 Welcome to Sheboygan County government working for you. My name's Adam Payne, County Administrator and co-host of this program. Though today, Chairman Mike Van der Steen is not with us. He had a pressing conflict and couldn't join us, so we're gonna push on without him and we're very pleased that our guest today is Mr. Terry Hansen, our Finance Director. Welcome Terry. Thank you, Adam. We're in the midst of our 2012 budget process. Every year it seems like we end one and very shortly begin the next. It's one of the most important processes that the county board has. Frankly, it's the most important policy document that they prepare and Terry has a critical role in the development of that budget as well as does a lot of other very important work. In fact, it's no longer the finance department. Terry is the Director of the Finance and IT department. Terry, please start by sharing a little bit about yourself and when you started with Sheboygan County. Well, I started with Sheboygan County in June of 2010 and prior to that I worked with the city of Sheboygan for two years as a Finance Director there and also had a little bit of the IT responsibilities as well and then prior to that I worked for a small community in Northern Minnesota for eight years and before that I even worked for the state of Minnesota for a few years and as a staff auditor for the legislative auditor's office. So are you rooting for the Vikings or the Packers? I've always been a Packer fan. That's good to hear, it's good to hear. And what was your impression? Was it a big change coming from the city of Sheboygan to Sheboygan County, roles and responsibilities, the environment? How was that transition for you a couple of years ago? The transition went very well. There was a big change and one of the big changes was the organizational structure of the county compared to the city with the county administrator. There was a lot more organizational flow and structure as to how things were to be accomplished and it's proven to be very well and I like that environment a lot. Well, as you know, we have a good team in place and you strengthened it. Tell us a little bit about your finance and IT department. This is a new consolidated area in the county. What are your roles and responsibilities? With the finance department, we still maintain our primary roles of making sure that the financial statements are done, all the accounting is accurate, the accounts payable, the accounts receivable processing, also a payroll processing we do as well, along with anything else financially related. We do investing, we do financing for our debt obligations and anything with the financial numbers we're involved. As far as the IT portion of the department now, we oversee all of the computer systems that the county utilizes and also the communications between all of the buildings and facilities and we provide user support and also the equipment support for all of the computers in the county and then also work with the departments to try to incorporate technology into solutions for their departments. Now recently you led an operational review of what was then the Information Systems Department. Now again, we have a consolidated department but what were some of the strengths and weaknesses identified there and what are you doing to improve upon our current operations? Some of the weaknesses that were identified were some of the skill sets that were in the IS department at the time and as far as some of the management communication styles that was carried on, some of the strengths that were identified is that we do have a good infrastructure in place and we have been investing money into that information technology. In order to improve upon that, I started conducting regular staff meetings with the staff. We have laid off a few positions that didn't have the technical skill sets that the county needed in order to operate an efficient IT department or IT division and we're looking at adding those skill sets and enhancing those. We have recently just added some training for all of the people in the IT division to ensure that they stay on top and on the cutting edge as far as the technology advancement and we've also improved communications with the departments and started working with them during the budget process to identify their technology needs and where they'd like to go in the future and start pointing them in that direction. And approximately how many staff do you have then in your finance IT department? Right now we have 18 staff. And about what ratio in the finance area versus the IT area? There's I believe 11 in the finance and seven in the IT. IT and we have a total of about 850 employees, county-wide 20 departments. The budget process, we started talking about that at the onset, 2012 budget process, a very important process, you have a key leadership role in the development of the county-wide budget. Please take us through that a little bit. How does the budget process work? What's it all entail? The budget process starts actually in January or February. We start forecasting out where we think we're going to be, we start relaying that communications onto the finance committee, to the executive committee, and also to the board periodically to make sure everybody's in the loop. There is also a meeting with the finance committee and the executive committee that starts the overall tone and basically direction of the upcoming budget season. As that gets developed, we prepare for a leadership forum that we meet with all of the county board supervisors and staff to discuss and present what our projections are for the upcoming budget year. After that, then we work on the budget instruction booklet and have the budget kickoff meeting with all of the department heads and key accounting staff that work on the budget. After that, the departments are all to put together their budgets, working with finance, working with their leads in their appropriate departments, and then reporting back to their liaison committee, moving that forward and then meeting with yourself and me at our administrative review meeting, and then also forwarding that onto the liaison and the finance in a joint meeting. And then once all that gets summarized and put together, then we go ahead and present that to the county board for at a public hearing. And then when it finally gets adopted in November, actually November 1st this year. So it can become a nine month process for the budget cycle. Often we're asked, well, how's it going? Or what are you focusing on? And it seems as though the budget process is, as you said, just about annual. It's adopted