363 MINUTES BOARD OF SUPERVISORS COUNTY OF YORK Adjourned Meeting January 31, 2025 8:30 a.m. These minutes were prepared based on an audio recording of the meeting. While every effort has been made to accurately capture all voices, some text may be omitted due to inaudibility or instances where multiple individuals were speaking at the same time. Meeting Convened. An Adjourned Meeting of the York County Board of Supervisors was called to order at 8:30 a.m., Friday, January 31, 2025, in the York Poquoson Law Enforcement Building by Chairman Sheila S. Noll. Attendance. The following members of the Board of Supervisors were present: Douglas R. Holroyd, Sheila S. Noll, M. Wayne Drewry, G. Stephen Roane, Jr., and Thomas G. Shepperd, Jr. Also in attendance were Mark L. Bellamy, Jr., County Administrator; Brian Fuller, Deputy County Administrator; Susan Goodwin, Assistant County Administrator; Richard Hill, County Attorney; Theresa Owens, Director of Finance; Greg Gillette, Chief of Budget; Heather Schott, Deputy Clerk/Assistant to the County Administrator; and Michelle Ireland, Administrative Technician. BOARD OF SUPERVISORS ANNUAL RETREAT Mr. Mark L. Bellamy, Jr., County Administrator, welcomed attendees and introduced the day's agenda. He reminded everyone to silence their cell phones, noted the location of the restrooms, and confirmed that the session was being recorded. He outlined the schedule, including discussions on the Board's strategic priorities, the Tabb High School renovation, the CIP, financial models, and an economic outlook. Mr. Bellamy also highlighted the importance of the new Popular Annual Financial Report and praised Susan Goodwin's work on the document. Sheriff Montgomery welcomed everyone to the Sheriff's Office and expressed gratitude for the facility's use. He highlighted the building's frequent community use, including forums on human trafficking and senior summits. He thanked the Board for their investment in the facility, noting its value to the Sheriff's Office and the wider community. Susan Goodwin, Assistant County Administrator, presented the Popular Annual Financial Report, emphasizing its purpose of making financial data more accessible and understandable to the public. She discussed its role in improving transparency, shared the report's creative design by in-house staff, and explained its expected submission for a national GFOA award. Susan expressed pride in the work and encouraged the Board to review the document and provide feedback. Mr. Stephen Roane commended Susan Goodwin on the financial report and engaged in the discussion about the Tabb High School renovation. He sought clarification on the project's costs, specifically the shift from a five-year to a two-year schedule, and requested details on annual expenditures. DISCUSSION ON TABB HIGH SCHOOL RENOVATION PROJECT Mr. Bill Bowen, Chief Financial Officer, provided the financial breakdown for the Tabb High School renovation, noting projected costs of approximately $19.3 million in FY26 and $18.8 million in FY27, excluding the turf field. Given recent construction cost increases, he explained the budgeting process and the need for contingencies. Mr. Holroyd discussed the energy efficiency aspects of the Tabb High School project, particularly the geothermal system and the optional solar component. He explained that the school is the County's most expensive to operate in terms of energy use, making these improvements critical to reducing costs and exploring net-zero energy options. 364 January 31, 2025 Dr. James Carroll, Chief Operations Officer, elaborated on the Tabb High School project's geothermal and solar components, noting that geothermal was selected due to the school's high energy costs. He explained that the solar option is still under study, with factors like roof load and replacement costs to be evaluated. Dr. Carroll stressed that the project is designed to prioritize long-term savings and energy efficiency while managing disruption to the school's operations. Mrs. Noll asked questions regarding geothermal systems and their use at other schools. She sought clarification on how the geothermal investment at Tabb High School compares to similar projects elsewhere and expressed support for understanding the project's progression and potential savings. Mr. Drewry sought clarification on geothermal implementation and shared insights on managing such systems in school facilities. Mr. Shepperd briefly commented on operational considerations, including impacts on HVAC systems, and expressed interest in ensuring air systems meet the needs of building occupants during the renovations. Dr. Carroll explained that the geothermal system alone will not achieve net-zero energy but is essential for significant energy savings at Tabb High School. He described the project's progression, starting with geothermal infrastructure, LED lighting upgrades, and the creation of a new gym entrance with an integrated geothermal pump house. Future phases include a new front entrance with a Learning Commons and repurposing the old media center into additional classrooms. Dr. Carroll emphasized the importance of these upgrades in modernizing the facility and managing long-term operational costs. Mr. Drewry questioned the placement of solar panels and whether the school had sufficient space on the roof or elsewhere to accommodate them. Mr. Shepperd raised concerns about the overall finançial impact of the improvements and questioned the total projected costs, asking for clarity between the initial and current estimates. He inquired about the funding sources, including the use of reserve funds and end- of-year reversions. He also discussed the technology reserve fund established during COVID and its ongoing role in supporting the school system's needs. Mrs. Noll expressed the importance of understanding the planned progression of improvements at Tabb High School and ensuring clarity on the project's scope and sequence. Mr. Roane requested the project's scope specifics, including immediate and long-term costs. He confirmed the County is committed to approximately $38 million over the next two years, plus $2.5 million for turf fields, totaling around $41.5 million. He emphasized tracking these known expenses while recognizing that other potential costs, such as optional solar installations, remain under consideration. Mr. Bowen detailed the cost breakdown for the Tabb High School project, estimating $19.3 million in FY26 and $18.8 million in FY27. He explained that the costs account for design and construction contingencies, soft costs for environmental studies, and other project requirements. Mr. Bowen reiterated that these are budgeting figures based on architect estimates and that actual costs will be refined through competitive bidding. Mr. Bowen explained the challenges of significant renovations, referencing prior disruptions at Seaford Elementary. He described issues with contractors, including repeated vehicle damage caused by spray foam insulation. He emphasized minimizing disruption at Tabb High School by reducing the renovation period from five years to two. He credited collaboration with the County Finance Department for structuring funding to support the compressed timeline. Mr. Roane supported the goal of shortening the project duration to avoid prolonged contractor presence and asked what projects were deferred to make that possible. He confirmed that although projects were shifted, the total six-year CIP cost remained approximately the same. Mr. Bellamy clarified that project deferrals were not only on the school division's side. He recognized Susan Goodwin's work in orchestrating CIP adjustments to balance funding while adhering to financial policies. 365 January 31, 2025 Mrs. Goodwin detailed the specific changes made to the CIP to accommodate the Tabb High School project. These included increasing cash capital usage, deferring the preschool project to the end of the plan, and pushing out other projects such as the Queens Lake expansion, York High School bus and annex projects, and the Graphic Commons project. She explained that these shifts ensured the Tabb High School project could proceed without exceeding debt service limits and kept the overall six-year plan stable in total cost. Mrs. Noll acknowledged the collaborative work to adjust the CIP, highlighting the importance of understanding how project progression affects financial planning and long-term affordability. Mrs. Theresa Owens, Director of the Finance Department, confirmed that the six-year plan was the same plan. Mr. Shepperd raised questions about the high contingency figures built into the project, noting concerns about their magnitude. He emphasized the need for refined estimates through the A&E process to reduce inflated contingency costs. Mr. Drewry expressed significant concern regarding the 43 percent total contingency applied to the Tabb High School project. Drawing on his construction experience, he stated that such a high contingency was excessive and recommended sharpening estimates through detailed design work to lower costs. Dr. Carroll acknowledged the high contingency but explained that these were conservative, ballpark figures based on advice from architects. He detailed the need for contingencies due to potential surprises during construction, inflation, and environmental impacts. He also emphasized that the design process would refine these estimates and reduce the need for excessive contingencies. Following a prior discussion, Mr. Roane asked for confirmation on potential cost savings, noting that if everything proceeded smoothly, the County could complete the project for approximately $20 million instead of the anticipated $38 million. Dr. Carroll responded that while such significant savings would be ambitious, any savings realized through the process could be repurposed to either reduce the overall project cost or be applied to other projects in the County's Capital Improvements Program (ciP). He explained that the County conducts annual reviews where such adjustments could be made. Discussion Followed. Mr. Bowen explained that the County's borrowing schedule trails actual expenditures, meaning that borrowing occurs after costs are incurred. As a result, if the project comes in