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Low interest, consumer spending and foreclosure/housing crunch boost '08 deficit to $8.4 million
By Rick Armon
Beacon Journal staff writer
Published on Tuesday, May 06, 2008
Summit County planned to dip into reserves this year to pay for an expected $4.6 million gap in its operating budget. That was wishful thinking.
The gap is now projected to hit $8.4 million, thanks to lower interest from investments, lackluster consumer spending, the foreclosure crisis and a stagnant housing market that has dampened county revenue.
''What we've seen affecting Summit County is repeated throughout the state,'' county Finance and Budget Director Linda Phelps said. ''We're all suffering from the same interest rate crunch and the collapse of the housing industry.''
Phelps briefed County Council about the finance crunch Monday night, emphasizing that it isn't county expenses going wild, but lower revenue causing the problem.
''We have to take a serious look at this,'' Councilman Tim Crawford said.
The economy deteriorated faster in the first quarter this year and more than anyone anticipated, Phelps said.
The good news — if there is any — is that the county has $25 million in a rainy day fund and $28 million in reserves to help it through the economic downturn. But the budget gap could eat up nearly a third of those reserves just this year.
County leaders are searching for ways to reduce costs, County Executive Russ Pry said.
Layoffs are not being discussed.
''It's a sign of our economy,'' Pry said of the gloomy revenue forecast.
The county had projected $117.3 million in revenue for this year, but the council approved an operating budget of $121.9 million, putting the spending plan in the red from the start.
Now, revenue is expected to be only $113.5 million. The major difference between the two forecasts involves interest. The county planned for $11.4 million this year, but expects to receive only $8.4 million because interest rates have dropped.
The county will receive $1.2 million less than expected in property transfer fees because of the slumping housing market. And building projects are down, meaning another $500,000 that was expected won't come through.
Other revenue sources that are off from projections include recorder fees and property taxes.
Sales tax revenue is expected to be stagnant at $36.8 million.
''County revenues are not recession proof and are tied to consumer confidence,'' Phelps said.
She said that the forecast could have been even dimmer if Akron and Summit County had not persuaded Goodyear Tire & Rubber Co. last year to keep its worldwide headquarters and nearly 3,000 jobs in the city.
Two bright spots in the revenue forecast involve the Board of Elections and auditor fees. The elections board is expected to generate $900,000 more through reimbursements from communities and agencies.
The fiscal office also will collect $400,000 more in fees for homestead applications.
Phelps is expected to provide another council update on finances in July.
Rick Armon can be reached at 330-996-3569 or rarmon@thebeaconjournal.com.
Summit County planned to dip into reserves this year to pay for an expected $4.6 million gap in its operating budget. That was wishful thinking.
Get the full article here.
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