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March 1, 2006

 

Prospect of an increase in the county property-tax rate in the coming fiscal year gained new impetus with the presentation by the Coons administration's chief financial officer to County Council of a set of 'pay me now or pay me more later' scenarios.

Choices outlined by Michael Strine at a meeting of Council's finance committee on Feb. 28:

Do nothing until the budget reserve runs out in fiscal 2009 and then impose a 33.4% rate increase, following with a further 31.3% boost in fiscal 2010. That would up the current 45.5 rate by an aggregate of 75.2%. That is up from a 60% increase which has previously been discussed.

Do not raise the tax rate until 2010, but engage in some significant cost cutting until then. Main component of that would be reducing the county workforce by between 20 and 30 positions a year, which would result in diminution of police, ambulance and library services. The rate would have to be increased by 37.8% in 2010 and 5.8% in 2011, with a compound aggregate increase of 48.8%.

Do nothing this year, but impose 9.9% increases in fiscal 2008 and 2009, following with 12% in 2010 and 11.8% in 2011 for an aggregate of 22.5% in the final two years.

Increase the rate by 9.9% in each of the next six years to eliminate the need for a spike in the last year or two of that period.

Strine emphasized that he was not offering a preview of the proposed budget and recommended tax policy which County Executive Christopher Coons is scheduled to deliver on Mar. 21, but giving the lawmakers something to chew on until then.

"The sooner we come together to get this done, the better off we'll be," Strine said.

Coons's spokeswoman Christy Gleason said the executive "has not yet made up his mind" about the fiscal package. Observers, however, are agreed that Strine's presentation was a further signal that he is leaning toward a 'get it over with' approach.

When Councilman Timothy Sheldon said "None of us around this table wants to vote for [any] new taxes," Strine replied, "Council and the executive recognize that you can't keep going the way you are going."

Councilman Jea Street questioned whether the way Strine presented some supporting data was intended to make a case. He noted, for instance, the claim that eliminating 39 already vacant positions amounted to a savings of $2.2 million while reducing the executive office contingency fund was stated as a 28% cut. After Strine acknowledged that it amounted to $190,000, Street said, "You're using big numbers when it's millions and big percents when it's thousands."

Unspoken at the meeting but obviously significant is the fact that six of the 13 members of Council have to face the voters in November if they want to retain their seats for another term. Also open to question would be the willingness of elected officials -- including Coons who is believed almost certain to seek a second term in 2008 -- to impose six or more successive annual tax hikes.

Strine said that the impact of each 10% increase in the property tax would be an additional $32.60 a year for the 'average' residential property or $10 if the household qualifies for the senior-citizen discount. A small business would pay $275 more and major companies up to $80,000, he said. Property taxes are due on or before Sept. 30 of each year.

Strine said the Coons  administration already has cut the proverbial fat from county spending. "The reality is ... we've begun to cut not waste but to cut costs," he said.

That, he said, has "reduced deficit spending from $25.6 million in fiscal year 2005 to $6.1 million" in the current fiscal year, which ends on Jun. 30.

Continuing to outspend revenue, he said, will jeopardize the county's triple-A bond rating and thereby raise the cost of borrowing money for capital projects. Rating agencies, he said, will require a firm plan for meeting necessarily rising costs before renewing the highest rating. The county previously had expected going to the bond market in January, but quietly shelved that intention.

When it comes to cost-cutting, Strine said there is no viable alternative to reducing the size of the county workforce. Nearly three-fourths of general fund spending is for salaries and employee benefits. By far the largest portion of that, 42%, is for police and emergency services personnel.

And, he added, "cutting people means cutting services."

He also said there is no wiggle room in the 20% 'rainy day' reserve fund. Because the county has only limited sources of revenue -- the property tax and realty transfer tax -- the rate is appropriate. The fund is intended to meet genuine emergencies, he explained. Although it has never been tapped, it would not last long "if something like [Hurricane] Katrina passed through," he said, reminding Council that "you spent $15 million to bail out just one neighborhood" following a northeaster rainstorm.

Without providing any details, Strine suggested that county government will go to the state legislature for help meeting its longer-term financial needs. Sheldon noted that Kent and Sussex Counties receive considerably more state-financed services than New Castle.

Strine also threw out the possibility of a general reassessment of property values. The tax rate is applied to each $100 of assessed value, but assessments currently are well below market values. The General Assembly would have to authorize a reassessment -- which would be politically unpopular -- and a principle usually followed is to make it 'revenue neutral' except for covering the cost of the survey.

At Council's plenary session following the finance committee meeting, it enacted, with minimal discussion, an ordinance which tapped the tax preservation reserve for $500,000 to help cover primarily the additional cost of gasoline and diesel fuel between now and the end of the fiscal year.

2006. All rights reserved.

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County tax hike probable in coming fiscal year

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