in early November and then already in January, certainly February, we're working on those projections and starting it all off again. The kickoff doesn't happen till June after that leadership forum. But I think at least the 12 years I've been here, what I've come to recognize is it's become a real anti-climatic process. There's so much teamwork involved and people involved with establishing the goal, the targets, preparing the budgets throughout the process that often by the time it gets to the finance committee, which is happening right now as we speak, most of the heavy lifting has been done. What's your impression been? You said you worked in Minnesota and worked at the city of Sheboygan. You worked on some different budget processes. How do you compare and contrast this or what's your impression been? This budget process is very good. It's the best process that I've been involved in. I think the early communication that happens really sets the tone and lets people know what we're up against. And like you said, it's kind of anti-climatic at the end. However, a lot of that's attributed to the department heads and their participation in this and knowing that they're all part of a team and they're all pulling in the same direction. And that's one thing that in the other communities that I worked for, you didn't have that unified pulling in that same direction. And I think that's attributed to your leadership and then as well as the budget process as a whole, as well as the joint cooperation between the committees, between the executive, the finance, and then also all the liaison committees. I think there's a great teamwork in place that helps make this budget process so successful. And I appreciate that and as you know, every year we make refinements and now the last two budgets you've been involved with, you've continued to get your fingerprints on it and have made improvements and every year we make improvements. Though every year, I think the process gets a little more challenging. Not so much perhaps the process. I think the process has been well established but just the challenge that all of us have at any level of government of trying to hold the line on taxes or reduce the tax pressure on our constituents. We've had some good success in Sheboygan County as you know but this year in particular, well again, every year there's those challenges but belts are continuing to be tightened. More pressure is coming to bear on our department heads to prepare their respective department budgets. Comment on that a little bit. What kind of trends are you seeing give our viewers a flavor for the challenges that we have? Some of the challenges that we have, of course, are always the personnel costs. It's one of the larger costs in the county. So dealing with that, just making sure that the wages are competitive but yet trying to hold the line on those at the same time as well as health insurance costs, those continue to escalate and we've done a good job with Mike Collard, the HR director yourself and Pam Kack-Merinsky, our controller being involved in that health insurance and making sure things are always trying to reinvent things as much as possible without changing things and making a huge impact to the employees. In addition, we have the normal fuel costs are always fluctuating up and down. We have those items and then in addition, we have the demands for new technology for money that wasn't there before, that is now. Then there's the service demands that don't stop even though the revenue starts slowing down and times aren't as good. The service demands often increase, especially in areas of health and human services and the sheriff's department as well as the clerk of courts. We see more and more activity. However, there's less revenue to pay for that activity. So that's always a constraint as well too. And then there's the overall economic factors. One thing that has really hurt us in the last few years is the interest rates. Interest rates are at a historic all time low, good for people who are borrowing for homes and whatnot but as far as for investing, it makes it very hard for us to get any type of income from what we can invest in. Years ago, we, with $130, $140 million budget, we might be getting 4, 5, 6% in interest revenue and garnering a pretty nice return. Now it's been less than 1% or 1% at best and it's really hurt us in the revenue side. Another area that's really hurt us in the revenue side as you know is the revenue we receive from the state. County's the right arm of state government. What have been the trends in state shared revenue and state support for Sheboyton County and other local units of government? State shared revenue has constantly gone down in the last couple years. This last recent year, our reduction in our base was over $600,000. So that was a significant impact to the county. And as we continue to go on, it's only anticipated that the state revenues that we do receive will continually be squeezed as they face their fiscal constraints. They'll pass those constraints on down to the county. So it's always gonna be one of those factors that I don't anticipate seeing an increase in revenues from the state. However, we'll always have to deal with the negative of them going down. In fact, state shared revenue for the county has been going down over 20 years and there's other revenue sources that have been going down as well in health and human services, what have you. And what I find kind of interesting is the state for the first time in 15 years balanced its budget. And you'll hear, of course, state officials pat themselves on the back for that. And they should feel good about it, but it's the first time it's happened in 15 years. I hope that trend continues. At the county level, of course, we have to balance our budget every year, regardless of state shared revenue reductions, regardless of fuel costs, other operational costs that go up, we have to balance that budget. And we have been balancing that budget. One of the things that impacts people's property taxes and what they pay is equalized value. And could you please set the stage there a little bit, Terry, what is the county's equalized value? What does that mean for county property taxpayers? Well, the equalized value is the aggregate value of all the property within the county. And in the last year, that went down 93 and a half million dollars, and that represents about a 1% decrease in our equalized value. The previous year, we just got done facing a 2.9% decrease in our equalized value. So over the two-year period, we saw almost a $350 million decrease in our equalized