under budget, the County will borrow less than initially planned. Mr. Drewry asked about the timeline for completing the architecture and engineering (A&E) work, emphasizing the need to obtain accurate cost estimates as quickly as possible, given the goal of starting the project this year. Dr. Carroll confirmed that the team is currently in the interview stage with A&E firms, with a selection expected in the near future. He estimated the A&E process would take approximately six to nine months to produce solid plans, potentially around August or later. He noted that actual construction bids would follow after that process, meaning final, competitive cost estimates would likely not be available until the following year. He confirmed that the geothermal test bores have been completed, and the project team is awaiting results to finalize the number of wells required. Dr. Carroll explained that the project is designed to allow work to begin outside the building, such as the geothermal pump house and athletic entrance, which could commence mid-school year without disrupting operations. Mr. Roane requested confirmation that the property has adequate water capacity to support the geothermal system. Dr. Carroll noted that the test results will guide final decisions, ensuring capacity aligns with project needs. Mr. Drewry reiterated his concern with the 43 percent contingency currently included in the project budget. He emphasized that completing the A&E process should significantly reduce the 366 January 31, 2025 contingency percentage, ideally bringing it down to approximately 10 percent, barring any unforeseen circumstances such as extreme inflation or another global event like COVID. He stressed that obtaining accurate numbers is critical to moving forward with confidence. Mrs. Noll thanked the team for their presentation and engagement with the Board, acknowledging the importance of the collaboration between the schools and the County. She appreciated the continued partnership and the detailed information provided during the retreat. Dr. Carroll closed by thanking the Board for its ongoing support and collaborative relationship, which he noted has been vital to the success of shared projects. FINANCIAL POLICIES AND DEBT CAPACITY DISCUSSION Mr. Bellamy introduced the next retreat segment, inviting Mrs. Owens to introduce the County's financial advisors. Mrs. Owens expressed her appreciation for the team from PFM attending the session. She introduced the representatives: Kevin Rotty, Managing Partner with over 35 years of experience in municipal finance. Ms. Katie Pifer, with six to eight years of experience. Ms. Kristy Choi, a University of Virginia graduate with over 18 years of experience. Mrs. Owens outlined the objectives of the financial presentation, which included: Reviewing the County's financial policies, including the annual Board review requirement. Discussing the County's debt capacity and how it impacts the Capital Improvements Program (CIP). Presenting the County's budget forecast model, which was introduced in the prior year's retreat but not completed. She highlighted the County's three primary financial policies: 1. Unassigned Fund Balance: Maintain at least 12% of the unrestricted General Fund balance. 2. Net Tangible Real Property Value: Debt limited to 3% of assessed property value. 3. Debt Service: Annual debt service shall not exceed 10% of General Fund expenditures. Mrs. Owens emphasized that the County consistently meets these policy thresholds, and all staff recommendations adhere to these standards. She also noted that these policies align with the guidance of Government Finance Officers Association (GFOA). Mr. Holroyd asked whether other municipalities typically adopt similar percentage thresholds. Mr. Kevin Rotty began the presentation by thanking the Board for the opportunity to provide an update. He noted that the earlier discussion regarding project costs and capacity was directly related to the financial topics covered. He explained that part of PFM's role is to evaluate the County's appropriate financial policies. This involves peer comparisons and consultation with rating agencies. He provided an overview of the three major municipal bond rating agencies- Moody's, Fitch, and Standard & Poor's (S&P)-and described their role in evaluating the County's ability and willingness to repay debt. Mr. Rotty highlighted York County's strong credit position, noting: The County does not currently have outstanding bonds rated on its credit, as it utilizes pooled financing. However, York County maintains a Triple-A rating from S&P, placing it among only 15 counties in Virginia and 115 counties nationally with this distinction. This elite rating reflects the County's strong economy, sound balance sheet, and adherence to fiscal policies. 367 January 31, 2025 In response to Mr. Roane's question about Moody's ratings, Mr. Rotty explained that Moody's has stricter grading and that achieving a Triple-A rating from Moody's would require an even stronger economic base and larger reserves. Mr. Roane sought clarification on the County's standing, confirming that York County is one of only 15 counties in the country with a Triple-A rating from S&P. Mr. Rotty discussed the County's 12% Unassigned Fund Balance policy and compared it to peer localities. He shared that neighboring jurisdictions, such as Newport News, maintain similar or slightly higher fund balances, with some smaller localities carrying higher percentages due to their limited operating budgets and the need for greater reserves. He confirmed that York County's 12% target is appropriate and supports the County's strong financial standing. Mr. Shepperd asked whether the fund balance represents money that is essentially held for emergencies. Mr. Rotty affirmed that the unassigned fund balance functions like "cash on hand" and is intended to ensure liquidity in case of unexpected financial needs. He also clarified that there is a difference between the policy minimum (12%) and the actual fund balance, which may fluctuate slightly above that threshold. Discussion followed on Ratings and Fund Balance. Mr. Holroyd inquired about the possibility of increasing the fund balance percentage. Mr. Rotty explained that while raising the fund balance might be beneficial for financial stability, it is unlikely to influence Moody's rating unless accompanied by broader economic growth. He noted that while maintaining a Triple-A rating from S&P is a notable achievement, the practical benefits of obtaining a Triple-A rating from Moody's may not justify the additional financial measures needed to achieve it, mainly since the County uses pooled loan programs with competitive rates that are not directly affected by Moody's rating. Mr. Rotty reviewed historical fund balance trends, indicating that York County has consistently maintained unassigned balances between 12% and 15%. He also highlighted the County's available fund balance, which includes committed and assigned funds. Approximately 20% of the General Fund is available in these combined categories, offering flexibility for future projects or emergencies. Following the introduction of the County's financial policies and debt overview, further discussion took place regarding fund balances and policy implications. Mr. Roane sought clarification regarding the composition of the County's fund balances. He summarized that the blue portion represented unassigned cash on hand, available for emergencies; the yellow portion was assigned cash set aside for specific purposes; and the gray portion represented committed cash designated for particular obligations. He asked if the remaining 80% of the budget represented funds allocated to specific line items and expenditures. Mr. Rotty clarified that the chart reflected percentages of the overall budget but did not directly correlate to personnel costs or other operating expenses. Instead, it showed the proportion of fund balances and reserves relative to total expenditures. Mrs. Owens further explained that approximately 20% of the County's General Fund expenditures are held in savings (fund balance) to provide a financial cushion, similar to a personal savings account set aside for emergencies. This practice ensures that the County maintains reserves in the event of unexpected financial needs. Mr. Shepperd inquired about the use of the term unrestricted. Mrs. Owens clarified that unrestricted fund balance refers to funds not yet assigned or committed to specific purposes. However, even committed funds, though designated for particular projects, can be redirected in emergencies if necessary. 368 January 31, 2025 Mr. Rotty added that the 12% unassigned fund balance policy is designed to address concerns from citizens regarding the appropriate amount of reserves the County should maintain. He referenced guidance from the Government Finance Officers Association (GFOA), which recommends that localities maintain at least two months (approximately 16%) of expenditures in reserves, including both assigned and unassigned funds. The GFOA also recommends replenishing any use of the unassigned fund balance within one to three years. York County's policy requires replenishment within two years. Mr. Rotty reiterated that excess funds are typically directed to cash capital for one-time expenses, aligning with GFOA best practices. He noted that more volatile or high-risk jurisdictions might maintain higher reserves, but York County's stable economy supports the current policy levels. Transitioning to debt policies, Mr. Rotty reviewed the County's policy limiting general fund- supported debt to 3% of assessed property value. He noted that peer localities maintain similar thresholds, and York County's current debt is well below this limit, closer to 1%, reflecting strong debt capacity. He further explained that while York County has significant debt capacity. available under this policy, careful consideration is necessary regarding the affordability of new debt, which involves determining the County's ability to pay debt service from existing revenues. Mr. Shepperd asked how debt capacity relates to tax rates, noting that even if the County has capacity under the 3% policy, it must still generate sufficient revenue to service that