Madam Chair and Members of the Board of County Commissioners:

I am pleased to present the Adopted Budget for FY99, which began October 1, 1998. The operating budget is $939.6 million, while the capital budget is $314.1 million. This budget is an update of the second year of the two-year budget presented last Summer. It reflects the fourth consecutive year of property tax millage reduction to the citizens of Hillsborough County.

At the same time, you have been able to invest resources to address some of the priority areas you identified last year -- crime, economic development, code enforcement, and community based planning. We were also able to address audit recommendations that encouraged us to lower fleet maintenance costs by adopting a fleet replacement schedule more in line with that of private businesses.

These selective issues have been addressed through an update process without the need to build a budget from scratch through the intensive process we used last year to mold budgets for two separate years. In large part, the Adopted Budget for FY99 reflects simply an updating of the Planned Budget you adopted last September and many areas of the budget are unchanged.

Where We Started: The Planned Budget for Fy99 Approved in September 1997

The budget update process, in accordance with your past direction, was kept to a minimum. In keeping with our biennial budget process the update process for this “off” year of the two-year budget cycle eliminated the extensive preparation process. Toward that end, we developed a full line-item budget for FY 99 last year simultaneous with the preparation of a line-item budget for FY 98. The Planned FY 99 budget reflected certain assumptions for revenues as well as normal inflation in our expenditures.

Major Assumptions in the Planned Budget for FY99 - Probably the most significant revenue issue was the anticipated growth in the property tax base. At the suggestion of the Property Appraiser, you adopted a Planned Budget that reflected a 4 percent increase in taxable value. That increase matched the average increase for the past ten years.

Some of the major expenditure assumptions were an average 4 percent pay-for-performance pool for employees, no increase in employee or employer contributions to our self-insured health insurance program, no change in retirement contribution rates, and minimal inflation in operating expenditures. We considered what funds would be carried forward from FY98 to FY 99 based on past experience, and we addressed our debt payment schedules for changes in interest and principle payments.

How the FY99 Planned Budget Has Been Updated

Revenues - To prepare the updated budget, we revisited revenue estimates to assess more recent information. Updating our revenue estimates allowed us to validate assumptions made a year ago and consider new information. We found that our tax base grew faster than anticipated. Our countywide tax base for FY99 grew 8.8 percent. This is the second year in which a combination of a strong economy and aggressive review of tax base exemptions led to unusually strong growth in the taxable base.

It is important to note that a portion of the increase in the countywide tax base occurred in downtown redevelopment areas. Under State law, the County must share an added $0.7 million in County revenue with the cities of Tampa and Plant City for their tax increment financing of improvements. The total amount of County property tax revenues used to support city redevelopment activities now totals almost $3 million per year.

With the larger growth in the tax base, the County had additional property tax revenue available for FY99. That presented the Board a prime opportunity to provide tax relief to County taxpayers, which you did.

The picture was similar in terms of our tax base for municipal services. The unincorporated area’s tax base, on which taxes are levied to provide municipal type services, grew 9.2 percent--up from the 4 percent anticipated in the Planned FY 99 budget. Given the potential we continue to see for financial strain in funding municipal services to a growing unincorporated population, the Board opted to retain our existing tax rate for unincorporated services. As we have discussed in prior years, the County faces absorbing the full cost of Sheriff’s deputies hired with federal grants that phase out over three years, and we still have significant needs to maintain new parks, staff recreation programs, and provide fire protection and emergency medical service to unincorporated residents and businesses. Late in the budget update process, the Board adopted a new service standard for law enforcement that will also impact future service costs: a planned ratio of 1.7 deputies per 1,000 unincorporated population. This commitment will add to our strain in finding sufficient revenues to meet funding needs, but it sends a clear message to our community of the Board’s commitment to public safety as a priority.

As we look forward to the next biennial budget cycle, the Board has directed staff to review options for reducing the County’ reliance on property tax through the substitution of other revenues – a “diversification” of our revenues. Just as an investor faces significant risk by investing most of his or her funds in a single company’s stock, the County faces significant risk by relying heavily on a single source of revenue -- property taxes. We anticipate reporting back to the Board on potential areas for revenue diversification prior to consideration of the next biennial budget for FY00 and FY01.

Expenditures - The required County retirement contribution for participation in the Florida Retirement System declined this year and the County’s budget was adjusted accordingly.

The budget update for FY99 factored in mid-year FY 98 actions by the Board that impact both the revenue and the expenditure sides of the budget for FY99. In addition, the budget addresses issues that came up during last year’s discussion that could not be fully funded with the resources we believed would be available in FY99.

