 Welcome to Sheboygan County government working for you. My name's Adam Payne, County Administrator, and with me is Chairman Tom Wagner. We both co-host this program, and every month strive to focus on a different area of responsibility, and we are so pleased to have our finance director with us today, Wendy Scharnen. Welcome, Wendy. Thank you. Wendy's now been with us, I think, two years. Just a little over two. Just a little over two years, so she has now gone through her second annual budget process, and I can't tell you how much I appreciate Wendy's leadership and the role she provides Sheboygan County. She's building a strong team in the finance department, and today we're gonna talk a little bit about the roles and responsibilities of the finance department, and of course our annual budget development process, which is just wrapping up. So Wendy, let's start with a softball. Tell us a little bit about yourself and your background. I graduated from Sheboygan North High School. I received my diploma in accounting from Lakeland. I went north, though, first to start working. I worked with the United Tribe as their financial controller, and I moved then to the Brown County. I became their project manager for their financial systems implementation. Believe it or not, when Wendy and I were in grade school for a very short period of time, we attended the same grade school in Cleveland. I won't say who's older, but we attended the same grade school in Cleveland for a few months when my parents were transitioning, moving back to the state of Wisconsin. Well, it's wonderful to have you here, and Tom and I really appreciated the leadership that you and your staff have provided, particularly with the budget development process of late. Please set the stage. Share a little bit about the roles and responsibilities of the finance department. In a broad sense, the finance department is responsible for the integrity of the financial information, because we're an essentialized type of operations with the county. This department also is handling all the accounts payable, all the accounts receivable, fixed assets, general ledger work. We are in control of the internal control policies and procedures, and that's how we guide ourselves through the transactions and keeping them the integrity of such. The heavy lifting though for this department really is in the consolidations when we're preparing for the annual audit reports and also in the compilation of the annual budget. Yeah, that is heavy lifting, and I'm so thankful that you and your staff do that. The budget development process, which let's get right to the meat of things here, this is an annual process more or less because we already start thinking about it in January, February, kick it off in June, but set the stage for our viewers. How does the budget process, essentially work or get rolled out, and who's all involved? Like you indicated, this is almost an entire year long process. We start in February, the county administrator, works with the county chairman in setting the initiatives, setting the goals and objectives. Then I work with the county administrator through March, a little bit into April, where we analyze the impacts, negative and positive, to attending the initiatives that have been set, and also just for sustaining our operations, we have to take all that into effect. We work collaboratively with the executive committee and the finance committee, all through, say, April and May, where the refinement of that budget is happening within those committees, along with what you're indicating with the chairman. We, excuse me, lead ourselves then into the leadership forum, where the county board has the opportunity to weigh in on all the initiatives and the preliminary targets that are there. They have the opportunity to change or challenge anything that's been established. We also, at that leadership forum, go through the previous year's performance and how we ended up. It's a very collaborative and it's a very important meeting, I think, and it happens early on in the process. From the leadership, we then go into your nuts and bolts. We go into the kickoff and the department heads are provided their preliminary targets and the initiatives that we want them to meet. Even through this process, then the department heads are refining even more with their liaison committees. Prior to the budgets coming to the finance committee where there is a final approval by the finance committee to introduce that budget to the county board. And you said it a couple of times. I think collaboration has really been the key to our success. By the end of the process, everyone has had an opportunity for input. Their fingerprints are on it. And I think it's one of the reasons when we get to the final budget approval, which will happen here on November 7th, that folks generally feel pretty good about it. There isn't a lot of angst or discussion generally at that last meeting because there was so much throughout the fall. Wendy, in your experience, and as you said, you worked for Brown County, you worked for the Oneida. Another tribe of Indians. Another tribe of Indians prior to that. You have a lot of background with budget development and financial background. How would you put into context our budget process or the approach? What's your impression after now being involved for the last two years? It is the input and the points of input that is provided to the county board. Where