February 23, 2005

Introduction into County Council of an ordinance to establish new budget reserve funds to replace several which were declared illegal was put off after two county residents went back to Court of Chancery seeking an order requiring county government to return revenue they allege was "stolen from the taxpayers."

Council president Paul Clark said only that he was withholding the measure "at the request of the administration."  Chief administrative officer David Singleton told Delaforum that the proposed ordinance was being "delayed because the lawyers have to do a little more work [on it]."

There was no public reference to the reopening of the suit at the regular semi-monthly Council meeting on Feb. 22 nor at a finance committee meeting earlier in the day. Nothing was said about withholding introduction of the ordinance at the committee meeting, which followed by about two hours an announcement by Richard Korn, one of the plaintiffs in the suit, and his lawyer, Ronald Poliquin, of further legal action.

It is not uncommon for a measure to be introduced into Council with the expectation that it will be replaced by a substitute modifying its language. On occasion, the substitute turns out to be a total revision of the original. Under Council rules, that can be done so long as the title of ordinance isn't changed. The procedure permits a vote to be taken at the next Council meeting.

At an executive committee meeting on Feb. 14, Council members were unanimous in deciding that there should be no rebate of the approximately $151.8 million of general fund and sewer fund reserves beyond the 'rainy day' set-asides which Chancellor William Chandler did not specifically rule illegal.

County Executive Christopher Coons, Singleton and Clark have all said that a rebate would be "fiscally irresponsible." The executive committee was told that it would have to be followed by a 17% increase in the property tax rate and a 33% increase in the sewer fee rate for the fiscal year which begins on July 1.

In their amended complaint filed with the court on Feb. 22, Korn and Andrew Dal Nogare, the other plaintiff, seize upon a comment in Chandler's decision questioning whether county government has the authority to establish a reserve to meet unexpected emergencies greater than the 5% that is authorized by the state constitution for state government. They ask the court to order that any money in excess of 5% in that reserve also be rebated.

That would bring the total rebate to about $190 million. The county's current combined general fund and sewer fund budgets total $210.5 million.

"No government in the country has in excess of 100% of its budget [in reserve," Poliquin said that the press conference at which the filing of an amended complaint was announced.

Both Korn and Poliquin maintained that a rebate or a tax rate reduction which accomplishes the same thing would not require rate increases nor result in a reduction in "essential services." The budgets can be balanced, Korn said, "by cutting out some of the fat."

Neither man would be specific about where in the budgets they think significant cuts can be made. "That is a political decision which has to be made by the people on Council," Korn said.

Singleton told Delaforum that he "disagree[s] with Mr. Korn's interpretation" of Chandler's reference to the state's reserve, adding that state government has other reserves in addition to its 5% 'rainy day' fund. Singleton formerly was state secretary of finance.

At the previous executive committee meeting he said the administration believes that Council can retroactively authorize other funds on the basis that the chancellor ruled them illegal because they were set up unilaterally by the previous Gordon administration without legislative action. The proposed ordinance which Clark withdrew would have made the new funds retroactive to last July 1. It also contained wording to the effect that, if retroactivity was subsequently ruled invalid, the funds would exist from the date the law is enacted.

It would set up two new funds instead of the three that were referred to in the administration's presentation to the executive committee. The fund not to be established referenced the capital budget for sewers.

The new Korn-Dal Nogare petition to the court also seeks a permanent injunction against the county proceeding with a previously authorized $80 million bond issue. Chandler declined to grant such an injunction, but did note in his decision that he doubted the issue could go forward since it was based on a budget that he declared illegal. Coons and Singleton have said they want to wait until the matter of reserves is settled before deciding if and how to proceed with the bond issue.

Other than to say they did not think their suit would have an effect on it, Korn and Poliquin declined to speculate on what the result of their suit and related events would have on the county's prized triple-A bond rating, which has been conferred for several years by the three major Wall Street rating firms.

Poliquin said the suit was not intended solely as an indictment of former County Executive Tom Gordon and his administration. The lawyer said Coons, who previously was president of County Council, "has to [also] take responsibility for what happened in the past."

Korn was unsuccessful last year in a bid for the Democratic nomination run for election to succeed Gordon. Coons won the nomination in a three-way primary election campaign against Korn and former administrative officer Sherry Freebery.

Asked why the amended complaint was filed before Council and the administration acted on the reserves or bond issue in response to Chandler's decision, Korn said he felt the move "is ripe for today."

"This is a defining moment for the county," he added.

2005. All rights reserved.

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