Travis County

Agenda Item

Consider and take appropriate action on the FY 2021 Budget Guidelines. (Commissioner Gómez)


Department:CC Agenda requestSponsors:
Category:General Government

Meeting History

Feb 11, 2020 9:00 AM Video Commissioners Court Voting Session
draft Draft

Members of the Court heard from:

Jessica Rio, County Executive, PBO

Travis Gatlin, Budget Director, PBO

Alan Miller, Assistant Budget Director, PBO

MOTION: Approve the Budget Guidelines as revised.

MOVER:Brigid Shea, Commissioner
SECONDER:Jeffrey W. Travillion Sr, Commissioner
AYES:Sarah Eckhardt, Jeffrey W. Travillion Sr, Brigid Shea, Gerald Daugherty, Margaret J. Gómez


Feb 11, 2020 9:00 AMVideo (Windows Media) MP4 VideoCommissioners CourtVoting Session

9:58 AMLike this.
We'll table the item, but do we need some more discussion? We have more time this morning than we do this afternoon. So if there's more discussion on this item, we should have it now.
No, I mean I think they have exemp exemplified they're willing to do whatever it takes. I think it's something we probably can get done, bring it back before we break for lunch or whatever. Occasionally, these kind of things do crop up on us. Some things have a short fuse. There are items that pop up where you go, if this is going to close, what are you going to do in the interim until something gets put in place. And so -- however you want to handle it, judge.
9:59 AMWe will table the item for now for staff to do a little bit more work.

