of all the challenges we had. So the audit work for the 08 audit began as soon as the 07 CAFR was coming off the presses. So they began their prelim work in the month of June, and during that time they're actually assessing our internal controls. They're going around to all the different divisions. They hit different areas, different years to kind of assess, you know, do we have our controls in place to prevent any material misstatement or fraud. So they conduct that preliminary work. Generally, it takes about two weeks for them to do that, a little longer this year because we had some new auditing standards that required a more detailed review of the internal controls. controls. And then we proceed after June 30th in closing the books. We were actually able to close the books this year, and I credit it to the staff in the accounting division and to PeopleSoft. We were actually able to close on August 19th of this year, which I believe is as early as it's been done since back in the 80s. So we're really excited about that. And the auditors actually began what they call their field work on August 18th as well, or 19th. So the auditors spent about four weeks with us during the ending part of August, the first part of September, where they actually went through transaction-based testing and balance-based testing from a balance sheet perspective to make sure that everything that we have reported in this document is fair and that they could reconcile the numbers. The field work actually finished right around September 19th, and so the auditors left for a period. And between the middle of September and the first part of November, we actually created the schedules, wrote the footnotes, the management discussion and analysis, and all the different pieces of the CAFR. So, you know, it takes a little over a month and a half to actually come up with these 160-some-odd pages. And at that same time, we're actually waiting to receive financial statements from all the entities that we consider a component unit of our government. We have nine different companies or entities that we actually report as part of the Lexington Fayette Urban County government. And they're the Lexington Center Corporation, the Airport Board, the Department of Health, LexTran, the Library, the Convention and Visitors Bureau, Explorium, Downtown Development Corporation, and the Parking Authority of Lexington. So we have to wait to get the financial statements from all but three of those entities, because we actually do the accounting for three of those companies. So we have to wait to get the financial statements from the other six entities, and then we roll that into our financial statements and produce this report that we're presenting to you today. So, again, within the financial section, after the audit report, you'll find the management discussion and analysis. this is where we attempt in layman's terms to tell you what happened. If you don't have time to do anything else, I highly recommend that this be the first thing you read. And for viewers at home, if you want to know what's going on with the city government, reading the management discussion analysis gives you that information. Also contained in the financial section are the government-wide financial statements, which begin on page 32 and go through page 35. And then you have the governmental fund statements, the proprietary fund statements, fiduciary fund statements, and then you come to the footnotes section. The footnote section, in my opinion, would be probably the second most important part to read, if you have more time. The footnotes go into great detail on what makes up the numbers and the supporting information regarding the different sections of each one of the financial statements. And then we also have, after the footnotes, all the required supplemental information that's required by the Governmental Accounting Standards Board. The last section of the CAFR is the statistical section, which contains primarily trend data. It also contains some non-financial data. So, you know, earlier it came up about the top ten employers. That's presented there. And so we do actively track, you know, the non-financial things in the CAFR that you can see from a historical perspective what, you know, what has changed. I know that most of you were in the session this morning where we went over the balance sheets, but I did want to just take a brief second to go over some of the key highlights. If you turn to page 36, you'll notice that in the other governmental funds column, if you compare the ending fund balance this year to last year, we actually had a decline or deterioration of the other governmental fund balance by 16, almost $17 million. dollars. This decline was primarily due to capital projects that we have undertaking during 2007-2008 that we haven't yet bonded. So if you can think of it in terms of if you wrote a check for your house and didn't go get your mortgage for another year, you know, that's basically what we've done. So So the net assets or the net fund balance of the other governmental funds have declined because we haven't issued bonds yet. If we had issued bonds as of June 30th, we actually would have seen over a $3 million increase in that fund balance overall, because we have actually spent over $19 million on projects that we have not bonded yet. The other thing that I wanted to point out, and if you can, on that same page, look at the very first column under the governmental funds. And you'll notice that our fund balance for the governmental funds in total is $24.4 million. That includes $5.2 million that we have outstanding for purchase orders as of year end. And it also includes the economic contingency. The economic contingency grew during FY08 and is now at a level of $13.2 million. That $13.2 million will actually increase again in 2009 because if you look right below that, you'll see that there's an undesignated fund balance of $4.6 million. Part of the ordinance related to the economic contingency provides for us setting aside 25% of that undesignated fund balance after capital carry forwards and after what we utilized in the 2009 budget to go into the economic contingency fund. So I know the number that's real important to you guys is, you know, what's available for spending. Of that $4.6 million, about $3.1 million will be available to soften the blow of what we're looking at in 2010. But as we, you know, discussed earlier, that's not going to be near enough to cover what we're projecting as a deficit. So if you look at the total, the $24.4 million, that actually declined $18 million from prior year. um if you look on um page 42 um the third line from the bottom where well actually before the the reconciliation you'll see a line called net change in fund balance and if you recall Through the original budget and all the budget amendments that came before the council during FY08 and after the end of FY08 when you approved the funding of the Internal Service Fund, we actually had an amended budget of a loss of $22.4 million. So we actually exceeded our budgeted fund balance projection by $3.7 million. So we were to the good. I just want to point out to you that part of that $18 million decline is due to us funding the internal service funds. And