I was coming from, there wasn't a lot of inclusiveness during the entire process, which is a key thing here for Sheppard County is why this budget works so well. It's one of the smoothest processes I've ever been involved with. I really didn't know how she was gonna answer that question. Were you a little nervous? I was feeling pretty good about it too, but I didn't know, so I'm glad to hear that. I'm glad to hear that, and obviously we take pride in our collaborative teamwork here, and I appreciate that, and you've contributed more to it. Well, with that, let me turn it over to Chairman Wagner. Right, just a comment on that. There obviously is leadership in the different committees and the executive committee, et cetera, but top-down really doesn't work that well, and we try and involve people at all the levels, and I think that ends up, the process is better, and certainly in particular, I think the product is better, which is really what the goal is. So thank you for being here today, and thank you for being with Sheppard County. Years ago, Sheppard County experienced like a 5% increase in equalized valuation, and that wasn't totally uncommon, but more recently, we haven't. Could you talk about what is equalized valuation and how that affects our budget process? Equalized value is the basis in which we use to allocate out the county property tax levy. The equalized valuation system is developed by the state where the state is looking more towards the entirety of a city or the entirety of a township or village to assess and figure evaluation that is more equitable or more even for when we distribute the county taxes. Equalized value then is used to divide against the property tax levy that the county has to establish the county tax rate. We are experiencing a 5% increase again this year. Last year, though, we only experienced a 1% increase. Right, and that's obviously very important. And please qualify that a 5% increase in equalized value is not necessarily mean a 5% increase in our total levy. That is correct. That was the equalized value increase. Absolutely, yes. We've got, the state has imposed property tax limits on the county. Could you talk about how that affects our budget process and what we do? There are two ways that the county can increase the property tax and one is through what is called net new construction. In the simplest terms, it would be you have a construction of a new building and then at the same time, you have a demolition of a building. And what the calculation is, is taking the net effect of both of those events. With that growth factor that the state is the one that calculates this. With that growth factor is used is the allowable increase that we are able to do with the property tax levy. The second way we're able to increase property taxes is through debt obligation, the debt service obligation, which realistically, we don't have a limitation on that part of it. Getting back to a little bit what Adam was talking about, the 2018 property tax rate and the levy, you want to talk about that? The property tax rate and the levy. 2018's property tax levy is, I want to say it's an increase of 660,000, that's what you're asking right now. Right, it's 1.38%. 1.38 is our, I believe it is. Is the levy increase. Increasing the tax rate increase, yeah. Correct, the levy increase is 1.38. The net new construction though was an increase of 1.72%. There were some reductions that we've seen by use of the sales tax for direct property tax relief and the debt obligations, so. Right, well thank you. And the tax rate, to follow up on your question, levy is going to go up as proposed 1.38%. The tax rate is actually coming down. It is actually coming down. When you see an increase in the equalized value, that increase is generally going to relate to a decrease in the tax rate. And on the county share, if it goes up 1.38, doesn't mean each person will see that because it depends on the valuation of their property. They could see a little more than that or a little less than that, depending on how their equalized valuation has been for that particular year. So it's. That is correct. Yeah. And depending on whether or not they have a library. Correct. Another factor, yes. The state budget impact on our county budget. You want to talk about that a little bit? The state impacts us with, we receive shared revenues from the state. We also receive state aides in transportation. We receive state grants in our health and human services area. So anytime the state has any decreases in these areas, it's a direct impact to us and whether or not we're able to sustain the services that we are providing currently. The state also imposes mandated services. And sometimes they don't necessarily fully fund these services that they mandate that we provide. Or if they do fund it, they'll slowly pull back on that funding and transfer that burden to the taxpayers of the local property tax levies. Some of the mandated services also are tied to fees that only the state regulates or has the control of increasing. And we haven't seen that the revenues are increasing at a steady enough rate to offset the expenses that we've been incurring. That is always a little bone of contention with local elected officials. And we have a very good relationship with our state legislators who I believe do a good job for Sherbrooke County. But unfunded mandates is something that we have to provide that we're not receiving either the