County's Losses Shrunk

March 17, 2006
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GRAND RAPIDS — The Kent County general operating fund deficit for 2005 was half of the shortfall registered in 2004, and receipts to the lodging-excise tax fund grew for the first time in five years last year.

The county’s fiscal year deficit was $3.48 million for 2005, down by nearly 56 percent from the 2004 shortfall of $7.86 million. A loss of $4.63 million had been projected for the general fund, so the actual deficit turned out to be 25 percent less than what was expected.

Although general fund revenue for the fiscal year was slightly less than the $142.7 million from 2004, expenditures came in at $5 million less than the previous year at $145.5 million for a 3.4 percent decline.

Still, some expenses grew dramatically during the year. The cost for the county’s self-funded employee health care rose by 20 percent from 2004 to $9.2 million during 2005, and retirement costs jumped by 62 percent from $2.6 million in 2004 to $4.2 million in 2005.

To help offset those rising expenses, tax revenue to the general fund grew by 5.6 percent from $68.9 million in 2004 to $72.8 million in 2005 — largely due to the shift in property tax collection dates from winter to summer.

The county used $3.48 million from the fund balance to cover the 2005 loss, less than the $4.63 million it expected to withdraw, leaving the balance at $74.2 million at the end of 2005.

“You had a $1 million improvement. Still a deficit, but an improvement,” said County Fiscal Services Director Robert White to members of the Finance Committee.

Revenue from the lodging-excise tax rose by 7.2 percent for the year, based on an accrual accounting basis from February 2005 through January 2006, to nearly $4.5 million. The gain in tax receipts for the year was significant, as revenue to the hotel-motel fund was stagnant at $4.1 million for fiscal years 2000 through 2004.

Receipts continue to grow. January 2006 revenue was up by 16 percent from the previous January and by 21 percent during February 2006 from the same month last year.

“Business is very strong at the convention center,” said White, as to why revenue from the lodging-excise tax has risen.

Convention and Visitors Bureau President Steve Wilson told the Business Journal that the tax revenue was also up because corporate business was up from the previous year and those travelers were helping to fill the county’s 6,600 rooms.

But despite the increased receipts, the fund balance for the account fell by $1.34 million as expenditures topped revenue by that amount. The balance stood at $4.3 million. Lodging-excise receipts are used to pay DeVos Place bondholders and that payment rises each year because the notes are zero-coupon bonds. The 2005 payout was $4.5 million, up by almost 15 percent from the $3.9 million that was paid in 2004.

Hotel and motel owners in the county charge guests a 5 percent fee on their tab, and that revenue funds the lodging-excise account.

Members of the Finance Committee adopted a set of guidelines the county will use this year to prepare its 2007 general operating fund budget. One requires Daryl Delabbio, county administrator and controller, to present a budget to the commission in which expenditures don’t exceed expected revenue.

“This says that revenue will meet expenses,” said Delabbio. “So we won’t use any fund balance.”    

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