so $12.9 million came out of the general fund and went into the urban service fund to cover expenses, claims that we know we've incurred or we project that we have incurred but that have not been reported to us yet. So it's really a presentation, you know, from a presentation perspective, $12.9 million was not truly a loss to the government. It just went from one, well, it was a loss to the government. It went from one fund to another fund because in prior years we actually had a deficit balance in the internal service fund balance. just as some budget highlights as far as I said that we came out more positive than we thought from budget and most of that was driven by an increase in revenues and just to highlight where that increase was we did see an increase of about $400,000 on the real estate property taxes in the general fund We saw a growth in our detention center-related fees, both from the detention center and from the district court jail fees. Both of those were up, and those two items together accounted for almost $2 million of the swing. The EMS revenues are up, and if you recall, we actually increased our EMS fees so that we could be in line with the allowable charge for Medicaid and Medicare. And so that was up about a half million dollars. And I wanted to point out, too, near the end of page 40, that penalties and interest was up almost $500,000. And I think that can be largely attributable to Bill O'Meara's department and to the council's foresight of adding those positions to the revenue department. Because it's paying off. You can see that we actually exceeded revenue by almost, you know, half a million dollars. just from the positions that were added. So it's money well spent. Mrs. Pfister? Yes. I do have a suggestion. Yes. And that is that it's hard for people to follow you because they don't have the copies of them with you. And this is the most important financial document, I think, the government produces every year. And my suggestion would be to give everyone a chance to read this over and study it and put it on the docket for next month so that we can thorough discussion of it at that time. Okay. That sounds good. Is there any questions before we do that? Yes, Mr. Lane. I was just wondering, are we going to be able to post this on the Internet so that the taxpayer will be able to go look at it? Yes. She said by Friday. Yeah, by Friday. All of our CAFERS are out on the Internet, and this will be as well. Okay. Thank you. I would urge the council members to take a good look at this because this is a very important document. Some of us did get a brief look at it earlier, but there's very important information on every page. And I congratulate you all on winning the award again this year. And even more, I congratulate you on getting the auditors to work in the third week of August. That is a record. Thank you. We appreciate that very much. Thank you. Did you have anything else you wanted to close with? No, that's it. I'll be back to you in January. And actually in January we're hopeful that we'll be bringing the first six months of 2009 in a balance sheet type format. Good. Well, we'll have tidings of great joy maybe next time. Great. Thank you. Thank you. How about the format for the 2010 budget? Actually, I had hoped to have something prepared to share with you today, But I think we're going to probably want to look at a different format this year in that we will probably not be asking our divisions to prepare requests for expansion, new and expanded, because it's very likely that we're going to be reducing everywhere. Of course, we will make a provision for things that absolutely positively have to happen. but over the holidays I'll work on some format issues and bring those back to you in January to see if you'll be okay with changes that we might make in the way we present the information to you. Okay, thank you. Are there questions about the format for 2010? Hearing none, we thank you very much for your thorough report today. The first thing on the agenda today is the equine task force recommendations for committee consideration. The last budget and finance committee, we went over the report of the equine task force, and there are many things that could and need to be done in regarding our signature industry. I've looked over the list. There are things that need to be done with the state, with the Thoroughbred Owners and Breeders Association, with Keenum. with Central Kentucky Legislative Caucus, with the Convention and Visitors Bureau, the Law Department, and, of course, PDR. And all these are very important, and I am uncomfortable leaving this hanging in the air. And what I would suggest that the committee consider, and Mr. Southers and I have talked about this, he and I would be glad to put on our shoes and go call on all these various elements that need to be contacted and bring and prepare for the next Budget and Finance Committee some specific recommendations that we, as a government, can do. Of course, some of the things are not part of us. The only thing on here I think that's urgent is the Central Kentucky Caucus. And I think if we want to make a plea in the legislature for removing the sales tax inequities for equine, we need to do that now. And so I would, if it suits the committee, Mr. Southers and I will do this work the rest of this month and have it ready for you in the new year, except for the Central Kentucky Caucus. and I would like to have an expression of what the committee thinks we ought to do about that. Mrs. Gorton. Thank you very much, Dr. Stevens. I think that's a wonderful idea. I would just like to advocate. I would hope that by the time the folks get here in 656 days, 14 hours and 2 minutes and 5 seconds, is that what that clock says? For the games, that we would be branded. I think the branding can't wait either because it's going to take a while to get the branding in place. and so I hope your recommendations will look at how we can brand ourselves with the Blue Horse through wayfinding signs, through parks, through bus shelters, however we can get that little guy up there to help brand us. I think that's going to take a little bit of time to do, so I'll look forward to your... Well, I would agree, and I think that one of the... Mr. Lord wasn't here at our last meeting, and he was going to present a report, but he got called away to Frankfurt. So one of the first stops we'll make was at the Lexington Convention Visitors Bureau to check on the branding and also what we can do to augment tourism as far as the equine is concerned. Mr. Gray? Can I ask a question, Doc? Can you go over that one more time for us, what you're planning to do to move the ball forward, just that process that you described? You said you and Jerry were going to go to the various constituencies, is that? Yes, to these various elements, like, for example, to create the Economic Development Office to advocate the interest of horse industry. That would be a governor's prerogative to do that. And I would suggest that he and I will go over to Frankfurt and visit with the governor's staff to see exactly what that status might be. We don't want to make this exclusionary. And if anybody wants to go with us, we're more than happy to have them just do the field work