Budgeting process remains the same

June 3, 2011
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The Kent County Finance Committee will meet again this week to continue its work on the upcoming budget for general operations, which will see less revenue from property taxes and less funding from the state in revenue sharing. But as committee members continue to carve out the 2012 budget, they can focus on income and expenditures instead of having to turn their attention to a new budgeting process that could challenge every decision they make.

County commissioners recently approved the Standing Rules they will follow for the next two years. But the new policy, which primarily fills in the gaps found in Robert’s Rules of Order, didn’t deliver a major change to how the operating budget gets approved — an alteration that eight commissioners called for late last year. They felt that a majority of commissioners have little say in how funds are allocated, and they argued that the power to shape the spending plan was in too few hands.

As it stood then, and as it still stands after the recent vote, as few as five commissioners on the nine-member Finance Committee can amend spending on a line-item basis, and then recommend that the budget be passed by the full commission. But when the budget reaches the board, spending additions or subtractions can’t be made, and the 19-member commission is only left with voting the entire budget up or down. If it’s voted down, it goes back to the Finance Committee and the five-member majority rule.

Included in the latest version of the Standing Rules that came before commissioners was a provision that would have allowed a two-thirds majority of the commission to make line-item changes to the operating budget. But a motion made by Commissioner Jim Saalfeld to eliminate that provision received support from the board, meaning the new budget-voting provision was erased. So the rules regarding voting on the budget remain as the regulations have been for at least the next two years.

Those eight commissioners tried to amend this year’s spending plan last November, but were ruled out of order as the Standing Rules don’t allow for line-item changes at the board level. A motion to overrule the ruling failed by an 11-to-8 vote; a two-thirds majority was needed to overrule. The same 11-to-8 tally approved this year’s $165 million general operating budget. Not all of the eight who challenged the process were re-elected to the board last year. One change to the process that commissioners did make is the Finance Committee can now recommend amendments to the budget when the spending plan goes to the full board.

One reason the budgeting process was upheld is it was given a share of the credit for the county getting Standard & Poor’s and Moody’s Investors Service to reaffirm its long-term and short-term triple-A bond ratings. The recent affirmation by the ratings agencies marked the 13th consecutive year the county has captured both top marks.

Only two Michigan counties, Kent and Oakland, received the highest grades from both. And Kent was one of only 55 counties nationwide to receive top ratings from both S&P and Moody’s. “We could have gone for a goal of double-A, but that’s not a challenge,” said Daryl Delabbio, county administrator and controller. Years ago the county was also rated by Fitch Ratings and had three triple-A marks, but the county decided to go with just S&P and Moody’s.

County Fiscal Services Director Steven Duarte said the county’s low debt ratio impressed the agencies. Kent can have an outstanding debt load of $2.3 billion, which is roughly 10 percent of the county’s State Equalized Value of real and personal property. Its current debt stands at $455 million, or just 1.8 percent of its limit.

“S&P and Moody’s consider that a very moderate amount of debt,” said Duarte, who added that 58 percent of the outstanding debt, or $258 million, is self-supporting, meaning the bond payments are being made by incoming revenue.

“Just about half of our debt will be paid off in 10 years,” he said.

Duarte noted that the county’s SEV for taxable properties dropped by $769.1 million, or 3.29 percent, between 2006 and 2010. Over the same years, he said the taxable value of those properties increased by $784.4 million, or 3.88 percent, because of inflation. For this year, the per-capita property value is $71,446.

“They consider that strong, but not as high as in some other triple-A counties,” said Duarte.

The countywide taxable value fell by nearly 6 percent this year from last year, and that will translate into roughly $1.5 million less in property-tax revenue for next year. A state cut in statutory revenue sharing is expected to take about $4 million in revenue from the county.

“Right now, we’re looking at about a $6 million hole in our budget, but last year we had a $9 million hole,” said Commission Chairwoman Sandi Frost Parrish of the 2012 operating budget.

Commissioner Stan Ponstein thought the county might see even less revenue come its way from the state next year.

“The more I hear legislators talk, the more likely the personal property tax will be eliminated. It will be a hit to local governments,” he said.

A general operations expenditure, funding for the Purchase of Development Rights program to preserve farmland, may be moved out of the annual budget and sent to voters as a millage request as early as next year. What would be unique about this request is that it would only collect taxes for a year and then disappear from the tax roll. Proponents of the millage believe it could raise up to $19 million in one year, which would give the PDR program a secure source of funds for many years. Over the last two fiscal years, the program has received $550,000 from the general fund.

Delabbio reported that the cost per taxpayer for the general operating budget last year was $215, which was down from $237 in 2008 and $228 in 2009. The projected cost per taxpayer this year, however, is at $235, $20 higher than last year.

“We can’t do more for less,” he said. “We can do the same for less, but we can’t do more for less.”

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