debt. Mr. Rotty confirmed this, noting that capacity and affordability are separate but related concepts. Having available capacity does not obligate the County to use it, as any new debt must be balanced against its revenue and tax structure. Regarding the County's debt service policy, Mr. Rotty explained that the County limits annual debt service to no more than 10% of General Fund expenditures. This ensures that sufficient funds remain for operations and other priorities. Mr. Roane observed that the County's current debt service is approximately 1.2% of assessed value, while spending less than 8% of the budget on debt service, well below the 10% policy limit. Mr. Bellamy added that adjustments to the tax rate could impact the County's debt ratios. For example, increasing tax revenue would lower the debt ratio, while decreasing revenue could push the County closer to or beyond the policy limits. Mr. Rotty agreed, noting that economic downturns or tax cuts could increase the debt-to- expenditure ratio, even if debt service costs remain fixed. He advised maintaining a buffer within the policy limits to account for economic variability. Mr. Rotty concluded that York County's financial policies are sound and consistent with industry best practices. The policies support the County's strong fiscal health, providing capacity and flexibility while protecting the County's Triple-A credit rating. He emphasized the importance of regularly reviewing these policies to ensure they align with the County's strategic goals and financial objectives while balancing stability, affordability, and long-term planning. Mr. Holroyd asked whether the financial advisors would recommend any changes to the County's current financial policies. Mr. Rotty responded that no changes were recommended at this time. FINANCIAL FORECASTING, CIP REFINEMENTS, AND FUTURE PLANNING Ms. Kristy Choi of PFM reviewed the County's debt policies and presented an analysis of the County's Capital Improvements Program (CIP). She noted that while meeting the established debt capacity ratios is critical, equal consideration must be given to whether the County has the financial resources to pay for projects. Mr. Roane requested clarification on whether the County's 3% debt policy applies to assessed value from real estate only or includes personal property as well. 369 January 31, 2025 Ms. Choi confirmed that it applies specifically to real estate assessed value. She then presented a snapshot of the County's existing debt, noting: The County has approximately $140 million in outstanding debt, with $112.7 million supported by the General Fund. An additional $27.8 million is self-supported through dedicated revenue streams. Annual debt service is approximately $10 million, tapering off after FY26-27, which provides space to take on new debt as part of the CIP. A discussion followed regarding the authority of debt issuance. Ms. Choi explained that the proposed five-year CIP totals $226 million, with $141 million financed through debt. This effectively doubles the County's current debt load over the next five years. Mr. Roane confirmed that this represents a doubling of existing debt from the County's current $140 million. Mrs. Owens verified the accuracy of this observation. Ms. Choi emphasized that this represents a significant increase for the County and that such growth in debt warrants careful consideration. Mr. Shepperd observed that the County's growing debt is partly driven by aging infrastructure. He pointed out that as the County grows and ages, infrastructure requires more maintenance and large portions of the CIP are devoted to refurbishing and maintaining existing assets. Mr. Bellamy added that many current CIP projects address the maintenance of existing facilities rather than new construction. He cited examples such as the new fire station, which, while relatively new, will eventually require maintenance. He also referenced recent library improvements and other modest upgrades. Mr. Fuller supported this, stating that most of the proposed CIP is focused on sustaining current assets, including building maintenance, pump station upkeep, and fire apparatus replacements. Mr. Shepperd pointed out that as population and services expand, the County faces ongoing demands for additional equipment, personnel, and facilities, further contributing to CIP growth. Mr. Bellamy reflected on the long gaps between new facility constructions, noting that after years without significant projects, the County now faces necessary reinvestments in its existing infrastructure. Mrs. Noll referenced the County Administration Building, which was repurposed from a school and is now significantly aged. She suggested that discussions about a new administration building would involve substantial costs and debt considerations. Mr. Shepperd highlighted that the more infrastructure the County builds, the more ongoing CIP funds are required to maintain those assets. Mr. Fuller noted that the Board would review the CIP in more depth later in the retreat to analyze specific projects and future maintenance needs further. Mr. Bellamy added that even projects like chain replacements on docks, which may seem minor, are costly capital projects. Mr. Roane commented that most CIP projects are focused on maintaining current service levels rather than expanding or adding new services. Ms. Choi reiterated that the debt-to-assessed value ratio is not currently a limiting factor, as the County's assessed value is substantial and provides ample capacity. Mr. Roane confirmed that the existing debt is being paid down as new debt has been introduced through the CIP. 370 January 31, 2025 Ms. Choi explained that while existing debt decreases over time, new CIP debt replaces it, keeping the total debt relatively stable, though slightly higher. Mrs. Owens estimated that the County's outstanding debt would likely be between $200 million and $250 million in the future. Mr. Rotty pointed out that while the total debt is growing, the County's assessed value is also projected to grow by approximately 2% annually, which helps maintain stable debt ratios. Mr. Roane verified that under these projections, debt as a percentage of assessed value remains around 1% to 1.4% through the planning period, well below the 3% policy cap. Ms. Choi then turned to the debt service-toexpenditures ratio, identifying it as the County's primary constraint. She explained that by 2033, the County's debt service ratio is projected to approach 10%, the maximum allowed under current policy. This projection assumes: General Fund expenditures grow by 2% annually. Future debt carries a conservative interest rate of 4.5%, though current rates may be slightly lower. Mr. Holroyd raised the question of whether the County should consider adjusting its debt service policy, noting that several peer localities maintain a 12% cap with a 10% target. In contrast, York County has a firm 10% cap. Mr. Roane expressed concern that, based on current projections, the County may breach the 10% cap in the future if expenditure growth slows or unexpected costs arise. Mr. Holroyd emphasized the importance of considering adjustments now rather than waiting until after exceeding policy limits. Mr. Shepperd questioned the value of reassessing the policy, cautioning against normalizing higher thresholds without thorough justification. Mr. Holroyd stressed that the County. should be proactive, especially if other highly rated peer localities operate with higher thresholds, to avoid future constraints and maintain flexibility. Mr. Shepperd inquired whether the County has remaining debt capacity under its current financial policies. Mr. Rotty responded that under the current projections, the County is nearing its debt service capacity, particularly in FY 2032-33, when the debt service-tp-expenditure ratio approaches the 10% policy cap. He noted that future boards will face decisions on whether to create additional capacity through policy adjustments or by limiting future debt. Rotty emphasized that any increase in debt would require careful consideration of how it would be funded, including potential tax rate impacts. Mr. Roane stressed that increasing debt obligations requires trade-offs, explicitly identifying what services or expenditures the County may need to reduce to accommodate higher debt payments. Mr. Holroyd highlighted the importance of long-term sustainability, acknowledging that future expenditures, such as infrastructure needs, will continue to pressure the County's finances. Mr. Rotty suggested that if the County wishes to create additional debt capacity, it could consider increasing its unassigned fund balance target from 12% to 14%. He emphasized that rating agencies favor this type of proactive planning, particularly when paired with a strategic increase in the debt service cap from 10% to 12%. He advised that if the County chooses to exceed its policy limits, it should do so deliberately, with a clear plan and justification to maintain creditworthiness. Mr. Roane summarized the issue, noting that by FY 2032-33, the County faces a decision between raising the 10% debt service cap or limiting the amount of debt incurred between now and that time. He pointed out that York County lacks significant land for future residential 371 January 31, 2025 development to grow its tax base substantially, making standard annual assessed value increases the primary driver of revenue growth. Mr. Drewry observed that the County reviews its CIP annually and will have opportunities each year to monitor and adjust as needed to prevent breaching policy limits. Mr. Roane added that while the projections are forward-looking, the current CIP structure, if fully executed, will push the County's debt service ratio toward the 10% ceiling. Mr. Shepperd clarified that the projections are hypothetical but based on current planning assumptions. He inquired how far in advance the County would need to act to avoid exceeding policy limits and whether rating agencies review these metrics annually. Mr. Holroyd reiterated the importance of continuous evaluation and asked what adjustments would be necessary in the CIP to avoid exceeding the 10% debt service ratio in the projected years. Mr. Roane requested an analysis of