120413SB.DOC

Special Meeting Minutes
Wednesday, December 04, 2013 Board Members
1:30 PM Andrew Kunasek, Chairman, District 3
Denny Barney, Vice Chairman, District 1
BOARD OF SUPERVISORS Steve Chucri, District 2
Maricopa County, Arizona Clint Hickman, District 4
(and the Boards of Directors of the Flood Control Mary Rose Wilcox, District 5
District, Library District, Stadium District, Improvement
Districts, Housing Authority of Maricopa County,
Housing Authority of Maricopa County and/or Board of County Manager
Deposit) Tom Manos
Clerk of the Board
Fran McCarroll
"The mission of Maricopa County
is to provide regional leadership
and fiscally responsible, Meeting Location
necessary public services to its Supervisors' Conference Room
residents so they can enjoy 301 W. Jefferson, 10th Floor
living in healthy and safe
communities” Phoenix, AZ 85003
BOARD OF SUPERVISORS
The Board of Supervisors of Maricopa County, Arizona convened in Special Session at 1:30 p.m.,
December 4, 2013, in the Supervisors’ Conference Room, 301 W. Jefferson, Phoenix, Arizona,
with the following members present Andrew Kunasek, Chairman, District 3; Denny Barney,
District 1; Steve Chucri, District 2 (entered late); Clint Hickman, District 4; Mary Rose Wilcox,
District 5. Also present: Fran McCarroll, Clerk of the Board; Tom Manos, County Manager and
Ian MacPherson, Legal Counsel. Minutes compiled by Shirley Million, Minutes Coordinator. Votes
of the Members will be recorded as follows: aye-nay-absent-abstain.
Presentations
1. PRESENTATION ON THE FY 2015 BUDGET FROM ELECTED OFFICIALS AND A
FINANCIAL OVERVIEW PRESENTATION
Presentation regarding the FY 2015 budget from Maricopa County Treasurer Charles
"Hos" Hoskins and Maricopa County Assessor Paul Petersen.
Additionally, a financial overview will be given by Alan Maguire, President, The Maguire
Company; and Jim Rounds, Senior VP, Elliott D. Pollack and Company. (C-20-14-019-M-
00)
County Treasurer Charles Hoskins introduced Richard Green, his Deputy Treasurer,
explaining that Mr. Green will be handling all the 2015 budget work with the
Supervisorial staff. Also present was Royce Flora, Chief Deputy Treasure. Mr. Hoskins
distributed two handouts which were used as the basis of his presentation on the more
than 250 statutory mandates for the County Treasurer’s Office.
~ Supervisor Chucri entered the meeting ~
Mr. Hoskins spoke about some of the challenges & opportunities in the Treasurer's
office and said it is responsible for the handling of nearly 900,000 transactions and more
than 200,000 constituent contacts in a year. Most of these (95%-97%) are handled at
the Call Center but 7,000 inquiries came directly to the Treasurer’s Office last year.

Special Meeting Minutes
Wednesday, December 04, 2013
Page 2 of 8
Mr. Hoskins said he requires additional resources to his budget primarily for the IT area
of the Treasurer’s Office. He explained that the Treasurer’s system is more than 25
years old and must be replaced because it is no longer supported by MicroSoft and
other companies. When he took control of the Treasurer’s IT, 16 positions were
transferred to OET, eleven of these have been returned and two were replaced this
year. Mr. Hoskins stated that he needed the other three positions.
He drew a comparison between the needs of the Treasurer for a computer system
replacement, its $10 million budget and the need to restore three full-time employees
with the County’s need to refresh its accounting system, its $40 million budget and the
hiring of approximately 100 new full time employees.
Supervisor Chucri asked about the system no longer being supported and clarified that
this includes new upgrades and technical support.
Mr. Manos reported that a contract approved by the Board a few weeks ago included
$40 million as the total ten-year lifecycle for three departments in the new financial
system, the Finance Department, Procurement Services and the Budget Office. He said
a comparison of $10 million for a new system for the Treasurer and $40 million as a ten-
year total cost for three departments is “like comparing apples and oranges.”