9:59 AMAfternoon. But if it needs to come back this afternoon, that can be accommodated as well. We'll table this item for now.
Thank you.
Next, let's go to agenda item number 19. 19 is to consider and take appropriate action on the fy2021 budget guidelines.
Good morning, county executive, planning and budget. And we've got travis gatlin and ellen miller. And I believe there are pbo -- in the audience. We will be presenting you today with the fy2021 budget guidelines. The guidelines set the framework for the budget process. This year is the first year, as you know, that we'll be under senate bill 2, which reduces what used to be called the rollback rate. The presentation itself follows the guidelines that are in your backup. These guidelines were sent out by travis last week to all elected and appointed officials, as well as department heads and financial staff. Timing actually also allowed us to present this information to the compensation committee. And we are currently looking for opportunities to have smaller group sessions with elected officials to let them know a lot of the information that's in here. And given sb2 and concerns on future years and our fiscal flexibility. This slide walks you through the main like to go over, but we would invite everybody to read the guidelines and begin a conversation with our office on how best to pivot the budget process from looking at it as an annual process to really looking at it as a two to three-year opportunity to plan further operations. So, the first slide on the economic outlook, as you know we're continuing a steady economic outlook right now. Nevertheless, we continue to believe that there are clouds on the horizon and that we need to make sure we are planning from a financial perspective for any midterm economic downturns because of sb2. Particularly, we don't have the latitude to not plan conservatively for those possibilities. The legislative update, sb2, sb2, sb2. It really was the big takeaway, or the major change that came out of the last legislative session. For those that don't know what sb2 is, it is -- basically, it limited our ability to set a tax rate higher than 3. 5% above the effective maintenance and operations rate. That used to be 8%. We were very mindful of tax policy at travis county and didn't hit that 8%. We came close to it -- I believe we hit it once, came close to it two other times. All three dime -- times in the last 30 years were during major economic downturns, which is why we're planning conservatively for the future to make sure that since we don't have that lever, that we are prepared as best we can be.
10:02 AMIf we included this past year, it would have been twice in 31 years.
10:03 AMI forgot this past year was a bit odd, given sb2 that was being approved. So. I'll turn it over to travis.
Our 30-year average above effective maintenance and operations rate is 3. 94%, well above -- below half what the 8% rollback rate was previously. Our ten-year average is 3. 84%. That even includes going to the 8% for 2020.
Both of those rates are above the 3. 5.
That is correct. moving on, i'd like to go over what we call our budget considerations, our cost drivers. And so we believe we're going to get $30. 2 million of new resource this is year based on all the assumptions that we're going to outline. Our budget considerations are 37. 1. That's a little bit over a $6 million difference. The reason we can bridge that shortfall is the commissioners court for fy20 set aside money and prefunded a number of items. I'll walk you through that. First is compensation of benefits. There is an across the board increase for classified employees. There is an annual step increase for those on the peace officer pay scale. There's also a working group making adjustments to the peace officer pay scale to make some internal adjustments to where each step could be 2. 5% between each step along the scale. And there's likely going to be some market adjustments for law enforcement employees as well. We do have those fundings set aside in our planning parameters. We've set aside resources for health benefits, retirement increases. Typically retirement when the stock market does well, which it has done this past year, sometimes the rate actually stays the same. But this would be year three of paying for a ten-year amortization of a retiree cola from several years ago. For planning purposes, we're setting aside resources. There's also resources for facility operating expenses. All of that 1. 6 million is reserved in this year's budget in preparation for these things. These items include moving the probate court to the new historic federal courthouse, opening a new tax office building. And there's also -- yeah, I believe that's it. We set aside money for the bcp transfer at waller creek. As jessica mentioned, we would like to set aside the incremental increase for the bcp transfer in the general fund allocated reserve and earmark it rather than send it over in the transfer. The transfer amount is roughly $20 million for fy20. That would remain the same as we would propose for the 2021 preliminary budget. We have $5. 7 million, mostly related to the public defender grant match and indigent attorney fees, and some justice-related items. If you want specifics, i'm happy to go in details. We have tech operating costs, new parks, which includes opening the bee creek sports complex, other priorities and pilot programs, and last, a new civil district court is coming online in October of next year and we did set aside resources in this year's budget so we would not be scrambling to find that money in our first year of revenue cap. The commissioners court did a lot of thoughtful planning to make this an easy landing. Last year at this time we thought we would have a $6 million deficit under the 3. 5% revenue cap. Had we not gone to the higher rollback rate and reserved the fundings, we would have that $6 million deficit that we discussed last year. Moving on for the financial forecast, we have found that it's not driven by a single issue or cost driver. Some of it it's population driven, some of it's service demand increases, workforce investments. The court has always said to us that we want to make sure that workforce development investments are in a sense set aside and prioritized at the early stage of the budget process so there'll be consistent resources there. And we have done that for the 2021 planning parameters. Often new or expanded programs or improved service deliveries or mandates can impact our cost drivers in local, state, and economic conditions as well. I would just like to highlight that moving forward, for all the assumptions in our forecast and for future tax rates, we are going to be using the voter approval rate, the 3. 5% rate. There's always been discussions with commissioners courts each year about what tax rate to use. Typically it's at or near the effective maintenance operations rate, but enough to cover cost drivers. This year we're just going with that rate. I think it makes it easier for plannin processes. But unfortunately, if some of these cost drivers are higher than we thought, we don't have any flexibility to change the tax rate to generate new resources. So that's going to be the challenge moving forward. Just briefly on our assumptions, this year we grew 8. 8%. That was the first time in over five years the county tax base did not grow in double digits. We had 5. 1 billion in new construction, a record. The previous year was a bit under five. We don't anticipate that's sustainable in the future. But it's also important to note at the 3. 5% voter approval rate, new construction is one of the key drivers that gives us new resources. In those years where we have less resources, new construction is going to have a significant impact on our budget. Or if there's a downturn where projects are stopped or new projects not added in the pipeline, it's likely we'll feel those effects for a number of years until we get back to normalized. We are using 2. 