HomeMy WebLinkAboutResolutions - 2001.07.19 - 26413MISCELLANEOUS RESOLUTION #01183 July 19, 2001
BY: Finance Committee, Sue Ann Douglas, Chairperson
IN RE: DEPARTMENT OF MANAGEMENT & BUDGET - DELINQUENT TAX
REVOLVING FUND (DTRF) - FISCAL RESPONSIBILITY PLAN
Chairperson, Ladies and Gentlemen:
WHEREAS, acting under the authority of the General
Property Tax Act, 1893 PA206, as amended by 1968 PA107, MCL
211.87b, the Board of Commissioners established the Oakland
County Delinquent Tax Revolving Fund (DTRF) in 1974; and
WHEREAS operation of the DTRF by the County Treasurer
has consistently provided taxing units with a stable revenue
stream while also generating a surplus; and
WHEREAS the Board of Commissioners annually
incorporates in the General Appropriations Act a strict
policy for accessing funds from the DTRF; and
WHEREAS the Governmental Accounting Standards Board
Statement #34 requires that the DTRF be reported as a Major
Fund within the Business-type Activities Category in the
Comprehensive Annual Financial Report (CAFR); and
WHEREAS the County Executive recommends adoption of the
DTRF 1% Fiscal Responsibility Plan which prudently utilizes
DTRF resources without threatening its primary mission; and
WHEREAS adoption of the recommended Plan would limit
the increased utilization of DTRF resources to funding
currently unfunded capital projects that are included in the
Board of Commissioner approved Long-Term Capital Improvement
Program; and
WHEREAS fiscally responsible increased utilization of
the DTRF can be achieved by using the fund to pay debt
service on certain specified capital projects that will
provide essential public services; and
WHEREAS adoption of the Plan would restrict DTRF
Retained Earnings to pay debt service on specified projects
for which the Board of Commissioners authorizes bonds to
fund.
NOW THEREFORE BE IT RESOLVED that the Oakland County
Board of Commissioners adopts the attached Delinquent Tax
Revolving Fund Fiscal Responsibility Plan (copy on file
with the County Clerk).
BE IT FURTHER RESOLVED that individual projects,
included in the plan, require approval by the Board of
Commissioners and designation of DTRF funding to pay debt
service.
Chairperson, on behalf of the Finance Committee, I move
adoption of the foregoing resolution.
FINANCE COMMITTEE
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FINANCE COMMITTEE
Motion carried unanimously on a roll call vote with Moss absent.
4 MEMO July 5, 2001
To: Board of Commissioners
From: County Executive Administration
Re: Delinquent Tax Revolving Fund — Fiscal Responsibility Plan —
Revision #1
Delinquent Tax Revolving Funds (DTRF) were created to stabilize revenue streams for
school districts, intermediate school districts, community college districts, cities,
townships, counties, special assessment districts, the state, and any other political unit
adversely affected by delinquent tax payments. Prudent management and fiscally sound
utilization policies have allowed Oakland's DTRF to not only consistently achieve its
goal of revenue stabilization, but also has allowed it to generate a fund surplus. Attached
is the County Executive's recommended Delinquent Tax Revolving Fund - Fiscal
Responsibility Plan for prudently utilizing DTRF resources without threatening its
primary mission.
BACKGROUND
Acting under the authority of the General Property Tax Act, 1893 PA 206, as amended by
1968 PA 107, MCL 211.87b, the Board of Commissioners established the Oakland
County DTRF in 1974. Also known as the "100% tax payment fund", the DTRF was
created to help stabilize local governmental revenues. The DTRF helps stabilize local
revenues by paying the local taxing units, in anticipation of the collection of those taxes
by the County Treasurer, 100% of their respective shares of delinquent ad valorem real
property taxes.
The County funds the DTRF by borrowing money and issuing revolving fund notes.
Payment of the notes is made from the proceeds of delinquent tax collections. The law
requires the delinquent taxes from which the borrowing is to be repaid be pledged to the
payment of the principal and interest of the notes. The proceeds of the collection of the
delinquent taxes pledged and the interest on the proceeds must be placed in a segregated
fund or account and may not be used for any other purpose until the notes are paid in full,
including interest.
Once the notes are paid in full, any surplus in the fund may be transferred to the county
general fund by appropriate action of the Board of Commissioners. Under the stellar
management of Treasurer C. Hugh Dohany, Oakland County's DTRF has consistently
provided our schools, community colleges, cities, villages and townships with a stable
revenue stream while also generating a surplus. Responsible use of this surplus is the
subject of this proposal.
While other counties have established DTRFs in their jurisdictions, Oakland County is
unique in that it has not immediately appropriated fund surpluses to fund operations. In
fact the County Executive has recommended, and the Board of Commissioners has
adopted, a strict policy for accessing funds from this precious resource. The policy is
incorporated in the annual General Appropriations Act, and specifies that any and all
appropriations from unrestricted DTRF funds, excepting penalties and investment
interest, shall be limited to one-time expenditures, as opposed to recurring operations.
