Oakland County Executive’s

Recommended

FY 2017 – FY 2019 Triennial Budget

Presentation to the Board of Commissioners July 20, 2016

L. Brooks Patterson Oakland County Executive

The Recommended Triennial Budget for FY 2017-FY 2019 is balanced

Balanced Budget

A strong leadership team working together

Thanks to . . .

LEADERS WORKING TOGETHER

Board of Commissioners

Jessica Cooper

Prosecutor

Michael Bouchard

Sheriff

Lisa Brown Clerk

Andy Meisner Treasurer

Jim Nash Water

Resources Commissioner

L. Brooks Patterson

County Executive

Nanci Grant Circuit Court

Linda Hallmark Probate Court

Julie Nicholson District Court

Dedicated and professional County employees

Thanks to . . .

An improved local economy

Thanks to . . .

For May 2016, Oakland County’s unemployment rate of 3.9% is less than the state and national rates, which are both at 4.5%.

Unemployment is Declining

By the end of 2018, it is projected that Oakland County will have replenished 92% of the jobs lost from 2000 to 2009.

Jobs are Increasing

Many of the new jobs predicted over the next three years will be within the Emerging Sectors strategy, which has generated $3.5 billion of investment to date.

Businesses are Investing

AdvantageOakland.com

Since 2009, per capita personal income in Oakland County has increased by 20% .

Per Capita Income is Increasing

The number of real property foreclosures are now below 2002 levels.

Foreclosures are Decreasing

The current total market value of property in Oakland County is $130.2 billion, which is 28% higher than 2012 post-recession values.

Property Values are Increasing

Acknowledged best practices for long-term financial planning and management

Thanks to . . .

Distinguished Budget Presentation Award

Since 1984

Certificate of Achievement for Excellence in Financial Reporting

Since 1991

Award for Outstanding Achievement in Popular Annual Financial Reporting

Since 1997

AAAAwardsTRIPLE

Laurie Van Pelt Director, Management & Budget

The County Executive Recommended Triennial Budget is balanced for the next three fiscal years.

FY 2017 – FY 2019 Recommended Budget

FY 2017 FY 2018 FY 2019

General Fund/General Purpose (GF/GP) $443,244,156 $450,332,208 $454,141,372

Special Revenue & Proprietary (SR) $411,087,701 $408,789,557 $406,419,823

Total All Funds Recommended Budget $854,331,857 $859,121,765 $860,561,195

Percent Change from Prior Year:

GF/GP 2.9% 1.6% 0.8%

SR 3.6% -0.6% -0.6%

All Funds 3.3% 0.6% 0.2%

Recommended Budget Highlights

Revenue adjustments

Projected use of fund balance through FY 2021:

Annual operations

Technology system replacements

Continued building security enhancements

Local road improvements

Employee compensation

Recruitment and retention

By design of law, governmental revenues are increasing at a slower pace than the economy

Tax Revenue Limitations

*(excluding planned use of fund balance)

Property tax revenue is approximately 53% of

total GF/GP ongoing revenue*

Taxable Value X Levy Rate = Tax Revenue?

March Board of Review

July Board of Review

Although property market values are

now increasing . . .

