Worse than expected
While the preliminary year-end statement shows Kent County’s general operating fund losing $265,344 for the just-ended fiscal year, the actual FY08 deficit may be almost 10 times that number — closer to $2.5 million.
At least that’s the warning County Fiscal Services Director Robert White gave members of the Finance Committee last week.
White said the final figures are expected to arrive by April and those numbers are likely to reveal that revenue to the fund that provides most of the county’s services will be about $3.2 million short of the initial projection, which was made well before the collapse of the financial markets and the ensuing recession.
White told the committee he expects revenue from real estate transfers to be $1.3 million under the fiscal-year forecast. Interest earnings and property-tax collections will be $1 million and $1.2 million below projections, respectively.
“We came up almost 2 percent short in our revenue projections,” he said.
At the same time, White said expenses will likely be 1.2 percent above projections and that could result in the general operating fund having a shortfall from $2 million to $2.5 million for the fiscal year. The general operating budget is worth about $165 million.
White said revenue to the county’s lodging excise tax fell short of the forecast, too.
After three quarters, income from the 5 percent hotel-motel levy was up by almost 5 percent from the previous year. But revenue during the fourth quarter was 12 percent below the same period in FY07. He said the slide began in mid-September, right about the time the financial markets imploded.
White expects the fund will register a loss of $750,000 for the year when all the figures are in, and the shortfall will roughly slice the fund balance in half to about $700,000. He said if FY09 follows the same path as FY08, the reserve in the lodging excise tax fund will be eliminated.
County Administrator and Controller Daryl Delabbio pointed out that this year is the final year of a two-year funding agreement the county has with the Convention and Visitors Bureau. Kent contributed $700,000 last year to the bureau’s marketing effort, an amount that was down by 25 percent from the $939,650 the county gave the CVB in FY07.
Delabbio said a new contract has to be negotiated with the CVB this year for the next two years. In addition to supporting the bureau, the lodging tax funds the bond payment for the construction of DeVos Place ($4.68 million last year), the West Michigan Sports Commission ($200,000) and the downtown summer Arts Festival ($10,000).
Revenue from the tax was expected to reach $5.2 million this year, but now it’s expected to be closer to $4.5 million. Expenses from the fund were projected at $5.7 million and that number is likely to remain stable.
White said the county’s general operating fund had a surplus every year from 1994 through 2000. Starting in 2001, though, the fund has had a deficit every year. At the current pace and fiscal policy, White said the county will run out of reserve funds in 2011.