March 31, 2003

Before adjourning at the end of June, the General Assembly will be asked to authorize the city of Wilmington to tap into one or more new sources of revenue. Its doing so, according to Mayor Jams Baker, will enable the city to avert a financial disaster.

"We can't tax our way out of it or cut our way out of it," Baker said at a press event on Mar. 31 at which he released a grim report on city's financial future and Governor Ruth Ann Minner pledged her support for steps to prevent its prognosis from coming to pass.

The report, by the Wilmington Economic & Financial Advisory Council with technical help from Public Financial Management, a Philadelphia-based consultant to public entities, said that , if present trends continue absent any action to address 'structural defects' in its revenue-generating capacity, Wilmington faces a budget shortfall of nearly $5 million in the fiscal year which begins July 1 and that will grow to $12.1 million by fiscal 2007.

Even with a best-case scenario involving a reversal of the present  straits in the national economy, there will still be deficits of $3.4 million in the coming fiscal year, growing to $5.2 million in the following four years.

"The bottom line is that the city of Wilmington faces the same sort of problem that we do at the state level," Minner said. "The [financial] health of the city is an integral part of the health of the state."

Flanked by Mayor James Baker (left) and City Council president Ted Blunt, Governor Ruth Ann Minner signs an executive order establishing a task force to recommend new sources of revenue for Wilmington. Seated behind them are Fred Sears (right), who will co-chair the task force, and Michael Hare who will be City Council's representative 0on it.

As she has said with regard to state finances, "quick fixes and gimmicks will not work."

By executive order, she established a 23-member task force composed of representatives of the public and private sectors. It is charged with evaluating the council's report and recommendations and presenting its own proposals to the governor and General Assembly by May 31. That, Minner said, would give the legislature time to act so that the new revenue sources are in place for the coming fiscal year.

She pledged her full support for whatever proposals the task force developed, but declined to speculate on what they might be or comment on the six put forth by thee advisory council. It said if all were adopted they would generate annual revenue of between $5.7 million and $21,5 million, depending upon which options within each method are selected.

The most radical idea is to require tax-exempt entities located within the city to make payments in lieu of property taxes. No taxes can be collected on about 42% of the city's total property value. While their owners would keep tax-exempt status, they would be assessed mandatory fees equivalent to part or all of what they would have paid if taxed. Affected could be such things as state- and county-owned property, schools, hospitals and non-profit institutions. The report notes several other cities where such payments are required, but pointedly avoids any mention of property owned by religious institutions, which traditionally have been the stumbling block on which such proposals fall.

Also proposed are new city taxes on cigarettes, hotel rooms, parking, event admissions and natural gas. Under Delaware law, the General Assembly would have to authorize the city to levy such taxes.

The report also notes that Delaware, unlike "most states," does not have a permanent revenue-sharing system to assist local governments. The state does provide assistance in several specific programs. The report lists Delaware last among the 50 states in terms of local revenue as a percentage of total tax revenue collected in the state, but that ranking does not take into account the fact Delaware provides many services, including road maintenance and public schools, which are municipal responsibilities elsewhere.

Minner said the task force, which is expected to deliberate in public, is not restricted to the council proposals. Baker said the council started out with about 50 possible ideas to consider, but did not say what any of the others were. The governor said that ideas from any source will be welcome.

Baker, however, rejected as "inconsistent with the problem [and] not fiscally sound" a proposal attributed to Republican sources that the city could make $1 million worth of budget cuts and use that money to hire additional police officers. The idea will not "stand up under the weight of reality," he said.

"We've cut the budget for three straight years; we've laid off people (city workers) for three years," he said. "Even if we could remove $1 million from the [current] budget, where do we go from there?"

It was announced that Fred Sears, head of the Delaware Community Foundation and chairman of the financial advisory council, and Scott Green, of M.B.N.A. Bank, will chair the task force. City Council president Ted Blunt said he will appoint Councilman Michael Hare to be City Council's representative. The other 20 members,  who will come from state, city and New Castle County governments and the private sector are to be announced soon.

Blunt noted that Minner responded by agreeing to create  the task force immediately upon being presented with the report on Mar. 28 and hailed that indication of support despite the fact that she is confronted with a serious financial situation on the state level.

© 2003. All rights reserved.

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