Immediately after Kent County Fiscal Services Director Robert White finished giving his general fund projections for this year and 2010, someone at the packed Finance Committee meeting last week asked, “Do you have any good news?”
After the nervous laughter in the room subsided, White said he did.
He pointed out that most county employees were under contract and the county’s obligation to its pension fund was minimal. “While you will be experiencing financial difficulties, it won’t be to the extent of counties east of Lansing and the state,” he said.
White appeared at a special session of the Finance Committee because he, County Administrator and Controller Daryl Delabbio, Treasurer Kenneth Parrish and County Commission Chairman Roger Morgan will jet to New York next week to meet with representatives of two ratings agencies. It’s an annual trip county officials make as an effort to try to renew Kent’s triple-A bond rating, a mark the county has held since 1998.
But the housing-market bust and rising unemployment have shaken the county’s chance to get that top rating. At last week’s meeting, White served up a preview of the presentation the county will make to Moody’s and Standard and Poor’s late next week. When asked what he thought the outcome of the trip would be, White said the county could see a downgrade but he also gave a more hopeful answer.
“We’d be thankful if we walked out of there with a triple-A rating and a negative watch,” he said.
The source of the county’s concern is that revenue projections for this year’s general fund, which covers the cost of most services Kent provides, has been reduced by $3 million from the forecast issued near the end of last year. Less projected revenue from property taxes, the real estate transfer tax, recording fees and lower interest returns from investments account for the overall decline, which push the fund’s deficit from an earlier estimated $2 million to $5 million for this year.
The general-fund deficit gets three times deeper next year when the shortfall could reach $15 million. White said the county can only expect revenue to rise by a paltry 1.2 percent this year and in 2010.
“These are the initial revenue estimates based on trends,” he said. “In 2011, I can tell you it will not get any better.”
Those two deficits will require the county to dig into the fund’s reserve to pull out $20 million to cover the 2009 and 2010 shortfalls and reduce the balance in that account to $47.4 million by the end of next year. At the start of 2005, the reserve balance was $77.6 million. In 2001, it was $120.8 million. This year will mark the eighth consecutive year the general fund will have a deficit.
“It’s as real of a forecast as I can put together now,” said White, who added he wasn’t aware of any federal stimulus money the county could inject into the general fund.
As for the economy, White said the ratings agencies aren’t interested in hearing about manufacturing, whether it’s durable or non-durable goods. So the county will focus on the growth in the medical and bioscience industries.
“The one thing we can point out is that West Michigan and Kent County continues to diversify its work force,” he said.
Kent is only one of three counties in the state with a triple-A rating and one of only 44 in the country. The county plans to sell about $30 million worth of bonds later this year to finance upgrades to the jail and juvenile detention center.
Falling a grade to a double-A rating would likely add a half-point to the interest rate the county would have to offer bond buyers.