Travis County Commissioners Court
July 20, 2004
Item 7
Item number 7 is to consider and taikdz on the following for the Travis County hospital district. Travis County programs and single-families to transfer to the hospital district. (b) is facilities to transfer to the hospital district. C is Travis County funds to transfer to the hospital district. D is issues related to independent audit required by health and safety code, section 281.122 and (e) is other matters regarding the implementation of the district and we probably have a few other people coming down. Now, we also need to discuss a couple of parts of this in executive session. 39 (b) specifically is to consider and take appropriate action on recommendation of a joint appointee. No, that is not the one I had in mind. We need to convene in executive session to discuss 7 (d) as in david and related matters would be covered by (e) under 7 and jim collins needs to give us legal advice on those. Now, we did get in yesterday's meeting documents under 7 c but after that meeting I received a recommendation from planning and budget and also the auditor's office that they were working on these and there would be revisions so I may as well not distribute them is what I was told.
>> okay. So we'll do that. Jim collins did give a draft letter, which his advice will cover. The third is some draft paragraphs from ms. Sillies for our consideration. When I mentioned this morning a draft letter I thought we would want to look at this afternoon and contact the city...
>> was there a section, judge, as well that was supposed to come from the auditor's office.
>> I know we did not get one from the auditor, right?
>> I thought you guys went in search of paragraph...
>> jim was going to do the main letter and you all were going to do a...
>> okay.
>> [inaudible - no mic]
>> will's last name doesn't have an e, does it?
>> i've already told jim collins. He's going to make the change.
>> we need to focus on what the issues are that we're going to communicate with the city about. We looked at actuals, I was told not to distribute this, right? So we are expecting documents later, meaning after today?
>> yes. What we have is the programmatic financial statement for the programs that we have contemplated would be transferred. The budget office has worked on budget. We've worked on actuals. We've obviously worked together and I think staff wanted to go over it one more time and coordinate between the two offices, and are we there yet? Not quite.
>> I would like to know budget has [inaudible]
>> christian is behind you.
>> behind me too.
>> tomorrow?
>> ready any time...
>> okay. We need to get christian's done first.
>> well, when we get this information to the city, it ought to be most accurate product we can get.
>> right.
>> at the same time, what I have in mind is us giving to the city and us saying basically here are ours under various things that we've requested of them and I知 assuming they're working on their. If we stay on target and have the managers in place in the early part of August, in my view we ought to be able to hand them something even if we have to refine it later on. I guess my question for us would be before we give these documents to the city, as basically I guess our first take -- our first effort and ask for their first effort as soon as they can get it, whether the whole court needs to see them as a group or whether we feel comfortable handing to the city, I was hoping tomorrow or so, and bag on the court's agenda so...
>> I知 not -- I don't know, judge, how extensive pbo's changes are so I don't know how to respond to you accurately. My staff will get together with them and what about as soon as we get that done, we hand deliver to each of your offices that package? I just don't know what to tell you on time because I don't know what the issues are on the budget.
>> well, my request to the court is whether we need to see these documents as a group and sort of approve them for delivery to the city. It's a whole lot of information, basically, about our actuals, our adjusted budget, some projections for next year. We know -- we know roughly what it is.
>> right.
>> it's our adopted budget plus any adjustments made this year and projections between now and the end of the fiscal year, and then for next year we've really taken pretty much the same numbers and saying these are our projections for '05 but increasing them some. If the whole court needs to see them as a group, john, we're probably looking at them next Tuesday.
>> if we feel comfortable with the city holding them to the court next week, we can do that.
>> or we can circulate these same documents to the court tomorrow. If individual citizens have concerns we can hold off on it. There are three possibilities here.
>> [inaudible - no mic]... Come back and meet -- going to recess the meeting today and come back again some time tomorrow, that would be allowable. You could even review the documents that you have now and see that if the court feels comfortable enough to delegate enough authority to some individual or set of individuals to deliver a document over to the city, that's a second option, or a third, as you say, just... So large an issue you want to come back next week and talk about it after it's been fleshed out over a couple of days.
