2019 2020 Biennium Preliminary Budget August 19 2019

2019 – 2020 Biennium Preliminary Budget August 19, 2019 1

§ High level look at revenue and expenditure estimates TODAY’S AGENDA § Preview of mid-term budget requests § What’s next in the process 2

THE COUNTY BUDGET § Over 80 separate funds § 20 distinct offices and departments § 11 offices headed by independently elected officials § 8 departments under the direction of the County Manager on behalf of the Board § 1 department led by a joint executive committee § Biennial Operating Budget § Capital Budget includes full project costs, balances to the Capital Facilities Plan, and provides flexibility between years 3

ECONOMIC AND BUDGET OUTLOOK 4

ECONOMIC AND BUDGET OUTLOOK Property tax increase limited to one percent growth The Assessor estimates new construction this year at $654. 6 million, growth of 15%. Growth in sales tax revenues in Thurston County is continuing – 7. 8% growth year-to- date comparing July 2019 to July 2018 At the state level, the Economic and Revenue Forecast Council anticipates a weakening in the real estate market, primarily due to sales of large commercial properties. In Thurston County, the County Auditor reports that REET filings are down about 10% compared to last year, however, REET revenue appears to be relatively flat. The unemployment rate in Thurston County is creeping up, at 5. 3% in June 2019 compared to 4. 6% in June 2018 Population growth county-wide is 1. 4%, unincorporated county 1. 55% Fewer opportunities for state and federal grants and more competition for those dollars Cost of doing business outpaces revenues 5

COUNTY UNEMPLOYMENT RATE 1990 TO PRESENT 6

COUNTY SALES TAX GROWTH RATES 1992 TO 2018 Thurston County Sales Tax Revenue Percent of Annual Year-over-Year Change 15, 00% 10, 00% 5, 00% 0, 00% -5, 00% -10, 00% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 7

COUNTY NEW CONSTRUCTION VALUES 1999 TO 2019 Thurston County New Construction Values dollars in millions $1 200 $1 000 $800 $600 $400 $200 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 8

INVERTED YIELD CURVE The yield curve has inverted before every US recession since 1955. Yields have typically inverted an average of 18 months before the start of a recession. 9

BUDGET OVERVIEW 10

SOURCES OF OPERATING REVENUE – ALL FUNDS 2018 In Millions 2019 In Millions 2020 In Millions Taxes $ 119. 3 $ 126. 0 $ 133. 7 Charges for Services $ 82. 1 $ 87. 5 $ 92. 4 Other Financing $ 45. 2 $ 30. 7 $ 23. 1 Intergovernmental $ 27. 0 $ 32. 9 $ 33. 0 All Other $ 20. 6 $ 21. 8 $ 22. 7 Total $ 294. 2 $ 298. 9 $ 304. 9 11

SOURCES OF OPERATING REVENUE - ALL FUNDS Operating Revenues for All Funds 350, 0 300, 0 Dollars, in millions 250, 0 20, 6 21, 8 22, 7 27, 0 32, 9 33, 0 45, 2 30, 7 23, 1 All Other 200, 0 150, 0 82, 1 87, 5 92, 4 Intergovernmental Other Financing Charges for Goods and Services Taxes 100, 0 50, 0 119, 3 126, 0 133, 7 2018 2019 2020 - 12

EXAMPLES OF REVENUE Licenses and Permits; Fines and Taxes Forfeits Property Tax Marriage and vehicle licenses Sales & Use Tax Construction Permits Special Revenue Taxes, such as Treatment Sales Tax Court fines, such as speeding tickets Charges for Services Miscellaneous Revenue Garbage disposal fees at the WARC Investment Interest Internal service charges, such as Financial Transfers (Other Finance Sources) Services Transfer from Roads Account to Road Intergovernmental Revenues Construction to account for projects Federal and State grants for services such as roads and housing State revenue sharing, such as Liquor Profits 13

SOURCES OF GENERAL FUND REVENUE 2018 In millions 2019 In millions 2020 In millions Taxes $ 60. 3 $ 64. 7 $ 67. 0 Charges for Services $ 13. 4 $ 14. 8 $ 16. 6 Intergovernmental $ 9. 1 $ 10. 5 $ 10. 7 Other $ 17. 7 $ 8. 7 $ 9. 8 Total $ 100. 5 $ 98. 7 $ 104. 7 14

SOURCES OF GENERAL FUND REVENUE General Fund Revenue 120, 0 100, 0 Dollars, in millions 17, 7 80, 0 8, 7 10, 5 9, 1 13, 4 14, 8 9, 8 10, 7 16, 6 All Other Intergovernmental 60, 0 Charges for Goods and Services Taxes 40, 0 60, 3 64, 7 67, 0 2018 2019 2020 20, 0 - 15