Current policy also provides that any appropriations from unrestricted DTRF funds not
considered advances to be repaid within a time certain, shall require a two-thirds majority
vote of the Board of Commissioners.
As a result of Oakland's current DTRF utilization policy, the corpus of the DTRF
continues to be available to not only protect our schools, community colleges, cities,
villages and townships, but also to generate interest earnings that, prudently managed,
can be utilized in place of new taxes as a funding source for necessary capital projects.
To date, the County has generally been faithful to its policy, using only a portion of •
penalties and investment interest ($4.3 million annually) to augment the General Fund
Operating Budget. All other projects drawing upon the DTRF have been limited to
identifiable projects having a specified time frame and benefiting a targeted constituency.
Examples include $6 million for installation of OAKNet, the Metropolitan-Wide Area
Fiber Optic Network linking law enforcement agencies throughout the County; $7.5
million for the Judicial Information Management System (JIMS) that will replace the
fragmented and obsolete records management system for Circuit, District and Probate
Courts; and $25.0 million for the Environmental Infrastructure Fund, a five-year program
extending through FY2003 that has earmarked DTRF resources to fund environmental
projects selected and implemented by Oakland County's CVTs.
ISSUES/CONCERNS
Formulation of the County Executive's recommendation was developed in the context of
several issues/concerns related to the financial well being of Oakland County over the
next several years, including:
1) The impending impact of the interaction between Proposal A and the Headlee
Constitutional Tax Limitation Amendment. This impact can be expected to constrain
the County's primary source of revenue, property taxes, at a time when growth in
population and human activity is placing increasing demands on government for
services and for facilities to house those services.
2) The law's demand that the purpose of the DTRF, (regularly paying to local taxing
units within the County 100% of their respective shares of delinquent ad valorem real
property taxes, prior to the collection of those taxes by the County Treasurer) not be
jeopardized.
3) The continued pressure to assist local units attempting to meet their obligations under
new federal and state environmental and infrastructure mandates while attempting to
maintain their core public services at acceptable levels. The impact of these mandates
is likely to be exacerbated by recent and pending federal regulatory actions
surrounding the newly introduced concept of Capacity Management for Operations
and Maintenance (CMOM), which will lead to future environmental related projects
with significant price tags.
4) The pending financial reporting requirements of newly issued Statement #34 of the
Governmental Accounting Standards Board (GAS B), that will require capitalization
of all assets, including buildings, roads, sewers, water and waste management
systems. These new reporting requirements apply to all governmental units
throughout Oakland County, as well as the State and Nation.
5) In response to 4) above, the need to develop a strategy targeted to benefit all of our
local units that will result in a standardized records management system integrating
the environmental infrastructure information needs of all municipalities throughout
the County. Such a system is an essential prerequisite to planning and financing
future physical improvements. It is apparent that an information system of this scale
would be cost prohibitive for most local units. Even if affordable for some, it is clear
that development of separate systems will result in duplicative efforts and costs for
CVT and County taxpayers. A County initiated and coordinated program, as is
proposed, with seed money provided by the DTRF, would certainly enhance the
probability of achieving successful implementation of such an information system,
including integration of all historical records into the existing Geographic Information
System (GIS).
6) A fully solvent, prudently managed DTRF is an essential component of the favorable
view that Wall Street has towards the County. Wall Street's support, as evidenced by
its award of a AAA Bond Rating, allows the County to issue debt at the lowest
possible interest cost. An irresponsible raid on the DTRF and its inevitable resultant
downgrade of the County's favorable bond rating would have costly, detrimental
long-term consequences for both the County and its political subdivisions.
RECOMMENDATION
The County Executive's recommended DTRF — Fiscal Responsibility Plan is based upon
these principles:
1. That the corpus of the DTRF must, at all times, be sufficient to guarantee
100% tax payments to the school districts, intermediate school districts,
community college districts, cities, townships, counties, special assessment
districts, the state, and any other political unit whose operations may be
adversely affected by delinquent tax payments. In other words, the primary
purpose of the fund must never be jeopardized.
2. That the corpus of the DTRF must, at all times, be sufficient to guarantee
timely payment of outstanding notes.
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3. That, except as provided herein, current DTRF utilization practices (including
a limited use of funds for operations) and policies that have proven themselves
beneficial to the County and its taxpayers should be preserved; and
4. That increased utilization of DTRF resources should be limited to the funding
of currently unfunded capital projects that are included in the Board of
Commissioner approved Long-Term Capital Improvement Program.
Fiscally responsible increased utilization of the DTRF can be achieved by using the fund
to pay debt service on three major proposed capital projects that will provide essential
public services. They are:
1) Work Release Facility (Including funding for the Jail Management System
and Video Arraignment Facilities and Equipment) - $18.0 million; and '
2) Rochester District Court and City of Rochester Hills Sheriffs Substation -
$23.3 million; and
3) Renovation of Oakland Schools Building - $13.7 million.