what adjustments would be required to keep the debt service ratio below 9% by FY 2033. Mrs. Owens indicated this would likely require removing or delaying projects from the CIP. Mr. Drewry noted that such precise modeling would take time but agreed it was an important question for future consideration. Mr. Roane emphasized the need for proactive planning rather than last-minute changes, noting that meaningful adjustments must occur well before reaching the critical years. Ms. Choi confirmed that any reduction in debt-financed projects before FY 2032 would help mitigate the risk of exceeding the policy cap. Once the debt is issued, the County is obligated to make payments, sO earlier action is more effective. Mr. Drewry explained that adjustments can be made as part of the regular annual CIP review process and stressed that the County does not need to wait until the final year to make changes. Mr. Rotty praised the Board's diligence, noting that few localities engage in long-term financial planning. He added that the projections assume conservative 2% annual revenue growth if the County experiences more substantial growth, such as 5-7%, the debt service ratio would naturally decline, reducing concerns about capacity. Mr. Shepperd requested a rough estimate of the County's operating budget in future years to better assess the impact of debt on overall finances. Mr. Bellamy agreed, noting that such projections would help the Board understand how revenue growth interacts with long-term debt. Ms. Choi reiterated that construction cost increases and economic conditions will also affect debt management. A contraction in general fund expenditures or an economic downturn could cause debt ratios to rise even if no new debt is issued. She presented a sensitivity analysis assuming a 5% decline in general fund expenditures, similar to what was experienced during the 2009 Great Recession. Under this scenario, the County's debt service ratio slightly exceeds 10% in FY 2032-33, highlighting the risks of economic downturns on financial metrics. Ms. Choi emphasized that rating agencies do not automatically downgrade localities for temporarily exceeding policy thresholds, especially when there is a clear rationale and corrective plan. However, she stressed the importance of messaging and management in maintaining creditworthiness. Mr. Shepperd reflected on the historical precedent of revenue declines during the 2009 recession, citing job losses and decreased property values. He warned that York County's reliance on federal employment and contracts makes it vulnerable to such downturns. 372 January 31, 2025 Mr. Roane raised concerns about the impact of regional megaprojects, like the Hampton Roads Bridge-Tunnel expansion, on construction costs and labor availability. He suggested. that when such projects end, construction costs could decline, providing opportunities for more favorable pricing on County projects. Mr. Drewry agreed, noting that large infrastructure projects heavily influence the regional labor and material market. However, he cautioned that this dynamic is difficult to predict and will depend on how overlapping projects proceed. Mr. Roane added that while some material costs, such as steel and concrete, are directly impacted by large projects, others, like lumber, are less affected. He emphasized the importance of understanding these market forces as the County plans its capital projects. Ms. Choi resumed summarizing the next slide, which reflected projected debt service. She noted that with the planned CIP debt issuances, annual principal and interest payments are expected to increase by $8.5 million over the next 10 years, from $13.8 million to approximately $22.2 million. She emphasized the importance of identifying how this additional debt service will be funded through real estate tax increases or alternative revenue sources. Mr. Roane clarified that the additional $8.5 million in debt service obligations will not be fully offset by the projected 2% annual revenue growth. Ms. Choi then described an additional modeling scenario to assess what would happen if the County pursued an extra $50 million in capital projects beyond the current CIP. Under this assumption, the County would exceed its debt capacity limits starting in 2029, leaving little to no margin for unexpected costs or future needs. This scenario highlighted the limited flexibility within the current debt policies if additional projects are added. She concluded that while the current CIP is achievable within existing policy limits, it leaves only a small cushion, and ongoing monitoring of project costs and general fund revenue will be necessary. Mr. Holroyd asked whether the County should begin planning for a potential increase in the debt service policy limit to accommodate growing financial demands. He recommended that the Board consider developing a strategy within the next one to two years. Mrs. Owens confirmed that policy reviews are conducted annually and that any adjustments to the financial policies, including debt limits, would follow this regular review process. Mr. Holroyd affirmed that, based on the current data, the Board should consider updating the policies in response to future needs. Mr. Roane refocused the discussion on the practical implications of the CIP, noting that the $8.5 million increase in debt service cannot be absorbed by revenue growth alone. He stressed that this gap would need to be covered either by raising taxes, cutting expenditures, or reallocating funds, not by assuming it will resolve through routine revenue increases. Mr. Holroyd suggested that some relief might come from managing project contingencies or through cost reductions. Mr. Roane cautioned that no one should assume the County can easily compensate for the added debt through small adjustments, as the funding gap is substantial. Mr. Shepperd reinforced that options to generate additional revenue are limited without significant new growth in the County. Mr. Fuller added that any growth would mostly come from new housing, but those opportunities are limited due to available land constraints. Mr. Bellamy reminded the group that these figures are based on conservative assumptions. He cited recent increases in home values as a factor that could improve revenue growth, referencing a 6% increase in assessed home values over the past 12 months. Mr. Holroyd agreed, noting that increased assessments could provide some cushion, though he acknowledged the volatility of the housing market. 373 January 31, 2025 Mr. Drewry warned that historical patterns show property, values can decline, which would have the opposite effect on revenues, creating additional strain on the budget. Mr. Bellamy confirmed that this is why Greg's later presentation would provide valuable insights into real estate market trends and their potential impact on the County. Ms. Choi explained that the County has been working with PFM to develop an Excel-based financial forecasting model. This tool integrates operating and capital finançial data, helping staff and the Board assess the long-term impact of fiscal decisions and identify potential funding gaps. Ms. Choi outlined the key factors in the forecast, including economic conditions, tax pressures, inflation (particularly for wages), and capital costs. She emphasized the challenge of balancing service demands with limited resources and noted that the forecasting model allows for the adjustment of these variables over time. She provided an overview of key forecasting concepts, noting that: Operating performance measures general fund revenues minus expenditures (including debt service). Net result factors in cash capital transfers and debt service. Total projected fund balance reflects the combined committed, assigned, and unassigned reserves. Financial policy ratios are monitored to ensure compliance over time. Ms. Choi then introduced a scenario where expenditure growth (3%) outpaces revenue growth (1-3%), with a constant tax rate and capital costs consistent with the current CIP. She explained that in this scenario: The County runs a small surplus through FY 2028. By FY 2029, expenditures overtake revenues, creating a structural deficit that worsens each year. Factoring in planned cash capital transfers, deficits appear even earlier despite the initial small surpluses. Mr. Roane observed that under this scenario, the County would consistently spend more than it earns by FY 2029, creating ongoing budget gaps. Mr. Drewry emphasized the gravity of the model's findings, pointing out that under these assumptions, the County would experience annual deficits indefinitely unless corrective actions are taken. He highlighted that this is not just a single-year problem but a systemic issue based on the assumptions of constant spending growth and limited revenue increases. Ms. Choi clarified that the deficits shown in the first forecast scenario are driven by expenditure growth outpacing revenue growth, noting that while revenue growth was modeled at 2.5%, expenditures were set at 3%, causing a structural imbalance beginning around FY 2029. Mr. Roane commented that citizens would be particularly interested in Scenario 2, which provides a more sustainable outlook. Mr. Holroyd emphasized the importance of monitoring cash flow, particularly in relation to capital spending. Mr. Rotty reiterated that the key takeaway is ensuring expenditures align with revenues, especially over multiple fiscal years. He acknowledged that the County starts from a position of financial strength but warned that deficits can compound quickly without careful oversight. He noted that $5.8 million is planned to transfer to the CIP in FY 2025, which must be carefully balanced to avoid deferrals or increased borrowing. Mr. Drewry reminded the Board of the long recovery period following the 2008-2009 recession, warning that it would take a significant event to cause a similar downturn but that the County must be prepared. Ms. Choi continued by showing the impact of sustained deficits on fund balance. She explained that under Scenario 1, the unassigned fund balance would drop below the County's policy threshold beginning in FY 2028, while the County's debt policies would remain in compliance. 