May 11, 2005

Property owners could see a increase of about 30% in their county tax three years from now if current revenue and basic spending trends continue, according to chief financial officer Michael Strine.

In the first of what are planned to be quarterly reports on county finances presented to County Council's finance committee, Strine said projected growth in revenue will not keep pace with increases in spending, even with the Coons administration's tightened fiscal policy. As a result, accumulated budget reserves intended to preserve the present tax rate would be wiped out during the fiscal year beginning July 1, 2008.

Given that the public is not willing to have services such as police protection, emergency medical response, parks and libraries curtailed, deficit spending is inevitable, he said.

"The have to keep expectations of what they get in line with what they pay," he said.

While it has become a foregone conclusion that an increase in the property tax rate is coming -- likely during the present terms of County Executive Christopher Coons and seven of council's 13 members -- Strine's presentation at the committee meeting on May 10 was significant because it was the first indication of the order of magnitude of the increase made public by a ranking county official.

A 30% increase would be comparable to the 28% increase in sewer fee rates that Council is expected to enact for the coming fiscal year.

"It's very sobering [information], but it's imperative for us to know," said Councilwoman Karen Venezky, who chairs the committee.

Councilman Timothy Sheldon said that although the prospect of higher taxes expressed as a percentage "seems big," it is not when viewed in terms of additional dollars and in the context of rate-payers having gone 15 years without an increase when it would be imposed.

The increase for a 'typical' residential property in the unincorporated areas of the county assessed at $75,000 would be about $95.

"Incremental smaller changes [would be] better than this larger change," Councilman Robert Weiner said.

Councilman John Cartier called for Council to formally establish spending priorities in line with residents' desire for services. "We're going to need resources to come to the mark with those things," he said.

"Starting as early as September, we (Council members) should sit down with the administration [officials] and address long-term planning as a cooperative project," Council president Paul Clark said.

Venezky previously introduced into Council a resolution calling on Council to "evaluate and assess the direction of the county, what services are provided, to whom and at what cost." It would "establish guidelines for managing the long-term fiscal health of the county."

Since its introduction on Apr. 12, the proposed resolution has undergone significant revisions -- mostly to remove specific targets such as 3.5% budget growth over the next five years and a 5% reduction in the size of the workforce during fiscal 2006. A fourth iteration of the resolution is officially tabled and could have been brought to a vote at Council's plenary session on May 10, but Venezky did not refer to it either at the committee meeting or at the session.

Strine softened his rate projection somewhat by emphasizing that it is based on how things now stand. "There can be strategies to change that," he said.

County government, for instance, was able to accumulate reserves because the state legislature granted it a larger share of the reality transfer tax at a time when the real estate market was booming. Although there is nothing presently foreseen in that regard, further modification affecting that revenue stream or the making available of an another source of revenue is always a possibility, he said.

More realistically, he added, administration policy could at least lessen the magnitude of the increase. The operating and capital budgets that Council is scheduled to enact on May 24 represent the beginning of "a course change" in county fiscal policy, he said.

According to the quarterly report which Strine presented to the committee, the proposed fiscal 2006 operating budget's $153.9 million spending plan is 4.6% higher than $147.1 million in the current budget when it is adjusted to include increases between when the budget was enacted in May, 2004, and the end of January, 2005. The 5% increase in personnel costs, the largest single spending category,  is the result of large increases in the cost of health-care insurance and pension costs partly offset by elimination of several vacant positions. It is proposed to increase other than personnel spending by half of 1%.

Even so, spending in the coming fiscal year will exceed projected revenue by about $10 million.

Strine's projections do not involve dipping into the county's 'rainy day' fund, which is intended to deal with unanticipated emergencies. It is set by law at 20% of the budget. The size of that reserve is being challenged by a taxpayers' lawsuit pending in Court of Chancery.

Strine said that the 20% set-aside is appropriate in view of the limited number of revenue sources that county government has. State government's 5% emergency reserve -- which is the basis on which the county's is being challenged -- is justified because of its more diversified sources of revenue, he said.

2005. All rights reserved.

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