to see where it stands. And I'll bring it back, and I don't know who's going to be on the budget committee next time or who's going to be. I know who the vice mayor is going to be, and I'll be happy to consult with him. Okay. So this can carry forward. Yeah, well, we all appreciate your taking the initiative on this. particularly in the illusion of retirement that you're creating. I propose this will be done before Santa Claus gets here. My goodness, that's great. Okay, thank you, sir. Any other questions? How about the tax inequities? Do we think we want to recommend to the Council that we put that on our legislative agenda for Fayette County and the Central Kentucky Caucus? Yes. If so, I think a motion would be in order, and I can take that to the committee. Yes. Mrs. Garten moves that. We take to the Central Kentucky Caucus the issue of sales tax inequities for horse farm owners. Okay. Okay. The motion has been made and seconded that we consider a change of classification for horses to livestock so that the sales tax inequities can be alleviated. Mr. Blevins. I wonder if you would accept a friendly amendment to also send this to our own legislative liaison, Mr. Sheehy. Gosh, I totally blanked Mr. Ned Sheehy, so that our own efforts will be in line with the caucus. Yes. Any further discussion? All those in favor signify by saying aye. Aye. Opposed, like sign. It's passed, and I'll bring that to the council this afternoon so they can also weigh in on that. Thank you. Mr. Van Pelt, did you have anything you wanted to say about your shop today? I was just going to make one brief comment and state that, based on the comments that were made during our presentation last week, that we've gone along with what Commissioner Coe was discussing about trimming our budget, And we were creative going into this budget year, and we reduced our budget by 8.9%. We've also trimmed 5% out of the operating, and we can be creative as necessary because we want to play along with everyone else in reducing our expenses. And we feel like we just want to have the ability to reach out and match the federal matching funds that are available in the future. That's it. So we'll move forward with this, and I thank you very much for your support of Jerry and I and your confidence in us. The next is the reporter of the internal audit and the director of the internal audit, Bruce Salley. Thank you, Dr. Stevens. It is my pleasure to come before the Budget and Finance Committee basically on a quarterly basis and report out on a couple of internal audits that have been recently completed. Before I get into that, and I know that time is important here and I will be brief with my comment, but there is one other item that I wanted to mention that is not actually in your packet. I have the distinct pleasure of serving with two council members on my internal audit board, Councilmember Stevens and Councilmember Myers, who is not here today. In particular, today, Dr. Stevens, I would like to state my appreciation, sir, for your service on the Internal Audit Board. You have served on the Internal Audit Board for four and a half years. During that time, you have displayed a complete and full dedication to the Internal Audit function that we try to provide here. You've been a source of consistently good counsel, and institutional knowledge has been of great value to the internal audit function. I greatly appreciate the support you have given both to me and to the entire audit staff. And I want you to know, sir, it has been a genuine pleasure working with you, and I thank you for your service on the Internal Audit Board. Well, thank you very much, Mr. Salley. I have enjoyed serving at your direction on the Internal Audit Board. And, of course, the fact that the chairman lives next door to me and makes sure I make it to all the meetings makes a big difference, too. But thank you very much. I appreciate it. You're quite welcome, sir. In your packet today, there are a couple of summaries of internal audits that were recently completed. I want to also point out in the internal audit process just a couple of important points. It is important to understand that internal controls are the responsibility of management, and each individual department and division has the basic responsibility for establishing, maintaining, and periodically reviewing its own internal control system. The objectives of the Office of Internal Audit are to assist members of the urban county government in their effective discharge of their responsibilities by furnishing them with analysis, recommendation, counsel, and information concerning the activities reviewed and by promoting effective internal control at a reasonable cost. And the second thing that I would just want to emphasize to the Council and also to the viewing public, it should be noted that findings are a common result of an audit, and they do not in and of themselves indicate carelessness or negligence on the part of management. Deficiencies identified during an audit can be the result of many factors, some of which are only partly controllable by management. And in addition, internal audit reports are designed to draw attention to opportunities for improvement, and therefore they do not address the areas of satisfactory performance that may be noted during an audit, and therefore Council is encouraged to maintain a balanced perspective regarding the nature and extent of internal audit findings. In the summary of audit results, first in your packet you will see an audit of the Division of Engineering Project Management. This audit was completed October 8, 2008. The general control objectives of that audit were to determine that project information was sufficient to allow for efficient and effective project management. Projects were properly managed to ensure timely completion. Project costs were clearly identified in the PeopleSoft system and could be tracked and reported for cost allocation purposes. Change orders were properly documented and their necessity clearly defined, and change order cost was effectively managed. The bullets you see next in your handout are as follows. As taken as a whole, the capital project information was significantly disconnected, and it did not lend itself to good overall project organization or evaluation. A centralized database is needed to capture all capital project financial information, change order activity, payments to vendors, and to monitor the budget status of those projects. This database also needs to track anticipated completion dates, major project delays, and actual versus projected project costs. It should also include features to identify possible trends of intentional low bidding, establish a history of change order activity among divisions, contractors, and types of projects, and provide a history of contractor performance standards that can be used to evaluate future contractor selection. Another item that we noted was that there was insufficient project coordination and communication between divisions that are involved in a given capital project, and there was no clear assignment of overall project responsibility for managing those projects. The overall authority and responsibility for capital project coordination and management should be assigned