374 January 31, 2025 However, she emphasized that the affordability of debt service would become a pressing concern. Moving to Scenario 2, Ms. Choi explained that aligning revenue and expenditure growth stabilized the County's finances. In this scenario: Expenditure growth remained at 3%. Assessed value growth increased to 4.5% during reassessment years and 3% in others. Real estate taxes increased by one cent in FY 2027 and FY 2028. These adjustments allowed the County to maintain balanced operations, generate modest surpluses, and keep fund balance levels healthy. Fund balance remained steady or grew modestly over the forecast period, and all financial policies complied. Mr. Roane asked if a scenario did not require tax increases. Ms. Choi explained that Scenario 2 combined assessed value growth and tax rate adjustments to close the gap, but any alternative revenue solution would still need to close the same gap. Mr. Shepperd inquired about the latest assessment trends. Mr. Bellamy confirmed that, according to Sarah Webb, assessments had increased by 6% over the past year, and due to the two-year reassessment cycle, that could double across the county. Mrs. Noll thanked the financial team for their thorough and informative presentation, noting that the material provided a great deal to consider. Mr. Bellamy acknowledged that the Board was running approximately 20 minutes behind schedule and proposed a 15-minute break, after which the meeting reconvened at 11:05 AM. Mr. Bellamy reconvened the meeting and introduced Susan Goodwin to provide updates on the Capital Improvements Plan (CIP) and common themes from Board member feedback. Mrs. Goodwin reviewed highlights from the December 3 meeting and the preliminary six-year CIP, reminding the Board that PFM's financial analysis was based on this version. She displayed the overall project totals, funding sources, and the impact of the CIP on the debt service-to-expenditure ratio, reiterating that FY 2026 decisions will directly affect future budgets and that the Board will revisit out-years annually. Before discussing feedback from Board members, she presented several staff-recommended refinements to the CIP: 1. Firing Range Project This $25,000 per year project, funded through the Hampton Roads Training Academy agreement, will be moved out of the CIP to reduce confusion, as it is not county-funded. 2. Sheriff. Armored Vehicle This item is being shifted from County funding to asset forfeiture funds. Adjustments will be made if those funds are unavailable closer to the purchase year. Mr. Bellamy clarified that this is not a tactical military vehicle but a smaller, practical replacement vehicle. 3. Tourism Information Center, Dockmaster, and Waterfront Operations Building Project The scope of this project is being reduced. Instead of constructing a new waterfront operations building, staff will repurpose existing space in the post office building, vacated by IT staff, who will move into the building inspections office (after a renovation). Development Services will then be consolidated into a single location. Mr. Bellamy explained this reorganization and confirmed that waterfront staff will remain partially at the waterfront as needed, but the main office functions will relocate. Mr. Roane inquired about whether these changes would affect trees, to which Brian confirmed no additional trees would be cut. 4. Countywide Space Study An additional $500,000 placeholder has been added to FY 2028 for design costs resulting from the findings of the upcoming space study. Mr. Bellamy clarified that this study will include the courthouse and additional facilities. Mr. Bellamy confirmed these adjustments would reduce the CIP by approximately $2.8 million in the out-years. 375 January 31, 2025 Mrs. Noll requested a schematic to clarify the staff movements and space reallocations. Mr. Bellamy agreed to provide a schematic but did not have one available at the meeting. Mrs. Goodwin reviewed further recommended refinements to the CIP. She reported that during the January 21st meeting, staff projected that FY 2025 would end with a surplus of approximately $3 million, lower than in recent years. The preliminary CIP had assumed the use of $3.2 million of the prior year surplus for funding, sO this adjustment necessitated reducing the cash capital contribution by $2 million to remain conservative. She clarified that this surplus cash capital is in addition to the $5 million annually allocated to cash capital through the operating budget. She noted that this adjustment was necessary to align expectations with actual revenue trends and that there would be an opportunity, to revisit these figures if surpluses increase. Mrs. Goodwin also noted that a heavy truck facility space study, previously housed in the Vehicle Maintenance Fund, would be rolled into the larger Countywide Space Study, eliminating the need for a standalone project. These refinements slightly positively impacted the debt model, reducing the debt service-tp-expenditure ratio from 9.2% to approximately 9.03% in 2031. She then introduced feedback received from Board members during individual conversations, focusing first on York Hall renovations. Key themes: Original estimates for the project were $5 million, including restroom renovations, East Room expansion, and a full upgrade of the Board meeting room. After hearing from multiple Board members, the scope was scaled back to focus on the restrooms, East Room, and technology improvements, reducing the estimate to $3 million and recommending pushing construction by one year, pending design. Mr. Roane asked for clarification on the scope of the restroom work. Mr. Bellamy explained that the restrooms are outdated, have plumbing issues, and are heavily used by visitors to Main Street, creating additional wear and demand. He also highlighted technology challenges in the Board meeting room, including: Obsolete cabling and lighting. Inconsistent and aging equipment, making broadcast production difficult. The fixed podium in the center of the room limits flexibility for other events and presentations. Poor sightlines for the Board and audience, with screens that are- hard to view and outdated sound systems. Mr. Shepperd shared his experiences with the room's limitations, noting that the Board members often struggle to see materials and presentations, the podium impedes other uses of the space, and the dais does not function well for meetings. Mr. Bellamy further explained that the sound-dampening panels in York Hall are deteriorating and showing signs of mold, and cleaning them is not a viable option due to their age. He reiterated the importance of maintaining York Hall as a community asset, recalling that Anne Smith, former Director of Community Services, had warned prior to her retirement that without focused oversight, York Hall might fall into disrepair since no single department "owns" it. Mr. Fuller added that the restrooms are the primary public restrooms for visitors to Main Street and should be prioritized for improvements, given their high usage and lack of accessibility. Mr. Drewry expressed support for limiting the renovation to $3 million, emphasizing the need to address the key functional upgrades, particularly technology and restrooms. Mr. Roane agreed, highlighting the importance of improving technology, seating for the public, and the Board's ability to view materials clearly. Discussion continued about specific improvements, such as: Upgrading the audio-visual systems. Enhancing seating for both the public and the Board. Improving lighting and sound quality. Replacing outdated technology with modern, potentially wireless solutions. 376 January 31, 2025 Mrs. Goodwin explained that $500,000 was proposed for A&E (Architectural and Engineering) design in FY 2026, with construction planned for FY 2028. Once design work is complete, actual costs and project priorities can be revisited. Mr. Drewry questioned whether $500,000 was excessive for a design on a relatively small building. Mr. Bellamy responded that the design phase would include engineering for complex technology, sound, and lighting systems, but the board could prefer to make adjustments to the design budget. Mr. Roane and Mr. Shepperd both emphasized the importance of resolving longstanding frustrations with the room' 's functionality, such as: Difficulty hearing proceedings. Poor visibility of presentations. Physical limitations of the space. Mrs. Noll expressed confidence that the project scope could be adjusted as needed during the design process and that refinements could be made based on budget realities. Mrs. Goodwin confirmed that the $3 million estimate was a placeholder and would be refined after design work, ensuring the project's flexibility. WILLIAMSBURG REGIONAL LIBRARY (WRL) - DIRECTION AND NEXT STEPS She then turned the discussion to the Williamsburg Regional Library (WRL), noting that this was another common theme raised in Board member feedback. Mr. Bellamy explained the growing concern with the escalating annual contribution to WRL, which could soon exceed $1 million annually. He outlined several options for consideration: 1. Limiting access to WRL services for York County residents, particularly for e-book usage, to encourage the use of York County libraries instead. 2. Opting out of the WRL partnership entirely and establishing a York County-operated library in the Upper County. 3. Partner with Virginia Peninsula Community College (VPCC) to create a joint-use library similar to those in Virginia Beach and West Point. Mr. Fuller added that WRL has plans to expand further, including: A new library location in Grove. Potential additional branches based on population formulas. He expressed concern that as York County's costs rise, the demand for services like digital circulation may actually decrease, leading to questions about cost-effectiveness. Mr. Shepperd questioned whether York County pays more per capita than other localities in the WRL system, seeking clarity on whether the County is paying its fair share relative to the usage of the service. Mr. Bellamy provided an update, noting that the Board had previously directed staff to renegotiate the County's contract with WRL. He explained that while initial discussions indicated a willingness to renegotiate, those talks have stalled. Current WRL representatives have not been ready to resume formal conversations. Mr. Holroyd suggested that until WRL agrees to renegotiate, the County should freeze spending increases toward WRL. Mr. Bellamy responded that the County is bound by a two-year notice requirement to exit the WRL agreement. He requested confirmation of the contract's effective date from Susan Goodwin or Mr. Fuller. 