Chairperson Stutsman called the Johnson County Board of Supervisors to order in the Johnson County Administration Building at 9:08 a.m. Members present were: Charles Duffy, Jonathan Jordahl, Mike Lehman, Sally Stutsman, and Carol Thompson.

Stutsman said that in this meeting she would like to hear Pillard and Stolze’s issue with Secondary Roads, then have a general overview of tax askings on the budget and the spreadsheet. She said that they should think about it over the weekend, meet with constituents, then return on Monday, and discuss where they would like to do some cutting. She said that final spreadsheets will be available in the afternoon.

Deputy Auditor Dan Stolze said that the additional tentatively approved expenditures for Secondary Roads decreased the projected ending 2001 balance down to $791,000. He said that they recommend Secondary Roads has at least a $900,000 balance to be able to cover expenditures until the tax revenues come in, in July and August. Stolze said that the $108,262 in the current report is the difference between where they project and what they believe should be the minimum balance. He said that they have several options. He said that they could leave it the way it is, which means that they could run out of money, or that they could cut the $108,262 out of the Secondary Roads budget, which would leave it at a $900,000 balance and have no impact on the tax side of it.

Stolze said that if they want to leave the Secondary Roads budget the way it is now and also have at least a $900,000 ending balance, they would have a couple of choices. He said that they could transfer that amount additionally this current fiscal year into Secondary Roads from General Basic. Duffy asked if they could really do this. Stolze said that they could. He said that the funding for Secondary Roads can come from a combination of General Basic and Rural Basic. Duffy said that they can do this up to a certain point. Stolze replied that this year they don’t even have anything budgeted to be transferred from General Basic, and that it is all being done out of the rural side. He said that next year it will be as high as it can go. He said that if they choose this option, it would cause the Supplemental levy to go up by $108,262 to cover that next year. Stolze said that the other option is to take the $108,262 out of Rural Basic next year and transfer it into Secondary Roads, which would increase the tax askings by the same $108,262. He said that 2 of the choices would result in having the tax askings go up next year. He said that if they cut the Secondary Roads budget by the amount it would not have an effect on the taxes.

Thompson asked what the effect would be of just leaving the balance at the lower amount. She asked what would happen if they run out of money and if they would have to do a budget amendment of make them postpone a project. Stolze said that they may not be able to do certain things for an amount of time. Stutsman said that the beginning year balance is for basic needs such as payroll. Thompson noted that the ending balance is only 10% of the annual expenditures, which isn’t 3 months expenses. She said that she is assuming that they are figuring the department will get some revenue to cover their expenses. Stolze said that the $900,000 balance was a very conservative estimate based on the history of what the department spends. Stutsman asked if this was just the bare minimum of what they would need to get through the first 3 months. She said that it hasn’t been so low in quite a while because the Board has intentionally spent down the balance so they would have the minimum.

Thompson asked if they could do like they’ve done in the past and lend Secondary Roads money from another part of the budget until they got their revenues in. Jordahl asked if they could use money from the Reservoir Roads Fund for Secondary Roads. Duffy said he didn’t think they should touch the principal. Jordahl said that he was referring to borrowing the money, then putting it back when they got the revenues in. Stutsman said she thinks they should check this with Tom Kriz to see what it would affect. She said that the issue at hand is whether they are comfortable with reducing the balance for Secondary Roads or if they want to leave it at $900,000, and then if they leave it at $900,000 how they are going to deal with it. Thompson asked Stolze if they had just noticed this. Stolze replied that in going over the spreadsheet they found that the amount doesn’t automatically adjust. Thompson said that they put $108,000 in the spreadsheet, so they must have known at the time that it was going to be an issue. Stolze said that it calculates automatically and they had to actually go in and find it. Stutsman asked the Board how they want to deal with this. She said that she is not comfortable with reducing the amount.

Jordahl asked what the actual ending balance for Secondary Roads was as of the end of Fiscal Year 1999. Stolze reported that in the current fiscal year they started with a balance of $2,091,000. He said that this is the number for the current year and the next year. Stolze said that the projected ending for this fiscal year is $1,416,000. Jordahl asked how $791,000 relates to this and if it was the projected ending balance for 2001. Stolze said yes. Lehman asked if it’s been reduced because they had been taxing less for it. Stolze said that he thought it was because the expenditures have increased. Lehman asked if they are going to tax less and try to find a comfortable level for the budget. Stutsman asked if they could decide whether they want to reduce it to $791,000 or if they want to keep it at $900,000. Duffy, Jordahl and Stutsman said that they would like to keep it at $900,000. Thompson said she would leave it $791,000 and see how it goes. Thompson asked what the projected ending balance for the current year is. Stolze replied that it was $1,416,000. Thompson asked if that was going into this fiscal year and Stolze said yes. Thompson said that they have budgeted enough money in revenues and expenses to balance this year’s budget and that at the end of the year they will only have $791,000. Stolze agreed. Thompson asked if the $1.4 million was part of what the department was going to spend next year. Stolze said that it is part of their total balance.