5 billion rather than the average. It's early in the budget process. We are the first people that present these forecasts. We've had discussions with the appraisa district. But at this time, it's so early on, we want to be very conservative. What we don't want to have happen is that we would project a higher new construction value, work through the preliminary budget and then those resources are not there and we have to make reductions to balance the budget. So we're -- that process has been slow and incremental. We'll make adjustments if we need to. But these are the numbers we're using for this forecast. Next, I want to highlight how we've grown in the past, which is historical values. In 2016 we grew 14%. A little bit over 13. And then a little over 10 for '18 and '19, past year, 8. 8, the first year we have not had double-digit numbers. The 30-year average is 7%. It is greater than our average over 30 years, but it has less than it has been during what we would call the boom times. And moving forward you can see how the values flatten out, using that 2. 5% growth. There is some softening in some of the urban areas of austin where areas aren't quite growing what they have been. There's also new legislation that May result in some flatter values moving forward, at least for the foreseeable future. Next, I want to highlight how the county has grown. As we've been doing these financial forecasts, we talk about how the county base budgets have grown over the past years. When we first started, they were growing 6% a year. The county has been driving that growth to a slower rate. This past year for the 2020 budget process, the previous ten years was 5. 15% compared to that 6 the past. But now we did grow a little bit more than we had, in preparation for sb2 and our ten-year growth rate is 5. 53%. So what we did was we took our ongoing base budgets and projected if they could continue to grow at 5. 53%, our ten-year compounded growth rate, what that would look like. It started from 2021, we would be at $742 million, which is what we're projecting for next year up to 911 million. But because of revenue caps, those areas in red would be resources that you've historically had access to based on priorities that the commissioners court, you think these items are so important that they need to be funded, you won't have access to those. We will never have a deficit. We will always balance our budget within available resources. But those are programs or initiatives or new things that you have historically done in the past that you won't have access to for revenue. We have to grow at 4. 3% rather than the 5. 53 in order to stay within those green areas of available resources. And these will reset every year and we'll keep changing the assumptions moving forward. But I wanted to highlight the impact, especially the farther out you go because of compounding. That $33 million resource you had access to is what sb2 is about and the pain as far as we figure things out. And the rate i'm using is the 3. 5% voter approval rate. I want to acknowledge dan and the county auditor's office. I work hand in hand with him on these forecasts. Looking back, they have been pretty accurate. I just want to recognize his work and his help for this. Next, I want to just highlight -- each year we're going to get 30 to $36 million. I focused on 2022 to 2025 because those are the areas where we're going to start to see the impact of sb2. The red area in this chart is the same red area in the previous chart. The previous chart had the $33 million resources, or 36 that we didn't have access to, that's what's shown on this red here. And then I just wanted to build up what the budget could look like over the next five years based on your past priorities. Workforce development is a key component of that. And so that's going to range between 17. 2 to 19. 25 million over that forecast period. And so it does appear that we can add workforce investments into our budget. I would add, even at the 8% rollback rate, there were a number of years where there was no compensation, either for rank and file or p. O. P. S. , or both. And so the assumption is that I suspect at some point there will be years, depending on the circumstances, where we will not be able to have compensation. But for planning purposes I wanted to show what that would look like. We won't be able to grow the number of to fte that we have in the past. I'm assuming compensation will grow at 2. 25. If we grew it at 5%, in eight years, that would be $30 million. If we grew it at 5% and added more resources and staff, then that would take up, in a sense, almost all the resources we're getting every year. So we just need to be cautious about growing at that 4. 3% rate. Maintenance, this could be indigent attorney's fees, maintaining -- keeping the lights on, incremental increases to utility costs, things that we do that are changing just because we have to do more because we maybe have more people to serve. And those range between 5 to 5. 5 million over the forecast period. Interlocal agreements are primarily with the city, increasing around 2. 5 to 2. 7 million a year. That's a critical item we need to keep an eye on. Next is the tidc grant match. There's a civil attorney pilot that's connected to the criminal attorney pilot that's included in the tidc grant match. We're proposing that we would fund 3. 5 million from 2022, 2023, and 2024 because in 2024, the county will be sharing 50% of the cost for the first six months, but the second six months of that year we'll be responsible fully for the program. We want to prepare for that and make sure that we fund that in advance, just in the event there's any economic downturns or challenges, that we'll be ready to fully implement that program based on -- commissioners court. Last, I wanted -- the blue line represents how much money we have left for everything the county would want to do. That could be new courts, new programs, expansions, different things. That's a very small piece. It'll get a little bit bigger at the end because we're going to finish the grant match in 2024. That could open up a small window. We need to think about, as we're implementing new programs or initiatives, strategically think about when there's opportunities for expansion. At least by looking at this there could be a small amount of additional resources, possibly. Keep in mind that workforce development, all these other program areas could grow at higher rates than what we're projecting right now. And the red would be just areas of revenue that are no longer available to the county to fund those priorities, as the county has grown in the past. Our ten-year average is $32 million of new resources but our five-year average is 38 million. We are getting less resources than we have been in the recent past. I'm happy to answer any questions you might have on this slide.
10:16 AMDo y'all want to go through the whole presentation and then swing back around, or do you want to go piece by piece? This is a lot. This sand art is a very important slide. [ laughing ]
10:17 AMI did have a question. and I have a note. I don't know if this is still germane, that there is a little bit of revision -- minor revisions. Is that still necessary with regard to the --
The re-submission of the backup. There were minor revisions. Travis will walk you through that once we get through the presentation, if that's what you're referring to.