>> put in a little bit of input here. This has been coming before the subcommittee which keeps growing every Monday in terms of the folks that are participating and quite frankly, even those of us that eat, breathe and live this stuff, I have to at some point, and I think that point is now, defer to the auditor's office that their piece of it is full and complete and accurate to the best extent possible. I defer to pbo that they have double scrubbed and triple scrubbed as best they can. But I知 not sure it's a very worthwhile venture for all of us to get this incredible pact and we wouldn't know a code number on a pbo line item is correct or incorrect. I really have to kind of defer that they have double, triple, glad rupial scrubbed it as best they can and still it's not 100% perfection. The folks have been working hand in hand along with sid and going through the inventory, I think at some point we have to invest our judgment and trust in these folks that they are working on our behalf and doing everything on our behalf and we ought to trust them to say it's ready to go over there because this is our best work product at this point.
>> judge, I think you have a work session on Thursday afternoon and that's an option that I wanted to lay on the table to see if maybe you wanted to discuss it then.
>> not posted.
>> yeah.
>> not posted. We have a hard time getting our 72 hours in. We could post it now.
>> yeah, it's too late.
>> Monday.
>> it's not too late if you take it up after 3:00 on Thursday.
>> [inaudible - no mic] [multiple voices]
>> Tuesday is already over.
>> [inaudible - no mic]
>> 48 hours.
>> so any objection to that? Why don't we do this? Why don't we get the documents to individual members of the court as soon as possible and if a single member has serious problems, you let me know about 1:00, we'll know to hold off until next Tuesday and if I don't hear -- if nobody has serious objections, and i'll be happy -- I can hand you what I have here. These will be changed, though.
>> they will be changed, judge, we will give you a complete pact in plain english as to what they are and i'll have a staff member go over those with you so you are comfortable with them from our part.
>> yeah. It's a whole lot of line items but the big deal is the adjusted for '04 as a figure of about 7 and a half million dollars excluding reserve, right, christian?
>> we want to be able to provide a summary with accurate data on the -- to start with the adopted '04 budget, which then moves to an adjusted '04 budget which includes some transfers and roll over encumberances and shows the '05 on one piece of paper and we'll have detail with five or ten pieces of paper, and detail with line items so whatever we provide, every one, regardless of how deep they want to dig, will have comfort and accuracy and that's what we're striving for. And it's doable. It just has to be done right the first time. If we do it and it's jiggled in the middle, then we have to pull it back. Pulling it back from five members of the court is one thing, pulling it back from many others is something we would prefer not to do.
>> let me give you a sense of some of the challenges out there in terms of what are the costs to date in terms of 6 months of the fiscal year. And the problem is the city of Austin is seriously behind on billing and they are seriously behind on getting these things so that we can pay them, so there are bills that go back to jan, February, March, that have still not cleared yet because they haven't even billed yet. So how can you know what your costs are to date if the other entity is five months behind? This is not easy, but our folks are doing the best they can with the information they know that is in our budget, some of the stuff in terms of what are the billables, don't know, we're working on it.
>> but it is a whole lot of work. Anything else we need to discuss in court at this time? We're going to take up the independent audit as well as the board of managers in executive session here moment arely.
>> and judge, if you will give me a copy of a draft of the letter you're sending, we didn't work on these statements, we just plain forgot to write our paragraph. I will have staff work on that so you have it today, so it fits into what you have, xerox this one and give it to diane and that will be fine.
>> got three options here, option 1, 2, 3, on different paragraphs and I think that's what you really need to focus your attention on is it has to do with the status of joint recommendation for the verification. This is in jim's proposed graph if you can get a copy to susan.
>> that will be great.
>> we have jim's page 1 and 2 and we have ms. Sillies' page 3. Part of our legal advice is not only looking at the statute but chatting with you about some of the audit ramifications after we chat with jim and I was planning to discuss this with the court after receiving legal advice, at the same time of relieving legal advice, so we can check further about this in executive session.
>> were you planning on working on the letter this afternoon or...
>> yes, ma'am.
>> okay.
>> my goal is that we get legal advice and get some feedback from the court and at least be able to put together a final draft that the entire court can sign and about on today and either sign today or sign tomorrow. Saying move so fast the sooner we get to the city the better. It's really about how we go about getting the independent auditor to do the work that's required. Okay?
>> okay.
>> at this time we've already announced 7 (d) regarding the independent audit required by the statute, and also 7 (e), other matters pertaining to implement of the district. We'll go into executive session to get legal advice on both of those and posted for executive session we'll have this discussion before we leave. It would be 39 (a) which is to consider and take appropriate action on appointing members to the board of managers of the Travis County hospital district and 39 (b), consider and take appropriate action on recommendation of a joint appointee to the city of Austin, 39 (a) and (b) would be under the personnel matters exception to the open meetings act. And we'll discuss these in executive session but we'll return to open court before taking any action.
