County Board Update – August 8, 2013

“The punishment which the wise suffer who refuse to take part in the government is to live under the government of worse men” Plato

Kewaunee County Board Activities Update, August 8, 2013

By: Ron Heuer, District 12 Supervisor, Kewaunee County Board

Is Kewaunee County facing a financial crisis, a management crisis, or both?  ——-You Decide!
Here are some facts about Kewaunee County, read them, evaluate them and then you decide crisis or not?

  • Kewaunee County employees are more than well paid, on average $3,704 higher per employee to comparable counties.  This costs Kewaunee County over $650,000 annually more than those comparable counties.
  • Kewaunee County provides its employees a fully comprehensive health insurance that costs the County $22,233 per year per employee who is enrolled in the family insurance plan.  Single plan cost is $9,084.  Total cost of insurance to the county is $3,047,364 for the159 employees who are enrolled in the plan.  Employees contribute 10% of the cost of health insurance as they have for the past 30 or so years.
  • Kewaunee County has over $23 million in combined debt and debt service.­­­   Cost of this debt service is in excess of $1,500,000 per year (Note1).
  • Kewaunee County has the 5th highest county tax rate in the state with $7.77 per thousand (for comparison sake, Door County rate is $3.55, Manitowoc County is $5.74 and Brown County is $4.68)  Our ability to tax is based upon our counties equalized value (Note 2).
  • Our Kewaunee County Highway Department has lost $2,866,000 over the period 2003 – 2012.   For the period 2009 – 2012 alone, this department has lost $1,984,000.    These numbers include the depreciation of equipment and the overall net asset values of the department (more on the highway department below).
  • In the past months, over 1200 properties in the city of Algoma have been reassessed and on average, the property values have been reduced by 13%.  In the near future, it is reported the city of Kewaunee properties will undergo the same reassessment.   These reduced assessments will have an effect on equalized values for the county and will force the county to do one of two things; reduce expense and services or increase taxes once again.
  • As a result of the closure of the Kewaunee Nuclear plant, Kewaunee County will, after four years, lose estimated $735,000 annual revenue.  Payments to county from Dominion will be reduced per the following table.
    2013                       2014                       2015                       2016                       2017                       2018                       2019
    $874K                    $869K                    $723K                    $576K                    $429K                    $283K                    $137K
    Unless there are cuts in operational expenses in the county this shortfall of revenue will lead to higher taxes.
  • Kewaunee County Inland Home sales for the period Jan 1through May 31, 2013 are down 60% from 32 sales in 2012 to 19 sales in 2013.  Combine that statistic with the 20% reduction in sale price and this is not a good picture at all.  In 2012 the Kewaunee County median priced home was $68,250 and in 2013 that price dropped to $55,000.   Door County, on the other hand experienced a 17% increase in the value of those inland home sales from $130,000 to $152,000.  Given our Kewaunee Nuclear plant closure, we are likely to see this trend continue or even worsen.
  • Kewaunee County Landfill under the management of the Highway Commissioner, Dale Jandrin, adopted a new pricing and operational direction in the month of April based upon an “extend the life of the landfill proposal”.  This proposal called for increasing the cost of garbage coming into the landfill and called for the amount of daily cover to be managed to a maximum of 25% of the total garbage coming in to the landfill which would adjust the number of tons of garbage coming into the landfill, increasing the revenue whilst at the same time extending the life of the landfill.  The Highway Commissioner is responsible for managing the landfill, including cover.  For the first three months under the new plan (May through July) the amount of cover has been running at 42% total landfill.   If this is allowed to continue, the future of maintaining the Kewaunee County landfill is questionable.  This has been allowed to happen even though the Highway Commissioner Mr. Jandrin is fully aware the landfill plan calls for 25% cover. 

At this time the Highway department has about 12 men assigned to the Landfill to complete the work on covering the cells that need to be capped.  Preliminary numbers show that in all likelihood, this project will come in over budget further weakening the financial position of the Landfill Operations.  Stand by for updates on how this is progressing.

Kewaunee County Highway Department Update
Is it time to hold the management (Mr. Jandrin, Hwy Commissioner and Mr. Dorner, Administrator to whom Mr. Jandrin reports accountable for the Highway Department (HD) losses ($2.8M since 2003 with nearly $2M in just the past four years).  In addition to these losses, the HD’s audited numbers show a $609,000 cash shortage at the end of the 2012 fiscal year.  This means the HD is “borrowing” money from the general fund to meet its financial obligations.  Over the past seven years, the HD has on average been short $531,000 in operational funds.

