 Welcome to Sheboygan County Government, working for you. My name is Adam Payne, County Board Administrator, County Board Administrator, County Administrator, and beside me is the County Board Chairman, Roger Distruty. You know, I think we've done this program now a hundred times, and that's the first time I mixed up my title. Now you're administrating us as a board. Yes, yes. I know who I work for. Thank you for joining us today. And as you know, every month we strive to bring a different department, a different department head to join us as a guest and talk a little bit about their roles and responsibilities. Right now we're in the midst of the most important policy document that the County Board ultimately adopts, and that is the budget process. And with us today is Mr. Terry Hanson, our Finance and IT Director. Welcome, Terry. Thank you, Adam. It's great to be here. Terry's been with us now since 2010, so the honeymoon period is over, and he's put together collaboratively along with Chairman Distruty and myself a few budgets now and continues to do good work for us. And Terry, why don't you begin by sharing a little bit about yourself and your background? Well, I've been in the accounting profession, government accounting profession ever since I left college and started off as an auditor and worked my way through various state agencies and quasi-state agencies, worked for a local government as a finance director and then moved to Sheboygan as a finance director for the city of Sheboygan. And from there the opportunity came to work for the county and I took the chance and jumped on that as soon as I could, and it's been great ever since. I understand that now that you've been working for the county, you've never been happier. Is that true? Never been happier in my professional career. Well, it's good to have you aboard. It's amazing how quickly the time's flown the last few years. And when you started because of your strong skill set and particularly some background with technology, as you know we consolidated our finance department with our, what was our IS department into the finance and IT department. And you've done an excellent job as department head over those areas. What are the roles and responsibilities of the finance and IT areas? Well, on the finance side, we handle everything that is financial, essentially. From accounts payable, accounts receivable, purchasing, the general accounting, preparation of the financial statements, working with the auditors for the financial audit, the budget process, and also the financial analysis and guidance given to you and the county board is another big piece that we do as well too and then we also process all of payroll. On the IT side, we manage all of the computers, mobile devices, and then all the information systems that go into making sure everybody can do their daily operations. If it's from the CAD-RMS dispatching software that the sheriff's department uses to the software that Health and Human Services utilizes to track all of their clients and all their information, we manage all of that and make sure that it's up and running. And then we also get involved in the project management aspect of it. We help those departments understand their business needs, translate that into the technology side and make sure that that can be implemented and solve those problems that departments may be having so that they can be doing their job more efficiently. And on the IT side of the house, that IT division, you really helped initiate a hybrid situation for Sheboygan County that's contributed to not only improved service but substantial savings. Please touch on that. Yes, one of the, we were approached by an outside vendor, Datamax IT services located here in Sheboygan, and they came and were looking to help the county in our transition period. And what we came up with was we have management and then more of the higher technology skill sets that we need as staff in the IT division. And then the daily interactions that most of the county employees have are with the Datamax employees that do a lot of the troubleshooting, installing systems and making sure everything's running smoothly. And that has worked out immensely. Right now we have been saving over $250,000 a year by implementing this. And this is a model that is now being implemented in other counties as well. I know Ozaki County has implemented the model and I believe that there's a couple others that are looking at it and I think the Random Lake School District is also looking at this model. Yes, they are. And again, it's just tried something different, hybrid with both county and private sector staff working side by each. And as you said, we raised the bar. We have stronger skill set, less cost and better service. So it's been a real winner for us. Well, back to the budget process. It's almost an annual process as you know, though it really gets going in June, July, and then through the fall months with the county board's oversight and review. Give us a snapshot of the budget process as a whole. How is it put together? Well, the process starts with some initial projections that you start requesting typically in January. So start working on those and providing that information to the finance committee and the county board, just making sure everybody's aware of it and also sharing that information with the department heads as well. And then as we get a little bit more solid numbers based upon what the state may be doing with their budget process, we start firming that up more in April. The finance committee and the executive committee decide upon some objectives for the overall budget upcoming and then that gets rolled out at the leadership forum with the county board as a whole. And then towards the end of that month in June, we have the budget kickoff with all of the department heads laying out all the targets that are set for each department and what we're looking at doing. And then July and August, they go through an administrative review. They get reviewed by their liaison committees and then subsequently reviewed by the finance committee. Everything gets wrapped up and presented to the county board in October and the final adoption of the budget in November. And this is the fourth budget process now that you've been a part of and certainly it puts your fingerprints on. How does it differ? How does the Sheboygan County's budget process differ from other budget processes you've been a part of in the past? I know you've worked for both the city of Sheboygan and you also were working for a unit of government in Minnesota. Yes. This