to a specific division or group in order to increase project accountability and improve the effectiveness of capital project management. Universal project numbering convention should be established in order to assign unique identifiers to each capital project. Identifiers should be assigned to all related contracts, change orders, and financial transactions so that activity related to a specific project can be matched to that project throughout its life cycle, regardless of the type of document, transaction, or the input source, as, for example, the various divisions from which the input source is coming. Detailed tracking of change order activity was lacking and needs to be incorporated into the recommended project management database, and change orders that increase project costs should be reviewed and approved by the Division of Purchasing prior to their being submitted to the Council. Management's responses to the findings indicated appropriate action would be taken to correct the deficiencies identified. The management and staff are very courteous and cooperative throughout the course of the audit. In the next page of your handout are the finding summaries for an audit of the Haley Pike landfill collection process, which was completed in September of 2008. Those control objectives were to determine that controls over cash and cash receipts were sufficient in functioning properly. Cash receipts were accurately deposited on a timely basis. Physical security procedures were in place and being followed. Written cash handling policies and procedures were current and were being adhered to. and landfill usage rates were consistent with any related ordinance and appropriate charges being accurately assessed. The findings that we noted during that audit, landfill employees responsible for generating weigh tickets and collecting their related cash payments had the ability to add and or edit transaction data in the autoscale system. There was no process in place to ensure that daily online reports per autoscale agreed with the related weigh tickets. A daily report totaling all daily transactions by cash and charge transactions was needed. This report should be reconciled by management personnel to their away tickets and agreed on a daily basis to the deposit report. One employee division of revenue created accounts for charge customers who would be using the landfill on a recurring basis. This employee also sent out the monthly billing to customers. They addressed customer billing issues, and they received charge customer payments, thereby creating a segregation of dues issue. A monthly report of landfill customer charge accounts complete with aging and write-off activities should be provided to the Director of Revenue. The landfill did not have a written procedure regarding the service of non-cash customers, deposit preparation, cash handling, or safeguarding of cash. And the auto-scale transaction backup procedures were limited to a monthly download sent to the Department of Revenue, and if possible, transaction data should be backed up at least weekly to improve data security and recovery controls. Managers' responses to this audit also indicated that appropriate action will be taken to correct the deficiencies identified, and the management and staff were very courteous and cooperative throughout the course of the audit. And with that, I would be willing to answer any questions you may have about the audits presented here today. Okay. Are there any questions? Mrs. Gordon. Thank you, Dr. Stevens. Bruce, thank you very much. I respect your work a lot, and I don't really want to say a lot right now, but in particular on the engineering audit, my question would be at the bottom, I think there are some serious things that you've reported back in your audit, And I'm wondering if how specific the management's responses are for corrective action. I believe a few weeks ago I sent the report out to Council. Did you have a chance to look at that? Management's responses. Yes, we had management's responses in it. Was there any particular item about the responses you had a concern about? Some of this, I mean, will there be reorganization? Will there be new people? Will there be reassignments of job duties to fulfill coordination, communication, make disconnection, connection, those sorts of things? When I came before the committee, I think it was two months ago, I talked about the tracking matrix that I have. And I think to answer your question, I will be revisiting these particular points in a matter of a very few months with senior management, with division management, to determine exactly what kind of processes have been placed to address that. Okay, that was going to be my next question, is when would you revisit? because I remember your spreadsheet of what you'd revisited and what actions had been taken, so that'll be in a couple months. In these particular responses, there was not a specific time frame given. Typically what I look for there is I would give them no more than six months before I would go back and revisit. I certainly have no issue with going back before then. I agree with you. There were some significant issues identified here. And if nothing else, perhaps February or so, that would give them about a four-month period. Well, I'm not an auditor, but I would think that going back before six months might be a good idea. As you recall, this came from the Stormwater Oversight Committee, this recommendation to audit. And it was because of some very specific situations. I think this is actually an audit that we completed. We're in the process of completing before stormwater. Well, I remember the first one, so this isn't connected. No, it is not. We are actually in the process of doing the field work now for the stormwater-related concerns that you have now. Okay, well thank you for clarifying that. I personally would like to see you go back before six months. All right. That's just my opinion. This project here was what we were looking at in this particular audit was to look at the process for project planning, monitoring, documentation, cost management, and project time management. Now, the field work that we are now doing that relates to your concern is going to be looking, let me look at my notes here and make sure I speak correctly to this. We're going to be looking at the engineering steps really that relate to what is in their council-approved manual. Right, the engineering manual. Documenting site visits for documenting their follow-up on problems that are discovered during site visits, looking at how they are dealing with citizens' complaints and that sort of nature. So the next audit we're now doing from a fieldwork perspective deals less with project cost management, if you will, and more in terms of a field management perspective, if that clarifies. It seems to me there is a connection, though. There is. The Division of Engineering, of course, as you well know, I mean, their process is a very large and complicated one. And so this project, you have to kind of slice these things up so that the project, the audit project, does not become really too much to get into one scope. So this one was looking more in terms of how they document things like delays in project, project