ability to fund it directly from the state is a problem for counties and other taxing entities. No question about it. About a half percent sales tax. We passed that, that took effect January one of this year. Could you talk about how that's affected our budget process and just the county in general? Well, the sales tax revenues have to be used for transportation capital projects, transportation capital equipment or for direct property tax relief. So the effect that we've had is that the direct property tax relief we're using one million in the 2018 budget to reduce or to actually assist with the debt service obligations that we're facing. With the transportation's capital projects no longer needing to be funded through financing. Our borrowing is lower. So we will eventually get to a trend where our debt service is gonna start to come down quite a bit. Yeah, and that'll be up. You don't see that right away but that'll be a very positive thing for Sherbrooke County and the taxpayers in general. Our last question that I have, what are some of the biggest challenges that you face in your position relative to the budget? Relative to the budget. Or anything else for that? Well, relative to the budget forecasting I can see that the biggest challenge still remains to be able to stay updated with the market, with our workforce. Just to provide modest increases for our workforce then that new construction increases aren't even covering that portion of it. And then we're all facing such increases in the healthcare where we're always facing a gap every time that we're going into a new cycle. Thank you. And that's a good segue because personnel costs obviously are a big part of our total budget. To summarize, our total budget as proposed is about 149 million and I believe about 48 million of that is property tax levy. The rest are state resources, federal resources, grants, what have you. So we really keep it a close eye on that property tax levy but in total, we're upwards of nearly $150 million budget supporting about 207 programs and services. And we have 825 employees who really do excellent work. And to Wendy's point, just providing CPI increases, modest pay increases or absorbing health insurance increases becomes increasingly difficult when you have net new construction increases that aren't enough to even cover that. So a lot of teamwork has gone into streamlining, establishing priorities, consolidating. And I think some of our viewers would be surprised to know just what's happened with our personnel costs over the last 10 years. Could you touch on that please Wendy? Certainly our personnel costs, and this would include the fringe benefits for 2018 is 69.8 million. Back in 2006, that figure was 84.4 million. So through the streamlining and consolidations that have occurred in the county, we've been able to reduce that cost by 14.6 million. So our costs are actually less today than they were 10 years ago. Some folks quickly, when I share that with people, quickly say, well you privatized your nursing homes, Sunny Ridge, which did have a big impact on that. But we were subsidizing our nursing homes to the tune of over $6 million a year. And now we have one healthcare center, Rocky Knoll, which is doing tremendous. And the subsidy has been closer to 6,700,000. In fact, the last couple of years, they've come in with essentially a balanced budget without using that subsidy. So tremendous progress has been made. But I always tell people, and Chairman Wagner certainly knows it as our finance director, nearly every department in the county has made enhancements, garnered efficiencies. I think we have about eight or 10 different areas that have been consolidated. And it's been one of the keys to our success in holding down the property tax levy and keeping those personnel costs down. Right, I would just follow up a little bit if you don't mind on, you know, Rocky Knoll's been doing very well financially and that's really important. But at the end of the day, the most important thing that Rocky Knoll does is provide services to the people who are patients there. And that's the most critical thing that they've been doing a wonderful job on. And in my opinion, also relative to the, you know, our difference between our budget and the levy, I think there are some viewers who maybe not be as up to the fact that, you know, we're really an arm of the state government. If you look at our health and human services department, our budget, they really provide so many services that our state mandated. Also a simple thing like plowing roads in winter, whether it be on the interstate or Highway 23, it is our vehicles that are out there because the state of Wisconsin really doesn't do that. They contract with us to do that and they rely on us to keep the roads clear in winter, et cetera. So that's an important part that I think that why there is that difference between the main budget and our local levy at least one of the reasons. Another factor in our budget that Wendy's well aware of because Wendy and her team helped lead that process is our five-year capital planning process and being sure we're planning for infrastructure improvements. A major one's going on at JN67 with our new transportation complex. But Wendy, please touch on that five-year capital plan process and how that impacts the overall budget. Well, the process is early on, again in the budget development where the department heads are submitting their planned