MARCH 1, 2011 MINUTESCITY OF VIRGINIA BEACH
"COMMUNITY FOR A LIFETIME"
CITY COUNCIL
MAYOR WILLIAM D. SESSOMS, JR., At-Large
VICEMAYOR LOUISR. JONES, Bcryside -District 4
RITA SWEET BELLITTO, Ar-Large
GLENN R. DAVIS, Rose Hall - Uistriet 3
WILLIAM K. DeS%'EPH, At-Large
HARRY E Dlh'ZEL, Kempsville - Uistrict
ROBERT M. DYER„ Centerville -District 1
BARBARA M. HENLEY, PrincessAnne-District
JOHNS UHRIN, Beach-District 6
ROSEMARY 139LSON, At-Large
JAMES L. WOOD, Lynnhaven -District 5
CITY COUNCIL APPOINTEES
CITYMANAGER -JAMESK SPORE
CITYATTORhEY- :LL9RKD. STILES
CITY ASSESSOR - JERALD D. BANAGAN
CI1'YAUUITOR - LYNDON S REMIAS
CITY CLFJtK - H U'J'H ROUGES 1•RASK'l2, MA9C
CITY COUNCIL WORKSHOP AGENDA
O1 MARCH 2011
C,ITYHAid. BUILDING
2401 COURTHOUSE DRIVE
VIRGINIA BEACH, VIRGINIA 23456-8005
PHONE: (757) 385-430.?
FAX (757J 385-.1669
E-MAIL: ctycncl@vbgov.com
L CITY COUNCIL and SCHOOL BOARD -Building 19 - A/B - 3:00 PM
A. BUDGET POLICY
II. CITY MANAGER'S BRIEFINGS -Conference Room - 4:30 PM
A. ROADWAYS
John Fowler, City Engineer -Public Works
Phil Pullen, Transportation Management Engineer -Public Works
B. RISK MANAGEMENT
Patricia Phillips, Director -Finance
-1-
MINUTES
VIRGINIA BEACH CITY COUNCIL
Virginia Beach, Virginia
March 1, 2011
Mayor William D. Sessoms, Jr., called to order the CITY COUNCIL/SCHOOL BOARD JOINT
WORKSHOP re BUDGET POLICY in the Conference Room of Building 19, Tuesday, March 1, 2011,
at 3:05 P.M.
Council Members Present:
Rita Sweet Bellitto, Glenn R. Davis, William R. "Bill " DeSteph,
Robert M. Dyer, Barbara M. Henley, Vice Mayor Louis R. Jones,
Mayor William D. Sessoms, Jr., John E. Uhrin, Rosemary Wilson
and James L. Wood
Council Members Absent:
Harry E. Diezel [Became IIIJ
School Board Members Present:
Vice Chairman William J. Brunke, IV, Todd C. Davidson, Emma L.
"EM" Davis, Chairman Daniel D. Edwards, Dorothy M. Holtz,
Sandra Smith-Jones, Brent N. McKenzie, Ashley K. McLeod, Sam
Reid, Patrick S. Salyer and Carolyn D. Weems
School Board Members Absent.•
None
March 1, 2011
-2-
CITY COUNCIL/SCHOOL BOARD JOINT MEETING
BUDGET POLICY
Chairman Edwards advised this is not a two year budget. The School Board understands that but thinks
it is prudent and necessary to look at what is going to happen in FY13. The Jobs, funds that are plugged
in to save the eighty-five (85) positions next year, is not there the following year. The Schools are also
aware that $13.3-Million in Reserves for FY12 will not be there in FY13. The economy appears to be
picking up, but to just "stick our heads in the sand" and assume that everything is going to be fine in
FY13, Chairman Edwards does not think is a responsible approach.
