Standard & Poor’s last week revised its outlook to negative from stable on Wayne County’s $218 million of outstanding limited-tax general obligation bonds while affirming its long-term A rating, as the southeast Michigan county faces a number of fiscal and economic pressures.
The outlook revision came the same week that Wayne County Executive Robert Ficano warned his government could be facing a $100 million deficit this year.
Analysts warned that the county, which includes part of Detroit, faces a “significant deterioration” in its financial position over the next several years. Chief among the problems are a weak regional economy and a drain on t general fund revenue from the juvenile justice and circuit court divisions, analyst Scott Garrigan wrote in a report on the outlook revision.
“We expect that financial stress could continue despite management’s efforts to limit negative fund balances across the county’s operating funds,” Garrigan said. “The negative outlook also reflects significant economic pressures that could limit revenue growth and stress operations, despite the county’s efforts to mitigate these pressures.”
Wayne faces an unemployment rate around 11%, negative unreserved general fund balances, and an annual general fund subsidy of $7 million to support the juvenile justice and circuit courts.
Standard & Poor’s A rating is supported by a diverse tax base, a moderate debt burden, and strong financial management, according to Garrigan. Additional strengths include general funds that are typically balanced and “above-average economic indicators despite areas of significant poverty,” he wrote.
Moody’s Investors Service rates the county’s limited-tax GO debt A3 with a stable outlook. Fitch Ratings maintains an A rating with a stable outlook on the debt.
Meanwhile, in his seventh annual state of the county address held last week, Ficano warned that Wayne County faces a possible $100 million deficit this fiscal year.
The deficit comes despite 10% across-the-board budget cuts last year. The cuts prompted county Sheriff Wayne Evans — who is running for Detroit’s mayoral seat in next week’s election — to sue Ficano in protest. Altogether, the cuts wiped out a $33 million shortfall.
In a relatively upbeat address, Ficano announced several economic initiatives aimed at jump-starting the county’s economy. Among them are two biotechnology projects, including construction of a new stem cell commercialization center. Also on the horizon is the development of an “aerotopolis,” or aviation-centered economic development corridor centered around the county’s two airports.
Ficano also touted a recent plan to develop regional mass transit with Macomb and Oakland counties and Detroit. Saying the project should begin this year with a light-rail line along Detroit’s Woodward Avenue, Ficano said a commuter line between Ann Arbor and Detroit would be next.
While noting the region has been “ravaged” by cuts in the U.S. auto industry, Ficano argued that the sector still had plenty of life left in it. “The demise of the Detroit auto industry and the entire region has been exaggerated by many people,” he said. “I want to assure you that Wayne County and southeast Michigan will help lead a comeback to prosperity. We will turn adversity into opportunity. But first we must change the way we do business.”
