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Michigan's Wayne County says it could face financial crisis
February 5, 2015 / 11:59 PM / in 3 years

Michigan's Wayne County says it could face financial crisis

Feb 5 (Reuters) - Wayne County, Michigan, in which the formerly bankrupt city of Detroit is located, could face a fiscal crisis as early as August, according county documents released on Thursday.

The county’s general fund had an annual deficit of about $50 million during the last three years, primarily due to a decline in property tax revenue, an unsustainable defined-benefit pension plan, healthcare inflation, and budget overruns in the sheriff and prosecutors’ offices, according to the documents, which accounting firm Ernst & Young prepared for the county.

“We know how deep the hole is,” Wayne County Executive Warren Evans said at a news conference on Thursday, according to a video on a news website, “We understand the fiscal illness and our determination is to make sure that illness is not terminal.”

The projected fiscal year 2015 deficit for Wayne County’s general fund is $73 million, according to the Ernst & Young document. The county’s defined-benefit pension plan is severely underfunded, the document said, deteriorating from 95 percent funded in 2004 to 45 percent in 2013. It could slide to 39 percent by 2023, the document said.

“What you’ll start seeing in August/July of this year - and even worse the next year - is that even with all the funds pooled together, we’ll get to the area where we just don’t have enough money to pay bills,” Evans said during the videotaped news conference.

“It’s a bad cash picture,” said Evans. “One of the big requirements for - it’s an ugly word and I wouldn’t suggest we would get there but let’s say bankruptcy - is your cash position. If you don’t have the cash, it’s one of the triggers. It’s a key trigger.”

Evans was not immediately available when Reuters contacted the county.

Wayne County’s biggest city is Detroit, which emerged from the largest ever U.S. municipal bankruptcy in December.

Moody’s Investors Service rates Wayne County as Baa3. In a report from June 2014, it cited the county’s “significant financial strain... as evidenced by a sustained operational imbalance and sizeable general fund deficit position.” (Reporting by Megan Davies in New York; Editing by Lisa Shumaker)

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