. We have views returned from executive session where we discussed item 7-d.
We had a draft letter prepared for us by staff and it set forth three options
toward the end and I move that we approve this letter to be sent to the entire
city council of the city of Austin and the city manager, that it be from the
five of us and that we go with option 3 and that we add a sentence that basically
says that although we request that the city council suggest a firm which may
jointly retain -- jointly retain to make the verification that's required
by law, we respectfully request that the outside firm that is the audit firm
for the city of Austin not be recommended, and in the letter we do indicate
that the county's outside firm deloitte and touch will not perform these duties
either. And in our view for the firm to be independent that it's probably
necessary it not be closely associated with either one of us. So if we can
get one sentence that says all of that is what we're looking for. [inaudible].
>> okay.
>> [inaudible].
>> okay.
>> the rewrite would be roughly consistent with mr. Collins'
draft that we looked at.
>> he has the draft, judge, and, you know, he was telling
me what he thought ought to be in it and I said why didn't he just write that.
>> with less legalese and alittle more diplomatic. If it's
fundamentally different we'll figure out a way to get it before the whole
court.
>> I have full faith and confidence in christian's wordsmithing.
>> he's a born diplomat.
>> he is.
>> and so move approval.
>> second. And I need to make some comments. Does it matter
if you take your vote?
>> the other thing we're hoping goes along with that would
be the tkwouplts we talked about this morning -- documents we talked about
this morning. The adjusted budget for '04, the projected budget information
'05 and related budget audit documents that we think the city of Austin ought
to be provided consistent with requests that we have been making from them
of the same nature. And what we're trying to do, for the record, is just put
a package of information together so beginning the 1st of August when the
board of managers is in place, hopefully we can hand them those documents
so they can start working toward the first annual budget.
>> I guess what I would like to say for the record is that
the difficulty is not calculating a tax rate. The difficulty is calculating
what numbers go into that tax rate. Almost all of us could pull out our calculators
and calculate the tax rate if the number were known. The very narrow definitions
that you probably -- your lawyers would recommend, I do not believe nor does
our audit firm deloitte believe that that presents a fair presentation as
to the financial position of those programs and therefore would not present
a fair presentation of what needs to be turned over to the district. And,
you know, there are controversies in the audit field, as you well know if
you read the paper, and what really have come out of that in a one sentence
summary is that accountants, c.e.o.s, lawyers, anyone that has anything to
do with financial statements are encouraged to use principals base rather
than rule base. What that means is tell the truth, the whole truth and nothing
but the truth. That's what I think we need to do. The package we put together
I think is a fair presentation of the financial transactions in Travis County.
I am not -- well, there is nothing that requires you to rely on me for this
audit. There's nothing in the law that says that. To approve it, to say it's
okay or anything. But as the chief financial officer of this organization,
I absolutely agree with the statements made by the partner from deloitte &
touche that when they responded, and this was immediately after a meeting
with the city and their auditor, their chief financial people, and basically
what the partner george scott, our partner, said when he declined to do the
audit because we had requested that he do it, you all requested the city that
he do it, and what he said is for an auditor's report to be rendered, multiple
years of financial information will be required to support a reasonable basis
for the auditor's conclusion. That's what I知 concerned about. Such financial
information would include but may not be limited to stand-alone county and
city program financial statements since 2002 for each of their respective
health promise. Also based on our discussions it appears these audits including
the report required by state statute would have to be issued by late August
'04. I agree with that. Two more sentences. Based on preliminary review of
the financial information currently available, such audits would be important
for an audit firm to reach an informed conclusion as to the financial activity,
reserves and assets available to the new hospitals district in order to report
to tax rate established. We thoetd that significant changes in financial presentation
have occurred in the city's health program since 2002 which may require significant
disclosures as well as legal representation and when paired with the short
time frame, it does not appear that such audits could be completed in the
limited time available. So my concern is that what an audit comes out from
both organizations that it in fact is fair and it tells the taxpayers the
total financial position of programs that are being transferred to the district,
which is what I believe the law means, and I certainly believe that that's
what was told to the people of this county when they voted for it. And so
that is really my concern, that we tell the truth. And I would like to make
one other comment and that is the other document that's out there, and this
emphasizes the importance of a awed and -- importance of an audit and following
property comes and standard. The city of Austin paid for a report that was
given to them by navigant consulting. I want to talk about the difference
between that and an audit. I don't know who navigant is, but I know they are
not auditors. One of the things they do at the beginning of the report is
they say this is based on what the city and county gave us. Means it is not
traced, it is not vouched, it's simply what was given to us. So that's a difference
between an audit and a report such as this. The city used this as a planning
document. It is not the document that I think is contemplated by the law.