process by far is the most comprehensive budget process that I've been involved with. It's the most formal. It is very professional and streamlined. We're always looking at ways to improve each year to make it a little bit easier. But by far this is the most structured. It starts the earliest and is the most comprehensive and thorough. It gets the most review out of any of the budget processes I've been involved in. So there's a lot of people who get to look at it with many different angles, make sure that we're covering everything that we should and making sure that we are putting the money and the resources in the right direction that the county wants to move in from a strategic point of view. It's good to hear you say that. It was good to hear chairman, finance committee chairman Bill Gehran mentioned last year that one of his criticisms of the budget process was it almost went too smooth last year and that's the kind of criticism that chairman Roger Distruty and I like to hear from board members but it really has been an effective process and one that I'm particularly proud of because it's very collaborative. In the end, everyone's had an opportunity for input and everyone's had ownership and it's led to some pretty positive results. In fact, when you look at the results of our budget process what's been the general trends there? What can you share with our viewers? From out of the last six budget processes that we've had, four of them have resulted in tax levy decreases so very good on holding the bottom line and making sure that we're being fiscally conservative especially in the tough economic times that the county has faced and we've always looked at streamlining those processes through this budget process making sure that we're doing things as efficiently as effectively as possible especially you highlighted the consolidation of the finance and IT divisions together that was a good savings for the county and we've also had other departments that have gone through consolidations which through this budget process a lot of those have fostered up and have been great savings for the county. In fact, our payroll today is less than it was over a decade ago so there really has been a lot of streamlining and consolidating. Before I turn it over to Roger some folks may wonder what's the role of the county administrator in the budget process versus the department heads versus the liaison committees and then of course you have the full board that ultimately approves the final budget but what are the roles of these different folks? Well the county administrator is responsible for submitting the budget to the county board and the county administrator lays down the groundwork works with the executive and the finance committees to set the budget goals and the budget targets and then once those budget goals and targets are set the county administrator establishes the levy targets for each department and the departments work with their respective department staff to develop a budget that falls in line with those targets. Once that budget meets those targets it's presented to the county administrator for review with the finance director and that has gone through if there are any revisions it'll keep going through that process until everything is fine with that budget but once that clears that administrator review then the liaison committee reviews the budget and has any input for the department from that standpoint and once that gets approved then the finance committee gets to review those departmental budgets and then once the finance department is finalized with reviewing all of them then the full budget is submitted to the county board for their review in October and it's open for public hearing for the public to have input and then finally for adoption. And just on a personal note I've been the county administrator now for 15 years and our process though we've tried to tweak it and improve it every year I really think the key to our success has been the collaboration. A number of my peers will introduce budgets in other counties and then the county board chair may introduce a different budget or maybe the county executive which is similar to my position but elected and then at the end you have all this hand wrangling and different ownership for different budgets and it can get rather ugly in the end certainly contentious versus in Sheboygan what we've done is through the good work in the finance department we pull our budget assumptions together between Terry and I we really tried to come up with a reasonable goal and targets but instead of just rolling that out then we meet obviously with Chairman Distruty and the executive committee and the finance committee and now the HR committee we try to involve as many policy making committees involved with that budget process early on so they agree with our budget assumptions agree with the goal that we've established and once they've given their nod of agreement then we meet with the full county board during our leadership forum for a very good dozen years and when the full board at the leadership forum sees the goal and targets through consensus if they're supportive of that then Terry and I know as we work with the department heads from that point on we are striving to position the county board to achieve its goal and that goal for a number of years has either been to hold the line or reduce property taxes and again under Roger Distruty's leadership with the county board we've had in fact Roger's been on the finance committee and the executive committee we've had a successful track record for some time now so it's been a good process Roger, I'll turn it over to you to get into equalized value a little bit because I know many of our viewers may wonder how does equalized value come into play and what is equalized value? First I'd like to say it's been a pleasure to work with you Terry and as finance committee chair and as Adam mentioned we've really come together and try to include everyone all the committees input and after each budget year we self-analyze what we did right and what we did wrong and I think that's helped us improve every year and it's a great testament to both of you fellas Equalized we've had Sheboyin County in the last number of years has always had 5% of value increase in our valuation but the last four years the property values have decreased it's not just our area throughout the state and the country but how does the equalized value decrease this year affect our taxes and how does more importantly how does it affect the property tax? Okay our total equalized value decreased $132 