It was minor wordsmithing. we shared comments with the department heads, the civil courts just requested minor clarifications in the wording. It's really almost like a scribner'ses error. It has been incorporated into the final backup you have before you. Okay. This is the challenges ahead. I want to req mys recognize we have lot of tools and strategies. I'm sure there's more that we'll be compiling based on everyone's feedback. But as I mentioned, we've got growth slower than in the past. Continue to focus on using on going resources for ongoing requirements. Innovation, bcp transfer, brief discussion on interlocal agreements, lease guadeloupe revenue, jail energy savings project opportunities, retiree healthcare policies, full cost recovery, in-depth target review and continue to prefund large budget items. Just quickly as I mentioned, the ten-year growth rate has been 5. 5. We need to grow 4. 3% to stay within the resources. We immediate need to focus on using ongoing resources for ongoing requirements. When we do fund things that aren't fully funded in that year, we fund the remaining amount. It's a strong budget practice these made the transition into this year about as smooth as we could possibly make it. Innovation, one of our county's guiding principles is innovation. But we don't necessarily recognize it as much as we should. We May want to consider working groups or annual awards to encourage that. We will need to rethink current processes. There's a lot of that already happening. We have some consultants looking at processes in the tax office, purchasing, and other places. Find more efficiencies. One example is the jail population review committee. There's probably other areas to look at with that.
10:19 AMOn your screen is our bcp transfer. We operate a regional permit with the city of austin. And what we were able to do two decades ago is develop a wildly successful financial model. So I applaud the commissioners court for that. And right now as travis mentioned we have a current transfer of 19. 9, nearly $20 million. And so we have gathered together with tnr and the county attorney and we have some additional work to do. In October of 2019, the bcp coordinating committee voted to extend the permit past the 2026 current end of that permit and to make some administrative changes to update the planned and the associated interlocal agreement. I believe the commissioners court approved the same approach in november. What we're recommending is to set aside what we believe will be the increase in the transfer. It's been growing at about a million, a little bit less than a million a year. We would like to set that aside, just the implemental million aandearmark it and allow for the time to do that additional work and stay true to the permit and its intent. The next slide should be . . .
10:21 AMWe've got roughly $25 million budgeted for inter-locals for fy2020, based on the approved agreements. Again, over the forecast period we think that's going to continue to grow between 2. 5 and $3 million. Our eight-year average is 2. 7 million a year. Some years it's been more, some less. As we are discussing these challenges with sb2 and how we can prioritize resources, the city and other entities are as well. And as we talk about full cost recovery for services we provide on behalf of other entities, it's likely the city's going to have having those discussions as well. We wanted to highlight this is one of the big ticket items in our budget. It's imperative that the city and county work together on these items and see how they can be more sustainable over time for both parties. And I would mention that the city does pay the county or central booking, and that's $6. 6 million of revenue. That's part of that money that's coming in. If for whatever reason that had to stop, rather than having $30 million of new resources, we would have about 7 million less than that. So that's a big deal. That's something that's a risk. That's one of our items we watch carefully, given the size of it.
10:22 AMSo as you recall, we negotiated a successful ground lease. What's not on this chart is the initial revenue that we received from that ground lease, about 13 million that we used to de-pedefease the debt. This provides a good snapshot of the revenue going forward. And the court wanted to match up that associated expense with -- or to help with the expenses associated with a civil and family courts complex. We moved about 460,000 to the debt service fund. What we'll be looking at in future years, because we know there'll be maintenance and operation costs associated with a new civil family courthouse, we'll be looking at matching that up on the general fund side because we have limitations on the general fund side we'd like to talk to you about in the future. That might help us in future years.
10:23 AMNext is the energy save --
Before we move on, I want to underscore that last slide. This is one -- if you can go back to the amount of revenue that we'll be getting each year from this 308 guadeloupe lease, I think this was an incredibly smart and prudent action by the county to hang onto that valuable downtown property and to go to the market and say what is this worth, and what proposals do you have for us. And we got back several very creative proposals. And we picked the one that maximized the revenue to the county over time. And so this is a way of off-setting and in the case of revenue caps, making up for a loss of revenue for county services. And I think it's really worth underscoring this because to me, this was a very smart and very prudent strategy that the county undertook. And it's one that we're looking to replicate with the palm school site as well. Keep the land in the county ownership, protect the historic buildings, but see what the market would produce in terms of value for the land and to the county and their citizens.
10:24 AMThank you for underscoring that, Commissioner Shea. As stated, we dedicated the revenue from 308 guadeloupe to our civil and family courts project over time. And there will be maintenance and operations costs. If we take this just as an example -- and it's a good example, but it isn't exactly the same value as palm school -- we do see that on a ground lease of palm school it could bring in $2. 5 million annually on a 99-year ground lease, dedicated to health and human services at a time when we are trying to -- very much trying to find about $5 million ongoing increase in health and human services for the next three years. We punted that because we could not find the $5 million. This is where we May be able to find it in the future, is in the sale of the ground lease of palm.
10:25 AMJudge, I just want to point one thing out, because I was new to the court at the time this decision was being made. And this decision did not come without a significant amount of criticism. But we listened to our professionals, who told us that this was a forecast that we should be expecting. And it has turned out that just what our professionals told us to expect is beginning to happen. So I think the court took a courageous step and made the right decision that will ultimately benefit the taxpayers for years and years.
10:26 AMThis is one of those alternative revenue sources we were talking about, real estate portfolio revenue, to offset the burden of the property tax.
Okay. next is the energy saving project in the jail. This past year the commissioners court did improve a number of investments in the jail to reduce energy consumption. And so we anticipate that those will generate at least $1. 1 million in savings where we can actually take that money out of the sheriff's office utility budget, maintenance budget, other kind of line items, and we can redirect those to other things. We had originally discussed moving those resources to cover some of the debt service for the project. Given sb2 and that there's no restrictions on savings, we can keep those in the general fund now. For 2020 we sent over $270,000 of savings to the debt service fund to cover some of the debt service on the initial project. But at this point, i'm hold that 270,000 in the general fund to make some of the numbers work, make sure we can cover the cost drivers for 2021. That would increase over time. The number here are based on the initial implementation. I think they're still implementing some of the project. I don't believe we'll get the full benefit of the million dollars in 2021. But it will be at least 270,000 and that's going to go up over time. There's additional savings that aren't shown here that are more cost avoidance. When utility rates go up, we wouldn't have to pay that increase because we've got lower utility costs. There's two phases of the project. The first was approved last year, replacement -- energy-efficient lighting. There's also some other projects funded with cos. For fy20, the commissioners court during budget markup intended to fund the remaining 10. 3 million of phase two with certificates of obligation. But the court actually approved using some general fund resources to pay for those. We won't have to pay the debt service on phase two of the project. There'll be more savings than we originally anticipated because we're not having to pay the interest on the full project. We really appreciated that. That gave the court some flexibility in our budget moving forward as well, hopefully.