As I look at the document, in terms of its credibility, I知 sure there are
some things that in fact are valid. But there are things in that report that,
you know, make me question the validity of it and I certainly wouldn't want
to rely on that in lieu of or to supplement an audit. One of the things that
is very apparent is -- and apparently this is the document that promoters
of the hospital district used because what they showed is that if you tax
county-wide, you would raise another $7.2 million. Although the report says
there needs to be reserves, there are no reserves in this report. If in fact
the hospital district -- if this report were absolutely accurate, that $7.2
million is $400,000 less the amount of reserves that the Travis County Commissioners
court would keep on county funds. The other thing in that report when you
look at it, which is again why I知 so nervous about something that is not
an audit, is -- and everything looked at is they are using a constant tax
rate, and the implication being that there is no increase in taxes. If you
understand truth in taxation, you know that can't be true. When we went to
the legislature, I put together a chart kind of for your reading edification,
I will tell you that in 1993, Travis County's tax rate was .3961. In '04 it
was .3859, which means that the actual new hampshire tphol rate went down.
According to the logic here, the assumption would be Travis County has not
raise taxes in 10 years and we know that's not true. To use that constant
tax rate is misleading because it doesn't really indicate whether there is
a sizable tax rate that might go over the rollback rate and I believe that
it is. I知 only going to make one other comment about the report because i've
only done a cursory examination of it but it's what makes me nervous and that
is that the increases -- they do a five-year projection, and the increases
in the health care services go up 4.5% in '06, 4.7 in '07, 4.7 in '08, 5 in
'09. I find that a staggering number. Our own health insurances ka laters
have been between 12 and 16%. Those very same services that Travis County
has rendered ourselves in our own program since we just put together the financial
statements for 2002 and '03 increased by 36%. So this report does not reflect,
in my opinion, the kind of data, and I don't criticize the navigant people
because what they said is these are the numbers we were given and they kind
of put it together and gave it a praoef review. All I知 saying is I would
not be comfortable relying on that report such as that or a report that doesn't
meet the standards that deloitte outlined. You need to get whatever auditor
you all think. As I said, I知 not really part of that process, but I would
encourage you to take what our firm says and make sure that the audit includes
that. That is the information we asked for the city. That is the information
we are providing here in Travis County. And the city has had that information
since June 15th. It's tough to get together. We've had a tough time putting
it together. But that's kind of my comments.
>>
>> [one moment, please, for change in captioners]
>>
>> ... That you are not willing to sign off on when the time
comes. I know that you are distancing yourself from this because you fear
that there's a direction here that a number of us aren't comfortable with.
I hope that we can get this thing back on...
>> sure.
>> ... The straight and narrow, but I will tell you, susan,
I知 going to look to you and your staff very heavily. I depend on you. I have
the jut most respect in what you do, and before I知 going to vote on any kind
of sign off, I知 going to make sure that susan and her staff is in agreement
with what we're doing.
>> anything else on item 7?
>> did christian get a chance...
>> he's here.
>> I have been briefed by counsel and defer to counsel.
>> thank you.
>> I mean I now have been briefed on the legal restrictions
and that we all have and there was some thinking that we might -- there might
be some benefit in going beyond that and I realize that counsel's advice will
keep us within a finite path.
>> have you seen the latest draft?
>> I have.
>> okay.
>> I have no changes.
>> what I would suggest to counsel is to send that to my
office. Look at it, if you have changes get those to me within the next 30
minutes or so.
>> fine with me.
>> i'll put it on the court's stationary.
>> okay. Good.
>> also discussed 39 (a) and (b).
>> judge, we have a motion that hasn't been...
>> sorry about that.
>> all those in favor? I made the motion, right?
>> right. I think Commissioner Sonleitner seconded it.
>> seems like days ago rather than minutes. And that does
it for 7.
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Last Modified: Friday, October 28, 2005 12:38 PM