Mendocino County, California

Antonella DemartiniPA 730: Managing Budgets In the Public Sector

Presentation: May 9, 2011Final paper: May 18, 2011

* Mendocino County is known for its wine, timber, and beaches.

*

The way to Mendocino County . . .

. . . And its supervisory districts.

A Snapshot:Mendocino County-

Was established in 1850 when California became a state;

Spans over 2 million acres or 3,500 square miles;Currently is home to about 93,000 individuals, 70%

caucasian, 22% Hispanic, 8% other;High school drop out rate was 18.9% in 2008.Displays unemployment rate of 11.7% as of July 2010;Household median income was $44,645 in 2010;Median price of homes in 2009 was $268,550; number

of homes sold since 2007 is increasing due to low property value;

Mendocino County Organizational Chart

Mendocino County Mission Statement

“The Mendocino County Board of Supervisors’

mission is to create and maintain a responsive and

responsible government that enhances the quality

of life of the people of Mendocino County. The

County’s mission is to deliver services that meet

public safety, health, social, cultural, education,

transportation, economic, and environmental

needs of our communities.”

-Adopted by Board of Supervisors on April 19, 1999

Mendocino County Budget Cycle

January: state releases Governor’s budget proposal

February: CEO analyzes governor’s proposal and reports state budget impacts to BOS; BOS prioritizes and guides CEO to formulate budget

March: CEO gives budget instructions to departments based on current mid year budgets, projected revenue & state budget impacts

April: departments create budget requests for fiscal year and submit them to CEO for reviewMay: CEO reviews

requests and compiles preliminary county budget worksheet; County Finance Team meetings begin; Governor releases revised state budgetJune: CEO presents state

budget impacts from Governor’s document on county budget and recommends the budget to the BOS for approval; after public input sessions, BOS approves budget with guidance to CEO for final budget

July-August: CEO watches for state and federal budget changes; depending on impacts, CEO can call additional County Finance Team meetings

August: BOS holds final budget deliberations via public hearing; CEO presents budget document and BOS takes public input

September-October: CEO and Auditor submit resolution to BOS for adoption of final budget

November: budget is published for following fiscal year

Mendocino County: Recent Budgeting History & Fiscal Reform

• In recent years, county has faced lowered revenues due to:• State budget cuts;• Lower property assessment value/reduced

property tax growth;• Reduced sales tax;

• FY 2007-2008: county reduced operating costs;

• FY 2008-2009: county introduced voluntary time off;

• FY 2009-2010: county introduced mandatory time off, began layoffs, and consolidated services to create greater efficiencies;

• FY 2010-2011: layoffs continue, department budgets are being cut 15%, hiring freezes and salary/benefits increase freezes are being implemented, and unions are being asked to make salary bargaining concessions;

Mendocino County Budget PrioritiesShort term:• To balance the budget for FY 2011-2012 to comply

with California Government Code 29009;• To rescue the general fund:

– FY 2009-2010, general fund deficit was nearly $3.7 million;– FY 2010-2011, general fund deficit was reduced to nearly

$1.4 million;Long term: • To build up general and departmental reserve funds;• To support long-term economic development;• To sustain public service delivery and retain staff,

when possible;

2005

2006

2007

2008

2009

2010

0 200 400 600 800 1000 1200 1400 1600 1800

Figure 1: Mendocino County full time employees from 2005 to 2010

FTE

Year

2005 2006 2007 2008 2009 20100

50

100

150

200

250

Figure 2: Five year trend analysis of Mendocino County

expenditures in millions of dollars

Year

Men

docin

o Co

unty

exp

endi

ture

s in

mill

ions

of d

olla

rs

2005 2006 2007 2008 2009 20100

500

1000

1500

2000

2500

Figure 3: Five year trend analysis of Mendocino County

per capita expenditures in dollars

Year

Men

docin

o Co

unty

per

capi

ta e

xpen

ditu

res i

n do

llars

9.65%

25.04%

6.42%

15.37%

31.93%

0.93%

0.18%10.47%

0.02%

Figure 4: 2005 Share analysis of Mendocino County expenditures

general governmentpublic safetypublic ways and facilitieshealth and sanitationpublic assistanceeducationrecreation & culturaldebt servicestransfers out

15.14%

20.99%

13.00%17.27%

27.90%

0.83%

0.12%4.75%

Figure 5: 2010 Share analysis of Mendocino County expenditures

general governmentpublic safetypublic ways and facilitieshealth and sanitationpublic assistanceeducationrecreation & culturaldebt services