capital projects for the course of five years. Some of them are earmarking and they work through their liaison committees and saying that we're believing that this is a need that we have. Now, even though it might not be this year's need, we certainly wanna see what that perspective is in five years so that we can plan towards it. This year, we're going to be bonding for 7.1 million to handle our capital projects. But again, this includes the second phase of the transportation complex. Involved also, part of the 7.1 is also the construction of a garage, a maintenance garage, after we sold the properties on Pennsylvania Avenue, which is gonna be further developed, I believe, for housing opportunities. We have your normal roof replacements that are needed for the county and also we're doing some air quality and air conditioning fixes. HVAC systems. HVAC, yeah. And work at the airport. Those runways and tarmacs. Yes. That takes some real dollars when it comes to enhancing the airport though. We do get a strong federal contribution with that as well. Correct. But the five-year plan, I think, has been one of the keys to our success as well because it's thoughtful. We look five years ahead. Just because it's in the plan doesn't necessarily mean it's going to happen, but it's part of that due diligence in exploring the opportunity and working with other stakeholders to make sure it makes sense. I agree. It provides a lot of time that you can do the due diligence and explore the possibility of that project. That's why I like to see it in the out years so that that dialogue can start early. You did a nice job earlier describing the overall budget development process and all of the collaboration internally. And you just touched on the five-year capital planning process, which again, a lot of input and collaboration internally. But how does the public get more engaged? How does the public provide input to the overall budget process or just having input on what programs and services are provided? We encourage participation and there's several ways that a constituent can do so. Our website has all of the agendas posted and all the liaison contacts that they can reach out and they can see when these budgets are moving through the liaison committees, which is their best opportunity because that's where it's being developed and refined. They're provided another opportunity when we post for the public notice. The public notice and our public notice meeting is going to be next week, Tuesday on Halloween, just sort of landed that way. But they're also then provided the opportunity to come to the county board and discuss certain things in that budget that they have questions on or would like to see differently. So there are different avenues that are available to them. Everything's on our website. You can see what's gonna be discussed where and when. Health and Human Services, which is one of our largest departments, providing safety net programs throughout the county, they have their own public hearing where they garner input on where we can refine programs or perhaps need to do more to help people in need. But frankly, I'd like to see more people attend these. We really don't get as much public participation as you might hope or want, but certainly the opportunities are there. Folks just need to get engaged and we welcome that, we encourage that. So next steps, I touched on it briefly and by the time this is shown to a number of folks, November will be in play, but the two big meetings coming ahead to wrap up the budget process are. They are the public hearing, which will be next week, Tuesday, October 31st from the hearing, then it'll go back to the finance committee for final refinement coming from that public hearing. And then the board, it comes to the board November 7th for approval. The apportionments then are all due by November 15th, so that all the municipalities know what that distribution is for the county. Yeah, and then we all take a deep sigh, maybe enjoy the moment for a day or two. A day. Yeah, day. And then we prepare for the end of the year. And then start all over again. Yeah, it's an annual process and one that Chairman Wagner and many of our board members have been involved in for a long time. And I'd like to just summarize, you know, the track record a little bit. If you haven't been following county government or are newer to the community, Tom Wagner, the former chairman, Roger Distruity, our county board has an excellent fiscal track record. If you look at the last 10 years as a whole, we had five years that we reduced the property tax levy. We had some years where we've had modest increases as proposed this year at 1.38%. But if you look at all 10 years, on average each year the property tax levy has gone up less than 1%. And there aren't many other units of government at any level that can state that, that have that kind of track record. And when it comes to holding the personnel cost down, I don't think there are many units of government or private sector businesses, frankly, that can say their personnel costs are less today than they were 10, 12 years ago. So we're proud of our collaborative approach. We have Thanksgiving in front of us. And I tell you, we have a lot to be thankful for in this community. And I'm really thankful to work with a thoughtful county board, a finance director who is as sharp as Wendy is. She's building a great team. And this is an organization that we take pride