10:28 AMI want to underscore this. this was another innovation. There's so much negative attitude toward government that I think it's important to underscore where we have been nimble and creative, and innovative. And we've done that in this case. The jail a huge user of energy. The electric bills alone are massive. The water bills as well. And so by investing in more energy-efficient and water-conserving systems on the front end, which were expensive on the front end, we're realizing it's a lifetime of energy savings. We have dramatically reduced our electric and water bill at the jail. And again, the taxpayers will reap the benefit of that. And I think it's important to notice it and call it out.
10:29 AMYeah.
I mean, these have not been witnessed yet.
I believe all the lighting is currently being replaced.
I mean, but we haven't witnessed the savings. I mean, we -- with our eyes open.
The benefit of the savings is that it's guaranteed by the vendor. If we do not realize these savings they will actually have to cut us a check. So it is certainly possible, if not probable, certainly, we couldn't get the consultants to commit to more. But it is very likely that the savings could be higher than the 1 million that's projected right here. But the savings of 1. 1 million -- and that's converted into energy for the purposes of the contract -- is guaranteed in the contract. And that's what the performance contract aspect of the contract means.
10:30 AMThat's what's so exciting about this. This isn't speculative savings.
This is --
Guaranteed savings by the vendor. And thank you very much for championing it, Commissioner Shea.
I'm making a point, I just want to see it happen and I want to see people -- because there are times when you don't get checks cut back. Litigation starts. And it's easier -- we went into it with the right intent on this thing. We're decommissioning 192 beds, closed four buildings. You've got to witness some savings with that. But let's make sure that that doesn't get thrown into this deal about, okay, here's where the savings are when quite frankly -- we just need to make sure that we're doing a really good job of witnessing whether or not this is something that's going to be beneficial.
10:31 AMWe need to fully implement the program, make sure it happens the way we thought. It's likely if it it is successful, we could use this model in other places. The original proposal was over $40 million from the vendor and we spent hours upon hours working with the vendor and with the sheriff's office to get a program that actually made sense that would actually pay for itself. And so we're excited. At the time, we didn't know what was going to happen with sb2. This gives us another lever that we didn't have access to before.
When will we start to know -- is there -- is it the end of the fiscal year this year where we'll first be able to track the savings and the contractual requirement for the vendor?
10:32 AMIt's going to be completed at the end of this fiscal year. We've already started. We removed $270,000 of utility cost in this year's budget in anticipation of the lighting being complete. One of the advantages for the sheriff's office is the old lighting you replace every six months. Some of the lighting is 30 feet in the air. Not only is it the light bulb switching out, but having the person to safely change the light bulb in the air we won't have to do. There's lots of efficiencies in avoiding maintenance and things. And again, we're excited about this one. All these various levers. Last year we mentioned whatever plan we come up with, we don't think you're going to be completely happy because you're not able to prioritize the resources. We're trying to brainstorm on every area we can go to to make this as painless as possible.
10:33 AMHow many buildings are there in del valle, is it 14?
It depends on how you want to count some of the outbuildings they use for training and the like, but of the main facilities out there, there's a good, solid ten that are in use constantly, the larger, every day. Then there's the academy area of training, another ten or so buildings. Those are relatively small and not used for corrections purposes. You're going to be hearing about buildings five through eight later on today related to that item, too, and building nine is associated with that, but they're keeping that one open.
I bring it up because the bad news is our physical plant of the del valle correctional complex is inherently inefficient because it has multiple buildings. So that's the bad hues. News. The good news is we have an adult system master plan that intends to take down the less-efficient buildings and build better buildings that are purpose-built, less traumatizing, more appropriate to rehabilitation and to the more modern and more compassionate view of corrections, and also far more energy-efficient and less costly to operate.
10:34 AMThose new buildings will need the same type of mechanical infrastructure because of the central plan. That's going to reduce -- it's not a huge cost.
I did want to -- if you don't mind, I would like to insert, because we are conservative. We did not account this as actual savings in calculating this, but there's $9 million worth of boilers that we won't have to replace in the next 20 years because of the central plan we're installing. Each building stands on its own with its own boiler right now. Some of the boilers are inefficiently placed. Those are all going to be going away for most of the buildings and replaced by the central plant. It's a long-term investment that the court was very wise to make.
10:35 AMAll right. moving on, retiree healthcare policies. We've discussed this in the past. There's a number of local jurisdictions that have a tenure-based contribution for retiree healthcare that includes the city of austin, lcra, the county currently contributes the same amount regardless of tenure. For right now, that's about 22,000 a year for those retirees under 65 and about 6,000 a year for those 65 and older. The reason for the significant difference for those 65 and older is because medicare is the primary pay-giver. The number has increased by 10% a year. Each year in the cost drivers, one plus $1 million of the new resources are dedicated to new retires that are current employees that are eligible for retiree healthcare coming on the health plan each year. It's also important to kn know in May 2019, 972 employees were eligible to retire with at least eight years of service, including 513 employees that were age 59 or older. That's the target group that's likely in the near term. And the last of the baby boomers turned 65 in 2029. The baby boomers are still out there working, but we need to be prepared as they move on and make sure the county is able to continue to provide retiree healthcare that is not in a --
10:36 AMOh my god, i'll be 65 in 2029. [ laughing ]
So what is the strategy -- or what are the strategies? I'm not seeing them so clearly here. Are you --