cost, evaluation of contractor performance, and things of that nature. This next one is going to be looking at, as I say, how they deal with, if you will, issues on the ground, so to speak. Well, I appreciate you doing both of them and reporting back. And this is always good information for council members to have. So thanks a lot. Thank you. Commissioner Webb, did you want to address something right now, or did you want to feel Mr. Blevins' question first? Which I think will deal with engineering also. I just wanted to fill in some gaps about what's been done as far as tracking projects. Could you step to the microphone just a little closer? Thanks. I'm sorry. We're currently, Kevin Wente is serving as a point person with finance, setting up interviews for folks that track grant, bond, capital projects, in engineering, traffic engineering, planning. They're currently setting up those interviews to collect all the data they can to try to build that into PeopleSoft so they can develop a system that will work for everybody. However, we expect that once we find out what PeopleSoft will track for us, that there may be a need for an additional database. But we need to get through that step first. But those interviews are just starting right now. Just wanted to let you know that was going on. Thank you, Commissioner. Mr. Blevins. I wanted to follow up on Council Member Gordon. In fact, she weighed right in where I wanted to go. The audit that we're discussing today about capital projects was separately started some months ago or maybe even a year. The other one that we're interested in that she mentioned was the one initiated out of the Stormwater Oversight Committee meeting. Do you have any feel for when we might see that audit completed? I actually asked my staff auditor about that this morning, and let me see his response here. He sent me an email if I can find it here. He's pulling samples of both active and inactive projects for review. uh he's going to be focusing on on how how that inspection process matches up with their own council approved uh procedure manual he said to me and this is just an estimate uh field work time frame should be the first middle of january for completion and uh so after that is done then i have to review his work papers We work on the draft to clear up any items I feel that maybe, from looking at the draft report, are not clarified or fully addressed. So hopefully, hopefully, maybe early February. All right. Thank you, Des. It's a large and I will tell you complicated project. They have nice thick manuals that we're trying to wade through and look at what are the pertinent items that we need to test against. Right. I am not surprised it's a complicated audit. So thank you. I just want to see where we stood on that and make sure that we are talking about two different audits here. Yes, sir. All right. Thank you. Mr. Gray. Thank you, Mr. Chairman. Bill, can you – you may have said this, and I missed it. If I did, I apologize. But how did you go about benchmarking or determining what sort of, well, determining what benchmarks were for best of class or whatever? I mean, this is basically a management competencies audit, it seems like to me. I mean, yeah. You're talking about the one that I'm speaking of today. Not the one in progress? Division of Engineering Project Management. Okay. What we, if you look in terms of some of the recommendations, particularly with regard, say, to the database, some of the information that we mention in here that needs to be included, these these are items that from an internal control perspective you need to be able to identify for your overall project management some of them relate to cost some of them relate to project timelines some of them relate to well for example looking at possible trends of low bidding now we didn't see any examples of that but those are the kind of things that you want to be able to identify Okay. The reason that I'm, you know, forgive me on this, but since this is a business that I'm in in a day job, I'm very sensitive about this. And for two years since I've been on the council, I've been talking about these issues. And Jay McCord, Council Member McCord, introduced me to what he considered to be these issues from his tenure on the council, which he described it shorthand as a problem with throughput, getting jobs through the system. And I have been, frankly, reluctant to be as forthcoming on the concerns that I've had about this for a long time. But after two years, I am sure that one of the core skill sets and one of the core competencies that this government must have is project management, because that's what we do a lot of. and what I have observed is that those skill sets are not here in abundance for sure in a way that you would expect them to be and that we really aren't making any progress on it. Now, it looks like to me that the things that you've examined are technical dimensions of project management. Do you have the proper cash management protocols in place? Do you have scheduling technologies in place? It looks like to me that those are the things that you've examined. I'm not so sure, though, that we are getting at the core problem, which is the competency of closure and management on projects. and it's all across the universe. Okay. And I'm going to simply illustrate this as an example, not to be punitive, because I was trying to be helpful. When the friends of Raven Run came to me in exasperation and they said, please give us some help here. We're not getting anywhere with the new visitor center, what's it called? Raven Run. That we, right. And Michelle and Jerry have worked hard on that project, and I am not using this platform to complain about that. What I have said after I got someone from our company to assist and to help was that these are not, Joe, you know what I've talked about, these are not day-to-day competencies of people who are doing jobs in parks. when we expect them to do these activities, then we are expecting perhaps too much. But these are management issues. And if the Department of Engineering is responsible for project management and is not able to get that done, then the question is, what are we doing about it? And Council Member Blevins has said, Mike, that you've been successful in introducing some new accountability protocols perhaps. And if you could share that with us, I think that would be useful. But I don't know that we're getting to the substance and the essence of the problem by examining whether or not we've got the proper purchasing protocols, which frankly, looking at Rave and Run, we had purchasing protocols in overdose on steroids. It took for three years going up and down, back and forth, to get to the same conclusion. And so the friends of Raven Run, who have committed half a million dollars to that project, are exhausted with our government's management of the project. Mike, I didn't mean to, you know, as I've said, I've heard that you're doing some good things here. So would you be willing to share with us from that point of view, is that appropriate or not? Some of the things, you know, Council Member Blevins says you're introducing some good accountability protocols and, you know, just getting closure on things. You know, I don't know how much detail. I