County Has Revenue Gap
GRAND RAPIDS — Property-tax revenue to the county’s general operating fund was down by a dramatic 86 percent for the first quarter of this year compared to the same period last year, representing a decline of nearly $20 million.
Property-tax receipts to the county totaled just $3.1 million from January through March; that figure was almost $22.5 million for the first three months of 2006. And because revenue from the property tax was down so drastically, total revenue to the county was off by 41 percent for the first quarter from last year.
Yet no one at the county is panicking because a much lower revenue figure was expected.
What has happened is the state-mandated change to the property-tax payment dates has completed its three-year cycle, a change that moved the bulk of those payments from winter to summer.
The county will get its property-tax revenue this year, and likely more than it received last year, but it won’t get the overwhelming majority of that income until October. Until then, Kent will have to operate without much in the way of revenue from its largest single source.
County Fiscal Services Director Robert White told the Finance Committee last week that cities and townships will mail property tax bills at the end of the second quarter in July, and property owners will have until Sept. 14 to make their payments. It will take a few weeks to process the payments, so the county won’t get its portion until October, which is the start of its fourth quarter and the month commissioners should be putting final touches on the 2008 general operating budget.
But when the revenue does roll in, it could resemble a financial tsunami with one large fourth-quarter wave. Property-tax receipts this year to the general operating fund have been projected to be 9 percent higher than last year and should reach $87.4 million.
Total revenue to the fund is expected to be $164 million, up 8.6 percent over last year. But total expenditures from the fund should be $166 million, leaving the budget with a $2 million shortfall. That deficit, though, could deepen by another $1.6 million through no fault of the county or the county’s taxpayers.
White said lawmakers in both state chambers are leaning toward cutting the share of the state liquor tax to local units by half as part of their effort to cover the state’s deficit. That move would cost the county half of the $3.2 million it is supposed to receive this year from the tax.
Because the state is facing an even bigger deficit next year, White predicts legislators will keep the other half of the liquor tax in 2008 to help fill next year’s shortfall.
So the county’s general fund deficit could climb from $2 million to $3.6 million this year if the state keeps half the liquor tax in Lansing, and the fund could begin next year in a state dug revenue hole of $1.6 million.
Tax revenue to another county account was also down for the first quarter. Receipts to the lodging excise tax fund were 4.6 percent less than last year, and total revenue to the fund was 6.5 percent less for the same period in 2006.
But in 2006, first quarter tax revenue was 22 percent above the receipts received in the first quarter of 2005, and White pointed out that it would be very difficult for the account to sustain that large of a gain on a yearly basis.
Revenue to the fund, though, is expected to record a decent gain this year of 13 percent and rise to $5.6 million. Expenditures from the fund, however, are also projected to rise this year by almost 7 percent to $6.6 million and leave the account with about a $1 million deficit that will have to be covered by the fund balance.
The largest expense this year, as in the past few years, is the $4.9 million bond payment for the construction of DeVos Place, the city’s convention center that carries an outstanding balance of $84.5 million. Other expenditures this year include funding to the Convention and Visitors Bureau of $1.1 million and $410,000 to John Ball Zoo.
The new West Michigan Sports Commission is not on the expenditures list. The county has pledged to support the commission with $1 million over five years and that money was initially targeted to come from the 5-percent tax on hotel and motel tabs. But if this year’s forecast holds true and the fund has a $1 million shortfall, the account’s fund balance will be reduced to $2.2 million at the end of this year.
The bond agreement requires the county to keep a quarter of the annual payment in reserve, approximately $1.2 million, so the entire fund balance can’t be used to cover a deficit.
“When the 2008 budget is drawn up,” White told committee members, “you will not be able to support all the programs.”