CHICAGO — Michigan Treasurer Kevin Clinton has "concerns" about Wayne County's draft deficit-elimination plan as the junk-rated county that is home to bankrupt Detroit struggles to avoid its own state takeover.
The treasurer has not signed off on the county's deficit plan in part because the county still needs to get approval from commissioners as well as the county treasurer and the unions, according to treasury spokesman Terry Stanton.
"We have shared concerns with the county as to whether all local parties can approve and implement the plan," Stanton said in an email. "As always, we stand ready to work with the county going forward."
The draft plan features wage cuts and layoffs, as well as changes to the county's pension and retiree health care benefits programs.
With 1.8 million residents, Wayne is the most populous county in Michigan. It's home to the world headquarters of General Motors and Ford Motor Company. The Detroit Medical Center and Henry Ford Health System are also major employers.
Its large tax base is one of its strengths, and Detroit's bankruptcy is expected to have limited impact on the county credit, ratings analysts said. But the county has suffered major deterioration in its fiscal position since 2010.
After its general fund first fell into deficit in 2010, Wayne now faces a $175 million deficit. That's estimated to grow to $236 million in the next two years, according to the county.
Chief Financial Officer Mark Abbo presented the deficit plan — required under state law — to commissioners in February. The proposal would cut $175 million from the deficit and eliminate the structural operating shortfall, Abbo said.
The plan relies on selling the county's wastewater treatment system for $121 million. Officials proposed create a new authority to take over the system and issue bonds for the upfront cash payment. Wayne County also proposed transferring another $81 million into the general fund from the delinquent tax revolving fund.
Officials want to bring down the annual structural deficit by cutting pension and retiree health care benefits, increasing employee contributions, lay off employees, a 5% wage cuts, and lease some county-owned facilities.
"Acknowledged is the role the county itself may have played in the situation it now finds itself," Abbo wrote in an introduction to the plan.
The recession, continuous population loss, and declining property values exposed serious flaws in the government finance model, he wrote. "While municipalities struggle, the state has scaled back revenue sharing, while maintaining and sometimes increasing mandates upon local government," he wrote.
Most commissioners have said they would not approve the plan, according to the Detroit Free Press.
Moody's Investors Service rates the county's limited-tax general obligation bonds Baa3 with a negative outlook. Standard & Poor's rates them BBB-minus with a stable outlook, and Fitch Ratings maintains a BB-minus rating with a negative outlook.
Wayne County has $726 million of outstanding LTGO bonds.