million last year that's a 1.5% decrease in equalized value what that means essentially is if the property taxes stayed exactly the same the amount of money that is needed to run county operations our tax rate would increase by 9 cents so even though our spending would be exactly the same the tax rate that people would pay would be higher this comes in and gets confusing with everybody is dependent upon what happens with their neighbor they may or may not be spending paying more in taxes than they would the prior year if their values go up then they would be paying more taxes than they would the prior year if their values stayed the same and everybody else stayed the same they would be paying the same amount of taxes the property values went down and particularly more than what the decrease was of the 1% then they would be paying less taxes so it can be very confusing because you can't look at it from an isolated incident you have to look at what's happening throughout the whole county as a whole so it gets very confusing but I invite anybody who has any questions about that to contact me and I'd be happy to walk them through it but the main thing is as the equalized value goes down our tax rate goes up even if we aren't increasing any taxes an equalized value is to make sure everyone's clear that's the combination of all property values throughout Sheboygan county whether it's your own private residence or a business all of the above that is correct and what further confuses it sometimes is we have a large county a lot of different types of properties and not everyone's property goes up or down the same as different properties lakefront property or farmland or a residential and even different types of residential move up or down so we look at the entire county's value but yours may be a little different than another township or cities that's hard to compare but we're looking at the total for the entire county yes we're looking at it in aggregate and it explained property tax levy limits and and the factor for the 2014 budget what's the difference between the state levy limits and our own self-imposed goals well the state tax levy limits limit the amount that the county can increase in their actual property taxes so right now it is limited to 0% or their net new construction which ever is greater and right now the county's net new construction for 2014 tax year is .85% so we could increase our tax levy by .85% which equates to about $320,000 for the county so the state's putting a restriction on the amount of money that the county can generate in addition to what they taxed last year so if we taxed $45,000,000 last year we can only tax $45,320,000 this year and that restriction does not look at any other factors that the county may be experiencing it's only looking at net new construction and net new construction is the new value that has been added to the county's tax base so if a new building gets built if a new shopping mall gets built they're saying you can levy additional taxes due to this new construction but you can't levy additional taxes if somebody's property value increased 50% so they're just looking at the new taxable properties that are being constructed in the county and what is the county's current property tax levy and how has it changed in the last year for instance since 2007 that group you have our current tax levy is $45,610,000 with a tax rate of $4.51 and over the last few years you can see that the taxes starting in 2007 we had a decrease in 2008 a decrease in 2009 another decrease in 2010 an increase in 2011 but followed with a decrease in 2012 and a slight increase in 2013 so out of the last 6 years we've had 4 levy decreases and that's not just a tax rate that is the actual amount of taxes that the county is collecting and so we have reduced our taxes 4 out of the last 6 years which is a very impressive track record based on our research we're the only county to have done so in the last 6 years and there's been a lot of talk about the state budget this year and how does the state budget impact our county taxes and our operations since the county operates essentially as an arm of the state we're very impacted by what the state does in their budget process and it can be something that doesn't catch any headlines but all of a sudden it may impact a department by $50,000 based upon what may happen so even though you may not hear anything on the statewide news or local news we are very sensitive to what the state does in addition they also may impose unfunded mandates which require us to do additional work or do additional tracking but do not provide any ability to fund those operations so the county has left trying to find ways in their current funding to cover these additional activities that we have to do so based upon what the state does the counties are very sensitive and it impacts us on a budgetary basis more than many people may think and especially and the biggest one that we have to be concerned with is tax levy of course because even though that's tied to net new construction it does not allow a county to absorb any increases for inflation or rising costs and the state is one of those agency or the state passes on a lot of fees to the county that are higher than inflationary costs as well too so we have to absorb those increases through what the state adopts in their budget as well so we have a lot of a lot of sensitivity to what the state does in their budget practices well thank you Terry for all the work you do and I'll turn it back to Adam for years we've been absorbing reductions from the state and for years we've had more mandates or requirements placed on us that weren't funded by the state it's been really a broken record and again fortunately we have a team in place in Sheboygan County between the county board and our department heads and our excellent staff where we've been able to streamline, consolidate gain efficiencies I mean at one point we had three owned and operated nursing homes in this county and now we have one Rocky Null so there's been a lot that's been done and many of us have certainly discussed this before but personally I think we're getting to a point where there's always room for improvement and it goes without saying that we're going to continue to try to strive to gain efficiencies and work smarter with net new construction with that statutory limit of net new construction let's put that in perspective a little bit this year, last year it's gone up less than 1% that provides about $300,000 but as you know Terry every year we start a budget process looking at our revenue and