Chairman Edwards gave an update from two (2) weeks ago when he and Vice Chair Brunke had the
opportunity to brief re the day the Superintendant's Estimate of Needs was released. The General
Assembly did act positively in its reconciliation regarding Education. Although, purportedly the LCI
(Local Composite Index) was restored, there were some takeouts, and the net effect of that, best guess
right now, is somewhere in the mid-$4-Million range. That is a `plus up"from where it was prior to
Reconciliation. If that comes to pass, the likely recommendation from the Administration will reduce the
draw down. At the last meeting, Chairman Edwards explained how Schools were at minus 209 FTE's
from this current year to next year, and would hopefully reduce that at about `half, resulting in just over
100 positions out next year. The draw down was 324, plus using some of the Federal Jobs money, and
then an estimated plus-up of about 30 positions based on increased enrollment, which will drive
additional State funding based on increased enrollment. In addition to those, included in the Estimate of
Needs next year is a 3% reduction of all non personnel items, with the exception of utilities and fuel,
which will have a $2-Million reduction on the fuel and utility lines. It is quite likely to change not only
from the State numbers but from Board positions as well. The fact that Schools are considering a bonus,
it is suspected the City Council would react similarly if it had Homeland Security money that had been
positioned to improve the compensation for Police. Schools already started and are into kind of an "open
season " for a retirement incentive, and the estimated savings from that for next year is $2.3-Million.
That will be ongoing money that will reduce seniority and the level of compensation average for the
workforce. Schools are considering a 0.5% pay raise using those funds. Chairman Edwards thought it
important to note the compensation adjustments being considered do not utilize local new money at all.
The local economy hinges on three (3) key factors: Consumer Confidence, Virginia Beach Defense
Spending (high military presence in the area) and Housing Real Estate Assessments.
Farrell Hanzaker, Chief Financial Officer, advised $14.5-Million for compensation purposes is a
combination of the one-time 2.5% bonus of picking up the approximate eighty-five (85) teaching
positions. Every year, Virginia Beach Schools have been able to budget sufficient funds in the School's
Capital Improvement Program to maintain their scheduled modernization program that was approved in
the long range building program.
John Kalocay, Head of Operations -Virginia Beach City Public Schools, concurred with Mr. Hanzaker.
Every year, there was less money and Schools go farther back in their modernization program.
Relative retirement incentives, Dr. James Merrill, Superintendent of Virginia Beach Schools, advised it is
not complicated because there is just the one dollar bonus at the front, but then there's no ongoing
expense after that. So, it's just a one lump opportunity to try and intent people to go ahead and retire, at
least those who have full Virginia Retirement System (VRS) qualifying retirement
March 1, 2011
-3-
CITY CO UNCIL/SCHOOL BOARD JOINT MEETING
BUDGET POLICY
It is important that we phase down reductions over two to three years, taking part of them this year and
more next year. Schools should be able to manage through attrition and avoid any. layoffs. This is not a
tu~o year budget. We certainly understand that. However, Chairman Edwards thought it still prudent
and necessary that we look at what we know is going to happen in FY13, and we know that the Jobs
money that we have plugged in to save the 85 positions next year is not there the following year. We also
know that $13.3-Million in reserves that we have in our revenue streams for FY12 will not be there in
FY13. So, we're trying to basically stair step rather than `fall off a cliff ' by drawing down some in FY12
and then there will be additional in FY13. Sure, the economy appears to be picking up, but to just stick
our heads in the sand and assume that everything is going to be fine in FY13 is not a responsible
approach.
The General Assembly did act positively in their Reconciliation regarding education. Although,
purportedly the LCI (Local Composite Index) was restored, there were some takeout and the net effect of
that, best guess right now, is somewhere in the mid-$4 Million range.