Growth in taxable value is intentionally

limited by State law

Estimated Taxable Value Increase

FY 2017 FY 2018 FY 2019

Current Budget Recommendation 4% 5% 4%

Previous Budget Estimate* 4% 4% 4%

Increase from Prior Year’s Estimate 0% 1% 0%

*From budget adopted on September 17, 2015

Estimated Percentage Change in County-wide Taxable Value

County General Operating Millage Rate

Maximum Millage Millage

Year Authorized Millage Levied Differential

1994 4.4805 4.4805 0.0000

1995 4.4805 4.4805 0.0000

1996 4.4805 4.3805 0.1000

1997 4.4805 4.3505 0.1300

1998 4.4630 4.1900 0.2730

1999 4.4188 4.1900 0.2288

2000 4.3688 4.1900 0.1788

2001 4.3259 4.1900 0.1359

2002 4.2886 4.1900 0.0986

2003 4.2602 4.1900 0.0702

2004 4.2359 4.1900 0.0459

2005 4.2240 4.1900 0.0340

2006 4.2240 4.1900 0.0340

2007 4.2240 4.1900 0.0340

2008 4.2240 4.1900 0.0340

2009 4.2240 4.1900 0.0340

2010 4.2240 4.1900 0.0340

2011 4.2240 4.1900 0.0340

2012 4.2240 4.1900 0.0340

2013 4.2240 4.1900 0.0340

2014 4.2240 4.1900 0.0340

2015 4.2168 4.0900 0.1268

2016 4.1868 4.0400 0.1468

3.8000

3.9000

4.0000

4.1000

4.2000

4.3000

4.4000

4.5000

4.6000

Mill

s

Oakland County History of County General Operating Millage Rate

Maximum Authorized Millage Millage Levied

Proposal A was approved in 1994. Beginning in 1996, properties with ownership transfers became “uncapped” which accelerated the effect of the Headlee millage rollback calculation.

millage rate differential

The major variables that impact the Headlee rollback calculation include:

Taxable value uncapping from property transfers (“pop-ups”)

The greater the number of pop-ups, a greater impact on rollback

Change in CPI

The lower the CPI, a greater impact on rollback

The higher the CPI, a lesser impact on rollback

Losses in personal property (recent tax exemption) will have a greater impact on rollback

Variables Affecting Millage Rollback

State Equalized Values vs. Taxable Values

$- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000

2008

2009

2010

2011

2012

2013

2014

2015

2016

$74,491

$67,858

$57,745

$52,453

$50,839

$51,429

$55,084

$60,806

$65,085

$64,745

$62,416

$55,081

$50,798

$49,235

$49,235

$50,048

$51,895

$52,786

Millions of Dollars

TV

SEV

Potential future uncapping of

properties

Annual Taxable Value Increase is Capped by

the IRM for Non-transferred Properties

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

1.9%

3.2% 3.2%

1.5%

2.3% 2.3%

3.3% 3.7%

2.3%

4.4%

-0.3%

1.7%

2.7% 2.4%

1.6% 1.6%

0.3%

1.0%

1.9%

2.3%

Inflation Rate Multiplier (IRM) for Annual Taxable Value Cap

Note: the IRM is based on the change in the Consumer Price Index (CPI) for the fiscal period of October through September of the preceding year.

*Source of estimates for 2017-2019: State of Michigan Consensus Revenue Agreement, May 17, 2016.

Lower IRM = larger Headlee rollback

2016 Equalization Report, TV Change

Total County taxable value (TV) increased by 1.72% in 2016

Real property TV increased by 2.84%

Personal property TV decreased by -12.22%

For the first time, this includes the effect of the new exemption for manufacturing personal property (EMPP)

The reduction in the market value of personal property was $948 million as reported in the 2016 Equalization Report which was published in April.

Since the issuance of the Equalization Report, the State extended the exemption filing deadline which resulted in a further reduction in personal property with market value of $34.4 million.

State Reimbursement for PPT Exemptions

The State is expected to reimburse local governments for 100% of personal property tax (PPT) exemptions this year

Oakland County’s estimated reimbursement is $2.4 million for FY 2016 which is anticipated to be received in November (after the end of the fiscal year)

Reimbursement in future years is expected but not guaranteed and depends on how much is collected by the State for the new Essential Services Assessment (ESA)

Reimbursements to local communities are prioritized with Tier 1 as the highest priority (local schools, TIFs, police, fire & ambulance); Tier 3 is the lowest priority which includes County general operations

Property Tax Revenue Adjustments

FY 2017 FY 2018 FY 2019

Estimated property tax revenue from adopted budget, 9/27/15 $220.1 $229.1 $237.4

Adjustments:

Increase in taxable value 0.0 2.1 3.1

Personal property exemptions* (2.4) (2.4) (2.4)

Adjustment for tax captures (1.4) (1.4) (1.4)

Net adjustments ($3.8) ($1.7) ($0.7)

Revised recommended property tax revenue estimate, % change in taxable value $216.3 $227.4 $236.7

