2021 budget guidelines

BUDGET GUIDELINES

2021 BUDGET

COUNTY OF MONROE

MICHIGAN

PREPARED FOR THE

MONROE COUNTY BOARD OF COMMISSIONERS

J. HENRY LIEVENS, CHAIRMAN

JERRY A. OLEY, VICE-CHAIRMAN

Transmitted to Board of Commissioners June 5, 2020

DOCUMENT PREPARED BY:

MICHAEL BOSANAC, ADMINISTRATOR/CHIEF FINANCIAL OFFICER

SUE MAIER, DIRECTOR OF FISCAL SERVICES

TABLE OF CONTENTS

1. PURPOSES OF BUDGET GUIDELINES 1

2. OBJECT STATEMENT 2

3. ANNUAL BUDGET WITH 2ND

YEAR PROJECTION 3

4. OVERVIEW OF THE 2021 COUNTY BUDGET 4

A. Budget Outcomes/Notes on County Finances 7

B. Financial Management Measures 9

C. Budget Positives 10

D. Budget Summary 15

5. REVENUES 18

A. Equalized Valuation & Property Taxes 18

B. Sources of County Property Tax Revenue 18

C. Inmate Dormitory Revenue-Special Revenue Fund 21

D. Court Equity Fund 24

E. Court Case Filings/Trends & Data 25

F. Friend of the Court-Special Revenue Fund 26

G. Fund Balance & Budget Stabilization Fund 27

H. State Revenue Sharing 29

I. Interest Earnings/Cash Management 29

J. Delinquent Tax Revolving Fund 30

K. Other Revenues & History of General Fund Revenues/Expenditures 31

6. EXPENDITURES 32

A. Retiree Health Care 32

B. Employee Health Care 36

C. Retirement 39

D. Employee Wages 41

E. General Fund Transfers-Out 42

F. Operating Expenses 43

G. Debt Schedule 43

H. Capital Outlay 44

I. Capital Improvement Projects 44

J. Enterprise Wide Computer Capital Outlay & Network Maintenance 44

7. BUDGET GOALS 45

8. BUDGET POLICY GUIDELINES 46

9. DEPARTMENTAL GOALS & OBJECTIVES 47

10. BUDGET COMPLIANCE 48

11. BASIS OF ACCOUNTING 48

12. PRIOR YEAR BALANCES 48

13. CONTINGENCIES 48

14. PROGRAMS FUNDED BY OUTSIDE FUNDING SOURCES 48

15. INDIRECT COST CONCEPT 49

16. FEES 49

17. FINANCIAL INDICATORS-PER CAPITA DATA CHARTS 49

18. 2021 PRELIMINARY BUDGET OUTLINE 54

1. PURPOSES OF 2021 BUDGET GUIDELINES

These guidelines are prepared to facilitate the preparation of, and to establish the parameters for revenue

and expenditure estimates for the 2021 budget. They outline the general direction for the preliminary and

recommended budgets. This document also serves to assist the County in complying with PA 2, the

Uniform Budgeting and Accounting Act by supplying requisite information on County finances to

policymakers prior to adopting the budget. It is one of several key reports presented on County financial

management.

Budgeting guidelines are defined as the Board of Commissioner’s principle budget policies to be reflected

in the annual appropriation process. In order to present these guidelines, it is necessary to review the

financial position of the organization and projections of the finances for the next budget year and beyond.

Below is an outline of financial information on the core operations selected for analysis. In summary, the

organization has remained in a state of financial stability and slightly improving from when this document

was drafted last year preparing the 2020 budget. Small incremental positive trends can be found in selected

areas of the budget and related financial position. While continued use of reserves has been required to

cover budget shortfalls over the past 10 years, these amounts have generally been trending lower and more

stable over time notwithstanding year-to-year variances. The 2020 budget projected a surplus when

adopted November 5, 2019. Since that time, one major budget amendment totaling $1.2 million of reduced

revenue has been made. As the budget is monitored throughout the current year, other measures may be

required.

As this document and the information contained herein were developed, the corona virus pandemic was

occurring throughout the county, state, nation and globe. Unprecedented actions and measures were being

taken to slow and mitigate the spread of the virus. The assumptions used in this document to develop a

preliminary 2021 budget outline will certainly stand to be modified and corrected over time as more

operational and economic impacts are known from the effects of this pandemic.

Financial review includes the following core areas of fiscal management of the County:

Current revenues and preliminary estimates of revenues for the upcoming budget year.

Economic forecast of the taxable value of real property is of primary focus and

consideration used in conjunction with the final Boards of Review and tax settlement

figures.

Evaluating past budget year operating surpluses or deficits and understanding the primary

factors that led to the financial outcome are provided. This encompasses all funds, including

major special revenue funds, the General Fund and cost centers within the General Fund.

Inflation trends and local economic conditions that impact supplies and contracted services.

Prospects for new taxes and fees, changes in current tax and fee rates along with collection

rates and best estimates for MTT adjustments. This includes what we know at this time for

the tax appeal settlement with DTE on the Monroe Power Plant and our best estimate of

results from the tax appeal of the Fermi II nuclear power plant.

Multiple categories of revenues and expenditures reviewed in trend analysis to demonstrate

the financial impact, changes over time and projections going forward.

Major non-recurring expenditures that fall due in the current budget year.

Major non-recurring revenue that will be realized or end during the budget year including

reserve funds.

Demands for public and internal support services from the organization and resources

available to provide these services. This includes demands for new employee positions

above any replacements or back filled positions.

External constraints on revenue, demands on the County due to external authorities, new

obligations, regulations and compliance. Of concern always will be the pending legislation

to extend court courts and fees in the absence of a new funding model and sunset of the

existing cost and fee schedules. These concerns spring from Michigan Supreme Court’s

decision in Cameron vs. Washtenaw County. While the decision kept the status quo, that is

untenable going into the future. The sunset provision from the Cunningham case in which

courts had imposed costs for which there was no authority; that authority is only through

statute and the legislature allowed costs to continue but this authority ends in 2020 and

clarity is needed as we project revenues into the 2021 budget.

Continued state funding for implementation of the requirements of indigent defense counsel

services for standards 1-4 and funding for the additional standards to be introduced and

implemented. From what was originally enacted in PA 93 of 2013 and the state responsible

for the cost of implementing the new standards, the County has implemented fully the first

set of standards with no negative financial impact to the General Fund.

The objective of this analysis focused on the above items is to define the financial parameters for the 2021

budget. All offices and departments should expect to see the financial position of the County and our

forecast reflected in budget policy recommendations from this office to the Board of Commissioners for

action on the 2021 budget. This will ultimately be incorporated into preliminary and recommended budgets

and is consistent with past practices related to budget development.

2. OBJECT STATEMENT

These guidelines are intended to present a framework with supporting data for preparation of the budget.

The preliminary outline for the 2021 budget reflects the supporting figures and assumptions contained

throughout this document, other ongoing budget management reports and are all subject to updated

information and figures throughout the budget development phase.

All State funded programs must continually be monitored to insure that changes do not take place that can

negatively impact the County’s current year operating budget and leave the County to cover obligations

intended for the State. This is due to the State budget starting October 1 while the County budget is

calendar year. Changes at the start of the State budget can impact the County budget during the 4th

quarter.

The Board of Commissioners will rely on those department’s receiving state funding to confirm the

accuracy of projected funding for 2021 and those department managers shall be prepared to modify budgets

should funding levels change even after the County budget is adopted. As a political sub-division, county

government is subject to the annual appropriation process of the Michigan legislature and therefore, any

strategies the state uses to lower transfer-out expenditures to local units. With the COVID-19 response and

other state budget changes, the impact to the County budget has to be understood.

Additional areas of concern relative to State funding that could affect the County’s budget and

corresponding level of services to the community include the following:

Impact from Public Acts 397 through 408 covering personal property taxes. In 2016, the

Michigan legislature provided the replacement funding intended to make local units whole from the

loss of revenue from manufacturer’s personal property tax. In the 2018 budget, we stayed with our

conservative budget assumptions for this revenue and the actual amount was much lower than in

prior years at $647,072 but still exceeded the revenue estimate. Accordingly, we have kept the

projections we had in prior budgets for this revenue source going forward. The four (4) years of

budget vs. actual for PPT:

2016 Budget $275,000 Actual $814,210

2017 Budget $275,000 Actual $1,452,564

2018 Budget $300,000 Actual $647,072

2019 Budget $450,000 Actual $1,005,007

2020 Budget $375,000 Actual TBD

Separately, funding reimbursement is provided to the Commission on Aging, Fairview Home and

the Museum’s budget. These amounts are reporting in those special revenue funds.

Changes in childcare funding, reimbursement rates, cost allocation plan amounts and associated

additional program administrative rules and requirements. We continue to measure the impact from

the new rules, requirements and interpretations of eligible costs highlighting the challenge of this

partnership with the state, courts and counties. We continue to monitor this cost sharing outcome

and impact to the County.

Solid Waste programs and changes to the fund balance in the Solid Waste fund from shrinking

revenues and continued demand for services will result in a reduction in the fund balance. Overseas

sourcing for demand of recycled products has dropped and impacted the overall costs and services

provided.

Any changes in Maintenance of Effort terms in the funding formulas that would not be

beneficial to the funding unit and allow the state to leverage County efficiencies and cost controls

with unequal benefit under the funding formulas.

Continued debate on criminal justice reforms that could impact housing of juveniles and a lack

of adequate cost sharing from the state for any new mandated services.

Possible implementation of the Michigan Joint Task Force on Jail and Pretrial Incarceration

Report Recommendations and impact to the County from the new procedures/rules.

County revenue sharing is expected to be negatively impacted. Information on the amount of

impact is not clear at this time. Our estimate for the budget is a reduction of 40% until we see the

state’s FY21 budget.

3. ANNUAL BUDGET WITH 2nd YEAR PROJECTION

The Board of Commissioners will consider financial commitments beyond the upcoming budget and weigh

longer-term impacts from any budget or policy commitment. This process will require all departments to

submit estimates of revenues and expenditures for a two-year budgeting cycle for the fiscal years ending

https://courts.michigan.gov/News-Events/Pages/DataDrivenJusticeSolutions.aspx

2021 and 2022. This will take a more deliberate scan of risks of revenues and value of planned expenses.

Finance staff will use these projections to update the long-term budget forecast. These projections will not

require a detailed evaluation of every line item, but will consider major revenues and expenditures to

provide an assessment of what trends are forming. The trends will be used to establish a basis to

proactively adjust operations to balance against resources prior to the ensuing budget cycles. These

estimates are modified on an annual basis to adjust amounts for unanticipated events. There is high value in

projecting the future obligations and resources and is worth the effort. The County will continue to adopt a

single annual year budget in compliance with the Uniform Budgeting and Accounting Act and projections

for the second year as required by Public Act 200 of 2012 and as we have done since 2001.

4. OVERVIEW OF THE 2021 COUNTY BUDGET

County finances have strengthened over time going back from 2014 and forward to today. There continues

an easing of the most difficult decisions involved in formulating a balanced budget while using reserves to

invest in a limited amount of capital expenditures. Associated with this has been the governing board’s

ability to adopt a budget much sooner than had been possible in prior time periods. Supplemental revenue

came from reserve funds to fund the current year’s planned expenditures and balance the budget. Elected

officials and managers have operated within budgets and consistently under spent appropriations to help

deliver operating surplus in each of the last 10 years. As a result, reserves have been strengthened to some

of the strongest levels in the past 30 years and are illustrated later in this document.

Notwithstanding these developments, budgets continue to be about choices, and about the best use of

limited resources within the organization. Questions center on how best to deliver the full service menu of

public services to our community. In order to meet the goals of the governing board and present a balanced

budget, we continue to employ a formula to short funding the full annual actuarially determined

contribution to retiree health care. The Board has accepted this approach as reasonable to meet current year

public service needs and fund long-term obligations.

The County has continued making progress in getting closer to a structurally balanced budget to help with

the next economic downturn. This was done through many changes, budgeting techniques and financial

management practices to assist the County with future budgets. These practices will be continue as other

financial challenges remain. Some of the challenges are routine as part of the budget process and others

change or develop with new levels of importance. At a summary view, these challenges include: 1) more

requests for funding than what is available from current year resources; 2) conflict over the prioritization

and allocation of limited resources; 3) efforts at cost containment to match forecasts of future sustained

revenue growth; 4) employee total compensation and growth commensurate with what the employer can

fund over the long-term; 5) capital investments in technology, facilities and fleet; and 5) continuing to meet

funding obligations of pension and post-employment benefit program expenditures.

Local governments, including the County, must meet a broad number of objectives, but none are more

impactful than maintaining a stable financial position. This results from the fact that any organization will

be severely constrained in its ability to function in a planned purposeful direction if its finances are not well

managed, maintained and strong. While capital investments, good management and service delivery are

critical issues in daily operations, these are all secondary to the financial standing of any organization, and

its ability to deliver services and chart a stable course forward. Financial position involves adequate margin

in current year budgets, trends of delivering operating surplus rather than operating deficits and

maintaining sufficient reserve funds from which rating agencies base in part the County’s financial credit

rating. Much more can be accomplished when financial strength and stability is certain as this allows the

organization to plan and focus efforts on outcomes rather than managing under financial strain either from

factors within or outside leadership’s control. Fortunately, the County is out of the financial crisis it was in

from 2009-2014, but looking forward, growth will remain limited due to a number of revenue limits in

place from prior legislative action.

Ongoing Initiatives:

Over the last several years, the Board has embarked on efforts to make purposeful and strategic

investments to position the organization for the next decade and beyond. Initiatives that drive new ways of

delivering outcomes through important upgrades to mission critical systems will move the organization

internally to enhance public services to our community. Some of these major initiatives include:

1) A new shared law enforcement records management system for all county police agencies along

with new computer aided dispatching and jail records management.

2) Leading efforts in geographic information systems bringing local units of government into this

shared platform.

3) Finishing the complete overhaul of the County information systems hardware and software

infrastructure to position the county to lead on the above initiatives while building a secure data

network.

4) A wage and total compensation analysis covering the workforce to determine both external

competitiveness and internal equity. This will be supplemented with options for voluntary incentive

programs for both retention and recruiting of the talent needed in our workforce to deliver public

service demands in our community.

5) Continuing to implement features within a new payroll and human resources operating system

providing a streamlined and integrated approach for efforts in managing our most important asset;

human capital.

6) Fiscal discipline that produced a financial statement free of debt allowing the General Fund to

redeploy resources to the above initiatives.

