Board Of Supervisors — Wednesday, September 14, 2016

..Title ..Body MEMORANDUM TO: Board of Supervisors FROM: Carol J. Huchingson, County Administrative Officer DATE: September 1, 2016 SUBJECT: FY 2016-17 Final Recommended Budget EXECUTIVE SUMMARY: Attached hereto for your consideration is the FY 2016-17 Final Recommended Budget. As staff advised during your deliberations over Recommended Budget in June of this year, due to the wildfire disasters of 2015, Lake County is facing one of the most challenging fiscal years ever. In developing this budget for your consideration, staff focused on your Board's long and short-term priorities - both related to disaster recovery and in general; maintenance of existing service levels; and, continued stabilization of the County workforce and the local economy, given the close correlation between the two. Your Department Heads have all come together in the balancing of this budget, with each and every one of them stepping up to make further General Fund (GF) reductions in their budgets or, where possible, contributing in creative ways to relieve pressure on the GF. My thanks to my peers is boundless, as is my respect and admiration of them as committed professionals. With the very recent onset of the Clayton Fire, the impact of this new disaster is not yet budgeted. Staff anticipates corresponding budget adjustments at the mid-year interval. As your Board is aware, staff has recently submitted a plea to the State of California, describing the financial challenges facing Lake County due to the wildfire disasters of 2015, even before the Clayton Fire. We have included meticulous detail regarding our need for state support for Clayton Fire response and recovery. No other small California county has been impacted by recent disasters to the extent Lake County has. Our discussions of need with the state thus far have been positive and we hopefully await a formal response. Recommended appropriations for all funds totals $219,604,172 (compared to last year's total of $203,884,537). The GF recommended appropriation is $55,165,108 (compared to last year's total of $60,085,643). State and Federal funding for Social Services and Behavioral Health, and one-time funding for disaster recovery projects account for the increase in the overall County budget. Revenue: In light of the wildfire disasters, the final property tax roll from the Assessor's Office, and property tax allocation from the Auditor's Office indicates a loss in the amount of 1.32% (compared to 2% growth last year). With total property tax losses now estimated in excess of $2 million, staff intends to claim all of the $1.3 million in Property Tax Backfill funding appropriated for Lake County in the Governor's budget in support of the losses sustained in the Valley Fire. We remain very appreciative of the Governor and our State Legislators for their support in this regard GF revenues in other accounts are expected to decrease by approximately $149,000. Due to the loss of a very active resort in the Valley Fire, Transient Occupancy Tax (TOT) is expected to decrease by an additional $121,000. At your Board's direction, in late 2015-16, to the extent time has allowed, Administrative staff initiated an outreach effort to local vacation rentals listed on AirBNB and VRBO, but not registered for TOT contributions. The Treasurer-Tax Collector has reported some resulting registration activity from that outreach. Staffing and Service Levels: The number of recommended positions is 1010.25, an increase of 10 full-time equivalents (FTE's) over FY 2015-16 Adopted Budget. The net increase results from many factors, including the mid-year addition of non-GF positions at Mental Health, and reduction of GF positions due to the closure of Juvenile Hall. New positions in this budget are primarily related to disaster response and recovery and include an OES Assistant and other essential positions at Community Development to support rebuilding in burn areas. Overall, the number of positions supported by the GF are decreased by 13.5 FTE's. The informal hiring freeze will continue for General Fund departments, requiring CAO approval to recruit/hire. Prior to approving each request, very serious consideration will be given to the necessity Capital Assets: This budget includes carry over appropriations for the Clearlake Oaks Sidewalk Project, targeted for completion by the end of the calendar year. Funds are carried over from prior year for the South Main Street/Soda Bay Road water line, Middletown Library/Senior Center project and Lower Lake Museum foundation and earthquake retrofit. Also included are completion of Kelseyville Skate Park and other park improvements along with various road, bridge and trail projects. Funds are budgeted for demolition of improvements on properties purchased for the Middle Creek Wetlands Restoration project. A new Budget Unit 8356 has been added for the Anderson Springs Sewer system, needed due to the devastation resulting from the Valley Fire. Elsewhere, funds are budgeted for reconstruction of the Starview water system, damaged in the Valley Fire, to be funded largely by FEMA. Unrelated to disaster, other water system and waste water related projects are included in Special District's budget units. Purchase/replacement of vehicles and equipment is included in various department budgets, based need. Local Innovation Subaccount Funding: Beginning in FY 2016-17, counties are required to establish a "Local Innovation Subaccount" and transfer 10% of the revenue from the growth allocation currently deposited in each of the following four accounts: � Trial Court Security Account � Local Community Corrections Account � District Attorney and Public Defender Account � Juvenile Justice Account Background The Public Safety Realignment of 2011 provides funding from vehicle license fees and sales tax that is mandated to support statutorily defined programs. The state funding that is deposited into each of the County revenue accounts that support these programs is composed of a base level of funding as well as an allocation for any growth in funding. Your Board can determine the expenditure priorities for the Local Innovation Subaccount as long as the activities are consistent with the underlying accounts. Although the intent of this funding set-aside is to foster local innovation and County decision-making, the fact is that the set aside of this funding comes at the expense of the underlying funds and our FY 2016-17 budget is not able to absorb a set-aside. Consequently staff recommends that the funds in the Local Innovation Subaccount be directed into the Local Community Corrections account which is the account that provides Public Safety Realignment funding to Probation, District Attorney, and the Jail. Based on current growth allocations, an estimated $25,695 will be available for transfer to the Local Innovation Subaccount during FY 2016-17. SUMMARY: Given the impact of local disasters, this Recommended Final Budget has required the use of one-time funds, in order to be balanced. To do otherwise would have necessitated deep layoffs, rendering GF departments unable to maintain basic service levels and preventing other impacted departments from providing essential services related to disaster recovery. Without disaster recovery and rebuilding, property tax revenues will never be restored. Thus, staff is committed to very conservative budgets for the next few years while we incrementally reduce our reliance on one-time funds to balance the budget. To fill this gap during these lean years, Fund 156 (formerly known as, "Economic Stabilization Reserve") has been renamed, "Budget Stabilization Reserve" and increased, using fund balance carryover from prior year, to $2.3 million. This fund will be used to reduce reliance on one-time funds and per our estimates, restore a structurally balanced budget within three years. In closing, I would be remiss if I did not recognize the outstanding efforts of my staff to complete this Final Recommended Budget during such challenging times. Their dedication to the work of this office, and their genuine concern about the County and the multitude of services provided herein is truly extraordinary. ..Recommended Action RECOMMENDED ACTION: 1. Adopt the Resolution Adopting the Budget for Fiscal Year 2016-17 as detailed herein, incorporating any changes desired by your Board following budget hearings 2. Adopt the Resolution Establishing New Classifications and Position Allocations for Fiscal Year 2016-17 to Conform to the Recommended Budget 3. Approve Continuation of the Informal Hiring Freeze for General Fund departments, delegating authority to the CAO to waive as appropriate. 4. (A) By motion, authorize the Auditor-Controller to establish the Local Innovation Subaccount in Fund 610 or in such other fund she deems appropriate; and (B) Direct that the funds in the Local Innovation Subaccount be transferred as needed to the Local Community Corrections Account.