Midyear Adjustments to the FY99 Budget That Impact the FY99 Budget

Expansion of Existing Services - One issue that needed to be incorporated into an update process was the adjustment of the Planned Budget to include budgetary actions taken during FY 98 that impact the FY 99 budget. Several key programs were expanded by the Board during FY 98:

• Based on recommendations from a performance audit of the Health and Social Services Department, the Board added staff in the County Attorney’s Office and in the Health and Social Services Department to improve internal control, quality assurance, and financial management.
• The Economic Development Department expanded to assume the City of Tampa’s federallyfunded Job Training Partnership Act (JTPA) program.
• The Equal Opportunity office expanded to provide additional investigation of complaints under federal fair housing protection.
• The Planning and Growth Management Department freed up property taxes by using added building permit revenue to pay for existing building permit activities, to open the Northwest building permit satellite office, and to address state regulatory requirements for certification of inspectors.
• Both the Planning Commission and the Planning and Growth Management Department received support to begin a community based planning program.
• The Courts received funding for the juvenile drug court. This funding was inadvertently left out of the Courts budget request for FY 98 and FY 99 and was funded in FY 98 through the use of restricted Court fees.
• Contributions to the County’s self insurance fund were raised to provide full funding of the general liability program.
• Funding in the amount of $50,000 per year was dedicated to the Chamber of Commerce for an international trade program, with an additional $50,000 per year for the U.S./Africa Foundation. These each reflect two-year commitments of seed money.

Key Elements of the Updated Budget: Meeting Board Goals and Continuing to Address Citizen Priorities

The healthy economy provided opportunities in this “off” year of the biennial budget process to address a small number of issues raised last year that we could not afford. At that same time, we believe it is important to keep the issues we consider to a minimum, and hold off most decisions to next year’s biennial process for FY 00 and FY 01. In reviewing requests for added funds in the update of the FY 99 budget, we focused on applying six criteria to evaluating requests:

1. Did the request support one of the twelve goals adopted by the Board earlier this year?
2. Did the request result from an external event that forces funding of a request?
3. Did the request address a technology issue or problem (i.e., year 2000 compliance)?
4. Did the request address unresolved employee equity considerations?
5. Did the request result from the operating impact of an already committed capital project?
6. Did the request solve a problem which can be addressed with one-time funding as opposed to a requirement for continued funding?

Board Goals for the County Administrator in 1998 - The Adopted FY 99 Budget directly addresses two of the goals that the Board adopted after the Planned FY 99 budget was developed:

Goal 1: Develop strategies for enhanced economic development opportunities including job creation, welfare reform, and revitalization of distressed communities.

The budget:

• Expands the targeted industry program that pays water and wastewater fees for businesses that create jobs with above-average salaries.
• Provides funding for a pilot program to assist businesses that participate in welfare to workplace hiring.
• Provides seed funding to establish a community development corporation to manage the community center under construction in the USF area. The funding level will phase down in FY 00 with the expectation that the corporation will be self-sufficient in FY 01. In coordination with that effort, we added additional Parks and Recreation Department resources to those already included in the Planned FY 99 budget to facilitate the opening of the new facility in FY 99.

Goal 2: Identify strategies to address restructuring of the finances of county government and improve the public’s understanding of the budget.

The budget:

• Provides a balanced budget with no increase in ad valorem taxes.
• Reduces reliance on property taxes through a tax rate reduction.

At the same time the Board adopted a comprehensive set of financial policies that should assist in structuring how we do business in the future. I would also like to note that in the interest of expanded public access to the budget, we placed the County’s budget document and the Taxpayers Guide to the Hillsborough County Budget on our Internet home page so that citizens can download budget information. That site may be found at:

http://www.hillsboroughcounty.org

External Events - The budget also followed up on Board actions in FY 98 to prevent future flooding in the County:

• Provides personnel in key support elements to ensure success in the Board’s decision earlier this year to accelerate the stormwater construction program -- the County Attorney’s Office, Real Estate Department, and Purchasing Department.

Technology Compliance - The budget provides funding to resolve software problems that may arise between now and January 2000 -- generally referred to as Year 2000 Compliance -- or “Y2K.” We believe we are either compliant or in the process of becoming compliant with our various automated systems and will be reaching out to the local business community to assist in getting the word out locally. We are continuing to test equipment and software to validate our compliance. Along the same line, we are investing one-time funds to address a variety of automation needs including the beginning of a document imaging project that should provide opportunities to significantly eliminate paperwork processing in three areas: Administrative Services, the County Attorney’s Office, and the Health and Social Services Department.