At the time of drafting this document, we describe the County’s finances as stable and improving. Standard

& Poor’s upgraded the County’s credit rating to AA in 2014 and in 2017 Moody’s moved the County to its

own rating equal to AA. Both upgrades reflect our own internal view of the County’s financial position and

the improved outlook. A key component of the improvement in the County’s financial position has been

cost control measures that have been developed and remain in place. What remains as primary concerns are

the unfunded accrued liabilities of the pension and retiree health care trusts. However, amortization funding

plans have been implemented to pay down the unfunded liabilities of the trusts over not more than 25 and

20 years for the RHC and pension trusts respectively.

The County has taken the steps required to be eligible to continue receiving State revenue sharing and to

qualify for the County Incentive Program (CIP) grants. This includes being able to demonstrate several

performance standards or be subject to reduced amounts of State revenue sharing.

Standard Compliance Date County Action

Transparency or dashboard comparative December 1, 2019 Compliant

data on operations and finances

Debt Service Report-All Funds December 1, 2019 Compliant

Projected Budget Report December 1, 2019 Compliant

See www.co.monroe.mi.us front page for dashboard

In 2015, the County realized an increase in property tax revenues for the first time since 2007-2008. This

compares to the period from 2008 through 2015, when cumulative year over year losses in property tax

http://www.co.monroe.mi.us/

revenue was $3.42 million. In 2020, budgeted property tax revenue is $1,672,861 more than actual

collections in 2018 (after net for MTT adjustments). We project continued positive growth in property tax

revenues resulting from increased values and coupled with new development. However, growth will be

very minor. Contributing to the moderate growth limits will be Headlee amendment rollbacks should the

growth from uncapping and developments outpace inflation. The County continues its dependence on local

property tax revenue as the primary source of revenue (64% of General Fund).

While sufficient revenue growth is necessary to fund the delivery of public services, we reinforce the need

for a continued effort to achieve higher levels of efficiency and associated cost savings while providing a

broad menu of public services from a full service County government. The County’s efforts have been

successful in leveraging technology investments, consolidating and restructuring internal services and

lowering costs. Over the past several years, the Board has approved reorganizations to restructure

departmental staffing, consolidate operations and improve internal efficiencies. These have all been

pursued while the General Fund Budget has been reduced by $7.9 million or 16.5% from 2008 through the

2019 budget. As the 2020 budget was prepared, a summary of 10 key actions/initiatives the organization

had taken resulted in over $8 million in cumulative savings. These strategies have provided a financial

footing to the organization.

The County has made significant progress in balancing its operating costs to be closer in line with available

revenues. We point to the multi-year budget trend to demonstrate this. While these spending plans were not

structurally balanced, they were improved over the budgets of 2009-2014. What structural imbalances

remained came from: i). the County covering the budget shortfall using reserve funds and, ii). short funding

retiree health care. The 2019 and 2020 budgets were developed with small projected surpluses but

recognizing less than full funding of the ADC to RHC.

i. Use of Reserve Funds:

2013 2014 2015 2016 2017 2018 2019 2020

Source/Use of Reserve Funds Budget Budget Budget Budget Budget Budget Budget Budget

Budget Stabilization $ 873,343 $ 129,901 $ 152,429 $ - $ - $ - $ - $ -

Contingency Account Shortfall $ 348,646 $ - $ - $ - $ - $ - $ - $ -

Fund Balance $ - $ - $ 369,000 $ 488,670 $ 618,731 $ 451,985 $ - $ -

Total Use of Reserve Funds $ 1,221,989 $ 129,901 $ 521,429 $ 488,670 $ 618,731 $ 451,985 $ - $ -

ii. Short Funding Retiree Health Care Annual Determined Contribution:

Due to budget imbalances, the County has consistently underfunded the actuarial determined

contributions (ADC) for retiree health care (RHC) benefits over the past nine (9) budgets in aggregate

$18.9 million and by year as shown below:

Budget Year 2012 2013 2014 2015 2016 2017 2018 2019 2020

ADC Shortage

$1,999,234

$1,999,420

$2,008,724

$3,184,973

$1,388,219

$1,673,273

$2,387,756

$2,277,129

$2,049,319

These budget measures were by design as the choice was made to fund critical public service programs

and employee positions. In each of these years, and projected in the current year the County was able to

fund all current RHC claims and invest funds into the RHC trust even though the recommended ADC

was not funded. This was possible due to lower claims costs and cost control measures previously

implemented. However, GASB Standard 75 requires the resulting liability to be recorded on the

County’s balance sheet. This is of course a significant liability at $72.9 million.

While the County has intentionally short-funded the RHC ADC, the shortfall is viewed to be

manageable over the long-term. This is due in large part to the County’s prior actions to design and

install new health care plans, closing the RHC plan benefits to new hires, increasing employee

contributions and retiree’s health care mirroring to current plan designs/cost sharing. We are starting to

see the impact of these changes in the valuations and the actuary noted the County is trending long-

term toward a level funded status meaning annual contributions are expected to be relatively stable

going forward.

A. Budget Outcomes/Notes On County Finances

The following sections provide a summary of past budget results in major areas of the budget along

with some relevant notes of our assessment regarding current and long-term financial challenges. In

addition, included are summaries about Board strategies developed and implemented to address

financial planning in the County and our planned appropriations for the 2020 Recommended Budget.

1. General Fund-Operating Results

Prior year actual results over the past thirteen (13) years are as follows:

Year General Fund Operating Surplus/(Deficit)

2006 $134,059

2007 ($528,397)

2008 ($3,412,980)

2009 ($1,979,822)

2010 $1,991,171

2011 $1,887,966

2012 $146,879

2013 $507,171

2014 $360,275

2015 $269,821

2016 $894,080

2017 $772,422

2018 $2,687,511

2019 $2,763,631* (Preliminary Subject to Audit)

The last ten (10) consecutive years have delivered positive operating results vs. operating deficits

from 2007-2009. The most recent 5 year period produced average operating surpluses of

$1,477,493 per year. The 2019 results are very good and produced a5.64 % margin. This compares

to 2018’s result of a 5.7% margin.

A few notes regarding history of County budgets, trends in major budget categories and overall

financial management of the County follow:

2. Retiree Health Care

Overall, the County is funding the obligation fairly consistently and in a manner that is

strengthening the plan’s financial position. In the current year, funding is at 78.7% of the ADC and

when County Agency funding is included, the rate is 80% after adding employer and employee

contributions. The overall contribution was increased by $896,575 to keep pace with the increased

ADC and close the funding gap that was developing. We expect the 2021 budget amount to be

approximately $414,571 higher than 2019. Other than one time in 2010, there has not been a

withdrawal from the RHC Trust and we can point to steady positive progress in the financial

position of the RHC Trust fund due to disciplined cost control and consistent funding of the

obligation. A final positive note, investment returns for the fund in 2019 was 19.95% vs. the

actuarial discount rate of 5.5%.

3. Pension

The Employee’s Retirement System funded ratio has fallen from 100% from the 12/31/2005

valuation to a low of 71.4% at 12/31/2018. The trust fund’s overall financial trend has not shown

any change toward a positive trajectory. The unfunded actuarially accrued liability (UAAL) (all

employers) now stands at $83.9 million; an increase of $6.8 million over the prior year and follows

the preceding year’s increase of $5.3 million. Employers are paying down the UAAL with a 25 year

amortization schedule with 2021 being the 6th

year of the schedule. The preliminary projected

increase in pension is $570,990. Like the RHC trust, pension investment returns in 2019 were very

good at 17.47% vs. the actuarial discount rate of 7.0%. Additionally, the County made a

supplemental contribution of $500,000 in June to help pay down the UAAL.

Considering only the County’s obligations, at 12/31/2018 the UAAL was $64.22 million or 76.5%

of the total; this amount is up from $60.83 million the prior year.

4. Capital Outlay

A history of the funding allocated to the Capital Improvement Program since 2008 is outlined

below:

Year Budgeted Amount Year

Budgeted Amount

Supplemental Funding

2008 $ - 2016 $ 200,000

2009 $ - 2017 $ 200,000 $ 650,000

2010 $ - 2018 $ 190,000

2011 $ - 2019 $ 250,000 $ 829,454

2012 $ - 2020 $ 350,000 $ -

2013 $ - 2021* $ 300,000 $ -

2014 $ - 2022* $ 320,000 $ -

2015 $ 175,000 2023* $ 350,000 $ - *Projected

The Board allocated supplemental funding from reserves in 2019 to fund the law enforcement

records management project (RMS, CAD & JRM). Additionally, funds from a combination of

reserves and the contingency account were appropriated to purchase portable pumps. The total of

these items is $1,492,118. Over 3 years, $500,301 of these appropriations will be repaid by local

units for the RMS. Non supplemental funding has been appropriated in the current year.

While minimal amounts of capital outlay have been included in the budget over the past several

years, these amounts have been supplemented both from additional appropriations and from the

property foreclosure fund. The foreclosure fund will be limited in capacity going forward as

foreclosures are falling and there is uncertainty until statewide lawsuits alleging the

unconstitutionality of the holding of foreclosure proceeds. Accordingly, we need to shift the

funding obligation to current revenues of the budgets.

For CIP expenditures, the 2021 budget will use the same amount from the foreclosure fund

($80,000) as the current year, and the balance from current revenues to fund the appropriation at

$300,000. This amount is $50,000 less, but will maintain the capacity within the budget to cover the

baseline CIP expenditures in future years.

In addition capital outlay expenditures will include fleet patrol vehicles in the Sheriff’s Office at

$325,000, or $50,000 less than current. As more officers are added, supporting operational and

capital expenses need to keep pace. Our objective has been to establish fiscal discipline to fund

capital expenditures as a baseline operational cost as level an amount as possible. The allocation of

the funding can be targeted for particular needs, however, the expenditure amounts will be needed

as a sustaining budgeted amount annually. It is important to recognize that capital expenses are a

constant expenditure and maintaining these budgeted amounts is an important part of a viable and

steady budget model going forward.

B. Financial Management Measures

1. Most employee groups received a 1% base wage increase in 2019 and 2020 along with a $1,000

lump sum payment each year. For the 2021 budget, groups with agreements in place are scheduled

to receive a 1.5% base wage adjustment and a $500 lump sum payment. These compensation

adjustments are within the County’s financial capacity and ensure a level of sustainability. Total

employee compensation across the workforce has been relatively flat over a period of years as

shown with some increasing amounts more recently. This correlates with the financial position of

the County, its revenue growth and balancing many other obligations. Organization-wide employee

total compensation is also being managed within our resources through the tier 2 compensation

program design. Priorities for new revenues have been allocated to support the addition of public

safety staffing and fund increasing obligations for pension and RHC. In the strategy of adding road

patrol officers, since January 1, 2013 the County has added 10 new Sheriff Deputies in addition to

other staff.

2. Our 5-7 year forecast for employee health care costs has been updated due to the Corona virus

pandemic. We closely monitor the quarterly claims data for any change in our forecast and project a

6% increase next year and the 4% over the long-term. A rate increase of 6% translates into total

employer cost increases of approximately $225,867 in 2021.

3. Use of reserves, one-time funding sources and other budgeting techniques continue trending

positive in successive budgets. The major exceptions remain in how we are balancing all

expenditures for public services with a reasonable funding model for the RHC ADC. The pension

ADC is funded at 100% each year. What follows is a year by year summary of how budgets were

balanced in the prior five (5) years, along with a chart depicting the same but over 15 years showing

an improving trend:

2016 Budget: Budgeted $488,670 from Fund Balance and the RHC ADC was underfunded

by $1.38 million.

2017 Budget: $1.67 million of RHC was underfunded; $618,731 used from Fund Balance

and used $80,000 from Foreclosure Fund.

2018 Budget: $2.38 million of RHC was underfunded, $451,985 used from Fund Balance

and $80,000 from Foreclosure Fund.

2019 Budget: $2.41 million of RHC was underfunded and $80,000 used from Foreclosure

Fund.

2020 Budget: $2.05 million of RHC was underfunded and $80,000 used from Foreclosure

Fund.

The chart below shows the pattern of shortfall budgeting and balancing from reserves:

(1) Excludes shortfunding amount to RHC

4. The 2020 contingency account is funded at $786,925 with another $37,000 restricted. To date,

$341,015 has been transferred out of the contingency account as part of a budget amendment. Of

the 2020 contingency account, we designated $194,552 as budget surplus, $250,000 as a one-time

funding source needed for possible adjustments from the wage and total compensation analysis. As

of this date, the remaining amount of $195,910 is unrestricted. In 2021, $350,000 will be budgeted

for contingency and an additional amount to be determined for CBA contingency. This reduces

budgeted expenditures by $436,925.

C. Budget Positives

Prior year budgeting and associated cost containment efforts by the Board, department leaders and

employees have helped and will continue to help contain cost escalation in the budget. There have been

many successes in this area. Some of the financial impacts, outcomes and further consideration of

Board policies and appropriations are highlighted as follows:

1. In 2021, Property tax revenues will continue to increase for the 7th

consecutive year. We

project this after netting the DTE reductions in the current year and revising our expected property

tax revenues at $30,402,000. This includes an amount for MTT adjustments. With an expected gain

of 1.57% in 2021, we estimate a net increase of $369,751. That is lower than prior year estimates of

3.1% gains due to the pandemic impact. We have also revised the out-year rates move at annual

increases of 1.52% for 2022 and 2023.

2. Retiree Health Care benefit program is more financially sound. Some of the factors include:

1) lower expected claims based on actual claims and; 2) lower future cost increases based again on

the County’s actual claims results. The expected funding level in 2021 will follow the prior year’s

effort to fund 70%-80% of the contribution budget amount. Below is a chart and table showing the

(8) year summary of RHC revenues less total claims paid and expenses:

Category 2012 2013 2014 2015 2016 2017 2018 2019 8 Yr. Total 8 Yr.

Average

Revenues $7,292,713

$6,665,147

$6,948,203

$7,816,345

$7,440,986

$6,998,433

$7,176,681

$7,481,727

$57,820,235

$7,227,529

Expenses $5,178,250

$5,233,610

$5,889,859

$5,297,109

$5,182,362

$4,638,142

$5,478,479

$5,573,084

$42,470,895

$5,308,862

Net Working Capital

$2,114,463

$1,431,537

$1,058,344

$2,519,236

$2,258,624

$2,360,291

$1,698,202

$1,908,643

$15,349,340

$1,918,668

Expenses include claims, investment management fees and cost associated with RHC.

A few key observations about the 8-year results above and focusing on how the trends compare with

the most current year results:

2019 expenses are above the average and the 2nd

highest amount in the 8 year time period.

2019 working capital is slightly below the average and the 5th

highest.

2019 revenues are above the average and 2nd

highest. This strengthens the ability to pay claims

while also providing sufficient margin to transfer cash into the trust for further investments to

prefund the ultimate benefit paid.