GENERAL FUND TAX REVENUES 2018 In Millions 2019 In Millions 2020 In Millions Property Taxes $ 39. 5 $ 41. 4 $ 42. 5 Sales Tax $ 16. 3 $ 18. 2 $ 19. 4 All Other $ 4. 5 $ 5. 1 Total $ 60. 3 $ 64. 7 $ 67. 0 16

GENERAL FUND TAX REVENUES General Fund Tax Revenue 80, 0 70, 0 Dollars, in millions 60, 0 5, 1 4, 5 16, 3 18, 2 19, 4 All Other 40, 0 Sales Tax Property Tax 30, 0 20, 0 39, 5 41, 4 42, 5 2018 2019 2020 10, 0 - 17

2018 DISTRIBUTION OF PROPERTY TAX 18

2019 – 2020 PROPOSED EXPENDITURES All Funds 2018 2019 2020 Operating $ 319. 5 $ 314. 2 $ 314. 6 Capital $ 33. 0 $ 26. 9 $ 38. 5 Total $ 352. 5 $ 341. 1 $ 353. 1 General Fund 2018 2019 2020 Operating $ 107. 0 $ 101. 7 $ 107. 2 19

PROPOSED EXPENDITURES ALL FUNDS Operating Expenditures, All Funds Dollars, in millions 350, 0 300, 0 38, 2 40, 7 37, 7 250, 0 52, 8 31, 5 31, 3 Internal Services 200, 0 150, 0 100, 0 50, 0 82, 4 84, 7 86, 2 Economic Vitality 19, 2 20, 9 44, 9 53, 5 50, 2 82, 2 84, 6 88, 3 2018 2019 2020 19, 0 Legislative General Government Health and Human Services Law and Justice 0, 0 20

PROPOSED GENERAL FUND EXPENDITURES General Fund Expenditures 120, 0 Dollars, in millions 100, 0 80, 0 2, 0 8, 5 2, 9 12, 0 1, 6 2, 1 7, 4 2, 6 12, 1 1, 6 2, 2 7, 6 3, 0 1, 7 Internal Services Legislative Economic Vitality 60, 0 General Government 40, 0 80, 0 75, 8 79, 6 2018 2019 2020 Health and Human Services Law and Justice 20, 0 21

MID-TERM CHANGES AND REQUESTS 22

REVENUE CHANGES General Fund, Non-Restricted Property Tax Estimate - $323, 000 Auditor’s Office Licensing Fees - $600, 000 Juvenile Court Parent Pay Program - <$96, 000> 23

GENERAL FUND EXPENDITURE CHANGES General Fund, without Revenue Clerk’s Office LFO Fund FTE - $33, 000 Superior Court Law Clerks - $205, 000 Sheriff’s Office Crime Analyst - $100, 000 Non-Departmental LEOFF Medical Payments - $100, 000 Non-Departmental Funding of Parks - $100, 000 CPED Planning Extend Positions - $205, 000 24

OTHER FUND EXPENDITURE CHANGES Other Items Adjustments in Treatment Sales Tax Courtroom Audio and Video Replacement Project Auditor’s Office Election Costs - $410, 000 Sheriff’s Office TNT Detective - $130, 000 TNT Fund Change Benefit Cost Share - $88, 000 GF, $179, 000 All Funds County Risk Pool Contributions - $404, 000 Risk Fund ERP Backfill - $504, 000 Large System Replacement Fund Information Technology Dept Support Staff - $301, 000 IT Fund 25

ITEMS NOT INCLUDED Cost of Living Adjustment Approximate General Fund $500, 000 per 1% COLA Funding for Parks Potential to increase Road Levy Shift Miscellaneous Community Requests 26

WHAT TO EXPECT IN THE COMING WEEKS 27

BUDGET WORK SESSIONS: AUGUST 26 - 30 General Fund Forecast Update and Review Major Funds Review Budget Requests, Grouped by Final Decisions by August 30 Policy Requests Grants and Revenue Supported Capital Projects Shifts between Years Technical Adjustments Items not in Questica 28

BUDGET WORK SESSIONS AND ADOPTION SCHEDULE Date Activity/Action August 21 Work Session: Health Care Premiums August 26 - 30 Board Work Sessions August 30 Board Preliminary Decisions September 23 Publish Bo. CC Preliminary Budget October 7 Public Hearing October 9 - 10 Board Final Deliberations October 29 Budget Adoption 29

FOR MORE INFORMATION: Ramiro Chavez, County Manager 360 -786 -5540 Robin Campbell, Assistant County Manager 360 -790 -3063 30