don't have a written document that I have passed out to people. but what I have tried to do is communicate what you are accountable for and expectations for folks it has not gotten as deep as how we reorganize yet however we're having discussions now just not at a point to share a whole lot of that but I have it's sort of how I was brought up in the industry that I was in about how you become accountable, what you're accountable for, and how you respond when it's your job or there's information that's needed. And not only that piece, but how teamwork plays into all this, that everybody cannot be accountable to know every piece of information. And that as public works, I would like us to be seen as a group that doesn't let the gentleman or the lady next to you drop the ball. If you're aware and you can help at that time, it's your job in my eyes to keep that ball from dropping. Now, I know this is very general, but I didn't come here prepared to share any individual things, but I think it starts at a very low level, and that is discussions on the front line. very frank discussions. And where appropriate, those discussions are taking place. Now, that does not mean that we would have a division of project management because we're having those decisions, but I think it's moving us all in the right direction that even though we don't, we're going to have to share some of those responsibilities and be accountable for projects as they move through the process. I shared this with some folks. You can have a, before you have a process that's good, you can have a process that's not so good. But if everyone works through that process efficiently, you can make it work better than it works today. And I think that's where we are right now until we can get some of the software tools and get some of the reorganization done that we need that will really move projects and help us measure the accountability. Being accountable for something always requires a measurement of are you reaching that accountable goal. So without specific conversations. Mr. Stenis is going to properly cut me off, but I want to say in short, just as a sound bite finish, you're giving us a ray of hope. That is very much welcome. Thank you very much. Thank you, Mr. Gray and Commissioner Webb. Mr. Stenet. Thank you, Commissioner Webb. Before you leave, I didn't want to cut you off, Vice Mayor. That's all right. I'm just going to add, if I might, I've dealt with this issue a couple times in the last few years being on council. But I guess what we all want to know is what's your time frame on dealing with this? I mean, are we going to hear something back in the next month? I know you can't share details today, but when will you be able to share details? A month, two months? Or is this going to be an ongoing challenge that we just have to keep asking about? No, I hope it's not an ongoing challenge. It actually stands outside of public works as you see it today. So I don't want to put a time limit. It's going to be more than a month. and at some point, I'm not sure what the proper way to get back is. Maybe we get back through the chair of the committee. And what we'd like to do is when we come up with some of the changes is start sharing those and get your input on how you feel they'll work and how we move forward. Yeah, I assume some of those changes are going to be personnel assignments, managerial changes, all of the above. All of the above. Okay, because we have some departments that are the engineers doing their work that they have to rely on and vice versa. Right, and we're looking now at how we line those things up a little bit differently. And we're very early in those discussions outside of engineering. So I really would like to get through those before I start sharing any information on that. All right. Thank you, sir. Thank you. Are there further questions for Mr. Salley, Mr. Blavins, and Mr. Lane? Mr. Webb, before you run off, you might as well stay up here. I just want to make sure, and Mr. Salley, you may need to answer this as well. I want to make sure I understood the audit. I think part of the problem is some of our capital projects span multiple departments. So, for example, a parks project uses engineering resources, and it becomes unclear who's running the show, and that's where we get into trouble. So that's one level of problem. In addition, the technical underpinnings of running a project, what the vice mayor was getting at a minute ago, are also evidently somewhat problematic for us. That was some of the findings. We don't have the software in place. We're not keeping track of our chain orders appropriately and blah, blah, blah. Was part of the audit also to look at projects that are managed just within the engineering department as opposed to multi-department? Were there a few examples of those looked at as well? You will actually have to ask Mr. Salee. This audit was done prior to me being here. Let him answer. Let's see. The projects we looked at in our sample typically were large projects, and therefore they did reach out past just the engineering division. But our primary focus was on the engineering process itself. But what we found, as you alluded to, was because they do transcend divisional boundaries, that there is no specific responsibility, clear responsibility assigned for completion. There's breakdown in communications between the various divisions. Now, that doesn't mean that any one division is not doing its job well or as well as they think they can with their specific piece of the pie. But it doesn't fit together well because of how these projects do involve so many different divisions. There is just simply a breakdown in how that process is managed and who's responsible for that process. And there's no database, there's no consistent amount of project data that can be examined where any individual from whatever division, regardless of the input, can look at it and say, here's where the status of the project here is. Here's where the delays seem to be. Here's where it appears to be on its continuum, its life cycle. Well, from my world, and I come from the project management world, what you're describing is a lack of project management. Yes. There is no single focus that's worried about the day-to-day aspects of the project completion, schedule, time frame, and all that kind of stuff. What I was trying to allude to for you, Commissioner Webb, is that I would expect of all the divisions in our government, there would be one that knows how to do that, and that would be the engineering department. And if they're having difficulties doing even the basic blocking and tackling on their own internal projects, that's a pretty large indictment. If it's just located to the large, meta, multi-department kinds of projects, that becomes more of an executive-level problem because we're not assigning responsibility. And that may be the results of the audit. I have not read the audit in some months, so I can't remember the details, but I would encourage you to look at it in two lights. One is from a multi-department point of view, but also is the engineering department itself following best management practices for project management? Take care of that. Thank you. Mr. Lane. Thank you Commissioner Webb. One of