Discussed with the court in detail last year. But for example, the city has a -- I believe if you work 20 years, it's kind of a max contribution. If you work less than 20 years, it's a stair step down. Right now the county pays about 85% of the retiree portion of healthcare. And so the thought is at least we worked on this, about ten years ago, we're going to revamp it. We would -- we need to look at the market and see what it is. Whatever made sense ten years ago May not make sense in this environment. If we went to a t tenure-based plan, the more you work, the more contributions. I think that makes all the sense in the world. As far as your retirement contributions are based on how long you worked and what your contributions are and they're different for each employee based on what their commitment was to the county. It's something that I think we'll need a year or two to work on. We want to bring it forward and give employees advance notice so they can plan for that, but then set a target date and implement it. We can continue to talk more about that. I think there's -- full cost recovery, i'll talk about that. It's something that we have talked about in the past. I believe within the next two weeks we're going to have a new indirect cost rate coming forward to you that's going to be a little bit less than 20%. It was 36% this previous year. And I know that alan and alex spent a lot of time with our consultant to make sure that the rate is appropriate in capturing all of our costs that we would be using. We expect to revise the rates that we would want to charge for school resource officers, law enforcement dispatch and security. There's things that we want to work with the medical examiner's office on as well. That's a lot. This is new item. We're doing our best and moving as quickly as possible. This May be something we May need some more outside resources on. We've had initial discussions. We haven't found a lot of expertise in some. All the help we need. We want to -- we'll be working closely with departments on this. As the Judge Mentioned earlier, 87% of our resources are property taxes. The remaining 13% are fine and fees set by statute. So there's not a lot of wiggle room. For the part the commissioners court has true control over -- last year I thought it was around 2 or 3% -- we've got to do everything we can to maximize that and make sure that the amounts that we're charging other jurisdictions are appropriate. I'll end it with that. There's a lot of work we need to do. Alex braden is our lead on that. I want to thank him for all he's doing.
10:39 AMOur target budgets as you saw on the slide that included cost drivers is $705 million. When we talk about the $37 million in incremental funding, your budget office pays attention to the $705 million as well as the reserves and everything that goes into the budget. What we'd like to do in light of sb2, I think it's incumbent on us to do this, is to even take a further deeper dive into those target budgets. We're not proposing this for the fy2021 2021 budget process, but for fy2022. In the meantime we would like to prototype and probably use ourselves, our budget as an example to provide the court with some differing views, what I think of as more dashboard-type information in the black book writeups. That is a book that's pretty thick. I know they've gone electronic. But if you were to print it out it's pretty thick. We want to make sure that you have the information that you need in future years if we are needing to look at where to prioritize, especially in light of strategic planning efforts that will hopefully be under way here soon. We want to make sure you're well-positioned for those discussions. Every year we look at vacancies patterns, at spend patterns. This would involve a greater emphasis on those. There's a new budget rule that was implemented this year that goes into effect April 1st for vacancies that are over a year. We look at vacancies that are 120 days or more in the budget process and we'll continue those efforts. Just wanted to preview this so when we talk about it later in the summer and going into next year you know what we're talking about and departments are aware of what our intent is, which is really mainly to provide the information in a more easily digestible way. We've started that process with mandated versus discretionary information. It's just a continuation of that look.
10:41 AMOkay. next is talking about prefunding large budget items. The cost drivers in the budget are 37. 1 million. We're only getting 30. 8 million in new resources. The reason we're able to bridge the difference is because we prefunded the new civil district court in advance. We prefunded expenses for the probate court moving, including maintenance. We have that in this year's budget in preparation. The same for the new tax office building. I knew there was a third one, north campus. I didn't remember it earlier in the presentation. That was the third thing we prefunded. We have a $2. 3 million lease ha we funded in this year's budget with some transitional cost as well. And also some security cost in there. We also did remove from the sheriff's office budget six law enforcement deputies related to the manor isd school resource officer contract. That contract is ending this year. So we did remove the expenses on that and will be working with them on a transition plan to make sure that those six employees continue to be employed and just move into new positions until some law enforcement positions are freed up. And we did discuss the 308 guadeloupe revenue. We need to make sure we've got a plan for that for 2021. Then we are planning to keep the energy savings projects, at least the 270,000, hopefully more, in the 2021 budget and re-prioritize that to other needs. I think the biggest thing is going to be with the strategy, we need to prefund items earlier. I believe it was Commissioner Shea this past year recommended that we did have some leftover funding for compensation, that we hold those in this year's budget in preparation for 2021. Another reason we can bridge that gap is because we set aside money in this year's budget. We're prioritizing that to benchmark. We'll likely get certified value in august, publish the preliminary budget in late july, based on a conservative estimate. In the event that new construction comes in higher than 2. 5 bilion there could be more resources to the court. The challenge is going to be, as you consider whatever those critical items are for 2021 and think about items for 2022, I would recommend you hold all or most of that back, not for new initiatives, but basic items. This is a new environment and we're moving into something that we haven't lived through before. We would urge caution on that. The difference between the $2. 5 billion new construction and 4. 5 billion is only about $6 million. I don't want to downplay the significance of $6 million, but when we have over a $100 million budget that is not a huge difference. Over 800 million for the general fund. So that 6 million is very critical. We have to be really cautious on how we use that. If that comes in at that and there's no guarantees. There's been many years we have had new construction less than $2 billion. I just don't think that's sustainable. I don't know when it's going to change. There's not any indicators. I can look at my window and I counted 13 cranes just looking north. South I see similar. But we can't guarantee that's going to be there for us to continue. But these are a lot of initiatives. This is going to make the transition better than most jurisdictions. It's going to be tough, but we're well prepared, as much as we can be.
10:45 AMCommissioners, questions? budget preparation guidance.
