This Is It, No More Is On The Way

March 10, 2008
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GRAND RAPIDS — Kent County Fiscal Services Director Robert White recently shared some good financial news with the county’s Finance Committee.

He told committee members that revenue to the county’s general operating fund would likely be up by 6.3 percent from 2006 to the $160.3 million figure he projected for the past fiscal year when all the accruals are in for 2007. In 2006, total revenue to the fund was $151.8 million.

Because revenue will likely meet the forecast and expenditures are likely to turn out less than what was projected, White said the county can expect a general fund deficit for last year to range from $1 million to $1.5 million. A $3.4 million shortfall was initially expected for 2007.

But then White cautioned the committee not to expect similar increases in the coming years, including the current one.

“We are done,” White said. “There probably won’t be another increase for this year.”

Last year was the third consecutive year that revenue from property taxes rose for the county. That income source was up by 6 percent in 2005, 9 percent in 2006 and is expected to be up by 11 percent for 2007.

The hikes for those three years were due to the state shifting property-tax payments from December and July to July only over a three-year period. That change allowed the county, as Administrator and Controller Daryl Delabbio has often characterized it, to collect four years of taxes over three years.

Receipts from the extra collection went into the county’s revenue sharing reserve fund, which lost $9.4 million to operations last year.

But that reserve is beginning to dwindle.

“You’ll continue to draw this down until 2010 at $10 million a year and you’ll run out of money in 2011,” said White.

The state has promised to begin making revenue-sharing payments again to the county in 2011, but county officials aren’t totally convinced that will happen then. White said the revenue-sharing reserve fund will completely empty out about halfway into 2011.

Another key county fund is also losing its reserve, as revenue to the lodging excise tax fund didn’t keep pace with the account’s expenditures. The 5 percent tax that lodging operators add to a guest’s bill had raised $5 million so far for 2007, or 5.6 percent more than it did in 2006. But payments from the account were at least $6.6 million last year, an increase of 7.4 percent over 2006, and that means the reserve will likely have to be tapped for $1.4 million to meet the 2007 expenses.

Covering the shortfall will drop the reserve to $1.8 million. It can’t fall below $1.2 million because the county has pledged the tax revenue to pay for much of the construction of the convention center, DeVos Place. The pledge the county has with bondholders requires it to maintain a reserve in the fund equal to 25 percent of the annual bond payment, which is almost $5 million a year.

So the county really only has $600,000 in reserve for the other expenditures in the fund, and White said most of that amount is expected to evaporate this year to cover the $400,000 deficit expected in 2008.

White also told committee members that the county’s total debt was $506 million at the end of 2007, and that county agencies could expect to make $62.4 million in payments over the course of this year. At the end of 2006, the county’s debt load was $353 million.

“You are at a significantly higher debt position,” said White.

White said overall debt rose last year due to the construction plans for the human services complex and airport parking project and to delinquent tax payments. But White also said the county was in sound overall financial condition. He noted that the figures he reported were of a preliminary nature for the fourth quarter of last year and he expected to have the year’s final report by mid-June.

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