377 January 31, 2025 Mr. Fuller indicated that the agreement may follow the fiscal year and recalled informal conversations about renegotiation approximately a year ago, which paused amid other regional challenges. He stated that although there was a willingness to discuss changes, nothing formal has been established. Mrs. Noll asked whether the two-year notice period would begin upon formal communication. Mr. Bellamy turned to Mrs. Owens, the County's liaison to the WRL Board. Mrs. Owens confirmed that the WRL contract is perpetual unless terminated with two years' notice. When WRL asked member localities if they wanted to explore changes, York County's Board expressed interest. However, discussions stalled and have not been prioritized by WRL leadership or local partners. Mr. Shepperd recalled that York County's payments to WRL were initially manageable but have escalated significantly, now exceeding $800,000 annually. He shared historical context, noting that when the County considered building its own library in the Upper County decades ago, the cost would have been around $1.5 million annually, making WRL participation seem more reasonable at the time. However, as WRL costs grow, the arrangement has become less sustainable. Mr. Bellamy highlighted the future financial risk, sharing that WRL leadership and James City County have ambitions to build new libraries and expand services, which will increase costs. He noted that WRL anticipates adding: A new facility in Grove. Additional libraries based on population growth formulas. Mr. Fuller confirmed that WRL's ambitions could mean significant added costs to York County. He expressed frustration with the value of the County's investment, questioning the tangible benefits compared to the County's own libraries. Mr. Holroyd proposed limiting WRL membership to District 1 (Upper County) residents, as the majority of usage comes from there, and redirecting funds to enhance the County's library system. Mr. Roane added that most District 1 patrons use WRL's digital services, which could be matched within York County's system by investing in more e-books and digital infrastructure. Mr. Drewry supported redirecting WRL funding into York County's own libraries to enhance local resources. Mr. Roane requested a financial analysis comparing: The per-user cost of WRL for District 1 patrons. The cost of serving those same patrons through expanded services at Yorktown Library or Tabb Library. Mr. Fuller shared that York County currently spends around $3.2 million annually to operate its two libraries, compared to WRL's $6 million cost for its system. He questioned the added value of WRL's higher costs. Mr. Holroyd emphasized opposition to making any capital contributions to WRL, stating that funding should be invested into York County's libraries instead. Mr. Drewry agreed, recommending the County remove funding for WRL from its future budgets and focus on its own library system. Mr. Shepperd suggested that the County notify WRL with a formal two-year termination notice, giving the County time to plan an alternative library solution while exploring renegotiation. 378 January 31, 2025 Mrs. Noll agreed and recommended that the County either negotiate new terms within those two years or prepare to exit WRL. Mr. Holroyd cautioned that delivering two years' notice could trigger a significant backlash from WRL and regional partners. Mr. Bellamy shared that the County had previously proposed a capital contribution to WRL in exchange for lower annual operating costs, but WRL rejected that idea, citing ongoing operational needs. Mr. Roane and Mr. Drewry continued to express support for exiting WRL and reinvesting those funds into York County's library system, particularly in expanding e-book offerings and potentially establishing a small Upper County branch. Key Takeaways: The WRL contract is perpetual but requires two years' notice to terminate. Costs for WRL are approaching $1 million annually and are projected to grow. Board members expressed strong interest in considering an exit strategy or significant renegotiation of the WRL agreement. Alternatives discussed include: Limiting WRL access to Upper County residents. Redirecting funds to York County Libraries. Establishing a storefront library in the Upper County as a first step toward a permanent facility. Issuing a formal notice of intent to withdraw from WRL while negotiating over the two- year notice period. Mr. Bellamy discussed the financial commitment to WRL, referencing conversations with Mr. Fuller and Mrs. Owens. He explained that WRL's operating costs continue to grow, with the County's annual contribution approaching $900,000, alongside anticipated capital contributions for future projects. Mr. Bellamy noted that WRL operates two libraries, and York County also operates two, yet WRL's costs are substantially higher-approximately $6 million more. Mr. Fuller supported this point, stating that York County spends approximately $3.2 million to operate its two libraries, while WRL's costs are nearly double that. He emphasized the need to set a timeline to either renegotiate or exit the WRL agreement, cautioning against indefinite delays. He questioned what additional value WRL provides compared to York County's system for the increased costs. Mr. Holroyd asserted that WRL would comply with limiting services if directed by the County and reinforced his position that York County should not be making any capital contributions to WRL. Mr. Shepperd questioned why citizens from Lower York County should continue subsidizing WRL if they are not primary users. He expressed support for reallocating WRL funding toward enhancing York County's own libraries, particularly in the form of e-books and services that benefit all residents. Mr. Drewry agreed, stating that the funds currently supporting WRL could be redirected into the County's system to improve e-book collections and reduce wait times for popular titles. Mr. Bellamy suggested that if the County withdrew from WRL, an interim solution could involve establishing a storefront library in the Upper County while planning for a permanent facility through architectural and engineering (A&E) design and site selection. He further explained that WRL anticipates continued operating contributions and expects future capital contributions, which are already reflected in the County's Capital Improvements Program (CIP). Mrs. Owens confirmed that $500,000 had previously been set aside in the CIP as a placeholder for WRL-related debt service, though it may no longer align with the County's current priorities. Mrs. Noll inquired about staffing levels. 379 January 31, 2025 Mr. Fuller responded that WRL employs approximately 65 staff members, while York County's libraries operate with around 35 staff members. He noted that WRL's staffing is comprehensive, covering building operations, but York County relies on Public Works for maintenance, which is not factored directly into the library's operating budget. Mr. Roane expressed concern about the combined operating and capital expenses tied to WRL, questioning the logic of continuing payments without directly benefiting York County's own infrastructure and services. Mr. Drewry added that the County had already contributed nearly $14 million to WRL over ten years, considering operating and capital contributions. Mr. Bellamy recounted that York County previously proposed reducing annual operating contributions to WRL in exchange for capital support, but WRL rejected that idea, insisting on full funding for operations. Mr. Shepperd agreed with withdrawing capital support and reinvesting in York County's libraries, emphasizing that the County does not need to match WRL's size and scope to provide meaningful library services. Mr. Holroyd reiterated that no further capital contributions should be made to WRL, and Mr. Drewry recommended removing future WRL funding from the CIP. Mr. Shepperd and Mrs. Noll proposed delivering formal two-year notice to WRL, triggering the contract's exit process while giving the County time to explore alternatives, including: Negotiating a revised agreement. Designing and developing a new Upper County library. Enhancing York County's digital and physical library services. Mr. Holroyd cautioned that serving notice could cause significant regional tension but acknowledged it may be necessary to protect County interests. Mr. Bellamy provided a population-Dased cost estimate, explaining that York County spends approximately $44.50 per person ($3.2 million divided by 72,000 residents) to support its own libraries. Mr. Roane suggested that the County could develop a direct payment model for Upper County residents to maintain access to WRL if desired, proposing a per-user cost (e.g., $50 per user) rather than continuing large lump-sum contributions. He emphasized the importance of entering renegotiation with clear terms, noting that the County must propose a specific framework rather than a general request to negotiate. He suggested a cost-based model linked to the actual use of the library by York County residents. Mr. Fuller recommended initiating formal renegotiation with WRL, acknowledging that past discussions had been unproductive but that the library board has expressed willingness to renegotiate: Mr. Drewry asserted that York County must either renegotiate or withdraw sO WRL can begin planning its future operations without York County's participation. Mr. Bellamy asked the Board for formal direction on addressing WRL's capital contribution in the CIP and future negotiations. Ms. Goodwin clarified that the current CIP includes $500,000 annually starting in FY28, totaling $2 million in planned capital contributions to WRL. Discussion followed, where: Mr. Holroyd supported using those funds for York County's own capital projects instead of contributing to WRL. Mr. Fuller suggested retaining the funding as a placeholder but repurposing it for potential York County library construction ifWRL participation ends. Mrs. Noll proposed removing specific references to WRL from the CIP, leaving the funds as a general placeholder for "library capital purposes." 