This department operates with and “enterprise budget”.  This means that each year the department is, theoretically, supposed to operate with a zero balance at the end of the year, and it is up to the management to ensure we operate the department to that fiscal goal.  Operating with a negative average of $531,000 is not exactly a zero balance and somewhere along the line this shortfall (according to both the auditors and the Wisconsin Counties Association) needs to be satisfied.  So the question is where will that money come from?  Most likely it will have to be taken out of the general fund.

Let us first understand why the losses are being incurred.  The answer is simple but yet complicated.  Over the years, the HD has been receiving less and less work from the townships, yet the “full service” HD has not reduced any services, nor have they taken any steps to reduce overhead, staff, staff hours, salaries or benefits.  For example, in 2003 the HD had 49 employees and the salaries for those employees $1,955,310.   Through attrition, in 2012 the HD had 39.5 employees with salaries of $2,079,953—10 fewer people, but the salary cost had actually increased by 6.4%.  The benefits have continued to increase in cost each year as well!.

In 2011, the HD lost $695,000 and in 2012 the loss was $848,000.  These numbers are primarily comprised of equipment depreciation and shortfall in revenue that was a budget number derived from estimated as revenue from the townships.  Although the HD Commissioner and the County Administrator recognized this problem prior to 2011, they choose not to make any adjustments and continued to operate, business as usual. This led them into the 2012 losses, and, by the way, we are now a full 7 months into the new year and nothing yet has been done to reorganize or restructure the HD which means the losses month by month are continuing.

Before I get into more detail I would like to say that Kewaunee County does have some great employees in the HD, and they handle their jobs professionally.  They are not, however the decision makers and are ultimately going to be the folks that bear the brunt of the solution to the problem(s) of the department.

So what to do?  First of all, something should have been done about this several years ago, before the HD had burned through its cash reserves.  When you analyze the problem, you quickly recognize the HD has been tailored around the snow removal requirements for the county.  So, when there is a snow storm, it’s all hands on deck and everyone is busy for a day or two.  Once that snow removal emergency is handled, then it’s back to maintenance of equipment and the HD buildings, etc.   And, then when the snow season is over, the department is still staffed at the levels required to remove snow in the county.  Other counties have dealt with this very problem years ago; they reduced staffs and outsourced snow removal to the private sector.  And, believe it or not, it has worked for them, snow is plowed.

The days of building new roads are in past, the number of miles of roads being resurfaced due to budgeting constraints are limited.  So the options are then limited, especially when the townships in the county have pretty much moved away from utilizing the HD for their summer work for various reasons of their own.  Rather than making the tough decisions to redefine the mission of the HD which would have direct impact on the number of employees in the department, the management elected to keep the staff full service HD intact.

So the Commissioner decides upon introducing a 3 year contract in which the Townships would guarantee 125% of their Transportation Fund allocation to the county.  He calls a July 2nd & P.M. meeting to discuss these new contracts with the Townships.  Township boards did not receive this three page contract in advance of the meeting, instead, they were handed this contract in the room that evening.  Additionally, the Commissioner announced in the meeting that if the townships didn’t sign this contract, the county would no longer plow snow for them.  He also mentioned the price per hour of work completed by the HD would be increasing.  Of course the next question posed by one of the townships was  “how much would that increase be”?  The Commissioner did not have those answers, and subsequently the meeting soon ended with the townships walking out of the room shaking their heads in dismay with plans to contact alternative sources for their snow plowing.

So fast forward to the next HD meeting on August 2, 8:45 AM.  No longer was the 3 year contract program in the mix.  But now the Commissioner has decided to select seven townships that the HD would plow snow for and the HD would reduce the work staff by six people and with that remaining staff they could handle the state highways, county roads and seven townships.  The criteria for selection of townships was going to be completed by the Commissioner and the County Administrator through a rather convoluted and confusing points system.  After a lot of discussion the following motion was made by Highway Committee member Brian Paphlam – Kewaunee County HD would plow all towns and villages and continue operations with the current staff, until April 1, 2014 and double rates on equipment.  Brian Dax seconded this motion.  Discussion followed with a friendly amendment offered by Larry Kirchman and accepted by Brian Paphlam to include; during periods of no snow activity in winter season and no activity in the non-winter activities during construction season reduction in staff hours will be implemented. All in favor, motion carried unanimously.