3. Retiree Health Care funding contributions from eligible employees has provided some

financial support to this benefit program. As employees who have this benefit continue to retire, the

County will see lower overall employee contributions. However, the ADC must continue to be

funded, so the difference will come from increased employer contributions. In the last three (3)

years, employee contributions have been as follows:

2017 $406,339

2018 $384,471

2019 $361,405 Actual vs. Budgeted $388,336

2020 $368,564

In 2021, we project employee contributions to be approximately $350,411.

The following chart tracks the number of eligible retirees and beneficiaries of retiree health care

benefits vs. the number of active employees who are eligible. Eligible employees contribute 3% of

their base wages to pre-fund a portion of the cost of their future benefit. Of the 689 eligible

beneficiaries (increase of 22 from prior year), 401 receive County supplemental benefits, meaning

they are primary on Medicare coverage. The plan covers eligible spouses. The other 288 are fully

covered under the County’s benefit plan for retiree health care.

4. New methods to improve efficiencies, deliver services, and focus on core priorities continue to

be identified by most of our managers and employees. The departments’ organizational structures

have been flattened from reorganizations that saved money, quickened decision making and added

staff hours. All of these efforts aid communication, information sharing and enhance teamwork. As

noted previously, we directed more resources into investments in technology and relied on these to

meet basic service needs during the pandemic. Additional investments that have been made in

equipment and facilities provide better support for employee efforts to enhance the delivery of

public services to our community.

5. Numbers of Liability claims have spiked vs. long-term average counts. The overall cost impact

is minimal from the number lawsuits filed by in pro per claimants related to a law enforcement

action against an alleged prescription drug dispensing abuse case. Further, in late 2019 the federal

judge dismissed all of the lawsuits and was followed by each plaintiff filing an appeal. When those

claims are removed, we remain below our 30 year average of active litigation files. The County has

benefited from reduced pricing from property and liability rates/discounts through the County’s

group self-insurance program. Also, membership provided risk avoidance grants and net assets

distributed back to the program’s internal service funds. Operating an internal service fund, we

adjust the illustrated rates to cover claims, IBNR and case reserves against working capital. Since

2006, the annual contribution is the lowest amount over the period of time saving $197,556

annually. This is a very good outcome over this period of time with our SIR limit moved higher by

$50,000 and our coverage limit unchanged at $15 million per occurrence.

6. Operating expenses related to most energy and utility costs are expected to trend within

historical budget amounts, but towards the lower end of the cost range. Michigan legislation

provides electric choice programs with 10% of the available base load to choice customers of which

the County has been a choice customer for over 11 years with aggregate savings of $832,000. A six

(6) year summary of the County’s budget vs. actual total utility spend is shown on the following

page:

Year Budget Actual Savings over Budget

2014 $1,081,625 $1,047,345 $34,280

2015 $1,042,443 $923,424 $119,019

2016 $958,565 $896,294 $62,271

2017 $1,025,841 $912,685 $113,156

2018 $986,064 $979,337 $6,727

2019 $991,435 $949,026 $42,409

Totals $6,085,973 $5,708,111 $377,862

Average Margin of Budget vs. Actual -$62,977 savings over budget

The above illustrates savings from energy programs and purchases of energy supplies. Over this 6-

year period we have been able to achieve baseline budget savings of $90,190 from amounts

budgeted over this same time period. These savings have been reallocated throughout the budget

and recurring each year. We are also budgeting much closer to actual thereby removing budget

margin.

7. Full time staffing of County employee positions were reduced by 23% from 2008 to today with

a net reduction of 105 employees. Since the lowest employee count in 2011, staffing levels have

grown by 9.5% to the numbers in the 2020 budget. With our long-term forecast, we continue to

project this chart to remain relatively flat for the next 5 years except for public safety efforts where

since 2013 ten (10) additional Sheriff Deputy positions have been added.

8. The County continues to benefit from employee engagement in safety practices. The number

of worker’s compensation claims and expenditures continue to trend low over historical figures.

Over a time, the County’s claims remain lower than the comparable benchmark of other public

organizations. Summaries of semi-annual work site inspections highlight and demonstrate the

collective efforts of leaders and employees toward workplace safety. Most recently, total claims

were the 2nd

lowest for the year only lower in 2016 over the past 10 years. Over the past 5 years,

claims paid were the 2nd

lowest in the most recent year.

9. Property tax revenues had continued to increase as we built the forecast for 2020 and

projected to grow in 2021 at a rate of 3.1%. However, 2021 tax revenues have been adjusted lower

as a result of expectations of economic decline from the pandemic. We have also recognized the

DTE Monroe Power plant tentative settlement that provides for an eight (8) year phased reduction

in plant value. In the 2020 budget, since notice of the tentative settlement, we recognized the loss of

plant values as portions are in both the City of Monroe and Frenchtown Township. This totaled

$351,000 in less property tax revenue. Additionally, the Republic Waste site in Erie Township

required an adjustment downward of $245,000 over 2019 valuations. These two (2) sites result in

$596,000 less tax revenue and 1.9% of all property tax revenue. As a revenue source comprising

approximately 64% of the General Fund budget, growth in property values is essential as a revenue

source to help build public service capabilities. Also, while MTT settlements have fallen, we will

continue to make adjustments in future budgets within the baseline property tax revenues

specifically for the DTE coal and nuclear power plant’s valuations. This is to provide for both

refunds and lower annual receipts.

10. Key economic and financial indicators including the unemployment rate, tax delinquencies,

home sales along with higher sale prices, etc., have all continued to show positive signs of

improving economic conditions over a 4-5 year period. Below are some specific notes from local

economic activity:

Single family residential housing starts: County-wide the total value of new single

family housing starts moved over the past 4 years as follows:

2019 $67.7 million

2018 $62.1 million

2017 $67.1 million

2016 $56.0 million

All Building Activity: The value of all new construction in the County is reported over

the past several years as follows:

2019 $113.4 million

2018 $74.8 million

2017 $135.6 million

2016 $78.1 million

Unemployment in 2019: Reached a high of 4.4% in July and a low of 2.9% in October

and November. Overall, 2019 had an annual adjusted rate of 3.8%. These compare to a state

rate of 4.1% and national rate of 3.7%. However, the Michigan April 2020 unemployment

rate was 23% with 1 million workers filing for unemployment claims. With the April 24,

Executive Order allow some businesses to reopen, we look for the rate to fall going further

into the year.

Equity markets: Market returns in 2019 were extremely good and helped the market

values of both defined benefit trusts. The RHC returned 19.95% and the pension trust

17.47%. So far in 2020, the pandemic has crushed market returns with the first quarter

performance approximately -16%.

11. The County’s credit rating remains unchanged and strong following Moody’s Investors

Service rating agency upgrading the County’s credit rating for outstanding debt on certain long-

term bonds in February 2017. Moody’s now rates the County at Aa2 and is equal to Standard &

Poor’s AA rating. In May 2019, Standard and Poor’s published its most recent rating analysis to

the County’s credit rating of AA with a long-term outlook of stable. The analysis of the County’s

finances included adequate budget performance with expected break-even or better general fund

operations and strong management conditions with good financial policies and practices.

12. Actual expenditures have consistently been under spent as compared to appropriations over

the last nine (9) budgets. Preliminary results for 2019 continue this trend playing a major role in the

General Fund surplus. The rates of expenditure are as follows:

Year Expenditure Rate Year Expenditure Rate 2019 97.42% 2014 95.27%

2018 95.73% 2013 97.42%

2017 97.42% 2012 96.37%

2016 97.37% 2011 96.22%

2015 96.04%

This trend is reflective of good financial management by all those involved along with effective

cost controls. As we develop the budget, we continue to adjust various line items to be in line with

operating needs of the departments. It is important to emphasize, we have removed margin between

budgeted and actual expenditures making it more difficult to remain within line item appropriations.

Some of the new baseline expenditure savings going forward will be from employee turnover,

although that is slowing. In 2018, we began to capture cost savings when legacy employees on Tier

1 total compensation plans were replaced with Tier 2 employees. Significant percentages of these

savings are redirected to legacy benefit programs to be able to support the financial obligations for

pension and OPEB, specifically the ADC’s.

D. Budget Summary:

Our preliminary projection is that the County remains unable to develop a structurally balanced budget

when we include full amount of the RHC ADC. However, we see positives in the budget due to a

culture of fiscal discipline within the organization. Revenue limitations over time and the slow growth

of revenues since the great recession have required our continued focus on cost control. The

organization has to continue relying on fiscal restraint as a core strategy coupled with strategic

investments in economic development efforts. With the long list of obligations, program funding needs

and basic operational expenses, we do not forecast a scenario where current revenues will meet planned

expenditures with full funding RHC ADC. The ADC shortfall of $2 million is not forecasted to be

made up and we recognize that as not a funding priority given the expenditure trends and results in the

benefit program financials. We have leveraged lower costs and expenses while striving to provide a

level of staffing necessary to meet our menu of public services to the community.

We again note our focus on cost control to be the primary strategy for maintaining financial stability

especially as the pandemic has slowed economic activity and other longer term impacts are expected.

We will need to continue to fill in some underfunded baseline expenditures in areas of the organization

where investments continue to be needed. We will continue to maintain conservative assumptions with

property tax revenues to err on the side of ensuring sufficient resources to meet budgeted expenditures.

Even with projected increases of property taxes, the 7 year forecast for the budget will not show budget

levels meeting the amount the County had in 2008 until 2024; 16 years later. However, the budgets also

show growing uses of fund balance and substantial reduction in unassigned fund balance to be able

balance budgets in future years. The rate of the use of fund balance and resulting decline in the amount

available is unknown at this time. Much will depend on how much of the County’s reserves will be

needed in 2020 to fill current year revenue reductions and/or cover increased expenditures that have

been needed to adjust to the new practices in operations during the pandemic. That creates the

underlying baseline budget structure and how long reserves may be appropriated used to cover budget

shortfalls.

*Amounts are projected based on 2nd Year Budget Forecast (2021) and summary income statement (2022-2026)

Below is a condensed summary of a 7-year income statement of the County based on updated

assumptions for expenditures and revenues: GENERAL FUND

2020 2021 2022 2023 2024 2025 2026

BUDGET FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST

Charges for Service $5,372,175 $ 4,864,175 $ 4,997,344 $ 4,991,488 $ 5,052,624 $ 5,203,013 $ 5,197,721

Fines & Forfeits $ 24,500 $ 16,500 $ 16,808 $ 17,123 $ 17,444 $ 17,773 $ 18,109

Interest $ 295,000 $ 225,000 $ 225,000 $ 225,000 $ 225,000 $ 225,000 $ 225,000

Intergovernmental Revenues $5,752,852 $ 4,537,299 $ 5,038,610 $ 5,263,737 $ 5,336,039 $ 5,193,623 $ 5,118,623

Licenses & Permits $ 255,800 $ 251,800 $ 252,207 $ 252,623 $ 253,048 $ 253,483 $ 253,927

Local Unit Contributions $2,947,752 $ 2,931,095 $ 3,072,145 $ 3,200,014 $ 3,356,054 $ 3,503,499 $ 3,658,921

Other Revenue $ 2,004,640 $ 1,994,609 $ 2,031,925 $ 2,069,630 $ 2,109,641 $ 2,150,597 $ 2,191,918

Taxes (1) $30,491,143 $ 30,884,762 $ 31,301,838 $ 31,926,255 $ 32,487,159 $ 33,136,802 $ 33,799,438

Transfer In $ 373,733 $ 379,244 $ 306,642 $ 315,260 $ 324,386 $ 334,017 $ 343,736

Budgeted Use of fund balance $ - $ - $ - $ - $ - $ - $ -

Grand Total General Fund Revenues $47,517,595 $ 46,084,484 $ 47,242,519 $ 48,261,129 $ 49,161,396 $ 50,017,807 $ 50,807,393

General Fund Expenditure Category 2020 2021 2022 2023 2024 2025 2026

Full Time Wages $15,297,342 $ 15,531,875 $ 15,930,914 $ 16,444,303 $ 16,944,595 $ 17,395,758 $ 17,849,165

Other Pay $ 1,725,132 $ 1,727,071 $ 1,725,551 $ 1,691,310 $ 1,723,622 $ 1,755,932 $ 1,788,875

Fringes $13,962,663 $ 14,763,213 $ 15,625,102 $ 16,568,101 $ 17,572,146 $ 18,608,173 $ 19,707,297

Supplies $ 1,508,581 $ 1,252,752 $ 1,308,872 $ 1,343,987 $ 1,641,489 $ 1,662,218 $ 1,683,436

Services/Other charges $ 3,699,019 $ 3,765,265 $ 3,819,893 $ 3,894,022 $ 3,970,221 $ 4,048,556 $ 4,129,096

Utilities/Maintenance $ 1,387,645 $ 1,385,596 $ 1,414,554 $ 1,446,016 $ 1,478,199 $ 1,511,119 $ 1,544,794

Capital Outlay $ 808,000 $ 472,500 $ 446,500 $ 496,500 $ 446,500 $ 461,500 $ 461,500

Contingency $ 823,925 $ 387,000 $ 415,000 $ 415,000 $ 415,000 $ 415,000 $ 415,000

Other Agencies $ 1,301,572 $ 1,303,313 $ 1,332,852 $ 1,347,490 $ 1,357,231 $ 1,362,076 $ 1,367,028

Transfer Out $ 7,003,716 $ 7,268,392 $ 7,789,188 $ 8,129,138 $ 8,452,139 $ 8,814,928 $ 9,113,160

Grand General Fund Total Expenditures $47,517,595 $ 47,856,977 $ 49,808,425 $ 51,775,868 $ 54,001,142 $ 56,035,260 $ 58,059,352

General Fund Operating Surplus/(Loss) $ - $(1,772,493) $(2,565,906) $(3,514,739) $ (4,839,746) $ (6,017,453) $ (7,251,958)

Beginning Fund Balance $15,202,726 $15,202,726 $13,430,233 $10,864,327 $ 7,349,588 $ 2,509,842 $ (3,507,611)

Ending Fund Balance $15,202,726 $13,430,233 $10,864,327 $ 7,349,588 $ 2,509,842 $ (3,507,611) $(10,759,569)

Unreserved Fund Balance $14,363,017 $12,590,524 $10,024,618 $ 6,509,879 $ 1,670,133 $ (4,347,320) $(11,599,278)

Unreserved Fund Balance as % of

Expenditures

30.23% 26.31% 20.13% 12.57% 3.09% -7.76% -19.98%

(1)Tax Revenues include $350,000 reduction allowance for DTE, 2021-2026

GENERAL FUND AS REPORTED IN CAFR* GASB 54

Non-spendable $ 1,395,516 $ 1,395,516 $ 1,395,516 $ 1,395,516 $1,395,516 $ - $ -

Restricted $ - $ - $ - $ - $ - $ - $ -

Committed $ 973,767 $ 973,767 $ 973,767 $ 973,767 $ 973,767 $ - $ -

Assigned $ 2,647,344 $ 2,647,344 $ 2,647,344 $ 2,647,344 $ 2,647,344 $ - $ -

Unassigned $14,363,017* 12,590,524 $10,024,618 $ 6,509,879 $ 1,670,133 $ 669,307 $(6,582,651)

Total General Fund as reported in CAFR* $19,379,644 $17,607,151 $15,041,245 $11,526,506 $ 6,686,760 $ 669,307 $ (6,582,651)

Includes 2019 preliminary results.

