Wayne County Executive Warren Evans’ call last week for the state to declare financial emergency in the county is sending different messages to both taxpayers and those who have been observing county government for years.
While news of the county’s financial troubles is no surprise, Evans’ decision to invite the state into addressing the fiscal challenges of the county is sending shock waves.
For some, this could be the beginning of the march into emergency management for the county, an ordeal that Detroit just came out of after 17 months.
In a letter to State Treasurer Nick Khouri, Evans said the county is facing challenges that require immediate attention.
“I am requesting pursuant to section 4 (1) (a) in the Local Financial Stability and Choice Act, Act 436, Public Acts of Michigan, 2012 (Act 436) that a preliminary review be conducted to determine the existence of probable financial distress within the county,” Evans said in his letter to the state.
Later in the letter he said the county faces an existence of a structural operating deficit.
“The county faces an existing structural operating deficit of $74.9 million in fiscal year 2015 without one-time, extraordinary transfers from the DTRF to the general fund,” Evans said. “While a portion of the annual DTRF transfer could be considered ongoing annual revenues, a siginificant portion of the recent transfers represented one time revenues. Without these continued transfers, the structural operating deficit is projected to remain roughly $70 million annually through 2019.”
Exacerbating this cash crisis, Evans said it is “anticipated that property tax revenues will have limited to no growth due to the reassessment process being undertaken by the City of Detroit and uncontrollable costs associated with the county criminal justice system (which) are difficult to project.”
Evans’ letter is a push for the county to enter into a consent agreement with the state, much like the kind of agreement Detroit reached with the station prior to its entry into bankruptcy.
Except in the case of Detroit, the state found that the city had not fulfilled all of its requirements in the consent agreement which some city officials at the time vehemently denied.
“Our Recovery Plan provides a clear path to financial stability for the county, but we are keenly aware that our time frame to get the job done is quickly fading,” Evans said. “Throughout this process we are constantly evaluating where we stand and proactively seeking solutions to work ourselves out of this massive deficit. I am requesting this Consent Agreement because the additional authority it can provide the county may be necessary to get the job of fixing the county’s finances done.”
The biggest contention in this financial crisis is with county unions.
Al Garrett, president of AFSCME Local 25 who was not available at press time for comment in a previous interview with the Michigan Chronicle, called Evans’ recovery plan a bluff.
“This plan does not speak to where they are going and where they are going to get revenue from. It does not tell you that revenue has diminished because of the property tax revenue,” Garrett said. “Their solution is to take it out of the employees’ dime and without any plan about how to get more revenues for the county. The county still has taxing ability for another two mills but yet there is no commitment from the county executive to use that.”
Garrett described the county executive’s relief plan as “another attempt to put the bandage on the problems of the county,” and that the leadership of the county is not explaining that to taxpayers.
“Some of the problems came from the debacles of the previous administration, but even without those, this report shows you that the revenue in Wayne County was down before they bought the Guardian Building and the jail fiasco,” he said.
Evans maintained that the county is financially bleeding, noting that in March of this year, Fitch Ratings “downgraded the county’s limited tax general obligation debt to BB-.” He said Fitch also “downgraded the county’s unlimited tax general obligatgion debt to B from BB.”
That is not the only credit rating problem for the county. Evans cited Standard & Poor’s which lowered Wayne County’s credit rating on the county’s general obligation bonds to “BB+ from BBB,” in part because of the county’s chronic structural imbalance “brought on in part by cost revenues in some of the county’s major operating areas such as the sheriff’s department.”
To the State Treasurer, Evans wrote, “It is for these reasons that I recommend that a financial emergency be declared in Wayne County. As the county’s fiscal situation will continue to deteriorate without further remedial measures, the time has come to rectify the county’s structural deficit, and time is of the essence.”
The Michigan Department of Treasury only said it will begin a preliminary review of the county’s finances and expedite the process because of some aspects in the request that indicate a dire financial climate.