in. We're proud of the collective work that our staff do to help the community be successful. And I really, I'm thankful to be in this position and to work with so many good people. And I trust you're thankful as well to live and raise your family and work in a county like Sheboygan County. So thank you for your support. Thank you for following these programs. We talked a little bit about Rocky Nolan a minute ago and what a success story that's been. As Tom mentioned, the most important thing that we do there is obviously provide critical care to our residents. Right now we're busting at the seams. Our census there is as high as it's been in years. We just had a state survey that was outstanding and was a real tribute to our outgoing Rocky Nolan administrator, Rachelle Valesky. I mean, she provided wonderful leadership. And next month, Kayla Clinton's gonna be here, our new Rocky Nolan administrator. And not only did she have the chance to work with her shell a little bit before she left, boy, she hit the ground running. So I know you're gonna enjoy meeting her. But Wendy, as you have, you think about your staff and how you allocate them, you have different accountants that work with different departments and just help monitor their budgets and making sure they're keeping on track. Just touch on that for a minute or two, if you would. How is it or what are your expectations of your staff as they keep tabs on Rocky Nolan, tabs on our transportation department and sheriff's department and just make sure that department heads are working within the parameters established by Chairman Wagner and the County Board. Well, sure, we have an accountant dedicated to Rocky Nolan. We have an accountant dedicated to the sheriff and also to the highway because these are our larger operations. The accountants are tasked with monitoring and making sure they're communicating with the directors that they see a problem coming with a variance, possibly that they're seeing in the areas of the appropriations. They also work very closely with the directors when there's a new initiative they want to develop where then they're doing research and trying to crunch some numbers and statistics for them so that they can make the best decision about that initiative. And what I've really appreciated about you and your team is some of us, that financial type work is not necessarily our strength. And even department heads, we've got a number of strong department heads but they really need that assistance as I do with that financial analysis and pulling that all together. And I think you and your staff have done a nice job being able to really boil it down so board members and staff alike can use that information and make thoughtful informed decisions. The finance committee, you provide routine reports to them. What kind of information does the finance committee receive that helps them monitor the budget? We provide a monthly variance report where we're indicating where possible issues might be arising. I like to say that we really haven't had too many issues arising since I've been here, truthfully. We have timing differences so sometimes when you're looking at it we identify when there's a timing difference meaning that we might have the budget there but we haven't purchased something yet so you have a little larger variance but in the end that variance isn't gonna be there. We also provide information on our cash flows and the investments and that's a monthly. And then we also do a quarterly variance reporting to the finance committee which then the department directors are also providing additional detail to any of the variances that they're seeing in the quarterly reports. Well, excellent overview. I hope you have a little better feel and appreciation for the important work of our finance department, Wendy. Thank you so much for being here today. You're welcome. Thank you, Wendy. Thank you for joining us. As I mentioned earlier next month, Kayla Clinton, our new administrator at Rocky Nills is gonna be with us and I know you're gonna enjoy hearing more about Rocky Nill and the good things happening there as Wendy discussed. Our budget process is just about wrapped up and though we are striving to hold the line on property taxes, a modest increase of 1.38% proposed for 2018, even with all that said and done the board and staff are always looking to new initiatives and there are some nice new initiatives in the 2018 budget. And one in particular, the chairman Wagner, his championed, is making sure we're doing more to help people struggling with opioid or heroin addiction. And we've just started a drug court, a treatment center. There's more funding for that. There's more funding for our emergency medical dispatch staff and have they done their wonderful job with that additional training and providing that additional service. Our transportation complex is gonna be completed in the year ahead and that was a huge initiative and investment for our community. And of course, we had the Amsterdam Dunes a number of years ago be purchased and nearly all those funds have not only been recaptured through grants, we're looking to establish a mitigation bank for further development, whether it's extending one of our own roads or airports or the private sector, looking to expand at Sargento or some other local company. So good things happening. Thanks for being a part of it. Thanks for joining us. Have a good Thanksgiving and we'll see you next month.