Percentage change from adopted budget estimate -1.7%

Percentage change from recommended budget for prior year 5.1% 4.1%

*Reflects estimated amount of personal property exemptions for FY 2016

(in millions)

Proactive Monitoring and Planning

The County levies and collects it property taxes in arrears as a result of the passage of Michigan Public Act 357 of 2004

Property taxes are levied in July for the fiscal year which begins on October 1 of the preceding year

This requirement adds greater uncertainty for budgetary planning, since property taxes and the millage rollback must be estimated approximately 18 months for budget purposes

The County Executive recommends continuing the County’s prudent past practice of maintaining a millage rate which remains below the maximum authorized rate

The Administration will continue to monitor the variables that impact the Headlee rollback calculation in order to foresee the potential constraint on the millage rate for the future

Annual operations

Technology system replacements

Continued building security enhancements

Local road improvements

General Fund Balance,

Five Year Outlook

Attention to Fund Balance

A healthy fund balance is an essential ingredient for long-term budget flexibility and sustainability = adequate cash flow

Past increases in General Fund equity reflect the County’s deliberate, planned approach to balance future years’ budgets for continued sustainability

Over the next several years, fund balance will be drawn down gradually as planned

Long-term Forecast of General Fund Balance

Jordie Kramer Director, Human Resources

TOTAL COMPENSATION PACKAGE/ RECRUITMENT & RETENTION

• Deferred Compensation Match

• Retiree Health Savings Contribution

• General Salary Overview

• Recruitment & Retention

HUMAN RESOURCES

Deferred Compensation 457(b)

Plan Enhancement - Fidelity

Voluntary Deferred Compensation Plan

Available to full-time eligible employees

Currently 1,892 out of 3,300 employees participate

Pre-tax employee contributions

Employer Match program - $300 match

Eliminated in FY 2010

Reinstated in FY 2016 – effective January 1, 2016

FY 2017 recommended increase to $500 match - January 1, 2017

Retiree Health Savings plan (RHS):

Effective January 1, 2006 – elimination of retiree health coverage for new employees

New employees provided Retiree Health Savings plan

FY2016 increase county contribution - $50 to $75 bi-weekly

General Salary Overview

General salary decreases during tough economic times 2.5% reduction FY 2010

1.5% reduction FY 2011

No general salary increases FY 2012 and 2013 October 2012 - one-time payment of $500

Restoring general salary increases

2% FY 2014

3% FY 2015

3% FY 2016

Proposed 2% FY 2017

Employee Recruitment and Retention

One third of the County’s current workforce is expected to turn-over in the next three to five years

Retirements

Voluntary turnover

Competition in recruitment and retention efforts

Low unemployment rates creating competition in the labor market

Shortage of skilled and qualified workers

Median tenure of employees in the general workforce is 4.6 years

Employee Recruitment and Retention

Increased effort to promote Oakland County as an employer of choice:

Health Care Benefits

Tuition Reimbursement

Parental Leave

Competitive Salaries

Intangible Benefits

Employee Recruitment and Retention

Recruitment Efforts

Social media

Human Resources website re-design

Relationship building with colleges, universities and high schools

New Hire applicant system - “NEOGOV”

Implemented June 2015

User friendly / mobile friendly

New Hire onboarding Fall 2016

Disabled Worker Pilot Program

Working with MORC (Macomb Oakland Regional Center)

Initial placement and new opportunities

Employee Recruitment and Retention

Training and Employee Development

Launched Human Resources Connection

Redesign of supervisor training courses

Promote talent development and inclusion in the workforce

On-going training of employees and supervisors

Succession Planning

Identifying needs within departments

Developing strategies

OakFit Wellness Program

L. Brooks Patterson Oakland County Executive

In Closing

The recommended budget is balanced through FY 2019

The longer term five-year includes continued but diminishing use of General Fund Balance through FY 2021

Fund balance will continue to be closely monitored prior to recommending use of fund balance to fund future capital projects

Oakland County retains its AAA rating, which would not be possible without the continued support from the Board of Commissioners, the elected officials, and the County’s workforce

Postscript: A detailed overview of the Recommended Budget will be presented by Fiscal Services at the August 11th Finance Committee meeting

Thank you