Chairman Edwards restated what Vice Chairman Brunke and he talked about at the last meeting, as far
as the arithmetic on the positions. Our draw down was 324, plus using some of the Federal Jobs money,
and then an estimated plus-up of about 30 positions based on increased enrollment, which will drive
additional State funding. We will not finalize any action until the middle of this month. It is quite likely to
change not only from the State numbers, but from Board positions on it, as well. There is $14.5-Million
in Federal Jobs money, and the intended breakout on that is listed there, $4.6-Million to restore 85
positions and 9.3 to pay a bonus. It is important to understand that money was placed on here for
teacher compensation.
The City Manager will present the FY 2011-2012 RESOURCE MANAGEMENT PLAN on March 29,
2011.
March 1, 2011
-4-
MINUTES
VIRGINIA BEACH CITY COUNCIL
Virginia Beach, Virginia
01 MARCH 2011
Mayor William D. Sessoms, Jr., called to order the CITY MANAGER'S BRIEFINGS re ROADWAYS
and RISK MANAGEMENT in the City Council Conference Room of the City Hall Building, Tuesday,
March 1, 2011, at 4: SS P.M.
Council Members Present:
Rita Sweet Bellitto, Glenn R. Davis, William R. "Bill " DeSteph,
Harry E. Diezel, Robert M. Dyer, Barbara M. Henley, Vice Mayor
Louis R. Jones, Mayor William D. Sessoms, Jr., John E. Uhrin,
Rosemary Wilson and James L. Wood
Council Members Absent:
None
March 1, 2011
-5-
CITY MA NAGER `S BRIEFING
ROADWAYS
4:55 P.M.
The City Manager advised the City is continuing to march through some of the major public functional
areas, so important to our community. Roadways are a huge area. City Manager Spore recognized
John Fowler, City Engineer -Public Works and Phil Pullen, Transportation Management Engineer -
Public Works. A comprehensive view of Roadways and Transportation shall be provided. This has been
one of the top, if not the top priority.
Overview
Transportation - "It's Essential"
Transportation Project Funding - "Where the Rubber meets the Road"
Recent Accomplishments
Proposed FY 2012-2017 Roadways Capital Improvement Program
CIP Project Information
Governor McDonnell's Transportation Plan
Above Target Requests
Transportation Operations and Maintenance
Transportation - "It's Essential"
United States Department of Transportation:
Serve the United States by ensuring a fast save, efficient, accessible and convenient
transportation system that meets our vital national interests and enhances the quality of
life for the American people, today and into the future
United States Department of the Interior
America's transportation network is an important tie binding our economy together. Our
strong and efficient transportation system provides businesses with access to materials
and markets and provides people with access to goods, services, recreation, jobs and
other people
United States Chamber of Commerce:
Transportation infrastructure plays a critical role supporting the nation's economy.
Similar to land, labor and capital, transportation is a key input to production
City of Virginia Beach City Council:
One of five City Council goals is to improve the transportation system with more than
twenty (20) initiatives (more than any other goal).
March 1, 2011
-6-
CITY MANAGER `S BRIEFING
ROADWAYS
(Continued)
Transportation - "It's Essential, but..."
John Fowler, City Engineer -Public Works, advised the current state of roadway program and funding is
actually very positive. City funds are `pushing" many projects forward and continue to be successful in
obtaining regional transportation funds. All three (3) of the large economic projects are underway:
Witchduck Road, Princess Anne Road and the new "on/off' ramps of 264 and London Bridge, as well
as the Governor's Plan to bring funding for several of our major roadway projects.
Nationally:
36% of major urban highways are congested
$710 per motorist spent in wasted time and fuel due to congestion
Estimated $186-Billion needed annually to substantially improve the nation's highways
(current spending level is $70.3-Billion
33% of major roads are in poor or mediocre condition
More than 26% of the nation 's bridges are either structurally deficient or functionally
obsolete
Virginia:
Third largest road system in the country with over 70, 000 miles of roads
Vehicle travel increased by 36%from 1990 to 2007
Over 30% of interstate and primary road lane miles are providing deficient levels of
service
By 2025, 96% of our urban interstates will fail to meet LOS standards
One in every four, of Virginia's bridges and culverts are either structurally deficient or
functionally obsolete
A brief film clip from the History Channel was displayed followed by slides depicting the reason
why it is important to keep the roadway program and funding very good. (Imagine a month long
black out, major failures of water delivery system in the West, levy breakdowns that cannot be
repaired
Hampton Roads:
Our region rated as the second worst in the nation for recreational travelers
Vehicular travel has increased 23% between 1990 and 2009.
