DALLAS-- With its books finally in order, Wayne County, Mich., says it's ready to return to the market with $200 million of borrowing to complete its unfinished jail project in downtown Detroit.
The county, which because of financial distress has been working under a state consent agreement since last year and has junk-bond level ratings, said it expects to sell the bonds in the fourth quarter. The announcement came with the county's release of its budget proposal Wednesday. Officials touted balanced operations and said the county hopes later this year to exit the state consent agreement.
The plan budgets $1.5 billion to be spent for each of the next two years, down from the 2015-2016 budget of $1.68 billion. The county's 2016-17 fiscal year begins Oct. 1.
Wayne County executive Warren Evans attributed the county budget reduction to $53 million in savings from his administration's recovery plan that was implemented during fiscal year 2016. The budget also includes continued cost savings from pensions and healthcare.
"We are again presenting a responsible and balanced budget that continues to navigate the County to financial stability," he said in a statement. "The fiscal discipline we put in place early in my Administration is beginning to translate into progress for the County, allowing us to make important investments, to become more efficient, and to better serve the residents and businesses in Wayne County."
The county ended its last fiscal year with an accumulated unassigned surplus of $35.7 million, of which $5.7 million is available for general fund operations. It was the county's first accumulated surplus in eight years. Surpluses are projected to continue.
The county's turnaround will allow it to address its other pressing issue, completion of the half-built, bond-financed jail at Gratiot site in downtown Detroit.
The county has budgeted an additional $10.5 million in debt service funding over the next two years for completion of the stalled jail project. This funding, said Evans, sets the stage for the County to move forward with a cost-effective plan to complete the jail in a timely manner.
The county plans to issue an additional $200 million in bonds to complete the jail, said county chief financial officer Tony Saunders. In December 2010, the county sold $200 million of taxable recovery zone economic development bonds through the Wayne County Building Authority to fund the Gratiot jail and can't abandon the project unless the bonds are fully paid off.
The county halted construction of the jail in 2013 after having spent $157 million. "The remaining money plus this new money we feel will be sufficient to complete the project," Saunders said.
Saunders said that the new general obligation bonds will be issued in the fourth quarter 2016 or first quarter of 2017.
Wayne County's recently improved credit standing should help it access the bond market at more affordable rates, officials said.
Last month the county received a four notch upgrade to BB-plus, one notch away from investment grade, from Fitch Ratings. The action followed an outlook change from S&P Global Ratings to positive from negative. S&P rates the county BB-plus. In February, Moody's Investors Service revised the outlook on its Ba3 GO limited tax bond rating to stable from negative.
Saunders said the county will select a firm to complete the architectural work on the jail in the next two months.
On Thursday, Wayne County settled with AECOM and Ghafari, the original design engineers/architects for the jail site. The design and engineering firm was being sued by the county for the overrun in project costs.
The agreement provides Wayne County with a $2.5 million payment from AECOM and Ghafari, dismissal of all counter-claims against the county and the Building Authority and undisputed ownership of all design documents including documents outlining a new design for a Gratiot jail. These documents, said Evans, are essential for the county to move forward with completing the jail.
Evans said on Thursday that although completing the jail on the Gratiot site meets the needs of the county and remains the most cost-effective option it is cooperating with the group headed by Dan Gilbert and Tom Gores in exploring alternative sites for the jail. Gilbert, founder of Quicken Loans, has been trying to buy the jail site from Wayne County since 2013 to make way for a Major League Soccer stadium.
"The County will not use any of its funds to explore alternative options and it will only consider an alternate option that meets the County's needs at no additional cost to its taxpayers," said Evans.
In May, Evans said that the County would be open to moving the jail to another site to make way for a soccer stadium only if it didn't increase the cost for Wayne County taxpayers and didn't delay the county's current timeline for completing the project.