News

May 16, 2003

Wilmington should look toward a dam and a dump as likely sources of new revenue to deal with its endemic budget problems. That advice is emerging as the likely top recommendation from the gubernatorial taskforce charged with looking for a remedy.

A three-part proposal from a subcommittee headed by City Councilman Michael Hare, which sparked the most interest and support from the full panel as it sought to complete its work in time to allow the General Assembly to act before calling it a session at the end of June, called for:

hImposing a $1-a-month 'water availability' surcharge on everyone who benefits from the water reserved in the reservoir behind city-owned Hoopes Dam.

hIncreasing rates charged to both city and suburban customers of the Wilmington water system, which presently are by far the lowest in New Castle County.

hCharging a fee for 'hosting' the Delaware Solid Waste Authority's Cherry Island landfill, which would amount to $1 a month per business and residential customer of private trash collectors who use the dump.

The taskforce kept the possibility of recommending a city lodging tax on hotel bills and an admissions tax on tickets to entertainment events on the table while eliminating, or at least putting off for the time being, such things as restructuring the wage tax into a two-tier system, sharing in revenue from state franchise taxes and fees, levying a 'public safety fee' in lieu of property taxes on tax-exempt property owners and instituting some form of casino gambling.

There was strong support among taskforce members for keeping the panel intact to evaluate those and other ideas for possible future adoption after it files its initial report. It has been impossible in the short time the taskforce has existed to delve into the ramifications of such complex issues as revenue sharing, said Fred Sears, its co-chairman.

Those ideas presented by Hare's subcommittee did not pass muster without some objections at a taskforce meeting on May 15, but there seemed to be a general feeling around the table that they probably stand the best chance of getting support from legislators wary of political fallout from placing a real or perceived burden on voters who do not live in the city,

State Representative Wayne Smith, who is a member of the taskforce, said that only a solid bipartisan bloc of lawmakers from city and other upstate districts will be able pass enabling legislation and that support will not be forthcoming unless those from the suburbs see no impact on their constituents. Suburbanites, he said, will not accept any "impact [on themselves] to bail out the city of Wilmington."

"The city has assets [it is] not getting a return on. The city has unique things that benefit the whole county," said Peter Ross, of the University of Delaware.

Smith said only a single package of acceptable proposals stands a chance. If such things as an increase in the city wage tax on nonresidents who work in Wilmington or a lodging tax which would be opposed by seashore tourist interests are included, "the whole thing goes down," he said.

Downstate legislators "will accept anything we agree on -- so long as it doesn't affect [their areas]," Smith said.

Smith, who represents a Brandywine Hundred district, is Republican majority leader in the House of Representatives. His counterpart in the state Senate, Democrat Harris B. McDowell, has a district which includes both city and suburban precincts. McDowell also is a member of the taskforce but was not able to attend the meeting.

State legislation is necessary because Wilmington and other municipalities in Delaware do not have autonomous home rule.

Ross said the city has to go to Dover with a single package of proposals. "June gets very complicated down there. Simple and understandable is the only way to do it," he said. "It has to be done this June because next June it won't get done." That was a reference to the fact 2004 is an election year.

Hare said that his group's proposal meets both Smith's and Ross's tests.

What's more, when taken together the ideas will generate sufficient revenue to eliminate what Mayor James Baker has called 'structural defects' in the city's revenue structure, which is now all but totally dependant on wage and property taxes. They will do so, Hare said, at negligible additions to costs which still will be below par for comparable services elsewhere.

A municipal consulting firm has said Wilmington presently needs to take in an additional $5 million annually and that could double by 2007. Baker has said that existing tax rates are maxed out. Hare's committee estimated the water surcharge would yield between $1 million an $1.5 million a year and the trash fee between $3 million and $5 million annually. The amount realized from higher water rates, would, of course, depends upon where they are set.

Governor Ruth Ann Minner, who established the taskforce in response to a request by Baker, has pledged support for the mayor's effort to put the city on more solid financial ground despite concurrent pressure to deal with the state budget's 'structural defects'.

Smith questioned what effect the water-availability surcharge would have on pending legislation, of which he is a sponsor, to establish a water self-sufficiency for northern New Castle County to counter future droughts. That measure, he said, was "carefully crafted to balance different interests" and injecting a significant new component could upset the balance.

Increasing the water supply in Hoopes Reservoir is a key component of that plan. It also calls for reuiring water suppliers to charge increasingly higher rates to customers who use larger amounts of water. "To a lot of ratepayers, it's going to look like a second hit," Smith said.

Ross said it could be 'sold' as a form of insurance and would be justified because a city asset is being used to provide assurance against the effects of a water shortage. People should be willing to pay for having a reserve water supply, he said. "It's like automobile insurance -- I hope I don't have to use it, but it's nice to know it's there."

A fee for having the landfill within the city limits drew more stringent objection from the waste authority. In a detailed memo, chief executive officer N.C. Vasuki argued it could put the quasipublic authority at a competitive disadvantage with private landfill operators. "Any direct payment of a 'host community fee' to the city creates both legal and financial quagmires," he wrote. Among other things, the authority's present fee structure is set until mid-2005.

Hare countered that the city is adversely affected by the landfill at its northeaster border and will be even more so if present plans to expand it by authorizing it to grow to a higher level. Taskforce co-chair Scott Green agreed, saying there is 'a direct cost" to the city as as result of what could otherwise be prime waterfront property on the Delaware River being rendered unavailable for economic development and, as a result "there ought to be some reasonable compensation."

Hare said the city, in any dispute with the waste authority, holds a political trump card. "There ought to be public support [for paying an additional charge] to make sure the landfill stays where it is instead of going somewhere else [in the county[," he said. "That hill is going to be there for a long time [and] we ought to get some money out of that hill."

It was agreed that a city lodging tax would be relatively painless, especially if a way could be found to collect it just on stays during the workweek when hotels in the city are used mostly by business travelers on expense accounts. Similarly, there was support for an admissions tax with the caveat that it be charged only on tickets costing more than $5 or $10 to avoid burdening suppliers of low-cost entertainment.

On the longer-range issues, such as piggybacking on the franchise tax, it was pointed out that even something that seems to be minimal tampering could have unintended but serious consequences.

State Secretary of Finance David Singleton said that great effort was made to obtain agreement from major corporations chartered in Delaware to accept Minner's proposal for a 17% increase in the franchise tax and fees. "They've gone along [with that] like good soldiers ... but who knows if [they would if] it went higher," he said. "It's not something we'd want to do in a hurry until we see what all the implications are."

But, he added, the state administration would be willing to consider a specific proposal, such as one by former Wilmington mayor Hal Haskell that the city, in its role as New Castle County seat, collect related charges for recording incorporation documents and providing similar services.

Lieutenant Governor John Carney said that and other forms of revenue sharing might seem to be an easy way to solve Wilmington's problems but that any sharing arrangement has to be designed in way that provides for equitable treatment. "What's done for Wilmington also applies to Selbyville," he said. Municipalities and political subdivisions have different levels of financial needs and some have no needs at all. In the latter, there would be a natural temptation, for instance, to use shared state revenue as a means for reducing local taxes.

2003. All rights reserved.

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