The last two slides, very brief. The budget preparation guidance starts on page 19 for departments. We will be putting out a budget manual that gives them much more detailed information, for those that are interested. So I would ins invite them to read the entire guidelines, but also look at page 19 for the budget preparation guidance which will be very similar to what you've seen in past years, the review of vacant positions, looking internally. It will be, I think, a more strict recommendation on any new ftes. We've really tried to focus on piloting projects first and proving up the results of any new programs or different ways of executing our programs. And we would encourage departments to really take advantage of that as well. With the budget calendar, the dates that are up here are pretty well-set. I believe the employee public hearing that's under tbd here is currently on all of your calendars for May 21st. We will get hr to help us get the message out once we've triple confirmed that is the date we want to use. I will say -- because I think it's important -- that the budget guidelines state that we are assuming there will not be an election on the tax rate this year. And I think in future years, if it is the will of the commissioners court to start looking at items that you believe need to go out to the electorate that we need to have those conversations very early. I would invite you to have those conversations with us in february. I think i've shared with you, and i'll get barbara to give her approval, if we were to go forward on an election it's a very tight calendar. And it's a very earl calendar. And so I just want to be very upfront that we are not assuming that we would go above the voter approval rate of 3. 5% in these guidelines. And we will test that again with you in june, but we really need to have those conversations now. So that is the end of that. I should say budgets are due April 20th. Please -- that date as well.
10:48 AMAnd also we're not asking for any budget reductions to balance the budget this year. Those could be needed in the future. But for the near term we're not asking for any. That's an important message that we send employees.
Commissioner Travillion.
Just to follow up on a comment or discussion we had earlier, i'd like to hear your thoughts about a grants office, whether you think it would be beneficial, where you think it ought to be located organizationally, and then staffing. I mean, as we look forward and think about things that are priorities, that might be difficult for us to fund, how do we go about the process of finding alternative funds that fit our budget model?
So I came up earlier to address that point, and i'll just say I believe that we need a grants policy. And that is on my work plan to do. And I think that grant policy will set the foundation for what types of grants you're talking about. Because, recall, a very successful grant that we're undertaking right now, which is the public defender office. We're very grateful that we have 50% funding for the next several years to accommodate that new program. At the end of that program we, travis county, will be fully responsible for that program. So it's kind of like the pilot programs. It is a very important piece of how we look at expanding programs or doing things in innovative ways. But we need to be very -- also mindful that it needs to fit in within -- and I think the Judge Made this point earlier -- within our purview of programmatic issues that we feel strongly about. And i'm very grateful that the strategic planning efforts that will be under way hopefully in the next several months will also help us set that foundational work.
10:50 AMThe second-to-the-last slide that had the -- I guess warnings about what potential impact we might see from the restrictions of the revenue caps, which I assume would only be much worse if the legislature comes back and reduces the ability to raise revenue to pay for services even further, which they have talked about. But I think it's important for us to find effective ways to communicate the things that we know are coming. So, I will frequently hear from people who want a lot more traffic enforcement on county roads. And we have limited funds for those positions now. We have funded some and they get shifted internally within the sheriff's department to cover whatever needs they have. But the fourth or fifth bullet that says funding for new programs for full-time equivalent positions is greatly limited. We need to find effective ways to communicate that so that people understand this is now in place. So when you come to us and you say, we need more people to, you know, enforce speeding on highway 71, well, we got creative with the constable's office but we simply won't have the flexibility to fund positions for things like that. And I don't know how we tell people that in a way that they get it or hear it. But this is one of the consequences of that action by the legislature.
10:51 AMWell, and that's what I heard loud and cler about funding positions. And so I think that you're either serious about what you said here, or you're not. So we need to know that so we can know where the parameters are to what we do or what we recommend or what we think needs to be done. So i'm taking you seriously.
10:52 AMPlease do. [ laughing ]
And to that note -- we've talked briefly about this at the end of last year. The budget hearing process I project will be very similar to last year. It really needs to be driven by the commissioners court, because there just are very, very limited opportunities for any kind of growth. And it might be that we don't have budget hearings. I don't know yet. But I do know that it will be limited in nature, just like it was last year. And I think prudently last year -- you touched on this already -- the entire court has -- we were very mindful. And I just want to highlight, again, we are -- our cost drivers, which are our main meat and potatoes, priorities in past years, total $37 million and we're only projecting 30 million. And you made up that gap. And we will continue to push you to make up that gap in preparation for next year. And then next year we will continue to tell you we need to prepare, we have the pd office coming online, we have these major investments that we're still 'digesting,' if you will.
10:53 AMAnd I will add, the areas in red are likely the money you have for new programs and ftes or paying for dimen -- compensation increases. The compounding effect with the new initiatives is in the red area.
Let me ask you about that red area. It shows that we are at a legislatively created deficit -- not deficit, a legislatively created lack of capacity of 14. 6 million by 2023.
10:54 AMRight.
From a scheduling purpose, we are not looking to bust the cap in November 2020. We're probably not looking to bust the cap in November of 2021. But are we looking to bust the cap in November of 2023 in order to manage some of what we know is coming?
I don't know. I can take it year by year. This year we've got toiogrow at a slower rate and stay within resources. Whatever new resources we get in for the certification -- I hope it's more than what we anticipate -- we need to hold some of that back, not for new initiatives, but for the basic building blocks of all those things that are in 2022. That $6. 8 million, if we get $6 million this year of new resource from the new construction we hold that back and make up the difference there. We're going to grow a little bit less. We're going to look at efficiencies and do all those things. We're going to do -- the whole thing will reset. It's likely that $6 million shortfall will get pushed into the next year, because we balanced the budget within the resources. And we have to keep pushing that red area to the next year being smaller and manageable and we'll figure out strat strategies how to do that.
10:55 AMIf you were to turn back the clock and the grant wasn't available for the pd office and the court wanted to implement a pd office at travis county, ha type of initiative would likely be the type of thing that you would be talking about, judge. if those types of items that are priorities for the court generate in future years, you will need to have those discussions on what I call, kind of, transformational programmatic changes. We're working on keeping on the lights.
