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Commentary

May 16,  2006

 Approval of the proposed $230.2 million county budget and a 5% increase in the property tax rate to partly finance it is a virtual certainty. County Council also will most likely enact the $58.3 million capital budget and approve a $75 million bond issue to help finance it. There also will be a modest 2.4% upward adjustment of sanitary sewer service rates.

Although the package of legislation to be enacted at Council's next session, on May 23, will be unchanged from what was proposed in March by County Executive Christopher Coons, it would be completely wrong to characterize Council's expected action as rubber-stamping. On the contrary, the series of budget hearings which ended on May 15 were anything but replicas of  the perfunctory 'dog-and-pony' shows that took place in recent past years. Administration officials were required to present detailed information about the specifics of what they want to spend in the coming fiscal year, the number of employees it will take, the goals they seek to accomplish and the challenges they expect along the way. Council members, sitting as a committee of the whole, asked several pointed questions and not always agreed with the answers.

The only logical conclusion to be drawn from observing both process and content is that the Coons administration has fully justified what has to be considered a politically unpopular position.

Although Council members are reluctant to go on the record at this stage with definitive responses, there is strong evidence of general support. Most significantly, no one has come forward with any proposed amendments to the budget, according to Councilwoman Karen Venezky, chair of the finance committee, and Michael Strine, the county's chief financial officer, through whom any changes would have to be administratively processed.

Less clear is the prospective vote on the tax increase, but observers at this writing are agreed that it has comfortably more than the seven votes required to enact the ordinance to effect it.

Only the two Republicans on the 13-member Council responded to a recent attempt by Delaforum to poll members on their views. "The proposed budget has structural problems which must be addressed to balance the budget without a tax increase.  The budget process is satisfactory, the results are not," said William Tansey. "It is intuitive that ultimately there will have to be some adjustment in tax rates given the rate of inflation. When aggressive cost cutting measures are coupled with aggressive efforts to seek approval from the state to authorize new revenue streams, I am not opposed in principle to modest tax-rate increases tied to the rate of inflation," Robert Weiner said. George Smiley, vice chair of the finance committee, and David Tackett would say only that they were undecided.

There hasn't been an increase in the property tax rate for 11 years, during which time the previous Gordon administration -- rightly or wrongly -- accumulated large reserves to a great extent as the result of getting a larger share of the state real estate transfer tax coincident with a real estate boom. About $80 million of that reserve still exists, exclusive of the so-called 'rainy day fund' to deal with unexpected emergencies.

That raises two logical questions: Why increase taxes while there is still enough money available to fully cover the difference between planned spending and anticipated revenue? How can it be claimed that there is a looming fiscal crisis when the professionals who rate county bonds say New Castle County is in better financial condition than all but a relative handful of counties across the nation?

The administration's response to both is the same: For several years, the reserves -- frequently referred to erroneously as surpluses -- have been presented to the public in a manner which has masked the real situation. The county's limited tax structure and ability to collect fees for certain services has limited revenue growth while the cost of government has increased at a far greater rate.

Unless something is done now to moderate the imbalance, the reserves will run out during fiscal 2009 and, the argument goes, a massive tax increase or drastic reduction in county services or, more likely, both will be necessary to make up for the years when there were not more gradual increases. The example of Delmarva Power's electricity rates is cited as illustrative of the point.

The Coons administration is relying on the relatively modest proportions of the proposed rate increase to bolster it's case. An additional $16 a year on the average-value  residential property -- $5 if the owner qualifies for the senior discount -- is a small amount to pay for commonly appreciated police, emergency medical services, libraries and parks. Expressed another way, ratepayers receive $1.26 worth of county service for every dollar they pay in taxes. And, besides, the property tax burden in Delaware ranks 48th among the 50 states.

2006. All rights reserved.

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