Mr. Hoskins said he is trying to convey that the Treasurer has problems with IT, as does
the County, and they are working with OET on some issues but he firmly believes the
Treasurer’s system needs to be replaced and updated.
Supervisor Wilcox said $40 million was a big investment for the County. She asked for a
report on what the cost would be if the Treasurer’s Office could be incorporated with the
other County departments in that project.
Mr. Manos replied that would be his optimum solution; the question is whether the
system purchased would satisfy the Treasurer’s needs. He added there have been
consistent conversations with the Treasurer on this topic and the new finance program
that was purchased does include a treasury component.
Mr. Flora said they are already using the County’s system as much as possible to
reduce costs. The problems stem from the County’s use of a system that is primarily an
accounting and inventory management system and the Treasurer deals primarily with
property taxes for 1.6 million land parcels. He reiterated that the current program is 25
years old and if $10 million would buy another 25 years he’d consider it a good
investment.
Mr. Hoskins stated that the Treasurer’s Office is working with OET and also with the
Assessor. They have had conversations about who is paying the most in interest on
delinquent taxes and the impact that may have on the economy.
On another budget-related topic Mr. Hoskins stated that the Treasurer’s Office has had
a number of long-time employees retire and 18 more who are eligible to retire. He
explained that it is difficult to replace the institutional knowledge that is walking out the
door. He believes the department needs highly educated individuals to replace them but
instead is getting entry level individuals wanting to get into the system and who then
move on to other jobs in the County. Another problem is in having to leave positions
vacant to offset budget adjustments. He believed that positions need to be reclassified
and salaries adjusted, especially in those positions that are critical.

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Wednesday, December 04, 2013
Page 3 of 8
Chairman Kunasek said that in making decisions from the revenue side to the
expenditure side the Board has committed to involving all of the elected officials in
discussions to solve problems. He referenced a statement made by Mr. Hoskins on
having to re-mail $20 million in last year’s tax bills that had been sent to outdated
addresses. This year it was $1.4 million. He also spoke about the procedure in sending
the tax bills out.
Mr. Hoskins said tax bills are being sent out but are not getting paid. Delinquent tax bills
have been mailed out twice this year. The interest on the $20 million that was mailed out
is approximately $250,000 a month. He said if this is coming out of the lower valued
properties it takes money out of the bottom of the economy and that does not help the
recovery.
This year there were a lot of unfunded cost increases after the budget was finalized. Mr.
Hoskins said expenditures in 2014 are estimated to be about the same as in 2012 and
2013 but his Office will likely be over-budget this year due to unfunded expenses and
penalty deductions in personnel. In the smaller agencies, reductions cannot be
absorbed after the budget is set.
Mr. Flora said after the budget had been finalized there were telecom costs,
maintenance costs and some other things like the Chairman’s deduction that were
included. Hoskins said microfiche costs alone have gone from $8,000 to $70,000.
Mr. Manos said the budget is finalized by a vote of the Board to adopt it and no changes
were made after that vote. Adjustments can be made up to the end as part of the
process leading to a motion and vote, but once the vote is taken the process ends.
Mr. Green said there was a $44,000 Chairman’s adjustment that was part of the revised
budget after the adoption.
Mr. Manos explained that adjustment was made after the Board adopted the tentative
budget, it could not have happened after the adoption of the final budget.
Mr. Green replied that adjustment led them to lay off all the temps hired to do the
rebilling and he believed that money was relied upon by the Treasurer’s Department.
Supervisor Barney said the Chairman would not have made a unilateral withdrawal of
funds from an approved budget – adding that Members may not always agree but things
happen by action of the Board and not just by the Chairman. He said that statute is clear
on how counties adopt a budget.
Mr. Hoskins explained, “What we’re seeing is a budget that is effectively less than what
we’ve averaged over the last two years, our expenses are the same or even more.” He
said when someone leaves they have to compensate for that by extending the
vacancies.
Mr. Hoskins said the County is operating very close to the edge on budget shortfalls.
The variance reports indicate that County agencies are not funded equally. Discussion
ensued on the information in the two slides that were provided showing the percentage
of variance in various County department’s budgets.