Jordahl said that he didn’t think they had calculated in the transfer of the maximum amount from the General Fund when they did the current spreadsheet. He asked if the $108,000 would be covered by the transfer amount. Stolze said that the transfers are already included. He said that they can’t increase the transfer next year because it is already at the maximum that the law allows. He said that the only other place to transfer money from is Rural Basic. Thompson said that over the last 3 years they have spent less than was budgeted by about $500,000. She said that the carry over each year is quite a lot greater than the planned carry over. Stolze said that this was a possibility. Jordahl said that this is a pattern and they need to budget according to what the department actually spends. Thompson said that they will have to amend in some of their carry over at the budget amendments next year. Stutsman said that they should include Gardner in the discussion to see what he can do with the minimum balance. Stolze said that if they wait and find out that the ending balance for the department is higher than they expected, then they wouldn’t have a problem. Jordahl said that consistently every year the department has a huge chunk of money that they haven’t spent. Stutsman said that the end of the fiscal year comes right in the middle of their project season.

Jordahl left at 9:25 a.m. and returned at 9:30 a.m.

Stutsman said they have asked Secondary Roads to spend down their ending balance and that they have done it. She said that she thinks they have spent it down as far as she is comfortable with. Stolze reviewed the calculation of the ending balance, which factors in beginning balance, transfers, revenues, and expenditures. He said that everything they are doing is a projection. Thompson asked if the ending balance was an adequate carry over. Stolze said that he thought it was.

Stolze reviewed the balance carried over in the other funds and compared them to the carry over in Secondary Roads. Stutsman said that she would hate to see Secondary Roads in the middle of a project and not able to complete it because they don’t have the funds. Thompson said that in such a situation they could lend them money from another fund. Stutsman said that this was like robbing Peter to pay Paul. Thompson said that it wasn’t increasing the expenditures and that the money would come back once they realized their revenues. Duffy said that he wouldn’t do this. Stutsman said that in past years they had always been cautious about getting fund balances too low in case they ever have another budget freeze. Thompson said that the total fund balance is $10 million, or 27% of their expenditures. She said that this is adequate and that she doesn’t think they should tax for ending balance. Stutsman asked Thompson if she meant that they should have a zero ending balance. Thompson said no, but that the total ending balance should be about 25% of the budget because they have the first 3 months before tax revenues come in. Pillard said that all the expenditure trusts can only be used for specific things. Stolze said that they really only make recommendations on minimum balances for just a few things.

Jordahl said that they need to consider what taxes are going to be in the rural area and they need to think about what they are going to cut. Stutsman said that they could transfer money in. Jordahl said that they were at the maximum transfer. Stolze said that if they were going to do it next year it was going to have to come out of Rural Basic. Thompson asked if there was anything they could do to prevent raising taxes for rural residents. Stolze said that the other way to do it would be to cut the Secondary Roads budget. Thompson said that she wasn’t in favor of doing this. Stutsman said that they have asked the Secondary Roads Department to lower their spending and they have dutifully done it, and now they are asking them to lower it even more. She said that she is afraid the Board will confine what they are able to do if they continue to lower the budget, and that if they get into a budget freeze it may restrict it even more.

Lehman asked where condemnation payments come from and what other factors, such as weather, would affect the spending. Stolze said that they would probably have to talk to Gardner for this information. Thompson asked if the rural levy would increase even if they cut the budget some place else, such as space needs. Stolze said that where they can take money from for Secondary Roads is limited. He said that if they decided to make an extra transfer into Secondary Roads this year from General Basic, what it would result in next year is that the tax asking in General Supplemental would have to go up in order to cover it. He said that if they wanted to offset that increase they would have to cut in other places. Stutsman said if they decide to decrease the ending balance that they would be decreasing the Secondary Roads budget by a little over $100,000. Stolze said that if they leave it just as it is there would be no cut. Thompson asked what would happen if the current year’s ending balance was high. Stolze said if it was significantly higher, this next budget would be all right because they would go with the projected expenditures that would put it higher. Stutsman said that they should ask Gardner if he can deal with a budget cut. Thompson said that it isn’t a budget cut. She said that they could put it in next year’s budget or save it from this year’s carry over.