As work continues on the 2021 budget, a snapshot of key County financial data is provided below with

major revenue and expenditure categories on the pages that follow:

Key Indicator Financial Measure General Fund current year budget: $47,517,595

2018 over 2019 budget increase 3.42% vs. inflation 2.3%

Full time GF employees: 462

Taxable value (2019): $6,311,157,529

Assessed Value (2019): $7,463,596,352

General Fund Debt obligation as of 1/1/2020: $0

Unfunded liability-Pension Fund @12/31/2018 $83,930,031

Funded Ratio 71.4%

County Employer Portion $64,224,437

County Agency Portion $6,309,704

Pension Trust Market Value Year-end 2019 $213,573,279

Unfunded liability-RHC @12/31/2018 @ 5.5% $74,212,661

Funded Ratio @ 5.5% 44.3%

RHC Trust Market Value Year-end 2018 $74,652,772

County Allocated Market Value $67,784,717

Unassigned Fund Balance @12/31/2019 $14,363,017* (30.22 % of 2020 GF Budget)

(Figure incorporates funds designated in 2019 as supplemental appropriations) Budget Stabilization Fund @12/31/2019 $2,430,587* (5.11% of 2020 GF Budget)

Credit Rating-Standard & Poor’s Rating Services AA Stable

Moody’s Investor Services Aa2 *Preliminary Subject to Audit

5. REVENUES

A. Equalized Valuation & Property Taxes

Property tax revenues consistently make up approximately 64% of the General Fund’s revenues.

Following adoption of the 2020 budget, we recognized lower property tax revenues from originally

budgeted. This is due to the DTE Monroe Power plant and Republic Waste agreements of taxable

value; the corresponding decrease to the General Fund is $596,000 less than budgeted. We do not yet

have a resolution for the nuclear power plant. In the prior two (2) budgets, we reserved $795,000 and

$900,000 respectively to account for expected property tax revenue losses for both plants. We will be

including additional reserves in ensuing budgets to fully absorb and recognize the loss of the DTE

Monroe Power plant revenue over the 8-year agreement and a contingency for the nuclear plant until

resolved.

The tracking of Taxable value illustrates a trend of increasing values in the chart that follows. The

unknowns of future personal property losses, new construction gains, MTT appeals (DTE) and future

inflation rates still makes it difficult to project at what rate future taxable value will be in the out years.

However, with the 2021 budget we are projecting an increase of 1.57% and an increase of 1.52% in

2022 for Taxable value. These are revised downward from the prior year budgets based on updated

estimates from Equalization. We incorporate these estimates in the 2021 budget and forecast models.

B. Sources Of County Property Tax Revenue The County’s top ten (10) taxpayers and their 2019 Taxable Values are outlined below:

TAXPAYER PRODUCT/SERVICE 2019 TAXABLE VALUE

DTE Energy Power Plant/Utility $1,090,863,140

International Trans. Corp. Utility Transmission $ 65,429,373

Republic Services, Inc. Waste Treatment $ 55,318,070

Good Will Co. (Meijer) Retail/Warehouse $ 27,449,258

Consumers Power Utility $ 27,215,376

La-Z-Boy Inc. Furniture $ 23,660,269

Michigan Gas Utility $ 16,114,540

Gerdau MacSteel Steel Processing $ 16,575,290

Global Engine Asset Automotive Plant $ 14,700,848

TGC Dundee Retail $ 10,822,930

TOTAL $1,348,551,435

Total 2019 Equivalent Taxable Value $5,902,841,816

Total Top 10 Taxpayers as a % of 2019 Total Taxable Value 22.85%

Compares to 20.65% in 2018 TV

2019 Taxable Value Breakdown

Class Taxable Value Percentage

Agricultural 330,324,189 5.23%

Commercial 673,586,087 10.67%

Industrial 1,100,050,780 17.43%

Residential 3,708,405,685 58.76%

Developmental 4,526,075 0.07%

Personal 494,264,713 7.83%

Total 6,311,157,529 100.00%

2008-2022 Actual and Estimated Property Tax Revenues

YEAR

EST/Actual Property Tax Revenue % Change $ Change

2008 $29,580,781 1.58% $461,084

2009 $28,522,671 -5.14% ($1,548,640)

2010 $27,267,793 -4.76% ($1,364,207)

2011 $26,778,208

-1.80% ($489,585)

2012 $26,304,143

-1.77% ($474,065)

2013 $26,219,236

-0.32% ($84,907)

2014* $26,158,335

-0.23% ($60,901)

2015 $26,839,265

2.60% $680,930

2016 $26,969,035

0.48% $129,770

2017 $27,532,954

2.09% $563,919

2018 $28,383,616

3.11% $1,131,579

2019** $29,520,450

Budgeted $28,725,450 Net

4.82% $1,372,272

2020** $30,277,165


1.40% $418,903

2021 $30,752,751


1.57% $475,351

2022 $31,220,193


1.52% $467,442

*Tax Revenues reflect payout of Consumers Energy MTT and revised receipt totals

**2019-2020 Tax revenues are estimates based on assumptions

Years 2019-2022 Reflect Budgeted amounts to reserve for DTE MTT Litigation/Adjustment/Refunds; shown as Net amount

In the 2020 budget, original tax revenue estimates were budgeted at $30,933,000 with $900,000 of this

amount reserved for the MTT and DTE appeals. The net amount of property tax revenues used to offset

planned expenditures was $30,033,000. The above table revises the tax revenue to $30,277,165 and this

now incorporates $351,000 of tax revenue loss due to DTE property in the City of Monroe and

Frenchtown Township based on the tentative settlement. It also includes the Republic Waste landfill in

Erie Township based on the parties’ stipulation order reducing tax revenues by $245,000. Both of these

property value reductions ($596,000) are carried forward into the 2021 tax revenue estimates and

beyond.

The estimated 2021 property tax estimate is $30,752,751 and of this amount, $350,000 is reserved to

cover the expected tax appeal resolution for the Fermi plant and other possible MTT settlements. The

amount is being held to make up for future tax revenue losses. This follows prior action and continued

consultation with our auditors to recognize the property tax liability and take prudent action when the

event first occurs to plan for the financial outcome. We have done that with the DTE Monroe Power

plant and additional reserves for other MTT stipulation orders and prevented expenditure of funds that

in whole or in part will require refund or revenues would not be realized.

C. Inmate Dormitory Revenue-(Immigration and Customs Enforcement Detainee Housing)

Since opening the Inmate Dormitory, reimbursement from housing federal detainees has been an

important source of revenue to help offset the total cost of operating and maintaining the facility. The

initial pro forma financial modeling to finance operation of the facility included this source of revenue.

The operations of the facility are recorded in special revenue fund. Revenues generated from inmate

housing operations and are a primary source of the fund’s revenue with fund generated revenue shown

below:

2020: 53.9%

2019: 52%

2018: 54.6%

2017: 54.4%

2016: 52%

2019* Amounts preliminary subject to audit 2020** Amounts are budgeted

The following exhibits show the historical financial performance of the fund. The operating results are

monitored closely. Revenues generated from federal prisoner housing offset costs the County would

have to fund exclusively from the General Fund to house County inmates at the facility. Housing

counts for 2014-2019 met or exceeded budget targets. The counts are for housing U.S. Marshal’s

Service detainees in addition to ICE detainees.

2019* Amounts preliminary subject to audit 2020** Amounts are budgeted

The historical financial summary of the operation of the Inmate Dormitory Fund is as follows:

YEAR FULL TIME

EMPLOYEES

INMATE DORMITORY REVENUES

NET GF CONTRIBUTIO

N

ANNUAL EXPENDITURE

S

G F BUDGETED REVENUE

COST ALLOCATIO

N

ICE INMATE COUNT

AVE/$ COUNTY INMATE COUNT

AVE/$ ICE

MO/AVE.

NET/GF MO/AVE. NET/GF

$ RATE

1998 - $891,159 $0 $295,104 $0 $0 $ 60.00

1999 38 $411,737 $343,370 $569,852 $343,370 $0 $ 60.00

2000 44 $733,279 $646,767 $1,847,775 $646,767 $0 38

$46.63 N/A $ 60.00

2001 40.5 $1,412,203 $1,181,400 $2,907,136 $1,181,400 $0 76

$42.59 N/A $ 60.00

2002 42.5 $2,163,427 $1,100,755 $3,059,563 $1,100,755 $0 83

$36.33 N/A $ 60.00

2003 42.5 $1,920,391 $1,124,391 $3,241,288 $1,124,391 $0 87

$35.41 N/A $ 60.00

2004 43 $1,851,101 $1,289,465 $3,206,594 $1,363,563 $74,098 89

$39.69 56 $ 63.09 $ 60.00

2005 36.5 $1,954,598 $1,395,264 $3,383,538 $1,470,434 $75,170 87

$43.94 55 $ 69.50 $ 60.00

2006 35.5 $1,669,037 $1,720,132 $3,557,890 $1,788,201 $68,069 87

$54.17 55 $ 85.69 $ 60.00

2007 36.5 $1,851,372 $2,129,193 $4,060,930 $2,209,557 $80,364 83

$70.28 61 $ 95.63 $ 60.00

2008 36.5 $2,018,374 $2,124,293 $4,202,382 $2,187,100 $62,807 77

$75.58 62 $ 93.87 $ 74.96

2009 35.5 $2,103,850 $1,849,988 $4,025,446 $2,003,087 $153,099 71

$71.39 69 $ 73.46 $ 74.96

2010 32 $2,695,011 $1,411,659 $3,801,450 $1,533,613 $121,954 90

$42.97 60 $ 64.46 $ 74.96

2011 26.5 $2,387,868 $680,727 $3,377,782 $852,875 $172,148 78

$23.91 62 $ 30.08 $ 74.96

2012 28 $2,442,822 $1,046,109 $3,690,165 $1,157,830 $111,721 83.4

$34.37 52 $ 55.12 $ 74.96

2013 30 $2,088,554 $1,129,188 $3,575,683 $1,231,844 $102,656 72

$42.97 66 $ 46.87 $ 74.96

2014 28.5 $2,382,484 $1,590,144 $3,807,297 $1,701,709 $111,565 88.9

$49.01 76.5 $ 56.95 $ 74.96

2015 29.5 $1,868,118 $1,465,538 $4,026,654 $1,591,199 $125,661 69.9

$57.44 107.3 $ 37.42 $ 74.96

2016 29.5 $2,296,175 $1,568,675 $3,857,998 $1,691,511 $122,836 78.9

$54.47 88.5 $ 48.56 $ 74.96

2017 29.5 $2,035,290 $1,562,689 $3,986,026 $1,703,573 $140,884 90.81

$47.15 101 $ 42.39 $ 74.96

2018 32.25 $2,525,450 $1,694,122 $4,032,753 $1,844,962 $150,840 86.75

$53.50 93 $ 61.88 $ 74.96

2019* 33.15 $2,530,117 $1,842,779 $4,568,716 $2,004,998 $162,219 87

$58.03 76 $ 65.78 $ 74.96

2020** 34.15 $2,592,341 $2,055,892 $4,381,759 $2,218,303 $162,411 78

$64.73 75 $ 75.10 $ 74.96

2019* Amounts Preliminary Subject to Audit

2020** Amounts are adopted budget

The daily rate is $74.96 per day charged for each detainee. The budget will continue to be developed

based on this rate. The financial performance of the fund is shown in the following charts/tables along

with the net support from the General Fund. There is some unpredictability with housing counts and

these directly correlate with GF contributions as operating costs remain relatively constant. Other fund

results by year are as follows:

Year Fund Operating Result

2019 ($33,601) use of fund balance

2018 $377,658 surplus

2017 $670,379 surplus

2016 $129,688 surplus

2015 ($445,923) use of fund balance

Preliminary 2019 year-end Fund Balance is $1,300,281. From this amount, $305,580 has been

encumbered for fund balance carry forward in the current year budget. In 2019, contributing to the use

of fund balance were several important projects including; jail records management, body worn

cameras, sewage lift station pumps, and security door replacements.

D. Court Equity Revenue & Friend of the Court Fund

The Court equity Fund, enacted under PA 374 of 1996, created a new funding source for all county trial

courts. This legislation also established new responsibilities for local trial courts including the creation

of the family division in the circuit court, and expanded jurisdiction of the district court. Funding trial

courts remains a focus with the report of the Trial Court Funding Commission and new

recommendations for a more stable and sustainable funding model. Past amounts received by the

County have moved lower by nearly $170,000 but have stabilized. Case volumes are counts only and

do not reflect weighting of cases used in the formula.

Amount Year Amount Year

$867,882 2007 $692,058 2014

$865,616 2008 $679,063 2015

$777,331 2009 $642,075 2016

$739,541 2010 $612,679 2017

$683,902 2011 $639,987 2018

$669,914 2012 $623,479 2019 Preliminary subject to audit

$649,792 2013 $600,000 2020 Budgeted

$600,000 2021 Projected

E. Court Case Filing Trends & Data

The case filings of the District and Circuit Courts from 2006-2019 show that year 2019 totals are

14,250 cases below those from the highest volumes in 2006. The 14 year summary along with court

appointed attorney fees is as follows:

Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

District 46,420 44,664 42,889 39,223 37,104 31,858 34,174 35,733 32,698 31,240 33,530 34,686 36,253 34,345

Circuit 5,129 4,856 4,762 4,309 4,583 4,479 3,418 4,064 3,839 3,595 3,521 3,884 3,410 3,297

Probate Case Filings 711 735 742 678 737 785 767 758 746 725 719 748 761 701

Probate Minor Cases 580 557 548 508 502 518 521 506 479 440 426 379 358 327

Friend of the Court 1,280 1,223 1,254 1,240 1,234 1,197 1,167 1,189 1,085 1,074 1,023 1,147 1,022 959

Totals 54,120 52,035 50,195 45,958 44,160 38,837 40,047 42,250 38,847 37,074 39,219 40,844 41,804 39,629

Per Court Caseload Reports: http://courts.mi.gov/education/stats/caseload/pages/default.aspx

Friend of the Court Cases are included also in Circuit Court Counts

Circuit and District Courts: Since 2006, there has been an overall trend of lower case filings. 2019 saw counts lower by 1,908 cases.

http://courts.mi.gov/education/stats/caseload/pages/default.aspx

Probate Court: There had been general increase in court appointed attorney fees from 2011-2015 and costs have come

down and have been relatively steady in the last 3 years. The numbers of minor case filings have

continued to trend generally lower through 2019.