Employee Equity Considerations - The Board received recommendations from Civil Service earlier this year to adjust pay ranges based on market surveys of public and private employers. Civil Service also recommended a market-based pay adjustment consistent with moving the ranges. Finally, Civil Service recommended a merit increase. While we were not financially able to fully implement the Civil Service recommendations, it is important to deal with the issues that led to those recommendations. Separately, we had previously identified as inadequate the retirement benefits employees will receive under the pension plan the State requires us to participate in. We attempted to address this when we adopted a modified benefit program for most employees last year, but we accomplished only a first step towards providing employees the opportunity to impact their retirement income by making the investment decisions on a small portion of that program.

The Adopted Budget provides for improvement in salaries at a level less than that recommended by Civil Service, but greater than originally approved for FY 99, as well as a modest commitment to add funding for defined contribution retirement. Specifically, the midpoint of classified pay ranges increased by an average of 4.7 percent and any employee earning less than the new minimum for their paygrade was moved up to the new minimum. Second, we are providing classified employees a “market equity adjustment” averaging 2.5 percent, effective the first pay period after January 1 to minimize the compression of salaries within pay ranges that could result from moving pay ranges. Third, we are using the savings from the lower contribution to the Florida Retirement System to provide employees an additional modest contribution to deferred compensation accounts in an amount equal to 1 percent of salary, and phasing that benefit in on March 1. Finally, we provided an average employee merit pay increase of 4 percent. Most employees not subject to collective bargaining contracts will have their pay increase vary depending on their performance evaluations.

Operating Impact of Capital Projects - The budget provides Parks and Recreation equipment needed to maintain parks funded through the parks general obligation bond program in recent years. It also provides funding to added median landscape maintenance through privatization and one staff member to oversee those contracts.

Other Issues

Constitutional Officer Requests - The budget reflects the requested budget of each Constitutional Officer, including those of the Sheriff and Supervisor of Elections.

The Sheriff submitted a budget request for 16 additional positions for FY 99 above those in the Planned FY 99 Budget, proposing to fund those positions with a portion of the savings from lower retirement contributions. After due consideration, the Sheriff agreed to modify his proposed staffing to five new positions (three deputies and two community service officers) to allow Sheriff’s Office employees the same market adjustment and other benefits changes adopted for other employees.

Outside Agency Funding - Per the Board’s direction two years ago, we accepted applications for the competitive and non-competitive funding of outside cultural and social services agencies last year for both FY 98 and FY 99. No process was held this year, and agencies selected for funding during last year’s budget process will continue to receive funding.

Funding of Repair and Renovation of County Buildings - In keeping with Board direction, the budget reflects a contribution of one percent of General Fund revenues and one percent of MSTU Fund revenues to capital projects to repair and renovate County buildings. We developed a two-year list of projects last year for FY 98 and FY 99. In addition to updating the schedule, we extended out the project listing for the full six years of the capital improvement program (CIP). Detail is available in Volume II of the budget.

Other Budget Update Priorities - The budget addresses the following issues:

• Provides expanded enforcement of County codes by adding two code enforcement officers to supplement the three added by the Board last year. As you know, this has been a continuing area of citizen interest in our neighborhood meetings.
• Provides added kennel staffing at the Animal Services shelter to assist in cutting existing staff there back to a 40-hour weekly schedule.
• Responds to audit findings regarding inadequate replacement of our fleet by investing a portion of the one-time funds available to the County this year. As I have mentioned previously, we have put in place a fleet rental program that will begin to ensure that we have sufficient funds to replace these vehicles when they meet industry replacement standards. The result of this investment will be continuing savings on fleet maintenance costs, and increased productivity of our staff through reduced downtime.
• Provides additional funding for the Public Defender’s Office to complete a videoconferencing project that allows public defenders to represent inmates without the inmates leaving the County jail and without public defenders traveling in person to the County jail.
• Provides funding to Town and Country volunteer firefighters to cover this year’s installment payment on their ladder truck.
• Provides funding for several added capital projects: planning funds for the next phase of jail construction, land acquisition for the Suncoast Parkway Trailhead and Upper Tampa Bay Trail (phase II), planning funds for Montague Road to serve a new Town and Country high school, and funding for the Ruskin Neighborhood Service Center.

Summary

The adopted budget for FY 99 represents the continuation of steps we are taking to address the BOCC priorities for service delivery while operating within the resources available.

Once again, I appreciate the Board’s direction as we worked through the second year of our two-year budget process. I look forward to our continuing service to the citizens of Hillsborough County.

Respectfully Submitted,

Daniel A. Kleman
County Administrator