By using the DTRF to pay debt service on the combined $55.0 million capital outlay,
plus issuance costs of $826,000, rather than pay-as-you-go, the County will adhere to the
principles set out above and achieve a $19.9 million net cost savings over the term of the
proposed bond issues.
The Executive's proposed DTRF-Fiscal Responsibility Plan also recommends initial
funding ($10.0 million) for expansion of the County's Geographic Information System, a
project that will provide County-wide, fully integrated, Environmental Infrastructure
Records Management System available to all 61 Oakland County CVTs. Such a system
will benefit local units in planning future physical improvements, and assist them in their
efforts to meet their new reporting obligations under GASB Statement #34.
BENEFITS
By using DTRF resources to fund necessary capital facilities rather than using them to
support operating expenses, the Plan makes maximum use of available resources to hold
in abeyance the ultimate impact of Headlee and the need to seek a referendum on
increasing authorized operating millage.
The Plan allows for the continued use of $4.3 million of DTRF interest earnings to fund
General Fund/General Purpose Operations as provided in the annual General
Appropriations Act. In addition, the Plan would address a strategy targeted at local units
to provide a Countywide, integrated, standardized GIS System.
The Plan fully complies with the current adopted policy on DTRF, thereby ensuring the
functional intent and operational success of the DTRF as originally established. In
addition, a $19.9 million net cost saving will be realized over the term of the proposed
bond issues.
Finally, implementation of the fiscally responsible recommended plan should reassure
Wall Street analysts because it demonstrates Oakland County's commitment to prudent
financial practices.
DtrfIrplan3doc
1999 2000
Actual Actual
$180,890,377 $184,451,902
2001 2002
Projected Projected
$183,176,461 $186,020,814
Unrestricted Retained Earnings at
Beginning of Year
$10,010,789
6,373,208
$16,383,997
$9,530,166
10,010,713
$19,540,879
$10,000,000 $10,000,000
6.594,353 6,696.749
$16,594,353 $16,696,749
$207,700
450,574
$658,274
$189,116
589,952
$779,068
$700,000 $700,000
450,000 450,000
$1,150,000 $1,150,000
$900,000 $0
2,200,000 2,100,000
5,000,000 5,000,000
2,000,000 3,800,000
1,827,000
2,365,000
2,500,000
$12,164,198 $20,037,252 $12,600,000 $15,092,000
$2,100,000
2,064,198
5,000,000
$1,837,252
2,200,000
5,000,000
3,000,000
6,000,000
5,000.000
OAKLAND COUNTY, MICHIGAN
DELINQUENT TAX REVOLVING FUND
PROJECTIONS FOR FISCAL YEARS 2001-2005
ATTACHMENT Al
Income:
Service Charges
Interest Income
Total Income
Expenses:
Operating Expenses
Interest Expense
Total Expenses
Operating Transfers Out:
Annual Subsidy - General Fund
Investment Income
Environmental Infrastructure
Jail Renovation/Internal Expansion
Work Release Facility Debt Service
Rochester District Court Debt Service
New Office Building Debt Service
Oakland Tech. Park Road Project
OAKNet (MAN/WAN)
Court Replacement System (JIMS)
Total Transfers Out
Restricted for Future Debt Service:
Work Release Facility Debt Service
Rochester District Court Debt Service
New Office Building Debt Service
Total Restrictions
Unrestricted Retained Earnings at
End of Year
$26,034,750
33,701,250
$59,736,000
$184,451,902 $183,176,461 $186,020,814 $126,739,563
NOTE 1) Service Charges projected at flat $10 million per year.
NOTE 2) Interest Income projected at 6.0% of Retained Earnings at Beginning of Year less 40%,
for purchase of Delinquent Real Property Taxes from local units.
NOTE 3) Operating Expenses projected at eight year average, plus Indirect Cost.
NOTE 4) Intererst Expense projected at 1.8% of annual $25 million Notes sold.
I.
Resolution #01183 July 19, 2001
Moved by Douglas supported by Palmer the resolution be adopted.
AYES: Buckley, Causey-Mitchell, Coleman, Crawford, Dingeldey, Douglas,
Galloway, Garfield, Gregory, Law, McPherson, Melton, Millard, Moffitt, Moss,
Obrecht, Palmer, Patterson, Suarez, Taub, Amos, Appel, Brian. (23)
NAYS: None. (0)
A sufficient majority having voted therefor, the resolution was
adopted.
STATE OF MICHIGAN)
COUNTY OF OAKLAND)
I, G. William Caddell, Clerk of the County of Oakland, do hereby certify that the
foregoing resolution is a true and accurate copy of a resolution adopted by the
Oakland County Board of Commissioners on July 19, 2001 with the original record
thereof now remaining in my office.
In Testimony Whereof, I have hereunto set my hand and affixed the seal of the
County of Oakland at Pontiac, Michigan this 19;9 day 0 July, 2001.
G. William Caddell, County Clerk