Court’s Case Filings/Trends & Data:

F. Friend Of The Court

The Friend of the Court (F.O.C.) Fund had a total of 959 new filings in 2019. The fund recorded

operating deficits in years 2007-2010 in an aggregate of $830,156. Since that time, more effective cost

controls and some previous un-allowed costs were reimbursed in 2011 and 2012, thereby providing

support for ensuing operating surpluses (addition to fund balance) over the last 9 consecutive years

totaling $659,778.

As the fund has been returning surpluses from operations, the county has been able to reduce, and then

flatten the transfer out from the General Fund due to lower costs and use of fund 215 fund balance

when needed, but intended as one-time funding. At year-end 2019, the fund balance of Fund 215 is

$659,780. The summary of budgeted transfers out to the Friend of the Court Fund, total budget and the

annual number of new case filings is illustrated below:

Per Court Caseload Reports: http://courts.mi.gov/education/stats/caseload/pages/default.aspx

2020 case count estimated at equal to 2019

http://courts.mi.gov/education/stats/caseload/pages/default.aspx

G. Fund Balance & Budget Stabilization Fund

The Unreserved/Undesignated Fund Balance hit a low of $2,636,804 at year-end 2009 following three

(3) consecutive years of operating deficits. It was the lowest amount since 1995. The year-end balance

at 12/31/2019 increased to $14,363,017 due to another strong year of financial performance by the

County. This is the highest amount ever in dollars and as a percentage of the budget as verifiable from

available records. A summary of fund balance within the General Fund along with the

unreserved/undesignated amounts for the 1992-2019 year-end balances are summarized on the

following page:

History of General Fund 1992-2020 and Associated Fund Balances

Revenue vs. Restated Reserved and Unreserved/ Percent

Expenditure Corrected Designated

Fund Unassigned of General Adopted

Year Revenues Expenditures Variance Fund

Balance Balance Fund Balance Fund Budget* Budget

1992 $26,465,197 $26,788,257 ($323,060) $605,816 2.35% $ 26,425,337

1993 $24,999,077 $24,392,116 $606,961 $1,721,405 $550,909 $1,170,496 4.35% $ 25,767,054

1994 $26,304,307 $25,793,521 $510,786 $2,054,435 $371,274 $1,683,161 6.20% $ 26,890,224

1995 $27,757,534 $27,035,848 $721,686 $2,829,030 $602,314 $2,226,716 7.88% $ 27,167,019

1996 $29,037,410 $27,442,155 $1,595,255 $4,462,058 $642,052 $3,820,006 12.93% $ 28,241,575

1997 $31,600,747 $30,524,058 $1,076,689 $5,538,747 $821,833 $4,716,914 14.69% $ 29,536,681

1998 $34,030,554 $32,119,233 $1,911,321 $7,425,558 $830,115 $6,595,443 20.01% $ 32,112,900

1999 $34,262,670 $32,949,023 $1,313,647 $8,739,255 $874,401 $7,864,854 21.97% $ 32,953,041

2000 $35,976,936 $36,086,685 ($109,749) $8,629,506 $758,406 $7,871,100 20.75% $ 35,793,047

2001 $37,493,798 $38,004,698 ($510,900) $8,118,606 $869,901 $7,248,705 18.04% $ 37,930,866

2002 $40,790,859 $40,409,970 $380,889 $8,499,495 $934,307 $7,565,188 18.04% $ 40,178,439

2003 $41,946,523 $41,259,809 $686,714 $9,186,209 $989,832 $8,196,377 18.74% $ 41,946,928

2004 $42,535,537 $42,098,749 $436,788 $9,622,997 $1,473,466 $8,149,531 18.07% $ 43,737,288

2005 $44,283,698 $44,150,770 $132,928 $9,755,925 $1,121,283 $8,634,642 17.75% $ 45,105,857

2006 $48,918,205 $48,784,146 $134,059 $9,889,984 $822,979 $9,067,005 17.65% $ 48,636,623

2007 $50,142,670 $50,671,067 ($528,397) $9,361,587 $3,089,434 $6,272,153 11.68% $ 51,378,208

2008 $50,341,465 $53,754,446 ($3,412,981) $5,948,606 $2,125,127 $3,823,479 7.50% $ 53,680,234

2009 $47,748,536 $49,728,358 ($1,979,822) $3,968,784 $1,331,980 $2,636,804 5.99% $ 51,009,831

2010* $44,267,009 $42,275,838 $1,991,171 $5,959,955 $909,581 $5,050,374 11.92% $ 43,986,678

2011 $43,401,419 $41,513,453 $1,887,966 $10,977,856 $5,205,028 $5,772,828 13.57% $ 42,375,635

2012 $42,387,749 $42,240,870 $146,879 $11,124,735 $4,826,465 $6,298,270 15.20% $ 42,550,885

2013 $42,200,733 $41,693,562 $507,171 $11,631,906 $3,852,226 $7,779,680 18.61% $ 41,429,080

2014 $42,596,879 $42,236,604 $360,275 $11,992,181 $3,511,566 $8,480,615 19.94% $ 41,792,534

2015 $43,362,725 $43,092,904 $269,821 $12,262,002 $3,141,224 $9,120,778 19.19% $ 42,539,492

2016 $44,839,441 $43,945,361 $894,080 $13,156,082 $3,391,485 $9,764,596 22.52% $ 43,358,710

2017 $45,824,638 $45,139,880 $772,422 $13,928,504 $3,521,235 $10,407,269 23.12% $ 43,941,803

2018 $46,576,444 $43,888,933 $2,687,511 $16,616,015 $3,880,261 $12,735,754 28.29% $ 45,019,474

2019* $48,688,467 $45,514,185 $2,763,631 $19,379,644 $5,016,627 $14,363,017 30.22% $ 45,946,844

2020** $47,517,595 $47,517,595 $0 $19,379,644 $5,016,627 $14,363,017 30.22% $ 47,517,595

*Figure reflects new GASB accounting to include BSF ** 2019 is preliminary subject to audit

*** Figure is based on adopted budget

The County was able to overcome serious financial challenges in years 2009-2011. Some of the

challenges were due to a combination of prior ill-advised decisions and in combination with the great

recession and illustrated in the above chart. The deep cost cutting measures put in place that followed,

stopped the run of operating deficits. Since then, while a run of positive operating results have been

delivered, it is not assured going forward as there are other financial constraints and factors beyond

management’s control including limited options for revenue growth, thin margins in line items, and

continued obligations for expenditures in legacy benefit programs. Note also, the 2010 results

incorporated new GASB rules accounting for Budget Stabilization Funds in the General Fund for

reporting that helped add amounts to fund balance.

2010 Year reflects new GASB accounting to include BSF

2019* is preliminary subject to audit

2020* projected based on adopted budget

A clarification is noteworthy concerning reserve funds. While reported as fund balance, generally, all

reserve funds are not readily available for operational uses. Fund balances do not recognize amounts

unavailable due to loans or other current uses or encumbrances of funds. The true availability of fund

balance is reported as the unassigned amount. In 2019, the County used $1,680,317 from reserves for

several projects. With this amount used, the ending unassigned fund balance is $14,363,017 at year end

12/31/2019. As a percentage of the 2020 General Fund amount, this is 30.22%.

The Budget Stabilization Fund (BSF) held $1,985,723 at 12/31/2018. This amount has increased year

over year due to interest earnings and a 2019 receivable from the General Fund that was reserved to

replace property tax losses from MTT appeals including from DTE. The BSF figure is included in the

restricted classification and its uses outlined in statute. The County has not budgeted to use any BSF

amounts since 2015. Accordingly, this amount will be available as we develop the 2021 budget or

amend the 2020 budget.

Total available cash reserves @ 12/31/2019:

Unreserved/Undesignated Fund Balance* $14,363,017

Budget Stabilization Fund $ 2,430,587

TOTAL $16,793,604 *Above figures subject to 2019 Audit

The total available cash reserves represent 35.34% of the 2020 General Fund budget.

The year over year change in these reserve funds is illustrated as follows:

The primary purpose of maintaining sufficient fund balance and reserves is that it is the key element of

financial flexibility because it describes the County’s resources available, held in reserve to meet

unexpected needs and unforeseen expenditures. Good financial management avoids the use of fund

balance or reserves to budget for ongoing recurring expenses. And as a recognized best practice in

financial management, unreserved/undesignated fund balance provides the highest level of flexibility in

meeting unexpected needs.

H. State Revenue Sharing

The decline with this revenue source began when the State eliminated Revenue Sharing to all Counties

and established the Revenue Sharing Reserve Fund as a way to offset this source of revenue. Each year

beginning in 2005, the County was allowed to appropriate an amount equal to the annual revenue

sharing payment the County previously received from the State of Michigan (adjusted for inflation) to

replace this source of revenue. Each year thereafter this amount was adjusted for inflation and changed

accordingly with the Department of Treasury providing the amount to be withdrawn from the fund.

After the total amount of the additional tax levy was expended, the State was expected to begin

restoring Revenue Sharing to Counties. This restoration did not meet the amount promised from prior

agreements spelled out for the statutory provision. However, beginning in the 2015 budget, full funding

of revenue sharing has been appropriated by the Michigan Legislature. Unfortunately, the amount has

been relatively flat with minor inflationary escalation to help the County meet growing obligations. It is

not yet confirmed what the Legislature will be appropriating in the 2021 fiscal year budget. With the

pandemic economic impact, we are expecting a significant reduction in 2021 and likely continuing into

2022. At this time, given the state’s budget schedule, no information is currently available. Our

preliminary budget includes a 40% reduction in Revenue Sharing over 2020 amounts. We will adjust

the budget to reflect the final appropriation from the Legislature after the state budget is passed.

I. Interest Earnings/Cash Management

The Fed Fund rate was reduced to 0.00% to 0.25% at the March 15, 2020 meeting of the Federal Open

Market Committee. Interest rates had been rising until the fall of 2019, when the FOMC changed

course. They lowered the rate drastically in March of 2020 with the onset of the Covid19 crisis. Most

of the investments that mature during the first half of 2020 will earn the higher rates. Everything

reinvested after March 2020, will earn an average of 25 bps for the foreseeable future.

Michigan law does not require financial institutions to insure public funds, which is why the Treasurer

is only able to insure between $250,000 to $500,000 accounts with FDIC insurance per bank.

Accordingly, the Treasurer diversifies for safety, and to keep maturities short to meet our liquidity

needs. However, this limits the interest that can be earned. Late 2019 through early 2020 saw us

working through the merger of one of our major depositories when Monroe Bank & Trust merged with

First Merchants Bank. At this time, we have a mix of bank CD’s, Money Market Funds, Commercial

Paper, Government Agency instruments, and Bonds.

o Cash Management-Cash flow will always be a concern, since we only begin to receive the

County Operating Levy when we are half way through the year and must rely on reserves,

internal funds and cash on hand to cover all regular claims, payroll and financial obligations

without requiring short term borrowing.

With the County Operating tax being levied in July, the County must be able to fund its

operations until July or August each year, when the tax levies begin coming in to the County

from the local tax collecting units. This requires the County to operate over half of the year

without a major source of revenue to fund operations, and this is a critical use of reserves.

The Board of Commissioners has to be fully cognizant of the cash flow restrictions of this fund.

Cash is needed to fund County operations for at least 7 months of the year, until the current tax

collections start to arrive in July, with the majority of our revenue not being received until

September or October. This means the County will need to rely on other cash balances during

this time.

J. Delinquent Tax Revolving Fund

The Delinquent Tax Revolving Fund is designed to be self-sustaining to support financing

delinquencies and avoid borrowing. Over time, the interest and fees earned on delinquent taxes can

build up sufficient reserves to fund the purchase of the next years’ delinquent taxes. As those taxes are

collected, the tax, interest, and fees replenish the fund and can develop into sufficient margin to classify

as surplus.

Through careful planning and good overall financial management over many years, the Delinquent Tax

Revolving Fund remains self-sufficient heading into 2021, and should be able to fund the purchase of

delinquent taxes without the additional time, effort, and costs associated with issuing tax bonds and

borrowing.

This signals to external stakeholders that good financial management is a practice within County

operations, and our Treasurer’s Office and further, is viewed favorably by bond rating agencies, which

helps result in higher ratings, and lower interest costs all County borrowings benefiting the County and

citizens who leverage the County’s credit rating for lower borrowing rates.

The chart that follows illustrates actual interest earnings from 1987 through 2019 and budgeted

estimates for 2020 and 2021:

2019* is preliminary subject to audit 2019 & 2020** are budgeted

General Fund Interest Income 1987-2021

Year Interest Income Year Interest Income

1987 $565,958 2004 $341,112

1988 $604,181 2005 $831,828

1989 $803,967 2006 $1,573,357

1990 $622,111 2007 $1,412,662

1991 $493,821 2008 $891,263

1992 $419,254 2009 $187,709

1993 $381,049 2010 $59,044

1994 $422,038 2011 $78,492

1995 $779,087 2012 $62,344

1996 $770,267 2013 $55,951

1997 $885,997 2014 $53,564

1998 $1,016,002 2015 $57,727

1999 $1,004,898 2016 $106,703

2000 $1,619,561 2017 $173,533

2001 $1,262,204 2018 $350,298

2002 $542,811 2019* $579,000

2003 $441,302 2020** $295,000

2021*** $165,000

2019 *is preliminary subject to audit

2020** & 2022 are budgeted

2021*** is projected

K. Other Revenues & History Of General Fund Revenues/Expenditures

There are a number of fees and service charges collected throughout the organization. These sources of

revenue change over time due to a number of factors. As part of the annual practice of developing the

County budget, these revenues are looked at on a line item basis in consultation with each

department/office in order to validate the revenue sources and sound estimates prior to budgeting.

These are estimated amounts based on past trends and current activities. However, we project revenue

amounts in the current budget to hold as budgeted. Beyond 2019, we project minor increases in the

revenue amounts and will build these adjustments into the budget in consultation with departments. The

goal is to avoid artificially low revenues but conversely, we do not want to base expenditures on

revenues that cannot be realized. That is a formula for budget operating deficits.

A summary of the past twenty nine (29) years of General Fund revenues and expenditures are

illustrated as follows. What is most noteworthy is the level of revenue projected for 2021 is about what

the County operated on in the 2005-2006 years. Revenues will be impacted from the pandemic and

depress overall budget growth. When considering the additional long-term obligations from legacy

benefit programs in the budget, the fiscal constraint of County finances are better understood. An

essential financial management practice is to only make commitments to obligations the County can

fund with current year revenues and avoid additional long-term costs that cannot be met. The County is

better prepared because of the prior 5-7 years of effort to align current year revenues with expenses to

achieve a balanced budget with this ideal in place.

