Whatever condition the economy is in — good, fair or really bad — $19 million is still real money. And that is roughly the amount Kent County will have to make up this coming fiscal year for the seven budgets county commissioners adopted last week for 2009.
“You’re spending much faster than you’re taking in,” said Kent County Fiscal Services Director Robert White to commissioners on the Finance Committee.
“But you’re still financially healthy,” he added.
Signs that county money is truly moving out at a faster clip than it is coming in can be found in the county’s general fund, which covers most of the county’s services.
One is property-tax revenue to the county. Although the inflation multiplier for taxable value this year will be 4.4 percent, the county’s expected increase next year in property-tax revenue will be less than half that figure, somewhere between 1.5 percent and 1.9 percent.
The reason for the less-than-inflationary return is because the taxable value of many properties in the county have reached the State Equalized Value. When those two figures meet, taxes can’t be raised on a property.
Another sign in the general fund, which is projected to have a $2 million deficit for 2009, is that the “lapse” amount in the budget is smaller than in previous budgets. The lapse is the estimated excess amount that department heads requested in their budgets but aren’t likely to spend over the fiscal year.
In the 2009 budget, the lapse is $5 million. In recent years, it has ranged from $6.1 million to $6.3 million. A lower lapse leaves the county with less cushion room for fiscal error in the 2009 general fund.
Yet another sign that spending is moving faster than income is in the Lodging Excise Tax fund, even with major cuts to expenditures.
The fund, which is supported by a 5 percent tax that hotel and motel operators add to a guest’s bill, looks to fall $294,000 short of meeting the $5.9 million worth of expenses in next year’s budget, which isn’t news to the county, as the fund has had deficits for the past five years.
But this shortfall is a bit different because the county has shifted $800,000 in outlays to the general fund and capital improvements fund and reduced its financial support to the Convention and Visitors Bureau from $1.1 million in 2007 to $700,000 this year and next year. Despite removing $1.2 million from the fund, it still has a deficit.
Those deficits have depleted the reserve, which, in turn, has forced the county to change its policy regarding the bond payments for the construction of DeVos Place.
“If we go below 25 percent we’re in violation of that fund,” said Daryl Delabbio, county administrator and controller.
Tapping the reserve next year to cover the shortfall would take the county below the 25 percent mark, which is roughly $1.2 million and a threshold the county established to ensure payment to bond buyers. Next year’s bond payment is $4.87 million and next year’s reserve is pegged at $1.16 million, an amount that is only 23.8 percent of the bond outlay.
So commissioners amended the policy last week and dropped the reserve requirement to 20 percent of the annual bond payment, which works out to be $974,000.
“Our hope is that at some point in time we see an increase in hotel-motel tax revenue. That is our hope,” said Delabbio.
But Delabbio said the county isn’t only looking at the convention industry to supply more tax revenue. He is also hoping that business travel and tourism increase in the coming years and raise the hotel occupancy rate, which is hovering in the low to mid-50-percent range this year.
“It’s more than just the convention center,” said Delabbio. “The new CVB president, Doug Small, is very much in tune to this issue.”
Despite the bad signs the county faces next year, White said this year had some good ones. The general fund is expected to finish in the black for 2008, and it looks like the county will end the year with a lower-than-expected rise in employee health care costs.
“There have been only nominal increases in health insurance and prescription costs for the first 10 months of 2008,” he said.
The county’s risk management internal service fund, which contains those charges that come to $22 million, is projected to have a positive balance of nearly $6.4 million when the year ends. A year ago, it stood at $3.8 million. And when 2009 comes to a close, the balance should be just under $6 million.
“2008 has been a very good year so far,” said White. “Again, the first 10 months have been extremely good.”
County over $19 million short
Only two of the seven budgets Kent County Commissioners adopted last week aren’t expected to have a deficit for the coming fiscal year that begins Jan. 1. If those fiscal projections are true, then the deficits should add up to more than $19 million.
Revenues for all the funds will come close to $330 million, while expenditures should reach $349 million. The differences between expected revenues and projected expenses will come from the respective fund balances.
Here is a listing of the funds, the revenues, the expenditures and the expected outcome for each one.
Type of Fund
Source: Kent County Fiscal Year 2009 Appropriations Act, December 2008