I would add to that, that's in there. In the green row. But we're going from zero in the 2019 budget to needing $15 million by the end of 2025.
10:56 AMWe're very grateful for the grant.
We are excited, but thattess a big driver. That took made the blue areas much smaller.
It's 67 new fte that you're going to need to absorb in that workforce development.
Plus resources for the. mat.
This is what I would ask for a subsequent item before we begin negotiated budget in earnest. I would like the budget office to come up with some triggers that we can -- some high-level -- they don't explain everything. But i'd like four high-level triggers for the commissioners court, basically a dashboard for us to take a look at to know if we tip over this, the probabilities of us having to go to a 3. 5 cap-busting election have now greatly increased. What I would suggest those four triggers be -- and i'm open to other suggestions and y'all would know better than I -- is if our new growth is under x. Because we are presuming a new growth for this coming year. And then a very conservative new growth of 2. 5 over the next five years. But if for some reason -- we know the bubble bursts at some point. So if new growth is under x, whatever y'all think x should be.
10:57 AMNew growth, I would describe that as new construction, because the effective tax rate, if we grow a lot or a little, is going to adjust. It's really that effective and new construction base that's going to really drive resources.
Good refinement.-another is ife bring on new programs over y, whatever that is. Because we're bringing on the public defender's office, that's a big thing. If we grow into new programs that we don't anticipate, I think that that also increases our probabilities of needing to go to a 3. 5-buster. A third one is a compensation increase, workforce development increase over what we expected. I don't know what the tip points should be. I'm looking to you all to find out those tipping points. I would imagine our aggregate ila would be a fourth. If we see our aggregate ila expenses with the city of austin increasing substantially.
10:58 AMThere's room for a fifth. the one that makes me the most nervous is some kind of new mandate whether coming from the state, indigent defense, lawsuit with harris county and changing pretrial practices. It's the big things, it's not the small things, it's the big thing wholesale sea change before we could make some incremental change to the tax rate.
10:59 AMThat would decrease our fees, to an extent?
With regard to -- we're already 87% personal revenue bond. Changes in our procedures would be -- there are some beneficial changes in our procedures, but it probably won't have much of an impact on finances because we already have a very high revenue bond -- I mean a personal bond rate.
That's why I didn't think it would affect us as much as maybe other counties who are utilizing the bail cash much more.
I think --
Much more.
I'm not the expert on this, but I think it's going to depend on some of the conditions with the bond and whether or not the county would be paying for those type of monitoring services and some of those are paid by the defendant right now. And if the county, and I know harris county fully funds those, if we went to that model at some point, that would be a big cross driver for us. That being said, any way we can reduce the jail population is is our biggest single cost driver, just talking about the reserve, there's 2. 1 million that we're able to remove 36 ftes in the sheriff's office, ten in the juvenile population. In the event one of these things happens like that within we need something to continue to keep the jail -- to continue to keep the jail population, we've got resources to be able to do that. We've got to use it for the appropriate purpose, but those big sea change things are the ones that make me the most nervous.
11:01 AMWe'll come up with that dashboard. Again, it won't explain anything but they would be bellwethers to see if we are approaching the rumble strip.
I like that idea. I think it would work. Especially the one about 37. 1 in cost drivers and the 30. 8 in revenue.
If we can just keep that in mind.
And I think that we should prepare politically for the probability that we hit these rumble strips in the November 2222 time period. That's an issue for us. That would be an election year and it's concerning. But I think we should be bending our minds to the probability of a November November 2022 cap buster. Let's prepare for the worst and hope for the best.
11:02 AMAnd just -- I know we've said this before, but we also have a bond program currently we pay for the employees on the general fund side. We open parks, cost drivers on the general fund side. Those are the types of items i'm thinking we need to be talking more and educating the public on that if you would like this new park, there's also a m and o portion of that that helps maintain that. Just as an example.
So before we leave this, I do want to repunctuate what Commissioner Travillion was saying about growing alternative revenue sources. We will look at how we could grow our grants, pursuing grants for good priorities instead of prioritizing to the grant, of course. We also are already looking at and should continue to look at our real estate portfolio. No lazy dirt. Any property that we own either needs to be in current productive public use in providing services or infrastructure or it needs to be sold and -- or ground leased into private sector utilization to generate property taxes. Nothing should be idle and nothing should be underutilized if we own it. Also, we are looking at alternative tax revenues. The hotel occupancy tax, we will continue to explore that with the city so that we can share the benefits of the hotel occupancy tax, and any other resources that we can find that are alternatives to the property tax so that we can diversify our portfolio, as it were, since we are currently at 87% property tax reliant.
11:03 AMJudge, I just have one caveat to the next to the last statement. I think that all of the property should be as productive as it can be; however, there are going to be some parcels that are compatible to affordable housing and potentially some type of land trust system.
11:04 AMAbsolutely.
I just want to make sure that -- where we can, guarantee affordability if it means reserving part of the space that is being developed around it.
Absolutely. the first priority is if the property can be -- can produce public benefit that is among our priorities, absolutely it should be used for that. But if it is being underutilized or has additional capacity beyond that public utilization, we should be making it as productive in the private sector as possible. We'll need it. We'll need that property tax revenue. Anything else?
Great work.
May we live in interesting times.
Generally in the past we've brought this forward and brought it forward the next week. I know this is the last time for the next few weeks we have all five of the commissioners court, so we would be fine of you approving the guidelines.
11:05 AMThat includes updated language based on the feedback in the civil courts.
Do we need to spell it out?
It's in the revised. it's further revised and already in here.
A motion by Commissioner Shea, seconded by Commissioner Travillion to approve the budget guidelines as revised. All in favor? That passes unanimously. Great job, y'all.

11:05 AMThank you so much. A lot to digest. We are at 11:05. What I would like to do is take a couple of executive session items -- actually before you all leave, let's do bats. Budget amendments and transfers, item 17. Consider and take appropriate action on budget amendments, transfers and discussion items. Any questions, comments? I'll take a motion.
11:06 AMMove approval.
All those in favor? that passes unanimously. Thanks so much. Let's take a couple items in executive session.