2019* Figures preliminary subject to audit 2020** Figures budgeted

6. EXPENDITURES

A. Retiree Health Care

When the County originally granted Retiree Health Care benefits for its employees, it did not establish

a method to pre-fund this benefit. Funding should have begun accruing at the time the employee began

earning credit for the benefit to be realized in retirement. However, at the time, program expenses were

relatively small and they were paid on a pay as you go basis as the benefit costs (claims) were incurred.

The County is making progress today to pre-fund the benefit plan, which is the preferred method of

funding. Until January 1, 1996, this benefit was funded 100% by County (employer) contributions and

funded on a pay as you go basis. Effective January 1, 1996 all new hire employees began contributing

1.5% or 3% of their base pay towards pre-funding of the Retiree Health Care Plan. Effective in 2002,

members of the Sheriff Deputies and the Sheriff Command Officers unions also began contributing.

Effective October 28, 2003 through October 1, 2007 various employee groups’ new hire employees

were no longer eligible for Retiree Health Care benefits. The remaining exceptions for plan eligibility

were for new employees hired into the Sheriff Command and Deputy Sheriff groups who continued to

receive this benefit until June 2013. After this date, new hires into these groups no longer receive this

benefit and the plan is closed to all new hires from that date.

The ADC had not been sufficiently funded to achieve a level funding amount over time, and this was

depicted in the trend of increasing contributions along with a lower funded ratio from 2009-2013.

Underfunding the ADC, health care inflation, increased numbers of beneficiaries, early retirement

program offers and lower investment returns all contribute in the challenge of maintaining financial

solvency. Recognizing the growing financial challenge, the Board adopted recommendations made for

employee/retiree health care plan designs. The Board also established equitable employee contributions

across all groups at 3% of base wages and introduced health care inflation cost controls by requiring

mirroring of the current year cost of plans to retirees. These changes in combination have moved the

funded ratio higher. The actuary noted long term cost escalation could be moderated and the effects of

the new plan designs in use today have reduced actual claims costs. These are the expected outcomes of

the changes that were made to help provide financial stability of the benefit plan and ease the growing

obligation to the employer.

An eleven (11) year summary of the employer cost to fund retiree health care is shown below using

percent of payroll as the basis to allocate charges for the benefit across all cost centers of the County.

Retiree Health Care Contribution Rates:

Employee Group Rate

Group 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

General County:

Non-Billable 0% 40.66% 41.23% 42.38% 42.54% 47.78% 15.56% 60.02% 59.67% 56.32% 50.87%

Billable 27.70% 40.07% 33.71% 31.99% 36.66% 43.61% 40.22% 28.13% 34.22% 42.56% 63.70%

Sheriff:

Non-Billable 0.00% 21.68% 28.21% 27.59% 35.71% 37.97% 50.55% 46.20% 51.35% 49.86% 60.78%

Billable 24.34% 18.21% 25.32% 26.86% 27.33% 34.64% 24.87% 25.98% 27.59% 46.81% 76.38%

Central Dispatch:

Billable 27.39% 23.15% 18.80% 17.85% 19.46% 29.92% 36.05% 29.21% 30.18% 49.28% 67.42%

(Above rates stated as percentage of each eligible payroll dollar. 2010 non-billable not charged)

Rates and associated dollar amounts for contributions to the RHC plan surpass those for pension.

Adding to the challenge is the annual contribution amount is spread among fewer eligible employees as

the benefit program is closed to new hires. Costs of the benefit can only be charged for employees who

receive the benefit to qualify with rules for charging federal grants and programs under OMB Circular

A-87. The chart on page 13 illustrates the declining number of eligible employees and the table above

shows the impact of spreading the cost. The County will have to develop a new methodology to

allocate the cost going forward. The zero percentages in 2010 represent the decision to not fund the

program due to financial constraints. Clearly, this impact is felt in the ensuing years as the long-term

contribution to the benefit program lost a year’s worth of resources, investment income on the cash

invested and use of funds from the trust to pay benefits. The past eleven (11) years of actuarial

determined unfunded liabilities of the Retiree Health Care Defined Benefit Plan have been as follows:

Unfunded Accrued Funded Ratio of Funded Ratio

Effective Date Liability Contribution Basis 6.5% GASB 45 5.5%

12/31/2007 $69,121,363 23.7%

12/31/2008 $60,805,196 30.2%

12/31/2009 $60,333,662 31.5%

12/31/2010 $80,245,294 25.1%

12/31/2011 $76,435,563 28.0%

12/31/2012 $78,126,257 29.4%

12/31/2013 $122,196,912 27.4% 23.1%

12/31/2014 $97,610,203 34.3% 29.3%

12/31/2015 $89,906,535 38.9% 33.5%

12/31/2016 $77,490,432 n/a 39.3%

12/31/2017 $73,476,673 n/a 43.8%

12/31/2018 $77,509,516 n/a 44.3%

Following is a graph of this information extended to include nineteen (19) years of data:

Governmental Accounting Standard Board (GASB) Statement 45 requires municipalities to present in

their annual financial reports the amounts of the unfunded liability and the Actuarially Required

Contribution (ARC). In addition, GASB 45 requires the liabilities to be calculated using a discount rate

of 5.5% vs. the actuarially calculated rate of 6.5%, based on actual investment performance and the

expected long term return on the assets within the investment policy. This is why beginning with the

12/31/2013 valuation we illustrate the different funding ratios based on different discount assumptions.

The County continues to underfund this liability although the year-end valuations from 2013 through

2018 show positive trends with the funded ratio. With improved investment returns above the discount

rate, and cost controls driving flat claim costs, we anticipate continued positive trends. However,

during the first quarter of 2020, the market value of the trust fund had fallen 16%.

Accordingly, at 3/31/2020, the trust for the Retiree Health Care Plan held market value investments of

$65,738,230. Of this amount, $56,535,790 is allocated to the County with the balance to the Road

Commission. Cash investments into the RHC Trust since 2012 are summarized in the table below: It is

noted, gains in the Trust reflect cash transfers over the past eight (8) years as follows:

Year Cash to RHC Trust

2012 $3 million

2013 $1 million

2014 $1.8 million

2015 $1.6 million

2016 $2.9 million

2017 $2.5 million

2018 $1.5 million

2019 $1.5 million

8 Year Total $15.8 million

Average $1.975 million

2020* $500,000 Yr. to date

$1.5 million projected

The four (4) year cumulative dollar gain in market value is $20.2 million. Beyond investment gains and

employer contributions, the only other source of supplemental funding into the RHC trust is employee

contributions. These, in combination with cost controls, have helped make significant gains in the

funded ratio and solvency of this benefit trust. The market value of the RHC trust is illustrated over

time in the graph below:

The above market value for year-end 2019 includes $7,558,142 allocated to Road Commission

In the 2020 budget, we include funding at $7.58 million or 78.7% of the ADC comprised of employer

and employee contributions of $7,243,547 and $341,564 respectively. For the 2021 budget, our

objective will be to keep pace with the ADC and fund the same percentage. We will calculate the

percentage of the ADC once provided by the actuary. With health care inflation and increasing numbers

of eligible dependents, we will need to continue appropriating additional amounts to continue making

positive results to the RHC trust that will ensure the benefit program is financially sound. Our

expectation is to increase funding by 8% or $606,400.

B. Employee Health Care

Health care plans with a choice among three (3) plan options have been selected by employees as

outlined in the following chart. Annually, the plans are priced by the County’s TPA for the illustrated

premium cost. These plans all fall under the hard cap provision of SB7 and are below the current year

cap amounts. The County continues to be fully compliant with the new Michigan publicly funded

health insurance contribution act opting for the hard cap cost containment measure. The County’s plans

are also compliant with the federal affordable care act. The below chart shows the plan selections the

past six (6) years including the buyout option for $1,000 per contract:

The County provides its employees and eligible dependents with a full menu of health care benefits

including the following:

1. Health Care & hospitalization: All full-time employees are covered under these new benefit

plans. The benefit plan consists of coverage through a Preferred Provider Organization – Blue

Cross/Blue Shield of Michigan. Employer covers 100% of the illustrated premium rate of a high

deductible health plan (Flexible Blue 3), integrated Rx coverage, and contributes funds into the

employees Health Savings Account (HSA). Employees pay the difference between the Flexible

Blue 3 plan with HSA and the PPO 3 (80/20) and the PPO 6 (70/30) with a 50% Rx co-pay that has

a co-pay floor of $5 and a co-pay ceiling of $50.

2. Vision: All full-time employees receive coverage through Blue Cross/Blue Shield of Michigan.

This is a 12 month plan with co-pays applicable. The Employer covers 95% of the illustrated

premium rate and the employee covers 5% (2020= $0.24 cents per pay for family coverage lower

from prior year at $0.27).

3. Dental: All full-time employees receive coverage through Blue Cross/Blue Shield of Michigan.

The dental coverage is 100/75/ 25 co-pay plan with an annual limit of $1,000 per member. 100% -

Preventative, 75% Tier II Services (Fillings), and 25% Tier III Services (Dentures). Focus is on

preventative care. The Employer covers 95% of the illustrated premium rate and the employee

covers 5% (2020 = $1.90 per pay for family coverage lower from prior year at $1.98).

4. Life: All employee groups receive life insurance coverage from the County. This coverage is

provided at no cost to the employee. Benefit ranges from $20,000 to $50,000 based on employees’

annual salary.

5. Short Term Disability: All employee groups receive coverage through a third party payer.

This coverage is provided at no cost to the employee. The County funds the benefit cost. An

employee on disability receives 67% of base salary for up to 2 years.

Comparatively, the County’s health care plan offerings (health & Rx) shown below have total

illustrative rates for family plans shared between employer and employee as follows:

Family Plans

Employer Annual Employee 2020

Plan Name Illustrative Cost Annual Cost State Caps

Base Plan w/ $1,000 HSA $14,965 $0 $18,597

PPO 3 Plan $14,965 $4,114

PPO 6 Plan $14,965 $1,898

For 2020, the state hard CAPS were increased 3.9% over the 2019 amounts. For 2021, we project the

caps increasing by a percentage range of 2.5% - 3.5%. Overall, we project total health care costs to be

$4,110,315 reflecting an increase over current year budgeted amount of $225,867.

The value of the County’s health care plan designs are illustrated in rates going up less than 1% from

2014 to 2015 followed by an aggregate rate reduction of 4.47% in the years 2016-2018. This helped the

employer reduce its cost by $297,400 towards illustrated rates over this period. In 2019 rates increased

4.45% bringing costs to 2015 rates and were followed by a 5.5% increase for 2020. Still, the new health

care plan designs and other changes have saved the County and employees money. This is further

depicted in the chart that follows.

With the 2019 results reported, we see overall health care claims paid for active employees and their

dependents higher than the average over the past decade for total amounts as illustrated below. The

costs in 2019 are second highest only to figures from 2012 and shows a three (3) year trend of

increasing costs. Both active and retiree cost increases are driving the totals. We will continue to

promote health wellness programs to assist employees and their dependents in realizing improved

overall health. These programs also help with better understanding of the health care benefits available

to employee so they can more fully utilize the benefit features including annual check-ups and

preventable care.

The costs between active and retired have remained relatively consistent over the past 3 years. We

expect the overall trend of health care costs to move higher over time due to number of

retirees/beneficiaries and due to health care inflation, but manageable due to mirroring and health care

plan designs. The self-insured retention limits per contract remain at $150,000 for active and pre-65

retiree health care programs and premium based for post-65 coverage.

Year Active Claim Amt. Retiree Claim Amt. Total Claims % Active % Retiree % Retiree

Change

2009 $ 4,809,191 $ 2,749,784 $ 7,558,976 63.62% 36.38%

2010 $ 4,481,579 $ 3,506,066 $ 7,987,645 56.11% 43.89% 27.50%

2011 $ 4,156,418 $ 4,306,658 $ 8,463,076 49.11% 50.89% 22.83%

2012 $ 4,710,956 $ 4,945,913 $ 9,656,869 48.78% 51.22% 14.84%

2013 $ 3,857,892 $ 4,853,838 $ 8,711,730 44.28% 55.72% -1.86%

2014 $ 3,549,030 $ 4,499,372 $ 8,048,402 44.10% 55.90% -7.30%

2015 $ 3,159,462 $ 4,616,312 $ 7,775,774 40.63% 59.37% 2.60%

2016 $ 3,077,289 $ 3,978,183 $ 7,055,472 43.62% 56.38% -13.82%

2017 $ 3,460,621 $ 4,556,978 $ 8,017,599 43.16% 56.84% 14.55%

2018 $ 3,794,232 $ 4,652,074 $ 8,446,306 44.92% 55.08% 2.09%

2019 $ 4,202,453 $ 5,046,067 $ 9,248,519 45.44% 54.56% 8.47%

C. Retirement

With a 25 year amortization schedule to pay down the UAAL of $77.1 million, we project all funds

including the General Fund will be required to make increasing contributions each ensuing year to the

Employees Retirement System. We project this total annually to be in a range between $400,000 and

$500,000 annually. However, the 2020 increase was $742,240 so we will need to see the next valuation

to know the 2021 change. Our projection is an increase of $570,990 using a 5% increase. In the last 10

years, the annual contribution has increased by $3.35 million. Higher employer contributions continue

to be a negative financial trend and the impact mirrors the decline in the funded ratio. See the historical

trend of the funded ratio that follows. With a sizeable UAAL, and the schedule to pay it down to $0 by

2040, expect contributions to continue with rate increases as percentage of payroll. Following is a

fifteen (15) year look at actual contributions with projections and estimates for 2019-2020:

YEAR COUNTY EMPLOYEE EMPLOYER CONTRIBUTION

2007 $172,963 $3,534,674

2008 $ 30,221 $3,900,511

2009 $ 35,548 $4,102,565

2010 $ 33,890 $4,135,707

2011 $ 36,878 $4,118,033

2012 $211,172 $4,902,862

2013 $398,227 $4,946,180

2014 $635,519 $4,796,888

2015 $807,412 $5,423,919

2016 $658,499 $5,557,800

2017 $668,968 $5,945,974 $36,633**

2018 $676,936 $5,726,754 $3,430**

2019 $677,742 $6,466,628 Subject to audit* $43,070**; $500,000***

2020 $704,472 $7,428,890 Budgeted*

2021 $715,289 $7,999,880 Projected

* Includes Defined Contribution amounts

** Prepaid in January; amount listed is excess contribution

*** Supplemental contribution

Retirement and retiree health care employer contributions together total $14.37 million in the current

year budget. While the total is not appropriated from General Fund, these two (2) benefit programs

represent significant obligations both of which have limited cost control available to the County.

The contribution rates (as shown below) and beginning for 2010 represent calculations based upon a 7

year smoothing analysis model. This takes into account the fund’s market losses and gains over a 7-

year rolling period. While the market value of the fund has moved higher, long-term pension liabilities

have grown faster pushing the funding ratio lower. The impact from the 2020 market returns will show

up in future valuations, again within the smoothing methodology.