32% of the existing roadways are operating at moderate to unacceptable/sever
conditions of congestion. Expected to increase to SI % by 2030
14`'' among the 35 large metropolitan areas in roadway congestion
23% of major roadways are in poor condition (12"` of 35)
March 1, 2011
-7-
CITY MA NAGER `S BRIEFING
ROADWAYS
(Continued)
Transportation - "It's Essential, but..."
Virginia Beach:
3 of the top 10 Congested Arterials as rated by Hampton Roads Transportation Planning
Organization
Indian River Road/Ferrell Parkway from I-64 to Indian Lakes Boulevard (#3)
Witchduck Road from I-264 to Virginia Beach Boulevard (#4)
Independence Boulevard/Holland Road from Virginia Beach Boulevard to South Plaza
Trail (#8)
Highest number of congested arterial lane miles in the region for both current and 2030 traffic
volumes.
Transportation Funding
Last year's theme: "The Good, the Bad (and the Ugly) " of Funding
VDOT Six Year Urban Funding for Virginia Beach (the Bad):
FY09 - FY14 (original) $ 62.8-Million
FY09 - FY14 (revised) $10.2-Million
FYI O - FY 15 $ 0
FYI l - FY 16 $ 0
FY 12 -FY 17 $ 0
Success in obtaining COF (Competitively Obtained Funds) (The Good):
FY 07-FY 12
FY 12
Annual Average with ARRA
Annual Average without ARRA
$92.8-Million *includes ARRA funding
$ 8.4-Million
$IS.S-Million
$ 7.9-Million
With COFprojects:
Follow State/Federal procedures (the Ugly)
Use or lose time frames (the Ugly)
COF provides funds for certain types of improvements
Typical COF Projects: Sidewalks, Pedestrian Accommodations, Turn Lanes,
Intersection Improvements, Signal Installation/Rehabilitation,
Limited major projects (ARRA)
March 1, 2011
-8-
CITY MA NAGER `S BRIEFING
ROADWAYS
(Continued)
Transportation Funding
Summary
Maintain City Funding
Continue to pursue COF (Competitively Obtained Funds)
Execute the Major Road projects in the Governor's Plan
Reduce the Backlog of Major projects
Work with our Federal and State partners to address transportation needs
Strong City Commitment to Transportation funding
City Funding has allowed many Major Roadway Projects to move forward:
Birdneck Road Phase II
Lynnhaven Parkway Phase IX
Witchduck Road Phase I
Princess Anne Road Phase IV
Princess Anne Road/Kempsville Road Intersection
Nimmo Parkway Phase V-A
Lynnhaven Parkway Phase XI
March 1, 2011
-9-
CITY MANAGER `S BRIEFING
RISK MANAGEMENT
5:32 P.M.
The City Manager referenced there have been concerns re the Risk Management Fund, and the $18-
Million underfunding there. Patricia Phillips, Director of Finance, provided information re the Fund
and recommendations.
Mf°s. Phillips introduced John Grook, Risk Management Administrator. Don Barnett, the City's
Comptroller, was also in attendance who performs the accounting for the Risk Management Fund John
manages the Risk Management function for the City. He has many years of experience, which have
proven invaluable. Mrs. Phillips also recognized Loretta Brown, Administrative Assistant, a valued
employee.
Ms's. Phillips advised the status of the Risk Management Fund, the history, as well as recommendations
to correct the situation.
