County financial-study panel
looking at a variety of approaches
to what you might have read or heard, no one in or around
county government is considering selling any parkland or
libraries. On the other hand, it is all but certain that
resident taxpayers, and some passers-by, will be required to
dig deeper to finance both vital services and amenities in
both the short and long terms.
It's a foregone
conclusion that County Council will approve a second
consecutive increase in the property tax rate for the next
fiscal year. Even before County Executive Chris Coons
presents a budget and spending plan for fiscal 2008 in
March, the lawmakers are likely to remove the 5% ceiling which
currently applies to any rate hike.
Beyond that, there will be a
series of measures proposed, most of which will require
county or state legislation and some of which can be done
administratively, to bring about what are referred to as
'structural changes' in the ways county government raises
and spends money in subsequent years.
They will be so deeply
focused that they will require, to paraphrase the words of
one taskforce member, a consensus of sorts on what sort of
county the public wants and how much it is willing to pay
for it. Following several boom years and more than a decade
without a tax increase, the Coons administration maintains,
the proverbial bubble has burst. While insisting there is
not yet a financial crisis, officials warn that one of epic
proportions is as close as two years away unless immediate
steps are taken to head it off.
Those steps will be largely
determined by recommendations from a so-called blue-ribbon
taskforce put together by Council and the Coons
administration. The panel is scheduled to report by the turn of the year, although one or more of its major
recommendations will be delayed somewhat awaiting results of
a consultant firm's study of how county employees' salaries
and benefits compare with what other governments and the
private sector pay people with comparable jobs. Personnel
costs account for about 70% of the New Castle County budget.
From conversations at
meetings of the taskforce and its four subcommittees has
emerged a comprehensive list of other potential
recommendations likely to be included.
Reports that the sale of
assets such as parkland is a possibility are erroneous.
Disposal of public parkland is tightly regulated and
virtually impossible. However, it already has been
determined that the county will test the water by formally
seeking proposals from potential concessionaires to take
over such functions as managing the conference center
at Rockwood, the equestrian program at Carousel and the
tennis courts at Delcastle. Also on the horizon is the
possibility of charging nominal fees to attend such events
as the popular
Ice Cream Festival and overnight campouts. More significant
would be joint maintenance agreements where county and state
parks are adjacent or in close proximity.
Since it is the largest
source of county revenue, the property tax system as well as
the immediate tax rate will come under scrutiny. Open to
question, for instance, is whether the senior-citizen and
first-time-home-buyer exemptions are equitable when applied
to high-value properties. Limiting the exemption to
the first $50,000 to $75,000 of assessed value would shift
them from being age-based to being need-based. While it is
unlikely that nonprofit entities will end up paying the tax,
it is possible that a payment in lieu of tax will be sought
from organizations such as the University of Delaware and
Christiana Hospital which are run like multi-million-dollar
In addition to dealing with
taxes, there no doubt the taskforce will recommend several
steps to bring various fees more into line with the cost of
providing services they are intended to finance. Middletown
and unincorporated Westover Hills, for instance, receive
county police services at what amounts to deep discounts
under long-sanding contracts. A $1-a-month service charge to
help support 9-1-1 emergency call service is applied to
bills for land-line telephone service, but there is no such
charge on cellular-telephone bills.
A longer-term recommendation
will be to seek to reassess all property in the county to
bring the assessment into line with market value. That was
last done in 1983, with the result, chief financial officer
Michael Strine said, that real estate is taxed on slightly
more than a quarter its actual value. Relatively speaking,
he added, commercial property, condominiums and townhouses
are taxed on significantly higher proportions of their
State law requires that the
property-tax rate be set after a reassessment at a level
which will yield no more than 15% additional revenue. School
districts are allowed a 10% increase without having to go to
referendum. First-year county revenue would cover little
more than the cost of doing the reassessment, but the higher
rate would remain in subsequent years and authorizing a
'rolling reassessment' would provide for updates every two
or three years so that assessed value in future year would
follow the same trend lines as overall property values.
With budget drafting for the
fiscal year beginning next July 1 in its
early stages, the size of the inevitable tax- rate increase is
pure speculation at this point. But the financial taskforce and its
subcommittees have heard references to 15% as an
order-of-magnitude suggestion. The current rate is 47.78¢
for each $100 of assessed value in unincorporated
areas with that scaled down relative to the amount of
services provided by Wilmington, Newark, Middletown and
Although proposing -- let
alone imposing -- a double-digit tax increase is bound to be
a political hot potato, it's not anywhere near as onerous as
it might sound. At 15% hike would cost the average
residential property owner an additional $45, or less
than $1 a week, according to Michael Strine, the county's
chief financial officer. That is calculated on the average
suburban assessment, $71,000, on a property with an
estimated market value of $205,000.
The 5% cap also is not
exactly what it sounds like either. Enacted by Council at
the time it was considering what turned out to be an
unsuccessful effort to reassess property, it limits only to
what the executive can ask -- not what Council can grant.
Leaving it in place, Council President Paul Clark points
out, would require Council to completely rewrite Coons's budget or
the administration to provide a double set of budget data.
The former would make an already complex process more so and
the latter would be an obviously unacceptable subterfuge.
Despite efforts to come up
with simplified explanations, public budget drafting comes
across to most people as something akin to alchemy. Even
though for more than a year there has been
considerable publicity given to a looming fiscal crisis,
there is still a widespread belief that county government is
awash in surplus money.
Strine said that even though
the budget reserve totaled $85 million at the start of the
current fiscal year last July 1, spending in excess of
revenue was anticipated to outpace revenue by $12.5 million.
What actually has happened, is that a
much-deeper-than-expected slump in the real estate market --
a local manifestation of a national trend -- has
significantly reduced revenue from the county's portion of
the state tax on real estate transactions and related fees.
The projected operating had climbed to $17.1 million as of
Sept. 30 was still rising.
cost-cutting was aimed at reducing the near-term $10 million
shortfall, but Strine said that does little to ward off the
major crisis. If nothing were done to adjust either side of
the ledger, he said, the reserve would be totally depleted
by November, 2008.
In preparing their spending
requests for the coming fiscal year, general managers have
been instructed to allow for the 5% annual pay raise
mandated by current employment contracts and then cut other
spending back to end up with 96% of the resultant total.
Even so, he said, "that buys
us time; it doesn't buy solutions."
Read previous Delaforum article:
Coons orders steps to cut county spending