2005 2006 2007 2008 2009 20100

50

100

150

200

250

Figure 6: Five year trend analysis of Mendocino County

revenue in millions of dollars

Year

Men

docin

o Co

unty

reve

nue

ijn m

illio

ns o

f dol

lars

2005 2006 2007 2008 2009 20100

500

1000

1500

2000

2500

3000

Figure 7: Five year trend analysis of Mendocino County

per capita revenue in dollars

Year

Men

docin

o Co

unty

per

capi

ta re

venu

ein

dol

lars

20.88%

5.88%

2.07%

2.52%

59.56%

7.10%0.86% 1.13%

Figure 8: 2005 Mendocino County revenue share analysis

Property taxOther taxLicenses, permits, franchisesFines, forfeitures, penaltiesstate and federal aidCharges for servicesMiscellaneous revenueUse of money & property

13.60%

13.78%

1.13%1.14%

55.15%

10.14%

4.93%0.13%

Figure 9: 2010 Mendocino County revenue share analysis

Property taxOther taxLicenses, permits, franchisesFines, forfeitures, penaltiesstate and federal aidCharges for servicesMiscellaneous revenueUse of money & property

Mendocino County:Capital Budgeting & Debt

• Mendocino County does not have any debt . . . yet!– All reserves were used to balance the budget last year

(compensate for the general fund deficit)• Credit rating according to Fitch: downgraded from “A” to

“BBB+” – Reliance on internal borrowing and transfers from general fund

to pension contributions– Overall tax decline– Limited prospects to grow economy: wine/timber/beaches

• Capital projects– Not pursuing new plans because of financial instability– Ongoing or newly completed projects:

• 1992- present: Mendocino Town Plan• 2008: Mill Creek Dams project• 2009: Microwave System for sheriff patrol dispatch

Mendocino County Reserve Policy: Policy #32

• On March 16, 1999, Mendocino County adopted by minute order Policy #32 which created a General Reserve Fund. Its goals are:– To provide funding for unforseen needs because of an emergency of a

non-recurring nature;– To withstand negative changes in the local economy;– To allow budgetary adjustments when revenues are reduced or when

expenditures are increased because of the actions of other governmental entities;

– To maintain a high credit rating and lower the cost of capital borrowing, indicating sound financial management of county resources; 

• The minute order stipulates that the fund must maintain a balance equal to 2% of the value of the general fund;

• To achieve these goals, Mendocino County established a general reserve from annual contributions from the General Fund and discretionary funds appropriated by the Board of Supervisors;

• County departments subsequently created similar reserve policies for individual departments budgets

Figure 10: Government Finance Officers Association Rating for Mendocino County

Budget

"yes" answers (60) = 0.705882353 or 70.59%applicable questions (85)

category number of questions "yes" answers "no" answers not applicableintroduction & overview 16 14 2 0

financial structure, policy & process 15 8 6 0financial summaries 23 16 4 3capital and debt 12 2 7 3

departmental information 13 12 1 0document wide criteria 13 8 4 1

total 92 60 24 7

Table 1: Mendocino County GFOA Rating

Mendocino County Budget: Discussion & Recommendations

• Budget process:– Stable, but attention should be focused on creating a debt management

plan now that incurring debt is imminent for FY 2011-2012;– Continue to explore creating greater efficiencies across departments;

maybe augment the County Finance Team to include citizens– Re-evaluate hiring priorities: sheriff officers, jail keepers (public safety) vs.

teachers (education) in light of elevated high school drop-out levels• Overall county expenditure growth is expected because need for

public services remains constant, and will grow if unmployment continues to rise;

• Something to debate regarding potential future revenues:– Grow tourism opportunities;– Marijuana cultivation – Mendocino’s informal economy for over 30 years . . .

• Sheriff officer layoffs from 2010 make enforcement difficult;• In October 2010, MC county sheriff arrested 42 people, gave 9 citations, seized

19,158 plants, confiscated 19 firearms and over $44,000 cash;• If marijuana cultivation remains illegal, the county could fine people for growing

marijuana in addition to pressing criminal charges; • If marijuana cultivation becomes legalized (not likely given the political climate and

connection to Latin American drug trafficking rings), the county could regulate and tax cultivation

Mendocino County: It’s worth the drive!

If you visit, you can:

• Fish, swim, kayak, hike, ride horses, picnic;• Wine taste, dine, learn to salsa dance; and

• Tour the coast by airplane or ride the Skunk Train!

Questions?

• The Mendocino County budget is proficient, but recommendations for improvement include:

1. Clearly delineating state aid from federal aid;2. Providing an overview of:

• residential demographics;• community and local economy information to contextualize

budget;3. Providing information on the general fund deficit that was covered by

the general reserve fund and explaining that the county has no legal debt limits/policies because it has no debt other than ongoing pension obligations, currently