Mr. Manos believed a meaningful comparison would be in comparing the operating
budgets of the departments. He said the operating budgets of County departments
across the board were very tight last year.

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Wednesday, December 04, 2013
Page 4 of 8
The Chairman invited the Assessor to come forward to present his budget. Paul
Petersen, County Assessor, said the office would send out notices of value in February
and noted that all property types are up at least 10%, although the County cannot
collect more than 5% because of Prop 117. He said it is the first time that such an
increase has happened in a number of years and he believes it will trigger a decrease in
the number of appeals received.
Supervisor Barney said there would definitely be a break in the primary and secondary,
and Proposition 117 only exacerbates that break in an appreciating market.
Mr. Petersen said the Assessor’s Office has done the Property Tax analysis for the
Board for a number of years and will continue to do so. He stressed the need to
continue to support the STAR center that provides answers to a large number of the
calls from the public which saves his staff from having to break away from their core
functional requirements. He thanked the Board for the raises provided to County
employees last year – the first increase received by employees in six years. He believed
this should continue with merit raises in the future to continue to support staff and show
appreciation for their continued efforts. He said the CAMA Project is only in its first
planning year and he has a good team working on this.
Tim Boncosky, Chief Deputy Assessor, noted that the Assessor’s mission statement is
to be fair and equitable to the individual property owner and the collective group of
property owners. He said the Office was nationally recognized when they received a
number of awards including the 2011 Silver LEED Certification for the renovation of the
Santa Fe Depot. The Office has 325 employees, two locations; and five divisions. They
are the fourth largest assessment jurisdiction in America. The County’s turnover rate is
the highest since 1998 with most of those leaving for higher wages. He reviewed the
Tax Timeline for 2014 and the 2015 Notice Reminder. He noted that postal costs will
increase in 2014 and they do three mailings a year so postage costs will have a big
effect on the office.
Mr. Boncosky also referenced the Legal Class Verification (LCL) process mandated by
the Legislature. He commented that this project also causes workload increase in the
Clerk’s Office.
The Board took a break at 3:06 p.m. and reconvened at 3:22 p.m.
Tom Manos commented on the strategic planning session held last Monday saying it
went well because some important ground work had been done prior to the meeting and
he would do the same with the strategic planning meetings on financial issues. There
are only four or five of these but they are very complex issues. One of these is to
determine the appropriate level of reserves to carry forward and when they should be
used or increased. He introduced Economist Alan E. Maguire to make a presentation on
the appropriate uses of reserves. Mr. Maguire has served as an adviser to six
governors.
Alan Maguire said he planned to discuss three things:
Balancing Spending and Revenues
Managing Over the entire Economic Cycle
Using Reserves Effectively.
Tax revenues should be sufficient to fund essential services, provide predictability for
taxpayers, match ongoing revenues and ongoing expenses and to build appropriate
reserves. He explained that not all revenue is the same. Base Revenue, such as

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Wednesday, December 04, 2013
Page 5 of 8
property tax, is ongoing; Expansionary Revenue (sales tax) is cyclical and One Time
Revenue (federal stimulus money or development fees) may be unexpected or
extraordinary. He explained that the goal is to keep the cycle moving together and
staying in balance, matching tax cuts with spending cuts and spending increases with
tax increases.
Mr. Maguire explained that virtually all of the government budget laws in America were
developed in the 1920s and 1930s and it all began with a property tax. Since then
income taxes and sales taxes have come to the forefront and have become the
dominant source of revenue for government. Public budgeting has changed but the laws
may be 80-90 years old. He spoke of fixed cost and variable cost saying variable cost
rises when activity rises and falls when activity lessens. It is dangerous to have a high
fixed cost when sales drop. He said that government services are often counter-cyclical.
There is more demand for public services during an economic downturn.
He remarked on the difficulties of elected officials having to live and produce in a
relatively short-term world, based on elections and terms of office and on the
importance of leaving government in good shape when your term of office ends. To
most people predictable taxation is more important than low taxation because they can
plan for the future. Most tax cuts don’t produce the desired outcome, which is stimulus.