The past twelve (12) year’s retirement contribution rates are noted in the following table and chart:

Employee Group 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

General County 13.26 14.92 17.29 22.23 23.75 24.18 26.19 29.39 30.69 29.69 31.87 33.44

Sheriff 17.58 19.43 20.5 24.11 26.26 26.92 29.4 28.78 30.29 28.61 32.54 36.39

Central Dispatch 18.79 19.45 19.09 20.48 19.42 19.94 21.59 22.84 26.11 22.42 25.49 26.27

All rates are % of payroll dollar

Beginning in 2016, the County changed the sequence of employer payments into the pension trust.

Semi-annual payments in January and July replaced monthly payments. Then starting in 2018, a single

advance payment was made in January. The result of this change in the manner and timing of employer

pension contributions through the 2020 budget is $931,422 of aggregate lower contributions or savings.

The percentage of payroll was adjusted lower for the employer due to these advanced payments and is

reflected above in the revised rates. Starting in 2020, the County continued with single employer

payments each January but is using the actual cash credit of the early contribution to be used to pay

down the UAAL. This would increase the year over year employer costs as we eliminate the cash credit

of approximately $200,000 but provide long-term benefit of paying down the UAAL.

The above chart shows the inverse relationship between the funded ratio of the pension fund and the

requirement of increasing employer contributions as the funding level decreased. The amount of

contributions going into the pension fund has been increased as the funded ratio is the net of the total

liabilities less assets in the trust. Each year this is calculated in the annual valuation and used to

determine the funding required to fully fund the plan over the amortization period including paying

down the unfunded accrued liability. The Board continues to closely monitor the pension and RHC

trusts as both have put financial strain on the organization as pension payments are a primary

obligation. The County is legally obligated to fund 100% of the ADC and has always done so. With

pension contributions going up by $780,573 and $742,240 in 2019 and 2020 respectively, unless this

cost escalation is moderated, consideration of other action may be necessary.

D. Employee Wages

The preliminary 2021 budget has built in the known adjustments for settled CBA’s. This provision will

be subject to any changes in the collective bargaining agreements that expire going forward. We have

also included any applicable adjustments for step increases for all effective collective bargaining

agreements and for all non-union employees.

The 2021 budget will need to be adjusted for any phase-in of the wage and compensation analysis that

is expected in June-July. The timing and recommendations of the report will determine the

implementation phase of the analysis.

Additionally, all costs for wage based fringes and increases in the baseline expenditures over 2020 have

been included based on the assumptions in the forecasting budget model. The total compensation chart

on page 8 illustrates the results of the new total compensation plans. The 2011 through 2020 amounts

more closely align with the County’s ability to fund wage and benefit programs. Year over year, 2019-

2020 there was an increase of $4,378 in total compensation on average for each employee. It will be

essential to keep total compensation escalation within the employer’s ability to pay and avoid the

consequences of any failure here.

E. General Fund Transfers-Out

Annually, the General Fund includes amounts that are transferred-out and into various special revenue

funds. The amount budgeted is the difference between the special revenue fund’s expected or budgeted

revenues and its budgeted expenses. As these special revenue funds are able to either raise additional

income/revenues and/or reduce expenditures, there is a direct correlation to the amount required from

the General Fund. There had been a long term trend of lower General Fund contributions to these

special revenue funds due to lower overall expenses and selected funds eliminating the need for any

contribution. Also, contributing to the lower trend has been the use of these fund’s fund balances as a

limited source of revenue and what we considered one-time funding sources.

A comparative view of the major special revenue funds and the budgeted transfers out for the past

thirteen (13) years is shown on the following page along with projections for 2020 based on the 2nd

year

adopted budget:

2019* is preliminary subject to audit

2020** is budgeted


Over the last couple of years, the biggest impact to transfers-out has been the effect of the July 1,

2019, 911 Surcharge. The revenue from this source reduced transfers-out to Central Dispatch to

zero. Year over year, we expect transfers-out to be higher by $222,000. The history of the General

Fund transfers-out to these major other funds as a percentage of the total over the past 15 years are

shown below:

Since 2008, total annual budgeted expenditures for the child care fund have decreased by $844,022

representing the effort in program outcomes. However, since 2015, budgeted expenditures have

increased by $584,748, but some of these costs within this fund are at overall savings to the General

Fund by moving employees under the Child Care Fund for accounting purposes.

2019* subject to audit 2020** is budgeted


F. Operating Expenses

As in past budgets, all departments will be requested to hold all operating expenses to the prior year

amounts unless to cover targeted expenditures or if operations will be unsustainable. Line items will be

reviewed as part of the budgeting process to allocate appropriate amounts for department programs and

services. Budgeted amounts will be based upon actual expenses from the prior 3 operating years and up

to date appropriation reports. We expect overall costs and expenses to increase by $75,000.

G. Debt Schedule

The County General Fund incurred installment purchase debt related to the IT infrastructure project in

2019. Through 2023, the County debt service is $143,008 to pay off the installment purchase. It should

be noted, the County has a debt margin of $746.3 million based on the preliminary 2019 CAFR. As

little additional debt has been issued under the County’s legal limit and existing debt is being retired,

the available margin has grown.

The Monroe County Municipal Building Authority has debt but that is the full obligation of the Mental

Health Authority, Fair and Library under a joint financing agreement for their facility projects.

Community Dental Clinic-Public Health

The County issued debt for the community dental clinic at the Public Health facility and will

service the debt from a ground lease between the dental clinic operator and the County. The

financing of the issue resulted in a debt obligation with a bond sale of $1.06 million and annual

debt service of $110,967-$120,231 for a period of 10 years through 2022. This is funded from

within the activity of Fund 221.

H. Capital Outlay

Capital expenditures need to be funded at a consistent and sufficient level as equipment investments

need to be made to keep operations reliable and avoid spending money on repairs that make those

expenditures less valuable over the long term than regular capital investments. ROI considerations and

repair vs. replacement justifications will be necessary prior to establishing capital expense amounts.

Included in the preliminary budget scenario are appropriations of $355,000 to invest in critical needs

for operations and establish baseline expenditures for this type of expense going forward. This will

cover $325,000 for the Sheriff’s fleet and related equipment, and $30,000 for a general county vehicle.

This totals $50,000 less than the prior year.

I. Capital Improvement Projects

As previously written, due to extended financial constraints, funding was limited for CIP initiatives in

years 2008-2014. Considerations for any facility or other critical emergency repairs were based

primarily on absolute necessity and were funded from multiple sources to obtain the necessary amount

of funding.

Continued deferral of capital improvement or related maintenance expenditures has a high probability

of leading to the need to fund more significant repairs later or even to prematurely replace specific

assets. While deferral is a fiscal first aid technique, long-term lack of funding in some cases may

worsen the financial condition or increase the total expenditure. As the financial strain has lessened, we

recognize the backlog of important projects that need to be funded. The CIP program has moved to a

two (2) year schedule to help identify projects to coincide with the 2 year budget. Our preliminary

budget will include a provision to fund $300,000 of capital improvement projects; $50,000 less than

current year. Priority will be additional energy conservation projects, security related expenditures,

additional roofing projects, operational equipment, and facility interior finishes for carpet and exterior

concrete and asphalt resurfacing work.

J. Enterprise-Wide Computer Capital Outlay & Network Maintenance

Monroe County has made significant investments in technology infrastructure allowing a workforce to

manage increasing workloads. A complete network of over 450 workstations, 15 LANs, and a fiber

optic backbone for a private countywide voice and data network are in place to leverage enhancements

in technology. These investments have improved the efficiency and productivity throughout the

County. The organization continues to introduce new tools with goals of improving data sharing,

service responsiveness, data analysis and spatial efficiency. At the same time, there is an ongoing need

to replace legacy systems to keep them current and efficient in supporting as much automation in all

areas of operation. In 2019, a major overhaul of the IT infrastructure took place enhancing data security

and network reliability. Data storage will continue to require additional investments to meet operational

needs going forward.

The Board’s appropriation for capital technology purchases has allowed managers who are in need of

newer equipment, to upgrade desktop computers and data management software programs. Unreliable

equipment cuts into efficiency, customer service expectations, and quality of the work product. This

leads to support staff spending more time fixing outdated or obsolete applications and equipment. A

budget goal is to continue to invest in employee tools, equipment and facility needs with a focus on

technology and automation. This investment will need to grow in dollar amounts over time and

succeeding recommended budgets will reflect this.

The concern to the County is to avoid budget choices that may stall critical technology development

and enhancements. Resource allocation decisions must consider the real value of investing in

technology projects to allow fewer employees to do the work previously completed with higher staffing

levels. A related concern is the reliability of existing systems after deferring replacement and

continuing with more expensive maintenance with less value for each dollar spent. The proposed

budget includes funding of $700,000 for continued support of the enterprise-wide network. This is

$54,000 less. Representative projects include replacing desktop computers in various offices, additional

document workflow installations and network security upgrades. Lastly, but most importantly will be

essential funding to replace the legacy financial accounting/management software following the

HR/payroll project.

7. BUDGET GOALS

With the preceding background, the Board of Commissioners are presented with the following goals

regarding the 2021 County Budget.

A. Continue current efforts, resources and strategies to improve the focus, initiatives and programs

offered for economic development activities in the Monroe community. The Monroe Link Plan is in

action phase and six (6) teams are working on the plan’s goals. Future increased funding for

implementation of the economic development strategies will be considered. An expanded economic

base with tax revenues is vital in order to provide public services. Opportunities to develop tax base

from the international bridge crossing project have begun by the Board to prepare communities and

sites for developer interest along the County’s transportation corridors and exchanges.

B. Provide County-funded services at prioritized and sustainable levels based on recurring revenues

in balance with recurring and projected expenditures. Public safety will remain a priority following

full implementation of the Sheriff Deputy staffing plan through year-end 2020.

C. Continue providing opportunities through increased investments in new technologies to provide

quality services, to improve productivity and efficiency with an expanded focus on improving

customer service skills/capabilities and leadership. Linked to this will be resources and time to train

employees in these new tools to better serve the public in delivery of services. The balance of this year

will be focused on implementing fully projects underway including RMS, JRM, CAD, HR/Payroll,

GIS. Next up will be the financial/accounting system and additional court automation projects.

D. Maintain and strengthen the overall financial position including the General Fund and Special

Revenue funds’ unreserved/undesignated fund balance at levels to maintain financial bond ratings, to

provide a safety net against future contingencies and unknowns, to provide sufficient cash flow/cash

management and for flexibility in meeting short and long-term critical obligations. Avoid financial

strain by exercising sound policymaking and long-term financial decision-making and prudent

commitments for ongoing obligations. With future of the pandemic unknown, use of reserves will be

expected to bridge revenue shortfalls to maintain public services in the community.

E. Fund necessary capital expenditures for fixtures, equipment and related capital projects

including fleet inventory and critical building maintenance and improvement projects. These will

keep reliable tools available to employees, provide for effective use of limited funds and ensure safe,

maintained and reliable work areas for employees and visitors.

F. Balance workforce levels sustainable from available resources. Leverage past workforce

reductions to strategically reorganize staff, processes and programs to meet highest public service

needs. Recognize the largest expenditure is personnel and associated costs of personnel. Continue to

seek out opportunities to restructure functions, staffing and allocations of personnel to best meet

today’s needs for internal service and external program service models for our community.

G. Develop and implement alternative funding sources to provide public services. Continue to

explore available sources and consider implementation without creating an excessive burden on local

community resources. Include intergovernmental service consolidation and resource sharing beyond

those pursued within the organization including hotel assessments used to promote and market the

County and our communities.

H. Continue exploring opportunities to contain and control employer costs for employee and

dependent benefits through appropriate and market based cost sharing models and programs. Prepare to make changes to the cost sharing model should costs rise faster than the employer’s ability

to fund all of the new costs. Consider alternatives through pools and other cooperative risk sharing

models that would maintain the quality of the benefit program while containing costs. Included are

outlines for compensation plans that offer voluntary choices for recruiting and retention incentives

around pension and wage schedule options for employees.

I. Continue to focus efforts to strengthen or minimally maintain the financial position of the

County over the next 3-5 budget cycles by containing expenditures, target select capital investments

that provide efficiency returns or other documented savings in labor or other operational costs. Use the

County’s resources strategically to position the County’s capital investments to further overall efforts in

creating innovative solutions to local government challenges and advance the County image as a leader

that will support recruiting and retaining talent necessary to achieve a broad set of goals and objectives.

8. BUDGET POLICY GUIDELINES

To implement these goals, the Board of Commissioners adopts the following guidelines:

All departments’ overall operating expenses shall be held to minor increases over prior year

amounts that keep pace with inflationary cost increases and targeted goal attainment.

Additionally, the Administrator/Chief Financial Officer along with Finance staff shall make

detailed reviews of submitted line item amounts to verify the funding amounts are appropriate.

Staff shall be kept at the current year levels as Administrator recommendations will be provided

to the Board to not increase any staff levels.

Departments shall continue efforts for staffing consolidation through reviews of services

and processes that develop more streamlined and optimally effective operations. The

restructuring of functional services must be continuously evaluated as a means to realize cost

control measures. This will be a focus for the balance of 2020 and also for the 2021 & 2022

budgets as the County prepares to adopt budgets reflecting adjustments in wages, benefits and

other expenditures with some uncertainty of revenue growth.

The County of Monroe Budget Calendar is incorporated into these budget guidelines and

will be followed as closely as possible in the preparation of the 2021 budget. Deviations to the

budget calendar may be possible but the intent will be to adopt the 2021 budget and projections

for 2022 within the calendar dates established or sooner if possible.

9. DEPARTMENTAL GOALS AND OBJECTIVES

Departments and offices shall review all services provided and determine if each and every service still

needs to be provided, and if so, must they continue to be provided under the existing service delivery

model. If the service needs to be maintained, the department must continue to explore alternatives to the

delivery of services. Departments and offices may be expected to provide information related to legal

mandates for the service and funding sources other than General Fund as the source. Of specific concern

will be any program, program expenditures or personnel funded in whole or in part from non-general fund

revenues and any reductions in funding. There will be no expectation to replace or supplement any loss of

funding with General Fund amounts.

In addition to the preceding, the following items will be considered and acted on as appropriate:

A. Efforts should be made to keep employees informed and updated on the fiscal issues that affect the

County Government in order to better prepare them for necessary changes. The intent of this effort is

to inform employees regardless of the nature of the information. The budget process is open to the

public and accompanying discussions focus on alternatives and possibilities. Depending on one’s

perspective of the discussion, the information may be concerning. Until the final budget is adopted,

various alternatives remain open for deliberation in public meetings and these may include staff and

program changes, reductions, restructuring and partnerships, etc. The input, ideas and collaborative

problem solving of employees should be sought and included by departments as they formulate goals,

plans and service consolidation initiatives.