value. Now, the equalized value is how our tax rate is calculated. And basically, we take that whole pool of all the property and then use that as the divider of how we distribute the taxes, the tax levy that the county imposes. The taxes could actually go down in this factor. However, our tax rate could go up, even though the tax levy goes down, because our equalized value is decreasing. However, if property owners see the same decrease in their equalized value, if you're a homeowner and your equalized value goes down 1%, and the county holds a line on the taxes, you won't see any change in your total taxes that are paid. However, your rate may change. So let's take a breath here and boil this down, because as you know, a lot of people get confused by this. There's the tax rate, and there's the tax levy. So the property tax rate and the property tax levy. And simplistically, the property tax levy is the total amount we receive to help operate our organization. That's the, what is it, about $40, $42 million that we receive in property tax levy. So when a county administrator or a county board supervisor or a city elder person, I don't care who says they held down or froze their property tax levy, that's wonderful, because that means that they haven't increased any of their costs associated with operations. But if they say they reduced the property tax rate related to equalized value, that, certainly you want that rate to be frozen or to go down, that's a good thing, but it's not the same as freezing your levy. Help folks understand that. What's, try to describe that difference for them a little bit more. Like you said, the tax levy is the actual dollar amount that we do receive from the taxpayers. The tax rate is the percentage that we charge on their equalized value. So if the home value is 100,000, our equalized, our tax rate is 523, so you would pay $523 on that. However, if we kept the tax levy the same and your home value went down and everybody's value went down, you'd still pay that $523. However, the tax rate would then change and your tax rate would be higher, so it would be maybe a figurative 6% rather than a 5.23. This is when I can see some of our viewers' eyes starting to glaze over like, huh, what? So $100,000 home, if the tax rate is $5.23, they're gonna pay $523 for that. If the equalized value goes down as it did this year and last, what will happen to that rate? The rate will go up, so it will go from 5.23 to, say, 5.5. Even if we hold the line and we don't raise the property tax levy, meaning we don't increase the money we need to operate, we successfully hold that line, which we're striving to do yet again in 2012. Since equalized value has gone down, all the property value combined in the county, folks can expect to see their tax rate go up a little. Their tax rate could go up a little, yes. Even if the county reduced its tax levy, the county tax rate could go up. The reason we're spending as much time on this as we are is that's what I envision is going to happen for 2012. I think the county board is going to, for the fourth time in five years, reduce the property tax levy, the total amount we need to operate, which is a tremendous accomplishment by our organization as a whole and a real credit to the county board and everyone involved. No county in this state has reduced property taxes for the last five years. But because equalized value, our overall value of property, county-wide, is going down, you still may see your tax rate go up a little bit. And for the viewers who watched this, hopefully that explanation was helpful because no doubt some of us and certainly folks will be contacting their county board supervisor and saying, I thought you said you held the line on property taxes, or you reduced the levy. Well, we certainly intend to, but your overall rate may yet go up a little bit. Let's move on a little bit. We talked a little bit about some of these rates and levy and our performance over the years. And I know you brought some charts along with you, Terry. Why don't you just walk through those a little bit? What has been our track record here in Sheboygan County? Well, as far as the tax rate goes, you can see that we held the line pretty much from 2001 through 2004. And then from 2004 on, you can see that the tax rate started going down to 6.28. In 2006, it went to 5.95. And then 5.64, 5.25, 5 in 2009, and then 4.96 in 2010. And then in 2011, there was a bump up to 5.23 and that's partly attributed to that change and equalized value, as well as there was a minor tax increase in the tax levy, the first one in the last four years. So that attributed to a little bit of that increase. So nine of the last 10 years, we reduced the property tax rate in part because of holding the line on our overall operational costs and perhaps with some help with the equalized value, whether it's gone up or down. But nine of the last 10 years, the rate's gone down. That's great. The next slide, you've got the levy, what we actually use to operate. What's been our track record there? And this is the change in the actual tax levy. And you can see that the change in the levy in the first few years stayed relatively flat and are consistent as far as the increase. But in 2006, the increase went from 3% then dropped to 2% in 2007. And then the big years were in 2008, 2009 and 2010, there was actually decreases in the tax levy. In 2008, it was a 1.2% decrease, about the same in 2009. And then just a minor decrease in 2010, but still a decrease in the actual total dollars that the county received. And then in 2011, there was a 2.5% increase, which the target at that time was a 3% increase. So we came in below the target, but it was the first increase in four years at that point. And like you alluded to earlier, we're looking at possibly holding it at a zero or possibly reducing it again for a fourth out of five years. So I don't know how well our viewers can see this slide here and I know they're gonna try to insert one that may be more visible to our viewers, but really this is the bottom line. This is where the rubber meets the road. This is where the county can point to its success, its fiscal track record and say for four, five years going back, we have really either reduced significantly how much we're leving or frankly just reduced what we're relying on to operate. And in order to achieve that, the county boards had to make some tough decisions as well as department heads, yourself included, have needed to be open to change, whether it's consolidating departments, making tough decisions, including reducing our workforce in some areas, what have