• Risk Management is a full service insurance "company" for the City of Virginia Beach
providing services for Workers' Compensation, general liability and automobile liability.
It is an Internal Service Fund
An Internal Service Fund is operated as an Enterprise and bills the departments as its customers. It gets
revenue from the City departments that hopefully will cover its annual expenses and for a variety of
reasons this has not been happening.
Insurance Coverage
Property
Automobile Liability -excess coverage
General Liability -excess coverage
Workers' Compensation -excess coverage
Other
--Aviation
-Human Services
--Farmers' Market
-Employee Dishonesty
-Volunteers
--TULIP (Tenant Utilization Liability Insurance Policy)
March 1, 2011
-10-
CITYMANAGER `SBRIEFING
RISK MANAGEMENT
(Continued)
Self-Insured Limits vs. Coverage
..:.~.
$1,000.0 ~
525.0 -
~ ~ ~ - -
o $20.0
., ,
.., i - ~ --
~ ~ - -- ---
$15.0 ~~ `
..
$10.0 ~ ~,~ a
- },_ ~:4
$5.0 ~ _ ~„
_,
Property General Automobile Workers'
Liability Liability Comp
Coverage €,., $1.0 R 510/$'.20 M $10/$20 M $25.0 M
Deductible ~ $50.0 K 52.0 M $2.0 M $850.0 K
Claims Processed
600
__ _ __
_
1400 r
1200
1000
80~
_ ~ -
__
_ __
_
~ .
-- ---f
600 ,..~ ,
400 ~e
~.
~~
.-
__.
:~
~~~x
.
a
_ .,A
~~ -- _
~: - _
,~
.
200
-
~ -
5
T
,g _
..
F R
. ~ .
^P: o
,.
~
~
, ~A b .ig . a . 6 ~
5'.
2006 2007 2008 2009 2010
d Automobile Liability ', General Liability ~~ Workers' Compensation
March 1, 2011
-11-
CITYMANAGER `SBRIEFING
RISK MANAGEMENT
(Continued)
crrY oF!'[RG1N1A sEACH, vraclNla
RISK R7ANAGEI~IENT [NTEI2NAL SERVICE FUND
ST.A'1'EM1IENT OF NE"C ASSET'S
.TUNE 30, 2010
ASSETS
Cash $ 6704, 262
LIABILITIES
Vouchers and Accounts Payable $ 316,010
ActuarialAccrued Liability $ '24 715,480
Total Liabilities $ 25,031,490
NET DEFICIT $(18,327,228)
Total Cost of the 2010
Risk Management Function
$5,334,091,
$6,704,605
II ~ `~ ,~_ ~ I'
F .r,
~~~
$524,349,
$83,944
$1,290,486 $38,551 $1,117,692
$334,273
Workers' Compensation ®Propcrty Insurance Premiums
~ Other Insurance Premiums R Legal Support & Services
Liability Expenses ~ Broker Fces/Actuarial Study
u Administrative Unfunded Actuarial Cost
Workers 'Compensation is by far the largest cost.
March 1, 2011
-12-
C ITY MANAGER `S BRIEFING
RISK MANAGEMENT
(Continued)
History of Risk Management Fund
(in millions)
~~~ ~, ~S 'Ft3 i "i~
:..
r .: Y~
to _'(iQ0 S l.il ~;(Z(i!
2{~,~ ~rlot (3.1 ~ Ili? ~~
_,
2tu7? ?Up, l.4 10.8)
(
;.i)U. -~O1)~ 2.1 //
l~ 1
2004 ?005 {.8} t{).5)
3.005-?006 ~ ~~ ~ r
2006-2007 ~ ~ ~) r ~ ?.~l i
aria;-~~,u~ ~ i ~.;;
2008--'uo~> i,.S~ (13~?
auo~~-3u~c~ , ~ s, ~ ~~ ;;
A_full Actuarial Study is accomplished each year, based on all open claims that we have as of the end of
the fiscal year. It does not anticipate something that might happen in 2011 or 2012. It covers all open
claims that are known at the end of Fiscal 2010. The City then evaluates each claim and most of them
are Workers' Compensation about what are the statutory requirements we have for those claims, that we
value it, or the actuary values it, and we present value back to the balance sheet.
