County gets good and bad news on budget
The county’s lodging excise tax fund will finish with a deficit for the ninth straight year when the fiscal-year tally becomes official, even though total revenue to the fund was up by 4 percent over the 2009 calendar year from 2008.
While total revenue stood at $4.9 million for the period covering Jan. 1 through Dec. 31, tax revenue to the fund was down by 5.5 percent to $4.4 million. The fund’s shortfall is expected to be about $1 million for the fiscal year. The only reason it won’t be higher is that county commissioners transferred $505,000 from the general fund last year to the lodging excise account because the account’s reserve balance has been depleted by eight previous years of deficits.
“The gain in the fund is from the general fund, not the tax,” said Steve Duarte, Kent County fiscal services director.
The tax comes from adding a 5 percent levy to each guest’s room tab. But the occupancy rate at hotels and motels in the county has fallen over much of the past decade and has hovered around 50 percent since 2001.
And as the tax revenue falls, the fund’s biggest expenditure rises.
The bond cost for the construction of DeVos Place convention center accounted for 82 percent of all the fund’s expenses last year. It rose by nearly 4 percent last year from 2008 to $4.86 million. The lodging excise tax was supposed to cover that expense, but revenue from the tax fell roughly $400,000 short of meeting that goal in 2009.
The bond payments, which are due in June and December, aren’t the only expenditures in the fund. Last year, a total of $900,000 went to the Convention and Visitors Bureau and the West Michigan Sports Commission. The annual arts festival got $10,000. Total fund expenditures were up by nearly 3 percent to $5.9 million in 2009, about $1 million more than total revenue even with the cash infusion from the general fund.
The lodging fund has an unusual fiscal year that runs Feb. 1 to Jan. 31, so the actual year-end numbers haven’t been calculated. Even so, the final figures aren’t expected to deviate much from the calendar-year numbers.
The deficit scenario isn’t expected to go away in 2010. Commissioners transferred about $1.8 million from the general fund in December to the lodging excise account for the current fiscal year.
But the latest budget news at the county wasn’t all bad. Duarte told the Finance Committee that the 2009 general fund, which pays for most of the county’s services, is likely to have a better ending than predicted. “This is better news than we anticipated,” said Daryl Delabbio, administrator and controller for the county.
Instead of an expected deficit around $2.5 million, Duarte said there was a decent chance that the shortfall would range from $700,000 to $1 million, based on preliminary figures he reviewed. “Expenditures did grow slower than expected,” he said of costs for group health insurance and contractual services.
Revenue from property taxes remained stable in 2009. But total income was reinforced by a $12 million transfer from the revenue sharing reserve fund to the general fund. That transfer is the second-to-last full shift the county will be able to make from the account. The revenue sharing reserve had $16 million when the current fiscal year began Jan. 1 and most of that will be spent this year.
The county is supposed to begin receiving $12 million in revenue sharing payments from the state next year, but Duarte said that figure will likely be closer to $6 million in 2011.
“The bottom line is we’re going to have to develop short-term and long-term strategies to slow cash flow,” he said.