July 19, 2012 at 9:37 am

Wayne County's bond rating at risk of being cut

Budget problems, Detroit's financial woes are top issues

Wayne County Executive Robert Ficano seeks permission to eliminate a $155 million deficit by using unspent grant money. (Daniel Mears / The Detroit News)

Detroit —Wayne County's bond rating is risking a downgrade because of its budget problems and Detroit's troubled finances, Moody's Investors Service warned Friday.

The ratings agency dropped its outlook on Wayne County from stable to negative, but kept its rating the same, two notches above junk.

Analysts cited the uncertainty over Detroit's consent agreement with the state and Wayne County Executive Robert Ficano's controversial plan to eliminate a $155 million deficit by using unspent grant money. The state is reviewing the proposal.

"Should the state prohibit the county's use of unspent grant revenue to address the accumulated deficit, additional expenditure cuts will have to be enacted," wrote the Moody's analyst. "These cuts would follow reductions that have been implemented in the past couple years, putting further strain on the county's capacity to continue to trim expenses in the coming years."

The proposal would allow the county to keep surplus administrative fees from grants that are normally returned to the state, saving $60 million over the next two years.

Treasury officials last month hired Pierce, Monroe and Associates of Detroit for $365,000 to review the county's finances before considering the plan.

Moody's spokesman David Jacobson said an outlook change means the agency could downgrade the rating over the next 12-24 months.

Doing so would make it more expensive for the county to borrow.

Ficano spokeswoman June West said the "big wild card" affecting the county's rating is Detroit's financial health. The city recently signed a consent agreement with the state to give up some control of its finances.

"The Detroit situation has wide ranging impact for Wayne County and the entire region," West said. "It's creating challenges."

County commissioners received a line-item budget proposal for the first time this year. Commissioner Ilona Varga, D-Lincoln Park, said that will help trim spending.

"We have ways where we can make cuts," said Varga, chairwoman of the commission's audit committee. "Because of that, I'm hoping we'll be able to show our bond rating doesn't have to decline any more."

cmacdonald@detnews.com

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