the things that happened in the last year is that we split off the, created the environmental quality area which, you know, spun out solid waste, sanitary sewers and storm sewers. Yes, ma'am. public works, is that not correct? Storm sewers are still maintained by streets and roads. Alright, I guess my question and I don't know the answer to this, is your engineering staff still providing support for sanitary sewers and doing the engineering work and doing construction management and supervision of the construction? Is that part of the function of engineering? Yes, we are still working together on we're working and supporting. Okay. Well, I just want to reiterate, I've had strong reservations about how well that department's been working also. And I was hoping that when the department split out, maybe we'd be using outside engineers to help run some of the major storm and sanitary sewer jobs that we're doing because of the scope of that work. Do you feel, based on this report, that we're doing a good job for Sanitary Sewer and Stormwater? I actually sat down with Marwan and went through each of these items whenever I got the report was final and looked at some of his suggestions for how we, and one of the things that I think we, he proposed to me and one of the things that we don't do is, or is not done right now is the design person does not follow the project all the way through. Therefore, there's decisions made down the road during the construction phase that may not be understood, may involve a change order that's not going back and checking in with that design person. So we have talked about a single point of contact for a project that would not only follow the project all the way through and be involved in that decision-making during the construction phase on changes in the design, but would also track all the paperwork that's associated with the project. And some of the things that were brought out in the audit were you cannot go and you can't go to the council clerk's office, occasionally a document will be titled different than it is in engineering. It may exist there, but you can't easily go find that document in both locations. Some of those types of issues, we are really hoping that the PeopleSoft unique identification and tracking numbers will track all the financials and all the documents that go along with a project that can be very complex and take place over a number of years, a road construction project. We'll have a lot of documents, and having a unique identifier in one location for all those documents will help a lot of this, what was identified here. But I think one key thing until we get a management group of people is the fact that we have that single point who handles the paper and keeps all the paper and follows the project through and understands the changes from the design to the construction and the closeout. On some of the larger projects that we have, do you think it would be practical to outsource the construction management so that we could have a company that's got trained expert people who can be on top of the job and they can handle one project at a time. Because, I mean, we're talking about spending hundreds of millions of dollars on our sanitary sewer improvements over the next few years, and to have bad project management on this is not a good thing. That should be our top priority because it's going to be the efficiency of getting the work done, the cost. There are so many factors that project management handles, And if we're not doing a good job on this, you know, I'm very, very concerned about this issue. And I would ask you, as part of your analysis, to look and see what would be the practicability of outsourcing some of the construction management services. It will certainly be considered. Thank you. Okay, thank you, Mr. Lane. And thank you, Mr. Salley, for your report and for your kind words. And we'll go to item four, Manowar Projects and SLX Status. Mr. Conyers. I hope there's a lot of money in that SLX sock. Stay's constant, pretty much. Good afternoon. For the viewers at home, I'm Max Conyers. I'm the Transportation Planning Manager for the Urban County Government and director of the Lexington Metropolitan Planning Organization, an organization that does transportation planning process for Fayette and Jessamine. Today I've just prepared five slides for you, and the slides are designed to just meet the request that you all ask of us at the work session, Council Member Myers and McCord specifically, And the first item, I think pretty much the entire council wanted to get a clear view of our MPO areas of representation. And so I had our Joey David on our staff prepared this good map. You see it's color-coded. It shows how the council districts are aggregated into three at a time. and you kind of get a regional type area of representation, which I think has worked very, very well from my experience. And I know Dr. Stevens was very involved on that committee that actually helped develop this, and it's worked well. Of course, Jessamine County to the south is represented well. Their county, Nicholasville, Wilmore in the process also. and so i won't say any more about that it's pretty self-explanatory and you can see that each council the council members get together and they determine who's going to be their representative and if one can't make it we usually we can get another one that's well informed of the issues and shows up at the policy committee meetings and makes good informed decisions and in jessama county i think is very happy with the the results they don't feel like they're getting overrun by Fayette County anymore. So that's... Well, we had no choice but to reorganize because the people from Justin County were so dissatisfied with the dysfunctional process we had that they stopped coming. Yes. So I'm happy that they're more... They're happier with this arrangement. Definitely. And we, our staff and our committees, go very far in making sure that we hear them and we're going to their task force meetings and their meetings and making sure we're hearing and we're communicating, coordinating, consultating, and considering all their issues. Let's go on to the next slide. Okay. So the request that was made of us was to look at our man-of-war study, congestion management study, that was finalized in 2007 and rank the low-build projects, rank those projects. and you can see that that study came out in 2007 and the report listed low build projects which were expected to have a very high impact upon congestion, capacity and also safety at a relatively low cost. And you all requested this of the staff, not just us, but as Mike was saying, we have a very coordinated, We're very lucky to have a very coordinated, good working relationship between engineering, traffic engineering, and planning, transportation planning, and even streets and roads. We get together very frequently, talk about plans, strategies, studies, processes, and that's a very effective working relationship. We always come to our decisions, I think, are made in a very coordinated fashion. And these projects listed below, well, we rank these projects. You'll see on the next page, but I won't jump ahead, that we rank these projects according to the MPO's project ranking criteria. And