Risk Management Fund
• The Risk Fund charges to departments are less than actual
costs. Therefore, transfers are made when possible.
... _ --1
General Fund Transfers to Risk Management ~
i
FY09 $2,200,000
FY10 x$1,460,547
I FY11 $2,800,000 ~
FY12 To Be Determined
Unreliable
Program underfunded
March 1, 2011
-13-
C ITY MANAGER `S BRIEFING
RISK MANAGEMENT
(Continued)
Annual hosts
2010
Actuarial Liability Increase due to nature and severity of open claims
Risk Management Fund
zoiz"
Not addressing this now will make deficit worse.
March 1, 2011
Percent of Cash to liability
27°,%
-14-
C ITY MANAGER `S BRIEFING
RISK MANAGEMENT
(Continued)
Risk Management Cash Balances Comparisons
June 30, 2010
a 20 -~- ---- -- _-- ---- 110
103.1
9
a au
c ~ ' 60
~W
. ~
~ ~ 42.8
.~ 510 ___.__._ ,._____________ __________- _,._.__ ____._.___.__._-'
~ .. __ _- 27.2% ~I
aW
rU
m `o 'r 10%
~> i 6.7%
'a
.. 5 .........-
a
i
5o a- -~ -40%
CHESAPEAKE, VA PORTSMOUTH, VA NORFOLK, VA VIRGINIA BEACH
Actual Cash Reserves mMillions - % of Cash to Liability
Virginia Beach does not maintain sufficient fund balances to address payouts of accrued liability or
fluctuations in large dollar short term claims. Anew cost allocation plan, along with budgeting for
actual, will help rectify this risk.
Other Cities -AAA
Percent of Cash t~ Liability
- _.- --- - _._- - _ ~J
Greensboro, NC -Over 100%
Plano, TX -Over 100%
.~
.- Islip, NY - 69°!0
Raleigh, NC 67%
,~
Minneapolis, MN - 58%
t F ' r w gy=p ,
~'
Omaha, NE - 0%
St. Paul, MN 0%
Islip, NY-Accrued Liability for Risk Management is reserved in the General Fund Balance
Omaha, NE and St. Paul, MN -Subsequent Year payment funded through the General Fund
March 1, 2011
-15-
C ITY MANAGER `S BRIEFING
RISK MANAGEMENT
(Continued)
GASB 10
"Accounting and Financial Reporting for
Risk Financing and Related Insurance
Issues (June :1990)"
Annual'Actuarial Study of Liabilities
Similar to Pension Accounting and Retiree
Health Care Accounting
Bond Ratings
Discussion of including unfunded liability
in debt calculations.
Agencies expect a highly rated government
to adequately fund risk management.
March 1, 2011
-16-
C ITY MANAGER `S BRIEFING
RISK MANAGEMENT
(Continued)
Recommendations
Policy of funding 70=100% of Actuarial
Liability for Risk Management
Currently 27%
Reach goal by:
-Charge each department. so that annual i
Fund revenues cover annual expenses
-Adding $2 million/Year to cash E
-Will take 5-6 years to reach 70%
Mrs. Phillips advised the increase this year is basically due to the nature and severity of existing claims.
March 1, 2011
-17-
ADJOURNMENT
Mayor Sessoms DECLARED the City Council Workshops ADJOURNED at 5:52 P.M.
- ~ - ~ .- y~6o%,.J-----------------
Beverly O. Hooks, CMC
Chief Deputy City Clerk
- - - -------- -- ~i~~-~-------
th Hodges Fraser, MMC
City Clerk
March 1, 2011