Triple-A Salt Lake County Braces for Hardship

DALLAS - When the White House conceded this week that some parts of the country were in recession, the statement might have brought to mind images of the Midwestern rust belt. But fiscally conservative and triple-A rated Salt Lake County expects to join the list of economic casualties.

With 2008 tax revenues falling nearly $11 million below projections, the county that includes Salt Lake City is taking steps to weather a tough recession.

County Mayor Peter Corroon has frozen hiring and sees the possibility of reducing employment through attrition. County departments have been told to keep their budgets flat to help him keep his promise of no tax increase.

The county also faces a decision on whether to spend $5 million to reopen the Oxbow Jail in South Salt Lake to ease crowding at the Adult Detention Center.

Salt Lake County auditor Jeff Hatch told the County Council that the county remains in solid financial shape, with an intact rainy-day fund and a AAA rating that was affirmed by Standard & Poor's in January amid worsening economic conditions. Utah is also one of the few triple-A states.

But economist Doug McDonald, who works for the county under contract, used the metaphor of a pair of surfers riding a towering wave and warning each other not to fall off their boards.

Residential construction, valued at $820 million in 2007, fell to about $100 million a quarter so far in 2008, with further declines expected in 2009, McDonald noted. Nonresidential construction is down 25% this year, and likely to fall another 10% next year. Falling sales tax revenue and lingering inflation could also trouble the county.

Despite a 10% increase in service business in 2008, McDonald said his forecast is for virtually no growth in the coming year.

Like Phoenix and other metro areas in the Southwest, Salt Lake County's population has grown since 2000, rising 13.4% to 1,018,904 in 2007, with growth expected to continue for the immediate future. The county accounts for about 39% of Utah's total population.

The county's economy - anchored by state government, the University of Utah, and its location as headquarters for the Church of Jesus Christ of Latter-Day Saints - combines services, trade, public sector, and manufacturing employment. Leading employers include companies making missile parts and medical devices, and doing scientific research. The Church of Jesus Christ of Latter-Day Saints is a major employer, but does not release employment numbers.

Sales taxes represent about 23% of general fund revenues and the county has no plans for any debt sales in the near future.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER