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February 3, 2006

 

In all likelihood County Executive Christopher Coons will seek an increase in the county property tax rate when he presents his proposed budget for the coming fiscal year to County Council. There similarly is little doubt that, if he does, Council will enact one.

"I haven't made that decision yet," he told Delaforum.

He said that, however, just after remarks to the monthly meeting of the leaders of areawide civic associations left no doubt that he is leaning strongly -- probably irrevocably -- in that direction. Earlier, in a speech before the Hockessin Rotary Club reported in Community News, he said the question is not whether taxes will be increased but when they will be increased.

He told the civic leaders on Feb. 2 that he intends between now and Mar. 21, when he is scheduled to deliver the budget message, to put the idea before the public in both personal appearances and media publicity and seek reaction.

The message he wants to get across: Take your pick -- a gradual elevation of the rate, probably in successive years, or a massive hit in 2009.

The hit, he said, would be on the order of 60%. That is double the order of magnitude projected last year when the Coons administration began talking about an eventual tax hike.

He told Delaforum that simply dividing the ultimate increase into equal installments during the next three years "wouldn't work out mathematically," but that more palatable annual increments can be devised.

Property owners in unincorporated areas of the county currently are taxed at the rate of 45 for each $100 of assessed value. That is scaled down in municipalities based on the amount of county services received, but those property owners also pay a local tax. County rates have not gone up during the past nine years. Assessments, which haven't been changed in more than a generation, are well below real estate market values.

"It would better serve my political interests to run out the clock" on the absolute need for a tax rate increase, Coons said. "I could wait [until 2009] and leave it for whoever comes next." That is probably more rhetoric than reality because, barring some major change in circumstances, no one expects Coons not to seek re-election to a second four-year term in 2008.

If Coons's presentation to the civic leaders is any indication, the question he is putting before the public is hardly rhetorical.

Council president Paul Clark was even more direct. If the little-at-a-time approach is not taken now, what will happen come 2009 "will surely shock you," he said.

As Delaforum has previously reported, the prospect of a tax increase is raised by the steady consumption of the budget reserve used to finance operating deficits.

The recent mid-fiscal year projection by chief financial officer Michael Strine was for reserves to drop from $86.8 million at the end of fiscal 2005 to $80.8 million next June 30. He is looking for reserves to be down to $4.4 million on June 30, 2009, and be overdrawn by $27.2 million in fiscal 2010. An overdraw is theoretical because county government is required by law to operate on a balanced budget. The reserve is exclusive of the $28.5 million currently set aside as a 'rainy day' fund to meet genuine emergencies.

Coons told the civil leaders that simple arithmetic explains what is happening to the reserves.

Thanks largely to the real estate boom and population growth which boosted the county's share of the state reality transfer tax, "a fair amount of money was salted away" during the administration of his predecessor, Tom Gordon. However, Coons charged, the reserve as not managed well. "Some [of it] was not budgeted properly" and county government went on a spending spree in fiscal 2004, he said. Coons was president of County Council then.

Overall, he said, property-tax revenue is increasing between 1% and 2% a year while the transfer tax and fees are going up around 3%. On the other hand, personnel costs -- largely health insurance and other employee benefits -- are climbing at an annual pace of 7%. Personnel costs are by far the largest category of governmental expense.

Currently, Coons added, the county also is being buffeted by the sharply escalating cost of energy. Energy costs are now projected to come in some $500,000 over budget this fiscal year with the full effect of the planned Delmarva Power increase to be felt in fiscal '07. He did say the county is looking to consolidate the costs to heat and light its 54 buildings so it "can negotiate [rates] as a unitary buyer" and exploring the possibility of finding an alternative supplier if the higher rates spur competition.

Since taking office a year ago, Coons said, he has been "cracking down on the cost of county government." But, he added, costs-cutting can go only so far.

Along with seeking a tax increase, if that is the course to be followed, he added, his administration will continue to keep control of the purse by "prudent fiscal management, ... controlling the growth of government and managing [delivery of] services."

He hinted that, when it can demonstrate that its finances are under control, county government will seek from the state General Assembly additional sources of revenue. He was not specific on what they might be.

In deciding how to proceed, the proverbial bottom line is to balance fiscal reality with the public's expectations regarding government services, Coons said.

During a series of 'listening sessions' he, Clark and the respective Council member held in each of the 12 Council districts, "we heard people say, 'We like what we have [in the way of services] and we want more of them, but we have no bright new ideas about how you're going to pay for them'," Coons said.

2006. All rights reserved.

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Get more information about this topic

Read previous Delaforum article: County spending on budget
Read Delaforum commentary: Belt-tightening cannot ward off a tax increase
Read previous Delaforum article: Council given update on county finances as fiscal year ends

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