Governments must learn to build reserves during the good times, to have reserve funds
available to draw from during bad times as shown through performance versus trend.
The types of reserves are:
Basic Reserve
Cyclical Revenue Reserve
Dedicated Purpose Reserve(s)
Special Reserves for High Risk Circumstances
He said reserves are the most powerful tool government has to manage the economic
cycle and serve the standard of care, which is fiduciary prudence and he explained
ways to use reserve funds most effectively. He said that effective budgeting and
management tools compensate for economic cycles. These are separate with separate
purposes and separate build rates.
Basic Reserve is the classic emergency fund, the classic core budget amount is six
months of reserves to cover bills if something unexpected happens. For a best practice
level, government organizations maintain a three-month spending level. Without a
reserve, governments can be forced to borrow on a short term loan basis. With a county
the general fund is the basic go-to if special purpose funds draw down but this can
reverse and the general fund is the first to go.
The Cyclical Revenue Reserve is the challenging one due to the revenue fluctuations –
the sales tax and the vehicle license tax both provide significant revenue to the general
fund. These must be considered separately from one-time revenues.
The Dedicated Purpose Reserve(s), which this Board used for the new Court Building
and has historically used in many other capital expenditures is saving the necessary
money before starting to build. Because it has a specific purpose the timing becomes
important.
High Risk Circumstances can be defined as whatever is appropriate for your jurisdiction.
Examples in different communities could be forest fires and resulting flood damage;
aging infrastructure – some old earthen dams that could fail. Each jurisdiction can

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Wednesday, December 04, 2013
Page 6 of 8
recognize the local weaknesses and build a reserve for them. Reserves are built during
expansion and spent as needed during a recession after first using cutbacks as a
control and to hold the reserve funds for as long as possible. He said it gets really
painful in the third and fourth year of a recession.
Supervisor Wilcox said, “the County has tried to live by those rules for the past couple of
decades and it has served us well but it is very hard to stay with it.”
Supervisor Kunasek referenced Mr. Maquire’s reference to forest fires and bridges
saying Maricopa County’s problems are with the legislatures and governors. “As we
saved and tried to do the right thing, others down the street looked at it as their
opportunity.” He said it has been an historical threat from somebody who had more
power than us.
Mr. Maguire recognized there is a tendency to punish the prudent and reward the
profligate. He said that is completely destructive to the incentive for good behavior.
Tom Manos offered the perfect example a few years ago when the State threatened to
send its prisoners serving one-year sentences to the County jails. It would have been a
significant unexpected cost to the County.
Chairman Kunasek agreed saying a minimal cost savings to the State would have been
catastrophic to taxpayers because of all the required upgrades to County facilities.
Supervisor Wilcox noted that the Board has been heavily criticized at times because the
County saved for projects instead of bonding and borrowing ahead of building.
Mr. Maguire said there is good and bad in both methods of financing, and each
jurisdiction must choose what method it wants to use. Maricopa County has operated
mostly on a pay-as-you-go basis and it saves the interest cost. However, it has to do
without or make do with what it has until the money accumulates. In debt financing a
long-term cost must be paid and interest does accrue. An advantage to debt financing is
that as people move to the County they will be included in the tax and so will pay for
part of the cost.
Tom Manos said he is hoping for a Board adopted policy on what is set aside for
reserves and how it is used. He said the State of Arizona had a significant rainy day
fund when the recession hit in 2008-2009 and they spent that rainy day fund on tax cuts
and additional spending programs before the recession had even hit. He reiterated the
need for the County to set a policy for the build-up and use of reserve funds, saying,
“The good times don’t last forever.”
Supervisor Chucri asked if interest rates will stay steady; noting that the vehicle
licensing tax & sales tax are ahead of schedule so far this year.
Mr. Maguire sees consistent improvement nationally in jobs and hiring. Clearly the U.S.
economy is in better shape than the rest of the world. When you look at the states that
were down and are coming back, Arizona is doing quite well and is maintaining its long,
sustained history of economic growth and development. Quality job creation has been
experienced since the end of World War II and the upcoming pattern doesn't look
different than in the past. He said there is a lot of risk at the national level as the Federal
Reserve is heavily influencing economic activity. This year he sees the economy as
more of an upside potential than a downside risk.