you. I know you have one other slide there. Before we get to that, give us a little flavor for what are some of those decisions or what has the county board done? What has our organization done to achieve this track record? One of the big ones is the consolidation of departments. Planning and land conservation board was recently consolidated last year. This year the finance and IS departments were consolidated and I believe there were other ones that happened prior to my arrival. And with that, there was greater efficiencies and yes, there has been some cases where staff have been reduced and like in the highway, the staff have been reduced significantly over the last few years. However, real property listing was consolidated with the treasurer's office, probate with court of courts, UW extension with UW Sheboygan and we used to have three nursing homes and now we have one consolidating three essentially into one and even Rocky Knoll, which continues to be under county ownership and operation, even there our census continues to be a struggle as more people choose other alternatives to a traditional nursing home. So you're right, a lot of consolidation, streamlining the last five, 10 years. And as far as just department to operational efficiencies with the highway, they figured out how to do the same or more with less and then as well as even out in Rocky Knoll getting creative with the ways that they can compensate their employees and changing the benefits that are available that don't necessarily are detriment to the employees but definitely help the county out. And this is a shout out to acknowledge my department heads. We have 20 departments again, about 850 employees, $130 million budget, 207 programs and services, 20 department heads. And we have an excellent team in place. You've gotten a feel for Terry Hansen our finance IT director and most of you if you've followed this program over the years have had a chance to meet most, if not all our department heads. And though we all have our strengths and weaknesses, overall we have an excellent team in place and they've been open to making changes, open to streamlining, willing to make some of the tough decisions. And of course our county board has been excellent. We've got 10 liaison committees, they oversee the departments, they're obviously focused on policy development but ultimately the county board determines what the budget's gonna be, what we can afford. And they've been willing to make tough decisions as well. So a great team and that last slide you have along really shows a major picture of had Sheboygan County operated like the average county, there's 72 counties across the state, had we raised our property tax levy following the average and doing what most counties are out there, what would be the difference in cost savings to or cost to residents of this community? Well in this chart you can see the light blue is the amount that the county actually levied over the years. So you can see in 2007 we were around a little over $45 million as far as the tax levy. And we use that as a starting point. And then the dark blue shows what the average county in Wisconsin, what their percentage increase was. So we applied that to that base and the dark blue you can see is where we would have been if we followed the average of all the counties. And then however the Sheboygan County didn't held the line on the taxes and made those changes and operations to garner those savings. And you can see over the years up to what we're estimating in 2012 holding the line flat on that that we would actually see over $29 million in taxpayer savings over that span. And that's a significant amount of money for the taxpayers that's able to stay in their pockets and able to help with the economic recovery or to help pay bills or whatever people are facing. Outstanding, outstanding. We only have two minutes remaining and we'd like to conclude by sharing just a little bit. We also have another very important process. In addition to our budget process we have a capital improvement process, a five year plan which really gets rolled into our overall budget. But what kind of capital improvements is the county looking at making in the next year, two, three years? In the next year we're really focusing on our transportation. We have $1.9 million allocated for the asphalt reconstruction out in the airport. However, the good part about that is 95% of it's funded by external sources. So the county's only paying 5% of that total cost. And then the major emphasis this year is highway projects. We have County Highway J going to be redone as well as a bunch of different roads that as needed. And we have $3.4 million invested in that. And there has been an emphasis over the last couple of years to really focus on putting money back into the roads and the highways so that Sheboygan County has a nice viable transportation system. Our Highway Commissioner Greg Schnell has said we should be doing on average 25 to 30 miles of overlay a year. And last year's budget and this year's budget achieves that goal where we're putting enough resources in to keep up with our infrastructure because if we don't it's gonna be far more expensive down the road to make those repairs or completely rebuild county roads that otherwise we could have stretched out the life. That concludes our half hour. This flew along, a lot of great information Terry. And if you have questions for Terry Hansen, our Finance IT Director, please don't hesitate to call him or a member of his staff. As you can see, very knowledgeable. He brings a lot of passion, new ideas. In fact, you mentioned his background in IT and I can't tell you how much I appreciate that kind of expertise because I personally, that is necessarily my strength at all and it's nice to have someone who has that and can really improve our information technology and make good things happen. So Terry, thank you for joining us today. And thank you. And thank you for joining us today. If you have suggestions, questions, would like to provide input on the budget process, please don't hesitate to contact Terry or myself or more importantly your County Board Supervisor, 34 board members across the county. It'll be 25 come April. They're gonna be downsizing themselves. They made that decision a number of years ago. So we have quite an election coming up next year, April. But again, don't hesitate to contact your County Board Supervisor to make suggestions or get involved. Thank you for joining us. And on behalf of the Sheboygan County Board Chairman Mike Van Der Stien and myself again, thanks for joining us. Have a good month.