that is a quite detailed criteria. We have a scoring process, and it considers safety, economic vitality, congestion reduction, public and local official support, and project feasibility among the main criteria. And we can share that with you at a later date, but it's quite involved. We didn't want to get into the complexities and details of that, but it's very, very detailed. And some of the times we've used it, it's worked very well. We're refining it for our 2035 long-range transportation planning process plan update coming up for next year. So it's a good way to consider everything that needs to be considered in prioritizing our projects. And then we bring that to our committees and to the policy committee for the ultimate vetting and decision-making of projects. So on the next page, you'll see there are the projects. There's nine. There was originally seven, but we broke up project six into three separate projects because actually they were three different access management projects. Basically, every one you look at there is a turn lane addition or extension, an operations improvement or an access management type of project that is very low in cost relatively to these high capital projects, but would go a long way and be very effective in dealing with congestion and safety. One of the biggest problems on Man of War is rear-end collisions, which is directly related to speed differential and cars falling out of a, or backing up and spilling into the through lane, out of a turn lane, and you have a car going 45, all of a sudden meeting a car going zero, and this is a big problem in congested areas. But you see, there are the rankings, and as I said, traffic engineering, engineering, and planning all sat down. We had two directors and several engineers and planners in there vetting over each project, and I think it turned out in a very logical and prioritized way, and that's good for our criteria and scoring ranking process, I believe. And I did prepare it visually there for you, so you wouldn't have to just look at a list. You can see that project number one is Blazer Parkway. That's one of the highest volume areas, one of the highest herni movement areas. It's a lot of mixed-use offices and hospitals and, of course, through traffic trying to reach the interstate and retail area. So it's a very high-impact area. You would expect that one to be up in the top. Of course, number two, Richmond Road, extending that right-turn lane. And number three, Darby Creek, restricting movements. This goes a long way in safety when you access manage. Number four, for the entire corridor, we do intersection crash countermeasures along Man of War. This would be an addition of safer, more noticeable signal heads, back plates and planes, flashing yellow arrows and signals, and traffic engineering is definitely working on that. Number five, Alumni Drive, channelizing that heavy right turn lane onto Alumni Drive. And as we talked about the last time, that connection between New Circle, Alumni, Man of War, Richmond Road, and the interstate is a huge movement during peak hours. Number six, Mount McKinley, restricting through movements on that street. That go a long way in preventing right-angle type collisions. uh number seven armstrong mill uh extending to turn bay number eight clearwater way extending to turn bay and then nine jocasta way more access management these projects total up to less than a million dollars so uh you can see that they're low hanging fruit to use that overused term and uh And also, Mike Webb, we took advantage of the current economic stimulus package initiative and submitted each one of these projects in the first round of that. And that's looking pretty good. We're getting emails from our organizations and state that says they're going to, looking pretty certain that they're going to approve a certain amount of the proposed money. So that's kind of the way we do if we have an opportunity to make sure and jump on it for funding. And that's basically it as far as the Manor War projects. The other item that I think Mr. McCord asked for was the status of our SLX monies. And just wanted to, just for the people at home, SLX is our acronym for Surface Transportation Planning Funds that are allocated to Lexington area on a population formula basis. And as Dr. Stevens said earlier, we hope for more, but it usually ranges about $3.7 to $4 million average per year. So we really got to use that money efficiently. That's the money that we as an area have total jurisdiction over, total say-so over. And they have to be adjusted to year of expenditure costs. They have to be updated to make sure inflationary as we go out in the years. They also have to be fiscally constrained. We cannot do or fund more projects than what we have estimated coming in. And so those are the two big things I was wanting to get out there. And I'm going to turn, as far as the project levels and the phasing, and I'm going to turn this over to Mr. Bob Barrett, who's with the Division of Engineering, to explain those to you. Thank you, Max. Mr. Barrett, we have about five minutes. The table I'm going to quickly go over is in your packet as well. shows the proposed allocations from 2009 to 2014. What happens over time with the SLX projects is the MPO tracks them in the Transportation Improvement Program. The state tracks them in their six-year plan. The two tend to converge. However, the state's six-year plan is not a fiscally constrained plan, as is the MPO's transportation improvement program. So we have to go back from time to time and balance the books. The MPO coordinator at the state asked us to do that, and so we've worked on that, come up with this chart, and just wanted to point out a few things on this with you. The boxes where the arrows appear, those are cells where numbers have moved out. In the first column, the 2009 column, near the bottom is a row that's titled SLX Apportionment. They're showing, as Max mentioned, we typically get $3.7 to $4 million per year in SLX funds. The 4.5 to 4.7 is the figure that the MPO coordinators in Frankfurt is asking us to use in our programming. So the scheduling that appears here is going to be sensitive to actually receiving 4.5 or 4.7 million dollars. If in reality it turns out to be 4 million dollars, then we adjust again and things move out. The second thing this is sensitive to is going to be the apportioned match, which is the row underneath the SLX apportionment. It assumes that a match of roughly $1.1 million is able to occur to meet the state money in the SLX. So that's another thing this is sensitive to. That's about all I wanted to point out. As you follow these projects out, through 2014, beyond 2014 into the future, you see the bottom of the future column where we still have a ways to go in order to get enough funding to complete the projects just on this list. If you have any questions on this list. Thank you. Are there any questions? I see none. Thank you very much. And we appreciate Loudoun Avenue, too. That's a beautiful project that was accomplished by our government. Max, did you have any closing comments? No, sir. Okay, thank you very much. If there is no further business, the meeting is adjourned. Sine Dye. Thank you for your leadership. You're welcome.