12/28/08 — County manager looks ahead to 2009

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County manager looks ahead to 2009

By Steve Herring
Published in News on December 28, 2008 2:00 AM

There is not a lot to be optimistic about in a downward-spiraling economy that is still trying to find the bottom of the barrel.

But Wayne County Manager Lee Smith is hopeful that steps taken over the past several years will help insulate the county from the worst of the freefall and allow it to keep projects, such as the $23 million school facilities plan, on target.

Smith also views the county budget's health as validation of commissioners' efforts to increase the county's fund balance in the face of criticism.

He balances his optimism that the county will not only weather the financial crisis, and may even be able to garner some benefit, with deep concerns over what could be slash-and-burn tactics in Raleigh as legislators raid funds to cover a $3 billion budget shortfall.

Even with those concerns, Smith said commissioners have indicated there will be no property tax increase next year.

"When I look at next year's budget I see no increase," he said. "I think we have to stay where we are or less. We made the cuts before 2008 in preparation for not only trying to get ready to borrow money for the jail and schools and those kind of things -- we were preparing ourselves for the future as far as having money."

"I still feel strongly about not using the capital and fund balance for one-time items. It is still for emergencies. I am still very hesitant to go back into the fund balance to pay for operations. Now for this coming year I know commissioners, in their mind are going 'no tax increase.' People are under hard times right now.

"So what we did for this year we went revenue neutral and in some cases we went below state forecasts and said 'we don't believe it' (state projections). I did not plan on one extra dime this year in property tax and there is a reason because we didn't think it was going to be there."

Some areas, say along the beaches, planned on higher values that have dropped dramatically and now they won't be able to make budget, he said.

The state had promised some $2.5 million to $3 million for Medicaid.

"No way we were going to get that this year from the state," Smith said. "So I counted on a million and if I get $2 million then great, you are $1 million ahead of the game, but don't count on it."

He added, "Sales tax is down, but you have got to remember we live 90 days in arrears in sales tax so you don't have a real picture yet. I will be real curious to begin seeing in February and March what December looked like. That will be the real test.

"We know we will see a downturn. How much, I'm not sure, but we did not count on what the state had said. It could it get worse and if it does I will have to make adjustments on the county budget. We already have frozen jobs, already frozen capital projects. I think we have done the things we can do right now to kind of prepare for this downward shift in revenue."

Complicating the economic picture somewhat is the county upcoming property revaluation. Smith said some people are concerned about conducting revaluation during an economic downturn.

"It could have a negative impact," he said. "But say you get beyond 2011, the board may want to go to four-year (revaluation) cycle if you have an upturn in values because you don't want to live with lower values. You want to value closer to what the market value actually is."

Smith said the state has depended on capital gains tax revenues for years to balance budget.

"They are not going to be there this year," he said. "It is going to be a problem."

Smith said it is difficult to know what direction the new state leadership will take.

"You have got to be prepared for what they pass down to you," he said. "Usually what they pass down to you is usually less in reimbursements, less in funds of any sort, but they will pass on program responsibilities that in the past have been their responsibility.

For example, this past year the state required counties to shoulder more of the cost for foster children care. For Wayne County that meant another $450,000.

Smith is concerned about what the lawmakers will do and what funds they may take, including lottery proceeds meant for education. That, he said, could affect the county's school facilities plan.

"They have got big holes to fill and where are they going to fill it -- they're going to startto look at pots of money," Smith said.

The county schools currently have $6.2 million in lottery proceeds, but the money technically belongs to the state.

"I say get it in the schools' checking account," Smith said. "Obligate it. I say build Eastern Wayne or Norwayne or a combination with cash tomorrow. Obligate it or we are going to lose it."

"Bid it out and let's do that now," he said. "I am urging them (school board) to move quickly because I think they are going to lose it (lottery  money).

"I think if we borrow $16 million and hope to use that (lottery) later I think it is going away. Ask counties about the inventory and intangibles (taxes) in the 1980s. The state said 'We'll never take your money.' Now it is gone."

Even a supposed break in Medicaid has cost the county.

"The state said 'we are going to give you full relief' and then when it passed they took some of my sales tax,. We lost hundreds of thousands of dollars over that. Even though we gained, we still lost a revenue source. I think they are going to take it (lottery) because they don't have a choice. They are not going to raise taxes.

"The next phase for the school plan is bond money and bond money is not there. It could be several years before the project could be done."

Smith said people have said to him that adding to the fund balance is just a way to get ready for capital projects.

"That's true, but we also did it to build and our sustain our credit rating," Smith said. "You also want to do it in case of an economic downturn. Well, we are in one.

"The thing Wayne County has been able to do over the past few years is to put some money aside."

Meanwhile, numbers from the Health Department and Department of Social Services worry Smith.

Applications for the Women Infants Children (WIC) program are up by about 25 percent. Food Stamp applications are up as well.

"I think our general health visits are up," Smith said. "It's not just those that who are poverty stricken who are walking into DSS and Health Department. These are people who just months before were making $40,000, $50,000 or $60,000 and now don't have a job. They are coming to Wayne County going 'I need some help. I don't have health insurance, what do I do?'

"We see them because that is our job. County employees are concerned because when there is an economic downturn their production goes up. That is the thing that is so concerning because that is when there is a strain on taxes yet there is more demand on services. I think we have to be real concerned about that."

Housing sales are down, foreclosures are up as are job losses, he said.

"There is a lot of fear out there," Smith said. "We have people here who build things for the automotive industry so we all are kind of standing back holding our breaths about that. When you watch the Congress hearings about GM and Chryslers that affects Wayne County."

Coming Monday: County will forge ahead with projects, economic development plans.