B. The County Board of Commissioners should continuously evaluate the organizational structure of

the County Government and consider constructive changes such as consolidating departments, boards,

commissions and functions to improve operations. Creativity should be used, and where appropriate,

breaks with tradition in the interest of efficiency should be considered. Alternative service delivery

methods should be considered if they provide needed public services and are the most appropriate

means of delivering the public good or service. Finally, programs and services no longer valued or

necessary should be shed or shifted from the County’s program offering.

C. Full reimbursement to the County of all Administrative Costs for Grants and/or contractually

provided services including all post employment costs will be included in all program costs.

10. BUDGET COMPLIANCE

All budgets must be prepared and submitted in accordance with the Uniform Budgeting Act, Public Act

621 of 1978, as amended and the County Budgeting Policy.

11. BASIS OF ACCOUNTING

In measuring its financial position and operating results, the County recognizes General Fund Revenues

and Expenditures on the modified accrual basis. Revenue is to be recorded in the accounting period in

which it becomes available and measurable. Expenditures are recognized in the accounting period in

which the fund liability is incurred, if measurable.

"Available" means collectible within the current period or soon enough thereafter to be used to pay

liabilities of the current period. Revenue, which usually can and should be recorded on the modified

accrual basis, includes: property taxes; regularly billed charges, or other routinely provided services; most

grants from other governments; inter-fund transfers where liability has been established and collection is

assured; or losses which can be reasonably estimated.

12. PRIOR YEAR BALANCES

Monies appropriated, but not expended within a given fiscal year are carried forward into the next fiscal

year as either obligated or surplus/(deficit) revenue.

General Fund monies are allocated each year in the County Budget to various departments, programs and

activities. However, if those monies have not been expended at the end of each fiscal year, they

automatically revert to the General Fund Unreserved Fund Balance, rather than being carried forward as a

departmental or divisional surplus. Encumbered accounts are the only exception to this rule.

Encumbrances are any unpaid expenses that are already obligated by contract or purchase order. They are

carried forward into the next fiscal year as obligated rather than surplus revenue. Special Revenue funds

containing fund balances may be used to offset transfers from General Fund in amounts determined after

additional analysis by the Finance Office.

13. CONTINGENCIES

Budgeting for contingencies in each fiscal year is the Board of Commissioner’s responsibility. This office

will not budget contingencies within any cost center except the General Fund. Departmental budget

requests shall not include contingency amounts. The preliminary budget includes $220,100 of general

purpose contingency.

14. PROGRAMS FUNDED BY OUTSIDE FUNDING SOURCES

Changes in Federal and State programs and the process of appropriating funds may impact the amounts

provided under various Federal and State grants and how the funds are administered by local units of

government.

Departments that anticipate funding for new or existing programs should define how any new program

appropriations and accompanying methods will affect their current operations and should also demonstrate

if there will be any future potential impact on departmental operations if the anticipated funding sources are

reduced or eliminated.

15. INDIRECT COST CONCEPT

Any new funding proposals for consideration in the budget shall include provisions for recovering indirect

costs paid by the County. Departments shall continue to implement the practice of billing non-general fund

programs for their allocated share of administrative and overhead costs incurred by the General Fund. This

practice will continue with an emphasis on collecting the indirect cost amount as calculated by the

County’s annual Indirect Cost Allocation Plan.

The 2021 Budget will be prepared using 100% of the most recently completed Indirect Cost Allocation

Plan based on audited 2019 financial statements. Indirect costs are defined as overhead, benefit and

administrative costs of support services used to administer a given grant, other fund or program. Indirect

costs are recognized by Federal and State funding agencies as eligible costs for providing a given service

and are eligible for reimbursement to the County. No exceptions to eligible reimbursement to the County

will be allowed.

All grant requests shall be reviewed by the Finance Department to insure that the maximum allowable

reimbursement for both direct and indirect costs is included. All departments submitting new proposals for

grants shall provide sufficient review time to fully consider allowable costs. All grant applications shall be

submitted to the Board of Commissioners prior to applying for funding to the grant source entity.

16. FEES

Every department shall annually evaluate fees charged for services provided, and establish fees equal to the

cost of providing the service. As annual costs of providing services to the residents of the County increase,

fees that are charged for the service should be adjusted accordingly. The concept of user fees for services

shall be included in the departmental recommendations for review by the Board of Commissioners. Each

department/office must review and prepare updated schedules of all fees charged as part of the annual

departmental budget submittal. The master fee schedule has been incorporated as part of the annual budget

and is found in the second to last tab

17. FINANCIAL INDICATORS-PER CAPITA DATA CHARTS

Financial indicators help an organization look inward and examine whether revenues and expenditures are

or have been in balance. Such indicators help to show weaknesses or strengths in the organization’s

revenue/expenditure future. A short description of each financial indicator is provided as a basis of

understanding each:

A. Revenues per Capita: This describes revenues relative to population. As population increases, it is

reasonable to assume a proportional increase in revenues will be necessary to continue existing levels

of equitable public services to an expanded citizenry. On the contrary, declining revenues per capita

could indicate insufficient resources to continue existing public services at the current levels and

reductions may be necessary. This was clearly a concern as there had been a 17.3% decline in this ratio

from 2008 to 2012. Beginning in 2015-2016, there has been a minor positive change to the trend and it

has continued. With the pandemic’s impact, this trend line will likely flatten.

B. Expenditures per Capita: Increasing expenditures per capita may indicate the cost of providing

public services is increasing beyond the County’s ability to pay for the same, especially if there has not

been a corresponding increase in revenue. Increasing expenditures per capita may also indicate

declining productivity if there have not been significant additions of new programs or services. It is

particularly helpful to compare this financial indicator with revenues per capita. The trend line mirrors

and exceeds the drop as compared to the revenue line thereby providing margin and the results are

shown in operating results.

This chart illustrates the per capita revenues in 2019 still below the amount in 2008 with that year the

highest. Expenditures match the level in 2005 with 2008 being the highest per capita expense ratio. The

trend line is generally positive the last 8 years with revenue ratios higher than expense ratios.

2019* Amounts are preliminary

2020** Amounts are budgeted

C. Residents per employee: This indicator compares what is typically the County’s largest cost

category to the population of the County. It is a proxy for the County’s overall cost structure and can

be a measure of efficiently delivering services, with higher a ratio equating to less County employees

per resident and lower unit cost per service delivery unit. The table shows the County employing one

employee for every 324 county residents. As staff is added and the population holds or declines the

ratio is impacted.

POST EMPLOYMENT BENEFIT COSTS: Per Capita Basis Data

Legacy Benefit Program Costs; per capita data: The two most challenging post employment

obligations of the County are pension and retiree health care benefits. Each of these funding obligations

is illustrated below. The costs represent the cost per County resident for the benefit liabilities described

and calculated from the most current actuarial valuations (12/31/2018). They show the per capita based

on the total calculated liabilities.

RETIREE HEALTH CARE:

The data below represents the value of the annually calculated total liability incurred for RHC. Since

the 12/31/2013 valuation, the per capita total liability has trended lower although recently is trend

negative as liabilities grow.

Data from Retiree Health Care valuations as of 12/31

Effective 2013 figures based on GASB 45 Standard @5.5% discount

The illustration below represents the trend of a growing unfunded liability generally from 2001-2013

valuations. The effect of GASB 45 standard is shown from the 12/31/2013 valuation moving the

discount rate from 7% to 5.5%. The chart shows the present day value of the assets in the RHC Trust

insufficient to cover the total liabilities of RHC benefits actuarially calculated. The 2014 valuation

significantly altered the trend line showing the actuarial change from plan designs and lower actual

claims along with projected lower RHC claims. The trends are generally positive the last five (5) years.

RETIREMENT SYSTEM:

The following chart illustrates the trend of the value of the annually calculated total liability incurred

retirement costs for the three (3) County employee groups noted and allocated on a per capita cost

annually. The trend line is negative save for one year with the per capita cost growing each year. The

trend line has continued in spite of a closed amortization schedule for the UAAL.

Data from Monroe County Employees Retirement System valuations for years ending 12/31 for County employee groups:

General, Sheriff’s Office and Central Dispatch

The chart below illustrates the trend of growing liabilities for which the value of the assets in the

Retirement System Trust are insufficient to cover the total liabilities of retirement benefits actuarially

calculated and promised. The cost is depicted on a per capita basis for each year. Again, a consistent

negative trend line is represented over the time shown.

RETIREE HEALTH CARE & RETIREMENT SYSTEM COMBINED DATA:

The next chart combines the cumulative unfunded accrued liability of both of the County’s post-

employment benefit programs. It is displayed as a trend line over the past sixteen (16) actuarial

valuations. The lower per capita amounts beginning in 2014 is primarily attributable to the lower

UAAL of the Retiree Health Care valuation.

2021 PRELIMINARY BUDGET

Significant Assumptions: 2020 Budget was balanced by deferring $2.05 million of contributions to Retiree Health

Care by intentionally underfunding the actuarial determined contribution (ADC) by this amount or funding 79% of

the ADC. The remaining budget shortfall covered by use of $80,000 from Property Tax Foreclosure Fund. No funds

were appropriated from Fund Balance. Technically, the County is operating a current year budget that is out of

balance from current revenues = current expenditures by $2.13 million. This is an improvement in budget strength

over the prior year’s amount of $2.49 million or a gain of $358,525 over 2019.

1. 2021 Property tax revenues are budgeted with a net increase of $369,751 over the 2020 adopted budget;

$180,249 lower in real property taxes and $550,000 lower in the amount reserved for prior year tax adjustments;

no change in the personal property tax reimbursement amount.

2. At this time, we do not forecast a need to appropriate any amount from General Fund reserves to balance the

budget.

3. State revenue sharing reflects a 40% decrease over the 2020 budgeted amount – a reduction of $1,058,869. All

other revenue line item’s cumulative total is estimated as level or flat to same amount as the 2020 budget.

Includes state revenue sharing payments equal to 2019 amount until state budget adopted.

4. Budget outline based on patterned CBA models and like provisions in CBA’s. Fringe rates are assumed at flat to

CPI increases except for rate increases as follows: 1) Retirement-Employer Contribution +5%; 2) Retiree Health

Care +5%, and; 3) Health Care-Employer Cost +6%.

5. No changes in staffing levels; no additional staff, no reductions in staff. Budget includes only Board approved

positions.

6. Contingency has been reduced to $350,000 which is a reduction of $436,925. No program reductions.

7. Capital Outlay funding is included in the amount of $414,000 for vehicles; a decrease of $49,000 over 2020.

$280,000 Equipment project completed in 2020 makes net decrease in Capital Outlay $335,500. Use of the tax

foreclosure fund to transfer $80,000 for funding for current year capital outlay expenditures. The transfer amount

is the same amount as the 2020 budget.

8. Computer Capital Outlay funding is included at the amount of $700,000; $54,000 less than the 2020 level.

9. Capital Improvement Program funding is included at $300,000 for facility capital needs; $50,000 decrease.

10. Funding in the unrestricted contingency account of $290,000; an increase of $69,900.

11. There will be a net increase in the General Fund transfer out amounts, due in part to an expected transfer to the

MANTIS drug enforcement unit.

Budget projections illustrated as differences between 2020 adopted budget and updated with settled collective

bargaining agreements, used as a baseline for comparative purposes to project a budget outline.

18. 2021 PRELIMINARY BUDGET OUTLINE

General Fund Budget Property Tax Revenue: Positive Negative

2020 Projected Property Tax $30,933,000

Reserved Amount (MTT) ($900,000)

Net $30,033,000

2021 Projected Property Tax $30,752,751

Reserved Amount (MTT) ($350,000)

Net $30,402,751

Revenue Increase Over 2020 $369,751 $369,751

State PPT Replacement $ 375,000 $0

Total Tax Revenues $30,777,751

State Revenue Sharing:

$1,588,304 ($1,058,869)

Retirement-Employer Contribution:

Assumed 5% increase in contribution rates

($7,428,890 vs. $7,999,880=$570,990)

General Fund portion=$354,308 ($354,308)

Employee contribution=$715,289

Retiree Health Care:

Assumed 5% increase in contribution rates

($7,233,735 vs. $7,648,306=$414,571)

General Fund portion=$259,997 ($259,997)

Employee contribution=$350,411

Health Care-Employer Cost:

2020 budgeted at $3,884,448. Assume increase of

6.0% in Health care employer rates=increase

of $225,867. General Fund portion=$139,294 ($139,294)

Charges for Service Revenue Reductions

Charges for service ($604,000)

Interest earnings ($70,000)

Convention facilities tax $23,868 ($650,132)

Tax Foreclosure Transfer:

Level amount of $80,000 $0

Contingency ($436,925)

Capital Outlay Funding ($335,500)

Computer Capital Outlay Funding ($ 54,000)

Capital Improvement Funding ($ 50,000)

Wage & wage based fringe expenses ($318,775)

Budgeted Expenditures

Operating Expenses ($113,618)

Election Expenses ($245,000)

Transfers-Out:

Special Revenue Funds net: ($368,676)

(Dorm, MANTIS, Child Care Fund)

Use of Fund Balance; not yet Budgeted ($0)

Summary:

Revenues and/or estimated savings over baseline 2020 Budget $1,491,176

Additional expenditures and/or lower revenue over 2020 Budget ($3,263,669)

Total Projected Preliminary 2021 Budget Deficit ($1,772,493)

Other 2021 Budget Considerations:

1. The impact from the pandemic has severely impacted State of Michigan revenues. Revenue sharing as an annual

appropriation under the statute will likely be impacted. We have used a 40% reduction of revenue sharing in our forecast.

2. Cautious review of all State Grant Funding line items in General Fund and Special Revenue Fund revenue sources.

Revenue shortfalls will be covered by expenditure reductions or General Fund transfers-in.

3. As the 2020 preliminary financials are finalized, we will compare significant budgeted revenue line items against

2019 actual and incorporate into final 2021 budget. The objective is to incorporate actual figures to establish a new

baseline for the various sources of significant revenue. There likely will be revenue adjustments due to changing

operations.

4. The County will need to consider the impact of legislation on forfeiture practices that have been used to fund

MANTIS and efforts against illegal drugs. Funding is expected to rapidly be depleted and if the programs and staffing

are to continue, the General Fund will need to appropriate money to continue.

Disclaimer: Projected Preliminary Surplus/Shortfall is based upon many dynamic factors and other assumptions. The figures are based on rudimentary calculations

and are subject to significant change. Significant additional analysis is necessary prior to increasing the confidence of the above figures. The purpose is to present an early projection of the 2021 Budget based on estimates and support the governing Board in its policymaking.

2021 budget guidelines

Documents