To clarify a couple of issues – In addition to the six work staff reduction, there would be an additional reduction in the office and management staff of two people.  This means there would be a total of eight staff reduced overall in the HD plan.  Each staff member on average with salary and benefits costs the county about $82,000 per year.  So those eight employees cost the county roughly $650,000 or $55,000 per month.  So this decision to keep the HD as is through the winter will cost about $380,000.  By doubling the cost of the equipment by 100% to the Townships an additional $78,000 will be gained for the HD.  So the net cost is about $300K.  Then in April, the HD will have to pull the trigger on the future, they will have to finally make the tough decision.  We are kicking the can down the road once again.

Kewaunee County Board Per Diem and Expenses Apr 2012 – June 2013
Mileage & Exp Wages Total
Abrahamson/James $              213 $            6,160 $            6,373
Barlow/James $            1,428 $            5,050 $            6,478
Cravillion/Dennis $              329 $            2,100 $            2,429
Dax/Brian $              543 $            4,570 $            5,113
Delebreau/Don $              484 $            3,220 $            3,704
Garfinkel/Bob $              857 $            5,320 $            6,177
Heidman/Bruce $            1,206 $            5,020 $            6,226
Heuer/Ronald $              260 $            2,470 $            2,730
Hutter/Charles $            1,411 $            5,380 $            6,791
Kirchman/Larry $            1,036 $            4,920 $            5,956
Koenig/LeVerle $              773 $            2,600 $            3,373
Mayer/David $              843 $            3,986 $            4,829
Paider/Ron $            1,081 $            5,010 $            6,091
Paplham/Brian $              517 $            4,750 $            5,267
Reckelberg/Gordy $              423 $            2,580 $            3,003
Shillin/Kaye $              177 $            6,570 $            6,747
Sinkula/Linda $              928 $            7,460 $            8,388
Swoboda/Jan $            2,949 $            5,650 $            8,599
Wagner/Chuck $            3,649 $            7,630 $          11,279
Weidner/Robert* $              987 $            5,070 $            6,057
 TOTAL $              20,094 $               95,516 $            115,610

 

* Weidner/Robert is the County Board Chairman and in his position receives an annual salary of $5,867 as well as one-half the cost of the county family plan health insurance which equates to $11,166.  So the Chairman has received to date received salary, per diem and benefits of $21,550.

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Note 1-

What is disconcerting about this is we have member(s) of our board who intimate Kewaunee County could borrow more money if we got in a real pinch.  Following is a verbatim, unedited excerpt from an email sent from Supervisor Wagner to concerned taxpayers in our county:

  “Now, when I was studying General Business in school, the general rule for borrowing money was to not go over two and a half times your income.  Let’s call the County’s General Operating Budget of $25 million as our income.  That includes our levy and all grant money coming the state and federal government.  The County in NOT allowed to spend over that amount each year.  And we never have. So based on the principle of not borrowing more than 2.5 times the $25 million we could conceivably borrow up to $62.5 million.  Standard and Poor’s states that based on many criteria Kewaunee County could safely borrow up to $77 million.

There is no one connected to County Government that would even dream of such a thing.  And as a matter of fact each and every project that we have taken on over the past fourteen years has been studied and studied and studied to make darn sure we are doing the right thing for the best price.  The County has a very long history of being extremely frugal.
If one takes the time to listen to all of the facts, I would think that reasonable person would come to the same conclusion”.

Note 2-
Kewaunee County has an equalized value of $1.4B.  Door County is at $7.1B, Manitowoc County $5.1B, Brown County $17.2B.  It quickly becomes apparent Kewaunee County cannot get the idea that we can spend at the same per capita levels as our immediate neighbors.  We should be staffed and have salary levels of comparable counties like Jackson County with $1.4B equalized value and 21,499 residents, almost a mirror to Kewaunee County.  Other similar counties are; Ashland County $1.2B, Price County $1.4B, Langlade County $1.6 and Taylor County $1.2B.

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I wish it would be easier to explain some of these issues, but particularly with the landfill and HD It is very hard to explain all the nuances without getting a bit wordy.

Ron Heuer

District 12, Supervisor
Kewaunee County

Posted in County Update