380 January 31, 2025 Consensus: Remove the name "Williamsburg Regional Library" from the CIP project title. Retain the $500,000 annual placeholder starting in FY28 for potential library capital investment. Proceed with formal renegotiation of the WRL contract. Consider issuing two years' notice to terminate the WRL agreement if negotiations fail. Mr. Holroyd warned that serving formal notice may create political and regional challenges, but it would provide a clear deadline for alternative planning. Mrs. Noll summarized the Board's consensus: Leave the $500,000 placeholder in the CIP for future library purposes. Start negotiations with WRL and explore an exit strategy, allowing two years for planning alternative services in the Upper County. Mrs. Goodwin clarified that there is confusion over the Tabb High School project contingency percentages. She requested clarification from the School Division on how contingency funds are calculated within the total project cost. Mr. Drewry and Mr. Roane expressed concern that contingency costs appeared inflated, referencing figures of 10% to 12%, with some elements, like labor and materials, being estimated separately with high contingencies. Mr. Holroyd questioned the overall cost of the renovations, noting that full high school replacements are often between $100-$120 million, and this renovation appears to be approaching half that amount, which seems high. Mr. Bellamy asked for Board direction on proceeding with the Tabb High School project in the CIP. Mr. Holroyd recommended removing funding for the project's second year until firm cost estimates are available. Mrs. Noll pointed out that these are placeholder numbers and not final commitments but agreed that better clarity is needed before proceeding. Mr. Roane stressed that the County should not start renovations without knowing the full project cost upfront, comparing it to not starting a home renovation without a complete estimate. Mr. Drewry suggested possibly delaying geothermal installation and bundling the entire project into a single year once full costs are known. Mrs. Goodwin shared that the design phase is funded, and the geothermal work is part of this year's planning. Mr. Bellamy proposed utilizing upcoming work sessions to have the School Division return with clearer cost details. Consensus: Request updated cost details and contingency breakdowns from the School Division. Consider adjusting CIP funding allocations based on finalized numbers. Recognize that actual construction timing may depend on completing A&E (Architectural and Engineering) work, which may take 8-9 months. LIGHTFOOT AND MOORETOWN ROAD TRANSPORTATION IMPROVEMENTS Mrs. Goodwin addressed concerns over the large, mostly debt-funded project. Since associated development has not materialized, staff recommended: Pushing the project to the last year of the CIP. Treating it as a placeholder in anticipation of future development. Expecting that grant funding or external support would be needed to proceed. She reiterated that the CIP will be updated with all discussed adjustments, and the plan will: 381 January 31, 2025 Be submitted to the Planning Commission to confirm consistency with the Comprehensive Plan. Return to the Board alongside the full operating budget presentation in March. Incorporate all project changes and clarified intentions from this retreat. Mrs. Noll confirmed the consensus: Placeholder funding for library purposes without specific ties to WRL. Begin renegotiations with WRL and consider issuing a notice of termination. Await updated Tabb High School cost data before committing to multiyear funding. Delay the Lightfoot and Mooretown Road project pending future development. The retreat took a recess for lunch and reconvened at 1:00 p.m. Mark Bellamy introduced Robert Crum, Executive Director of the Hampton Roads Planning District Commission (HRPDC) and the Transportation Planning Organization (TPO), and Greg Grootendorst, Deputy Executive Director and Chief Economist. Mr. Crum provided an overview of the role of the HRPDC and TPO, emphasizing their function in coordinating local governments, facilitating collaboration, and advancing regional projects. He highlighted the region's ongoing efforts in economic forecasting, transportation improvements, and infrastructure development. Mr. Crum acknowiedged the engagement of York County representatives, including Ms. Noll and Mr. Shepherd, in HRPDC and TPO initiatives. He explained that every urban area in the country has a federally designated transportation planning organization, and the HRPDC serves as that entity for Hampton Roads. The organization identifies transportation needs, prioritizes projects, and manages federal, state, and local funding, including revenue generated from regional sales and gas taxes. Mrs. Noll noted that transportation planning used to fall solely under the Planning Commission before federal requirements led to the separation of the TPO. Mr. Crum detailed the TPO's responsibilities, including developing the Long-Range Transportation Plan (LRTP) and the Transportation Improvement Program (TIP), which manages funding and ensures compliance with federal transportation guidelines. He emphasized that regional cooperation has led to significant transportation improvements, including the I-64 widening, the I-64/I-264 interchange project, and the Hampton Roads Bridge Tunnel (HRBT) expansion. Mr. Roane raised concerns about the focus on expanding roads and questioned whether alternative transportation methods were being considered. Mr. Crum responded that the long-range transportation plan is multimodal, incorporating biking, walking trails, public transportation, and passenger rail. He noted the importance of freight management and regional airport infrastructure in overall transportation planning. Mr. Roane also inquired whether efforts were being made to encourage businesses to establish operations in less congested areas. Mr. Crum clarified that while HRPDC provides data on transportation trends, land use decisions remain a local government responsibility. He highlighted the organization's efforts to provide planning directors with data on workforce movement, freight transportation, and military corridor utilization to support informed land use planning. Mr. Shepherd addressed the Primary and Secondary Road Fund proposal, which suggested increasing the regional sales tax by 0.3 percent to generate approximately $84-85 million annually for local transportation projects. Mr. Crum provided an update, noting that while the bill had passed committee votes, the tax increase had been removed, leaving the bill to establish a fund without dedicated revenue. Discussion continued on transportation funding challenges, with Mr. Shepherd explaining the distinctions between primary and secondary roads and how regional funding mechanisms prioritize congestion relief. He noted that primary and secondary road projects often struggle for funding under current state programs like Smart Scale. He emphasized the difficulty of competing for funding against larger cities such as Virginia Beach and Chesapeake, which experience significant congestion. 382 January 31, 2025 Mr. Holroyd inquired about the future of the Primary Roads Bill, questioning whether it would sufficiently address transportation needs. Mr. Crum noted that while major highway projects have received substantial funding, an estimated $3 billion in additional regional transportation needs remain. He pointed out that transportation planning must account for secondary road impacts, as increased highway traffic ultimately affects local neighborhoods. Mr. Drewry asked about the reallocation of leftover transportation funds. Mr. Crum explained that while cost savings had occasionally resulted in funds being reallocated to other projects in the past, rising project costs in recent years have largely eliminated surplus funds. Greg Grootendorst then presented an economic forecast, highlighting that the national economy has performed above expectations in recent years despite concerns over inflation. He noted that Hampton Roads' economic growth has been moderate, with employment trends closely tracking national patterns. He pointed out that while construction and healthcare sectors have seen job growth, retail trade has experienced declines. Mr. Roane inquired about the percentage of local retail sales conducted remotely. Mr. Grootendorst estimated that over 20 percent of retail sales in the region are now online, noting that this shift has affected local sales tax distribution. He highlighted that localities such as Portsmouth saw increased revenue due to residents shopping online rather than traveling to other jurisdictions. Discussion then shifted to tourism and defense spending, with Mr. Grootendorst noting that Hampton Roads has performed well in both areas. While hotel revenue has softened, the region continues to benefit from its drive-to tourism market. Defense spending remains a key economic driver, with approximately 35 percent of the regional economy tied to military-related activities. Mr. Crum presented an update on the Trail 757 project, which aims to extend the Virginia Capital Trail from Williamsburg to Fort Monroe. He emphasized the economic benefits of investing in a continuous regional biking and walking trail, estimating that over one million people use the existing Virginia Capital Trail annually. He noted ongoing efforts to secure federal and state funding for the project. Mr. Roane asked how the new trail would integrate with existing infrastructure in York County. Mr. Crum explained that the project would connect to the Virginia Capital Trail through James City County and follow a planned route through Newport News Park, with connections to Yorktown. He acknowledged that further coordination with the U.S. Navy and local authorities would be necessary to finalize the trail's alignment. Mr. Crum then introduced the regional broadband initiative, which aims to connect Hampton Roads to transatlantic subsea cables in Virginia Beach. He explained that the project could position the region as a global internet hub, attracting technology and financial industries that require high-speed data infrastructure. The project's first phase is nearing completion on the South Side, with plans to expand fiber connections to the Peninsula. Mr. Roane emphasized the need to ensure broadband providers build last-mile connections to serve residents and businesses. Mr. Crum agreed, noting that performance metrics were included in agreements with service providers to require expansion into underserved areas. He stated that additional fiber mapping efforts would help identify existing infrastructure that could support the regional broadband network. The final discussion centered on legislative priorities, including funding for flooding prevention, transportation, and regional infrastructure projects. 