April 11, 2006

Meeting Summary – April 11, 2006
IMAX/Exploris, 8-11:30 a.m.

Goals/Objectives

1. Examine local government financing in Wake County and how other local governments are responding to the demands and costs of growth.
2. Explore the values underlying public choices and how infrastructure work groups can use this framework to develop collective recommendations.
3. Review April 25 work group tasks and process.

Process Overview

Fred Day, Committee Co-Chairman, welcomed the committee and outlined the day’s agenda. Committee members have been assigned to work groups by topic, focusing on these areas:

Criminal Justice Facilities (courts, jails)
Finance
Mobility Choices (Transportation)
Parks and Open Space
Public Schools
Wake Tech
Water and Sewer

He reminded the group that it’s important to take a strategic, long view of these major capital areas, rather than trying to tackle the details of every plan. He also reminded the committee that while members bring valuable expertise and perspectives to the table, it’s important that we work together for the “greater good” of the entire community when it’s time to reach consensus on recommendations. The committee will meet in its work groups on April 25 for an extended session (8 a.m.-2:30 p.m.) at the RBC Center to work on funding recommendations.

Capital Finance – The Wake County Story (view entire presentation)

Johnna Rogers, director of Wake County’s Budget & Management Services, presented an overview of revenue sources available to Wake County government: user fees, taxes (property, sales and excise) and intergovernmental revenue. Of Wake County’s fiscal 2006 General Fund Revenues of $816.6 million, taxes account for 71.2%; federal and state funds (human services programs), 11.9%; user fees, 10.6%; fund balance, 2.3%, and other sources, 4%. The breakdown of the county’s fiscal 2006 tax revenue of $596 million includes property taxes 74.4%; sales tax, 23.1%; property transfer tax, 1.4%, rental vehicle tax, 0.4%, and other, 0.6%.

She outlined the advantages and disadvantages of paying for projects with cash (pay-as-you-go) vs. taking on debt and financing them. Generally, a mix of the two strategies is considered prudent financial practice and provides the most financial flexibility for an organization.

Historically, Wake County has relied on general obligation bond debt to finance capital projects such as schools, criminal justice facilities, libraries, Wake Technical Community College and open space acquisition. As of June 30, 2005, the County’s outstanding G.O. debt was $1.049 billion.

Wake County is one of just 22 counties in the country with triple-A ratings from the three national bond rating agencies (Moody’s, Standard & Poor’s and Fitch). Two other counties in North Carolina, Forsyth and Mecklenburg, have triple-A ratings from all three agencies. Both Cary and Raleigh maintain triple-A ratings from the three, and Apex, Garner, Wake Forest and Holly Springs have strong agency ratings, as well.

Capital Finance – Peer Counties (view entire presentation)

Johnna Rogers was joined by Dean Kaplan and JoAnne Carter, managing directors of Public Financial Management, Inc. (PFM), to discuss how some other high-growth areas similar to Wake County are financing their capital needs. PFM is an independent financial advisory firm headquartered in Philadelphia.

Eight counties were chosen for comparable analysis with Wake County, based on similar population, income and housing characteristics. They are:

Mecklenburg County, N.C. (Charlotte)
Fairfax County, Va. (Washington, D.C., suburbs)
Loudoun County, Va. (Washington, D.C., exurbs)
Montgomery County, Md. (Washington, D.C. – Baltimore suburbs)
Gwinnett County, Ga. (Atlanta)
Maricopa County, Ariz. (Phoenix)
Clark County, Nev. (Las Vegas)
Travis County, Texas (Austin)

All of these counties have experienced or are experiencing rapid population growth similar to Wake. The highlights of the comparisons include:

For most counties, a small number of major sources account for most general revenue – principally, real and personal property taxes and sales tax.
It is common to have special revenue funds set up to fund particular items, often dedicating a portion of other revenue sources.
Some counties rely on other locally generated revenues (for instance, Montgomery County receives more than 40% of its revenues in income tax, almost $1 billion).
The peer counties all fund infrastructure differently, though most issue bonds. In some places, developers provide the infrastructure, and some counties rely on special revenues like student fees to pay the debt services on revenue bonds. In most counties the major general revenue sources (property, sales) are also the primary source of funds to pay debt service on the bonds.

The study also examined Public-Private Partnerships (P3s) and provided some case studies ranging from the use of impact taxes on developers in Montgomery County to Special Purpose Local Option Sales Taxes in Gwinnett County. In Fairfax and Loudoun counties, a transportation improvement district was used to finance improvements like lane widening and intersection upgrades.

The presenters said that some peer counties are using innovative methods to fund targeted infrastructure costs – especially for transportation and other development-related projects. However, the majority of infrastructure funding continues to be supported by large traditional tax sources in each jurisdiction, in part due to the high costs of infrastructure and the related need for significant revenue sources. Local governments appear to be using a variety of approaches to funding growth needs; of particular interest to Wake County are those that increase regional approaches to infrastructure funding and those that consider varying funding responsibilities and revenue sources for local governments, counties and states. While no single strategy appears to be a “magic bullet,” the different approaches offer a wealth of experience and lessons learned.

Public Choices & Decisions (view entire presentation)

Committee facilitator Phil Boyle presented “Public Choices & Decisions,” exploring why it’s often difficult for communities to agree about public projects and decisions. He said that the four core public values of liberty, prosperity, equality (equity) and community tug different interests in different directions. Often, public decisions involve trade-offs, no one can make decisions alone and there is no one answer that can seem “right” for everyone at the same time.

He told the committee that its first and most important goal is to identify the goals or ends that Wake County is trying to achieve through investing in infrastructure. Only when the work groups have agreed on a standard or level of what we want or need as a community can we then decide how to best pay for it, he said.

The work groups will face several challenges in developing recommendations, including:

Collaborating – no one sector or jurisdiction can do it alone
Agreeing on current state of county and infrastructure
Agreeing on assumptions about future growth
Agreeing on priorities
Reconciling special interests
Engaging and educating the public
Making collective decisions

Dr. Boyle provided the committee with some tools and tips for making collective public choices, including:

Solving problems means more than choosing sides (problems can’t be solved with just one value, no one value is always better than the others, and we don’t choose the same value every time)
Making good choices means balancing public values (how will you treat those values with which you disagree?)
Distinguish between means and ends
Treat government not just as a cost but as an investment in the good life
Create shared understanding by discussing choices before decisions