Less revenue means lower spending for county

October 9, 2011
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Kent County has projected that its tax revenue will be down next year, which would make 2012 at least the fourth consecutive year the county’s general operating fund has received less. But at the same time, county departments have reduced projected expenditures for next year, which would make 2012 at least the fourth consecutive year the county has spent less, too.

In 2009, total operating expenditures, minus transfers to other funds, were $135.6 million. In 2012, the same 15 county departments plan to spend $128.9 million — or $6.7 million less than in 2009. Also in 2009, tax revenue to operations was $86.6 million. For next year, those receipts are expected to be $83.5 million — or $3.1 million less than in 2009.

Tax revenue to operations mostly comes from property taxes. And with the county’s taxable value and the state’s equalized value down, receipts are also lower.

“It’s fair to suggest that with the decline in taxable value, people in the aggregate are paying less property tax,” said County Administrator and Controller Daryl Delabbio. “I’m saying flat or slightly negative (in the next few years) — no increases.”

County Equalization Director Matt Woolford agreed. He said he didn’t think values would rise in the near future. In fact, he felt the value of commercial, industrial and residential properties in the county are likely to drop further.

“I don’t see any significant signs of strength at this point. There is some significant number of foreclosures in the pipeline on the residential side,” he said.

Another key revenue source for county operations is the state’s personal property tax, a levy that commercial and industrial firms and utilities pay on machinery and equipment. The county expects to receive $9.9 million next year in PPT receipts, but that situation could change.

“We know the state is going to do something about the personal property tax; we just don’t know what,” said Delabbio.

Delabbio told the Finance Committee last week that the area’s state senators and representatives told him the PPT could be eliminated, or phased out, for commercial businesses, or for manufacturers, or for both, and possibly be replaced by something else. “The issue is the something else,” he said.

One thought is an increase in the sales tax could replace revenue from the PPT. But as Delabbio noted, residents will begin paying higher state income taxes next year to offset the cut to business taxes, and they likely won’t be too pleased with having to pay a higher sales tax on what may turn out to be fewer purchases in 2012 because nearly $1.5 billion more of their money will be going to Lansing.

Delabbio also said the county has a better handle on how much its operation will receive in statutory revenue sharing from the state for next year than in recent years because state lawmakers adopted the state’s operating budget in June — months earlier than in previous years. He is expecting about $9 million for 2012, which would be up from $7.5 million this year. But he remains somewhat cautious about the state payments.

“The other thing I’m concerned about is revenue sharing. Statutory revenue sharing is just one of those low-hanging fruits,” he said, in reference to the state’s recent track record of cutting payments to local governments to balance the state budget. “If we were to receive full revenue sharing, it would be about $12 million.”

The county’s revenue-sharing reserve fund is bare; it was emptied for this year’s budget.

As of now, the 2012 general operating budget has a total revenue estimate of $160.5 million and total proposed expenditures of $160.6 million, which means roughly $158,000 will have to come from the fund balance to cover the slight deficit. The current budget eliminates 21 full-time positions when the fiscal year starts Jan. 1.

“If there is any good news in that, 15 of those (positions) are vacant,” said Delabbio. The general fund will support 1,056 of the county’s 1,775 employees in 2012.

But the budget could change somewhat between now and Nov. 17, the date commissioners are to adopt the 2012 spending plan. The Finance Committee is expected to go over the budget three or four more times; the full commission has a work session on the budget planned for later this week.

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