Legislative Report 11 -- 2007 Report to the General Assembly
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State of Vermont |
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Report to the 2007 General Assembly
Legislative Report 11
Title: Fee for Space Implementation and Budget
FACILITIES OPERATIONS REVOLVING FUND
(Fee for Space)
January 15, 2007
CONDITION OF THE FUND
For the second consecutive year, the Fee for Space program has completed the fiscal year with a positive operations balance. BGS continued to aggressively manage the vacancy level within the program. The Commissioner’s office relied upon financial staff to monitor the condition of the fund monthly throughout the year. Decisions to tighten controls were then passed to Facilities management and carried out by Facilities staff. Other factors helping with cost containment were the medical premium holiday, a drop in the cost of property insurance, and billing departments for pay act. Factors that were challenging included the higher cost of petroleum and a marked increase in the cost of materials.
BGS did not seek, nor receive, a budget adjustment in FY-2006.
The fund deficit was reduced by a positive income of $28,782 on an accrual basis. In addition, the fund balance benefited from a transfer in of $250,000 from Section 272 (j)(9) of No. 215 Acts of 2006.
Following final audit, Net Assets in this fund stood at ($940,590) on an accrual basis at the beginning of FY-2006. Operating gains totaled $278,782 leaving the audited condition of the fund at ($661,808) on June 30, 2006.
A copy of the audited FY-2006 Balance Sheet is attached.
Fiscal Year 2006 Budget Adjustment
BGS and the Department of Finance and Management consulted on projections for the fund for this current fiscal year. Upward pressures were considered and the operation of the fund was fully examined. It was determined that a budget adjustment of $405,850 will be sought in FY-2007.
This budget adjustment is comprised of the following components:
Electricity rate increases (GMP, CVPS, Burlington and VELCO) occurring during FY-2007 of $146,300.
Opening of the New Haven State Police Barracks (8 months), $66,000.
Inflation effects upon supplies, $157,550.
Increased property management expenses in lawn care of $36,000.
FY-2007 Budget Development
The FY-2008 budget continues to set rates by district rather than by towns as was first implemented last year. The result is that rates have flattened out and remain less volatile than during the first years of the program. The budget fully funds staff, pay act and medical increases. (Pay Act of $228,300; medical of $118,700). Two new buildings appear in the program. The New Haven and the St. Albans State Police Barracks are both funded for the full year. ($198,000, though the increase to Public Safety’s budget will be $93,440 because they are currently paying $104,560 for rent and associated costs). One position is transferred into this program from the Property Management program. ($88,700). Though the electricity increase approved in the 2007 Budget Adjustment is annualized, ($292,600) the inflationary effect upon materials is not. In fact the inflationary effect upon materials is not provided for.
Additionally, due to the concern over indoor air quality one position has been added to the program at a cost of $73,117. This position will be a trainer for custodial and maintenance staff as well as an inspector. The position will be responsible for implementing policy and procedure to ensure clean and healthy buildings.
Creation of the Rental Rate
The rate varies by cost center. For FY-2008, BGS is continuing a district cost center approach, which more closely matches the organization of the BGS facilities effort. This allows district wide expenses to be equitably shared between towns in a district. The result is a much more closely aligned rental rate between districts.
The rate is determined by dividing the budgeted expense of the cost center by the net rentable square feet in the cost center. Net rentable square feet is defined as "the square footage including circulation area such as corridors and stairwells, storage areas, office closets, rest rooms and lobbies. The square footage of common area (i.e. conference rooms, rest rooms, lobbies, corridors, stairwells) has been divided equally with those departments sharing the particular facilities." This rental rate is then applied to the net rentable square footage assigned to each agency in the cost center to determine that agency's billing.
Some space is left out of the calculation because it can be considered overhead. The space occupied by BGS Facilities Division, temporarily vacant space, and cafeteria space shared by all agencies in the cost center are examples of space that is considered overhead. As such, the costs associated with them are included in the numerator but the square footage of these areas is not in the denominator. The space occupied by other BGS units such as Administration, Engineering, and all internal service funds are billed to BGS in the same manner as all other agencies.
Space that receives less than full service such as Libraries, Corrections, and Liquor Control, where only building maintenance services are provided, pay for only the service provided.
Vacant space that can be expected to remain so for more than two years (such as the former Brandon Training School) is charged to BGS.
Space that is leased to other than State entities such as the Vermont State Colleges or private entities such as the New England Insurance are charged to BGS at the Fee for Space rate and sublet in accordance with BGS policy number 0001 (rental rates).
Due to inability to distinguish between the cost of storage space and office space both are billed at the same rate.
A copy of the proposed FY-2008 rental rate structure is attached.
