County in pretty good financial shape
Kent County Fiscal Services Director Stephen Duarte unveiled the county’s five-year financial forecast recently to members of the Finance Committee. He projected that tax revenues to the county would rise from nearly $84 million this year to $89 million in 2016.
“That’s about a 1.4 percent compounded growth,” he said. “We think this is a reasonable forecast.”
Duarte also said the county’s property-tax revenue wouldn’t decline this year as much as initially thought. Instead of a 2.6 percent drop from last year, he felt it would be closer to 2 percent because the housing market is stabilizing. “The residential market is showing some signs of bottoming out and starting to rise,” he said.
The equalization report that department director Matt Woolford will present soon is likely to show that the assessed value of residential property in the county fell by 3.7 percent in 2011. But at the same time inventories decreased, prices stabilized, and some inched up as the economy improved. Home values decreased, however, because of lingering foreclosures, distressed sales, and fewer residences changed hands last year on a historical basis.
The value in commercial and industrial properties countywide both fell by more than 5 percent last year, while agricultural property values rose slightly.
“All this is mixed news for county property owners, since lower taxes mean lower property values,” wrote Commissioner Jim Talen in his weekly update. “It’s bad news for county government since property taxes are the county’s major source of revenue.”
As for other revenue sources, Duarte expects state revenue sharing to be a constant $9 million through 2016, a drop from the $10.2 million the county received last year. The statutory revenue sharing payment the county receives comes from sales-tax receipts across the county.
But officials are concerned the county could lose $3 million from that annual total because of how the state’s Economic Vitality Program rewards governments for accomplishing certain things, such as reducing the cost of employee pensions and health insurance coverage — even though Kent is a statewide leader in both of those compensation areas.
While most health insurance costs rise annually, the county’s forecasted cost for employee coverage is constant at $11.3 million through 2016 because of the design of its plan, which Duarte credited County Human Resources Director Don Clack with originating.
“I think we can hold the line on these costs,” said Duarte.
The county has about 1,700 employees in its plan.
Kent doesn’t pay health premiums for retirees’ coverage. Instead, it offers retired workers a monthly stipend that doesn’t go up when premiums do.
The county’s pension costs are projected to range from $5.6 million this year to $6.4 million in 2016. Most of the county’s bargaining units have agreed to an employee contribution rate of 7.5 percent, which is up 1 percent from the earlier rate, while the county contributes 9.29 percent.
Kent has an unfunded pension liability of $32 million, well below the $800 million of Wayne and Macomb counties and the $500 million of Genesee County.
“When you look at public pension funding, we are stronger than most,” said Commissioner Harold Voorhees, also chairman of the Finance Committee.
Why is the county worried about losing revenue sharing when it’s in a much better compensation position than most counties in the state? Because Kent took a different path to get to where it is, but it doesn’t match the method the state’s Economic Vitality Program recommends.
“The bottom line is, our end result is better than what they want, but we go about it in a different way?” asked Commissioner Jim Saalfeld.
“That’s correct,” said Daryl Delabbio, county administrator and controller. Delabbio said he has been speaking with area lawmakers about the issue in an effort to prevent the state from cutting the county’s revenue sharing by a third.
“Our costs are around 6.71 percent,” he said, adding that a plan contribution shouldn’t exceed 10 percent.
Duarte expects total revenue will go from about $161 million this year to $171 million in 2012. Wages are expected to increase from $59.9 million this year to $62.4 million in 2016, a growth of 1.44 percent compounded over those years.
“At some point, we’re going to have to have some kind of wage increase for employees,” said Duarte.
Total expenditures are projected to be $160.8 million this year and $171 million in 2016. Duarte told Finance Committee members they should expect to make some budget cuts in the coming years and be reasonable about spending.