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Home My WebLink AboutMARCH 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