Jordahl said the revenue-expense adjustment the Auditor’s Office calculates is significant, because this same type of thing occurs in the spending in Secondary Roads. He said that Secondary Roads has always had a significant amount of money in excess of what was budgeted for an ending balance. Thompson said that they need to keep this in mind for next year so they can accommodate it in the budget. Stutsman asked if the Auditor had already made this adjustment. Stolze reported they have factored it in. Jordahl said that they need to hear from Gardner how he has changed the department’s spending. Lehman said they have to worry whether Secondary Roads will have the funds to cover expenditures. Thompson pointed out that all they have to worry about is the first few months before tax revenues come in. Duffy expressed his concern about letting the balance get too low and said he would be against borrowing money from the principal in the Supplemental Roads Fund. Thompson asked why they don’t change the revenue-expense adjustment to eliminate the $100,000. Stolze said that the revenue-expense adjustment is based on the revenues and expenditures and that it doesn’t have anything to do with the fund balances. Jordahl said that this results in an excess in the fund balance at the end of the year and that they are not unrelated. Stolze said that it tries to correct this and make sure that they are not taxing for more than they need to.

Thompson asked why they don’t just change the revenue-expense adjustment to $142,000. Stolze said that the $1.416 million, because it is already money that is in the budget, shows as a minus because they do not have to tax for it. Jordahl asked if the revenue-expense adjustment indicated that the budget was off by $250,000. Thompson said that they would have to adjust the budget to accommodate but that it would solve the problem with the funds. Stutsman said that she thought they were making too big a deal out of idiosyncrasies. Jordahl said that would be irresponsible because that’s not what the Auditor feels the number is. Stolze said the spending down of the balance indicates Secondary Roads is trying to budget accurately and changing the revenue-expense adjustment would not be an accurate way to budget. Jordahl said that he thinks that right now the best thing to do is look for $100,000 to cut. Thompson said that they could do this by doing half of GIS. Jordahl pointed out that this is on the rural side. Thompson said that she understands, but that they can fix the funds by changing the revenue-expense adjustment. Pillard said that they need to remember that it will not be a one to one ratio. Stolze said they could put any number in for revenue-expense adjustment, but that they tried to do it based on what they thought was accurate. Stutsman said that it is done by a formula and she has never known the Board to adjust this number. Stutsman suggested getting Gardner in before they make a decision.

Lehman asked to look at the actual dollar amount impact of a $100,000 change in the rural basic fund before raising that levy. Jordahl noted a $100,000 change in the rural area has about an $11 impact, and in the General Basic fund only about $2. He said he would favor cutting the budget rather than raising the rural levy, which has a larger impact. Thompson asked if Jordahl thought they should leave the ending balance at $791,000, or if they should cut the budget by $100,000 to make the ending balance correct. Jordahl said that they should get Gardner in and offer him a choice. Thompson said that last year they cut Secondary Road’s ending balance and they were told that it would not affect the department’s operations. Jordahl said that they cut the balance in a road construction escrow fund because it had been out there and not used for a number of years. He said that they took $300,000 or $400,000 dollars from the fund. Thompson asked about this transfer and said that she thought they had already done this in the budget. Stolze said that they took $30,000 from the fund this year and will take $150,000 from it next year. Pillard said the transfer in the budget brings the fund down to the desired amount for the funds for maintenance agreements.

Lehman said one of Gardner’s problems is that he has to estimate the cost of road projects and that he doesn’t want to come back to the Board and tell them that the bids all came in higher than he was expecting. Stutsman agreed that Gardner has a lot of variables in writing his budget. Lehman noted that Secondary Roads has a good record for not going over budget on individual projects. Stutsman asked if they wanted to discuss the budget any further today or take time to look at it over the weekend and talk further on Monday. Stutsman said that she thinks they have to balance rural taxes with what people want for rural services. Jordahl said that this is not relevant in the current discussion. Thompson asked about tax equalization. Stolze said he would update the spreadsheet today. Jordahl suggested getting budgeted and actual balances for 3 years. Lehman suggested that this may be something that Gardner would also like to see. Stolze said he could get this.

Adjourned at 10:13 a.m.

Attest: Tom Slockett, Auditor

By Mark Kistler, Recording Secretary