our expenditures anticipated increases for fuel, utilities feeding prisoners at our correctional facility, maintaining programs at health and human services and the increased demand and of course wage and benefits and health insurance has continued to be a real expensive area for us how does net new construction and that limit how does that relate to these other increases if at all it has no relation to the actual increases that we're facing and it is completely based upon what is new being built in the county whereas those other inflationary costs are directly inflationary in order to make sure employees have at least the same of what they would last year we have to follow the CPI consumer price index that we usually base everything off of and we're looking at about 2% for that just for the years for this upcoming year and .85 there's a gap between .85% and 2% so we have to find a way to cover that and like you said through the years the county has been very good at finding new efficiencies streamlining and finding areas to fund that but there will come a time that will become harder and harder to do same with the inflationary costs for utilities and what not we have found ways to be more efficient in our use of our utilities but it's just a matter of time before you're as efficient as possible and then you have to absorb those inflationary costs of 3% to 5% for your utilities so at that .85 while we have been able to balance our budget the last few years it will become increasingly more difficult to do so with net new construction being below 1% and to put it in perspective if we're looking at a 2% salary increase for all employees wage increase for all employees following CPI and health insurance increases in that 4, 5, 6% range if memory serves that's about a 1.7, 2 million dollar hit just for wage and benefits is that correct? That is correct so it really gives I hope gives you an appreciation that the statutory caps may sound wonderful and politically may be appealing we're going to hold the line and put our heel on the necks of county board supervisors or local government the bottom line is net new construction has absolutely no relationship to the programs and services that the county board is required to provide and so it's creating I think a situation where the county board is really going to have some tough decisions ahead of them about whether or not we can truly eliminate programs and services though we can eliminate the mandates or what alternative revenue streams we're going to look at but in the meantime fortunately we've been able to streamline, consolidate and continue to hold our own in fact as Roger mentioned earlier the county board really has an excellent track record of putting their own self imposed limitation to hold the line of reduced property taxes so we've led the way prior to the state caps even getting in place last night the county board and this will be shown a few weeks later but last night the county board had big decision with a five-year capital plan and just touch on that five-year capital planning process and how that relates to the overall budget process yes, further larger capital projects we have a separate budget track essentially to fund these larger projects and in May we send out information to all of the departments having them submit their larger projects and our capital projects are anything over $250,000 or $100,000 and what we're looking for are ways to fund it and typically we fund most of these by issuing bonds for it so borrowing money to fund these projects because they have a longer life than just an immediate one year typically the life of the bond at least a 10-year life so as we submit these projects they come through to the county administrator and also to the liaison committee and then to the finance committee for review once the finance committee approves an initial plan it gets submitted to the executive committee and then the executive committee then forwards that onto the county board for a final vote there's many projects on there we had a total of $14 million that we're looking at bonding for above our own $4 million per year imposed cap that we imposed but it has some very large projects that are key to providing a lot of public safety to the community one is the combined dispatch center rolling in the city's operations into the counties and then also replacing the radio towers that are used to communicate and dispatch all of the emergency personnel throughout the county and we're facing an end of life cycle for our current towers and that project in of itself is around $9 million or at least the infrastructure on the towers we're not even talking about the radios but the infrastructure and then we also the big key to this is we also have a health and human services addition that was funded through fund balance software that they're imposing that is also through fund balance and then some other minors but the big thing is that we're continuing to reinvest in our infrastructure and our roads and bridges which is key to any county and we were able to maintain our predicted path to make sure that we're replacing at a good rate and you had a big hand in pulling that together for us we appreciate the work you and your staff have done Terry Hanson finance and IT director if you have any questions about anything he's shared this morning or that you're going to see in the comfort of your homes don't hesitate to contact Terry or Chairman Distruder myself certainly would welcome your questions and your input and that's a big part of the budget process the board is starting to get to the final stages of it we're feeling good about the 2014 budget development process but your input your ideas are very important to us and as you know or I hope you know committee meetings are open to the public all of the agendas are posted on our website and we welcome your input and participation all of the county board supervisors names as well as department heads are listed on the website our county website so if you want to contact your county representative please do so but don't hesitate to get involved with your county organization and a budget that in the end is about 130 million dollar operating budget a lot of projects so we welcome that input so hope you got some information and a nice snapshot of the importance of our finance and IT area please join us again next month when we'll have our veteran service officer Charlene Cobb here to talk about the very important work that the veteran service office does as well as veterans day coming up here in November so until then thanks for joining us