383 January 31, 2025 2 Mr. Crum also addressed concerns about a proposed General Assembly bill that would restrict interbasin water transfers, warning that such regulations could severely impact regional water management. He assured attendees that HRPDC was actively working with local legislative liaisons to oppose the bill. Mr. Crum introduced the regional legislative agenda, a collaborative effort developed annually by the PDC and TPO. He explained the extensive process of meeting with chief administrative officers, legislative committees, and various groups from July through September to establish regional legislative priorities. These priorities are then advocated for during the General Assembly session and, in some cases, at the federal level. He emphasized the importance of coordination and collaboration, noting that while the PDCr may not be the experts on all topics, they serve as facilitators, bringing together stakeholders and experts to address regional challenges. He highlighted that legislative priorities change annually based on community needs, citing previous years' focus on public safety and current priorities such as flood prevention and transportation funding. He noted that two budget amendments, one in the Senate and one in the House, totaling $190,000, remain active and hopeful for approval. He then discussed Trans-Atlantic subsea cables that landed in Virginia Beach, emphasizing their potential to provide the fastest internet speeds on the East Coast. He distributed a two-sided poster illustrating the network. He detailed how Phase One of a Southside fiber network connecting Virginia Beach, Norfolk, Portsmouth, Suffolk, and Chesapeake would be completed in June. Conversations are ongoing to extend the network across the bridge tunnels to Hampton and Newport News, with further expansion planned to York County, Williamsburg, and James City County. Crum underscored the economic opportunities associated with this infrastructure, particularly for industries requiring high-speed broadband, such as financial trading and modeling and simulation firms. He explained that the goal is to facilitate data transmission across the Atlantic and ensure local communities benefit directly from this infrastructure. Mr. Roane inquired about the accessibility of high-speed internet in the region, to which Crum responded that the objective is to ensure local off-ramps into the community rather than allowing the region to serve merely as a pass-through for internet traffic. Mr. Crum stressed the importance of ensuring that broadband providers offer last-mile service to residents. He shared that 288 fiber strands were installed on the Southside, with 98 already leased to a provider committed to expanding last-mile service, Mr. Roane emphasized the need for regulatory oversight to ensure providers deliver on last-mile expansion commitments. Mr. Crum confirmed that performance measures, including requirements to serve underserved areas, are built into leasing agreements. Brian Fuller, Deputy County Administrator, noted that York County already has some fiber infrastructure, particularly in emergency services buildings, and inquired whether this could be leveraged for future expansion. Mr. Crum encouraged local officials to begin mapping existing assets to facilitate future integration. He highlighted that municipalities on the Southside saved substantial funds through public-private broadband agreements and suggested York County could benefit similarly. Discussion shifted to the General Assembly's proposal to restrict interbasin water transfers. Mr. Crum described this matter as a significant regional concern. He explained that if enacted, the legislation would prevent Virginia Beach from using water from sources such as Lake Gaston and could impact Newport News Waterworks. He stated that the PDC and local legislative liaisons are actively opposing the bill, engaging with senators, delegates, and advocacy organizations to ensure it does not advance. Greg Grootendorst highlighted the strength of regional collaboration, noting that stakeholders from VML, VACO, and the state regularly seek the PDC's position on key issues. He emphasized how regional unity enhances advocacy efforts in Richmond. When asked about delegation unity, Mr. Crum affirmed that local legislative delegations do work collaboratively and value regional input, though attendance at PDC caucus meetings varies. He noted that legislators regularly consult with the PDC on regional priorities. 384 January 31, 2025 # Mr. Roane inquired about the timeline for expanding the fiber network to the Peninsula, and Crum confirmed that the Southside fiber ring will be completed in June, and discussions are underway to fund the Peninsula connection. He noted that three additional subsea cables are under consideration, further solidifying the region's role as an emerging internet hub. Discussion then turned to economic development opportunities tied to broadband expansion. Mr. Roane asked how York County could position itself to attract data centers, given infrastructure improvements. Mr. Crum explained that the fiber network would make the region more attractive, while data centers require substantial power and water resources. He suggested that strategic planning should include zoning and infrastructure readiness considerations to capitalize on this opportunity. Mrs. Noll and Mr. Holroyd briefly discussed the implications of surface water management policies and legislative efforts that could impact water resources. Mr. Crum reiterated the PDC's active engagement in opposing restrictive legislation. A brief discussion followed concerning the key takeaways from the presentation. Mr. Shepperd acknowledged the importance of intergovernmental cooperation and HRPDC's role in facilitating regional collaboration. Mr. Bellamy thanked Mr. Crum and Mr. Grootendorst for their insights and contributions to the meeting. The meeting then transitioned to budget discussions. Greg Gillette, Chief of Budget, presented a fiscal update, summarizing the FY 2024 budget results, which included a $6.2 million general fund surplus. Of this, $2.3 million had been planned for CIP funding, while the remaining funds were allocated to reserve accounts. For FY 2025, Mr. Gillette noted an estimated $3 million surplus, with personal property tax revenue showing modest growth but real estate tax revenue impacted by veteran tax exemptions and limited new development. Susan Goodwin, Assistant County Administrator, clarified that while the veterans' tax exemption was not a state mandate, its adoption was effectively necessary due to regional demographics. She noted that initially costing $172,000 annually, the program now represents a $4.1 million revenue loss. Discussion followed on a proposed state budget amendment that would relieve localities where veteran exemptions exceed 1% of property tax revenue. Staff confirmed that York County would qualify under this threshold. Mr. Gillette outlined budget considerations for FY 2026, projecting approximately $3 million in new revenue, driven primarily by personal property tax growth. However, with contractual obligations, service level maintenance, school funding, and employee compensation needs, available discretionary funds will be limited. Mr. Bellamy highlighted the financial challenges ahead, noting that the first debt service payment for Seaford Elementary School-aproatimately $850,000--must be factored into the budget. He estimated the county's ability to contribute an additional $500,000 to schools, significantly lower than in previous years. Discussion ensued about balancing school funding with other County obligations, with board members emphasizing the need for transparency and strategic prioritization. Regarding the budget process, Mr. Gillette detailed the review timeline, explaining that departments submit budget requests in November, with staff and administration refining recommendations before the budget committee meetings in February. The proposed budget will be presented in March, followed by town hall listening sessions and individual supervisor meetings. Public hearings will take place in April, with final adoption in May. 385 January 31, 2025 Board members requested that budget presentations clearly outline revenue options, including the implications of maintaining the current tax rate versus potential increases. Mr. Shepperd emphasized the need for a clear understanding of funding needs and viable solutions, stating he would support a tax increase if necessary to maintain services. The meeting concluded with a discussion on staffing studies. The Board received the final report from the Berkley Group, which confirmed that York County is not overstaffed and recommended minor personnel reallocations. Mr. Bellamy proposed considering Phase Two of the study, which would focus on public safety and social services, pending budget availability. The meeting adjourned following final remarks from staff and board members, with an agreement to reconvene as scheduled for further budget deliberations. Mectpng,Adiourned, A/3:36 p.m., Chairhan Noll declared the meeting adjourned sine die. Mark L. Bellamy, Jr. Sheila S. NolLhairman County Administrator York County Board ofSupervisors 386 January 31, 2025 This page intentionally left blank