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Wednesday, December 04, 2013
Page 7 of 8
Supervisor Wilcox noted that there has been a slow-down in businesses and the
building industry and immigration reform is necessary to reverse that.
Mr. Maguire believes the development community is “probably overly conditioned” by
the first decade of this century and does not see a return to that kind of a pattern.” He
continued, “One thing I know about workers is when you raise wages they appear.”
Supervisor Barney thought the bigger question is when to begin to use those reserves?
He noted that the State had some reserves but they used them up at the beginning of
the decline. The County recently used some of the reserves that previous Boards had
built up. Mr. Barney said “it is a challenge to balance it all and in keeping it balanced.”
He noted that capital projects come in waves and the latest for the County was the
Court Tower and the Sheriff’s Office. He stated that the next wave is coming and the
question is whether to go back to the pay-as-you-go model or shift to another model?
Chairman Kunasek explained that some of the capital projects had worked well as pay-
as-you-go over the years but it was always playing catch-up to needed services. The
Board started talking about a needed court building in the 1990s and it was finally built
in 2012. He added that car sales have zero interest loans again and wondered if that will
be the next bubble.
Mr. Maguire said car incentives are always a leading indicator because they are
measuring economic activity every single day and they aren’t giving discounts when
they don’t need to.
Supervisor Hickman said his biggest worry is for the nation’s youth coming into the
workforce saddled with school loan debt that is not forgivable. They have to have higher
wages to pay that debt off. He asked how population growth would drive cyclical
reserves and what Mr. Maguire sees coming in that growth.
Mr. Maguire replied that when Arizona comes out of an economic downturn and begins
an expansionary period, employers add jobs and migrants follow jobs. He believes the
rates will come back.
In response to a question from Supervisor Hickman on east and west coast
infrastructure, Mr. Maguire responded that the western grid is much younger and in
much better shape than the eastern grid. The roads, water and sewer systems are
younger in Arizona than they are in the midwest and east coast, especially in urban
areas.
Chairman Kunasek invited elected officials present in the audience to comment or ask
questions on today’s discussion.
Mr. Hoskins spoke about the gap between the haves and have-nots that show up on
lower-end property delinquencies and asked about the impact on the economy in
moving money out of the lower valued properties and lower income property owners.
Mr. Maguire replied that stress on the diminishing American middle class over the past
30 years has been substantial in that it has continued over a long period of time and
their reserves have been depleted. He stated that his parents were better savers than
he is and the older people become the more they tend to save. Younger middle-income
households have very little reserves because of many different factors. When income is
impacted it can be survived for a year or two but after that, at some point people are
likely to stop paying their taxes.

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Wednesday, December 04, 2013
Page 8 of 8
Dr. Covey, Superintendent of Schools, referred to the automobile industry’s $18 billion
debt crisis causing people to move out of Detroit because of the lack of jobs. He said
Detroit has trouble in even paying the interest on the amount that is owed. He explained
that jobs drive growth and there must be a workforce for those jobs. Maricopa County is
a desirable place to live and people move here because of the ambiance but ultimately
they move here for a job. Dr. Covey mentioned the importance of infrastructure and of
having a sufficient water supply in the desert for the influx of new residents.
Mr. Maguire admitted the challenge and said it drives the importance of keeping the
infrastructure current and active. He said, “yes it is in a desert, but Arizona has the most
effective water management laws in the world.” He said many places in the world come
to Maricopa County to study what we do in water management that works and what
tools we use to make it work.
A man in the audience asked at what point taxes need to be increased to be able to put
money back into the reserves.
Mr. Maguire replied as soon as performance is above the trend line and the County is in
an expansionary period the reserves can be rebuilt, whether it is through natural cyclical
growth in revenues or a tax increase. The key is the trend line because there will always
be a downturn at some time in the future.
MEETING ADJOURNED
There being no further business to come before the Board, the meeting was adjourned.
__________________________________
Andrew Kunasek, Chairman of the Board
ATTEST:
______________________________
Fran McCarroll, Clerk of the Board