DALLAS -- Wayne County, Michigan was released from state oversight but expensive challenges remain, county executive Warren C. Evans warned.
"It's a positive step, but not cause for any long celebrations," Evans said in a press briefing Thursday. "The consent agreement allowed us to do what we needed to do, but it was never going to be a cure-all to Wayne County's finances. It was the necessary means to get our fiscal house in order so we could tackle the remaining challenges."
The state formally granted the county's request to be released from oversight Thursday. The county entered the consent agreement in August 2015 as it struggled with growing red ink. The pact allowed the county to work with the state to renegotiate contracts, improve its cash position, and reduce underfunding in the pension system, resulting in elimination of a structural deficit.
"I am pleased to see the significant progress Wayne County has made while operating within the best practices established by the consent agreement," state Treasurer Nick Khouri said in a press statement.
Under the agreement the county established a recovery plan and eliminated a nearly $100 million accumulated deficit and a yearly structural deficit of approximately $52 million through various measures that aimed to bring recurring revenues in line with liabilities. The county reduced its unfunded pension liabilities from $817 million to $636 million. Some retirees saw big cuts in healthcare funds.
The county has balanced its budget two years in row and recorded surpluses. The county ended the last fiscal year with an accumulated unassigned surplus of $35.7 million, of which $5.7 million is available for general fund operations. Evans said he expects to garner a surplus north of $35.7 million when the books are closed on 2016.
Wayne County commissioners this month approved a $1.5 billion budget for the 2016-17 fiscal year , which began Oct. 1. The approved budget lowers spending by $180 million.
"Clearly the recovery plan is working," said Evans. "The state releasing us from the consent agreement affirms the progress that we've made."
Evans said that the county now has the fiscal stability to tackle some remaining big ticket objectives such completion of a new county jail in downtown Detroit, which will require $200 million of bond funding.
Wayne County halted construction of the jail in 2013 after having spent $157 million. It recently launched a request for qualifications process to pre-qualify firms with the goal of issuing a design-build request for proposals no later than January.
There also remains the issue of the county's unfunded liabilities. Wayne County still has $635 million in unfunded pension liabilities that needs to be addressed, said Evans. Likewise, the county's other post-employment benefits liabilities, which were reduced from $1.3 billion to $462 million under the recovery plan, still remain unfunded.
Evans said that future budget surpluses are likely key to funding the county's unfunded liabilities.
There is also the matter of improving the county's services.
"At the end of the day that is the goal of all of it; providing the best services the county can with the resources that we have," Evans said. "Moving forward my team and I are committed to stay the course to ensure that Wayne County has the prosperous future that we have all envisioned."
On Sept. 29, Moody's Investors Service upgraded the county one notch to Ba2, two notches away from an investment grade, and signaled more positive action could be forthcoming by assigning a positive outlook. In June, Fitch Ratings raised the county four notches to BB-plus, one notch below investment grade, in recognition of its progress toward structurally balancing its books. Also in June, S&P Global Ratings revised its outlook on Wayne County's BB-plus rating to positive from negative.
The county has $510 million of long-term limited tax general obligation bonds and limited tax general obligation supported lease bonds. It also has $287 million of short-term limited tax general obligation delinquent tax anticipation notes. Moody's rates $300 million of the county's long-term debt and does not rate the county's short-term debt.