December 16, 2006

Panel prepares package of ideas
to deal with county budget crisis

Declaring that county government's "financial situation is serious [and] requires immediate action," the Financial Future Taskforce is preparing to offer more than a score of recommendations ranging from an immediate "substantial" increase in the property tax rate to a complete reassessment of property values followed by periodic updates.

A draft of an executive summary put before the panel's final meeting before presenting the first installment of a report to County Executive Christopher Coons and County Council appeared to garner consensus approval from the nine-member group. No formal vote was taken.

Members were invited to submit comments and suggestions for tweaking and rewording by electronic mail as chief financial officer Michael Strine puts the draft into final form and assembles the mass of supporting data previously reviewed by the taskforce and its committees. If that process turns up any significant variations in opinion, members will be polled by e.mail, Strine said.

He said an interim report will be ready by the Dec. 31 deadline set by the Council resolution which established the taskforce as a joint legislative-executive venture. The initial report, however, will lack what may be the final report's most significant component: a possible recommendation to overhaul the pay and benefits system for the 1,350-person county government workforce.

That has been delayed until around mid-January when the taskforce will receive results of a study by an outside consultant of how the employees presently compare with those holding comparable positions in other governments and the private sector. Personnel costs account for about 70% of the county's $175 million budget.

Also expected then will be the results of a professional survey of what a representative sample of county residents desire in the way of services and how much they are willing to pay to sustain them.

"The residents of New Castle County face a choice between the current level of service and the current price for receiving those services," the draft executive summary declares. County government "cannot sustain its current service levels with existing property tax, fee[s] and other revenue sources."

Coons, who did not participate in previous meetings to avoid the appearance of exerting undue influence, attended part of  the taskforce meeting on Dec. 15 to personally thank the participants whose efforts, he said, demonstrated a collaborative approach to dealing with a public issue found in few other places. "In a lot of jurisdictions, they don't get things done. They just keep going on until they have a trainwreck," he said.

Former County Councilwoman Karen Venezky, who sponsored the resolution which established the taskforce and who co-chaired it with Strine, hailed the panel's cooperative attitude. Although its membership reflected a variety of potentially competing interests, it was able to accomplish what it was intended to do, she said. "We've done it and there's been no finger-pointing," she said.

Coons added that he believes the taskforce report will "respect both our workforce and the folks who have to pay the bill."

The draft executive summary states the problem in succinct fashion: "General government expenditures are projected to grow at an annual rate of roughly 6% a year while revenues are projected to grow at a rate of approximately 2% per year. ... Delaying action will make any solutions much more difficult and painful for residents and taxpayers in the future."

It points out that the "financial imbalance" expected to exhaust the reserve fund being used to balance the operating budget by November, 2008, is the result of "overdependence on revenues related to real estate." It is considered a foregone conclusion that county officials will seek approval from the state legislature to diversify its revenue streams.

The draft executive summary cites steps taken during the past two years to control spending and maintain service levels, but declares "there are no easy budget cuts left."

A pivotal recommendation in the draft executive summary calls for continuing services at current levels in areas which affect all or a large majority of county residents. They include public safety and emergency response, property code enforcement, libraries, parks and human services.

Less comprehensive services and special events would be financed to a large degree by charging participants fees to cover all or most of their cost. The possibility of 'outsourcing' some activities to private contractors or concessionaires would be explored.

"There is no solution in the short term that does not include a substantial increase in the property tax" Strine told the meeting.

The summary does not suggest how much the increase should be beyond noting that increases for the coming and subsequent fiscal years "of more than 5% will be required to bring the budget into balance."

At a previous meeting the taskforce called upon County Council to repeal the provision in county law which prohibits the executive from submitting a budget request which includes a proposed tax increase of more than 5%. The law, however, does not restrict Council from exceeding that amount. An ordinance to remove the cap has since been introduced and is likely to be voted upon when Council reconvenes after the turn of the year.

In previous discussions, the taskforce and its revenue committee have talked in terms of an order of magnitude of about 15%. The current rate on both residential and commercial properties is 47.78 for

Taskforce membership

Michael Strine, chief financial officer, co-chair

Karen Venezky, former Council Council member, co-chair

Vincent D'Anna, New Castle County Board of Realtors

Richard Davis, Du Pont Co., former state legislator

Brian McGlinchey, A.F.L.-C.I.O legislative chairman

Pete Ross, former state budget director and New Castle County chief administrative officer

Deneen Stewart, general counsel and secretary, I.N.G. Direct

Richelle Viable, chief executive officer, Citizens Bank Delaware

James Wolfe, president and chief executive officer, Delaware State Chamber of Commerce

each $100 of assessed value in unincorporated areas with that scaled down relative to the amount of services provided by Wilmington, Newark, Middletown and other municipalities.

Among the 22 likely recommendations included in the draft executive summary is one calling for requiring payment in lieu of taxes by owners of tax-exempt property used for commercial purposes, which in the aggregate is currently assessed for $3.6 billion.

Also included is one to restructure existing tax and sewer-fee exemptions for senior citizens and first-time homebuyers, which are referred to as being "over generous," so that they are available only to "residents that are truly suffering from financial hardship."

The draft executive summary divides the potential recommendations into those that are considered long-term 'structural' ones and short-term.

The long-term ones are:

"Set tax level to tie recurring and predictable revenues streams to support of basic operating expenses."

"Develop policies for us of extraordinary revenue gains." Rather than incorporating 'windfalls' into the general budget, the money would be used for such things as meeting capital costs, debt reduction, tax rebates and temporary tax-relief measures.

"Adopt expenditure limitations." That would follow the state government's provision for limiting appropriations to 98% of anticipated revenue.

"Align growth in personnel costs with fiscal conditions." That would eliminate automatic merit-system pay increases in favor of determining the raises on the basis of the current financial climate.

"Implement 'rolling reassessment'." After a general reassessment to equate assessed value with actual market value, a proportionate number of properties would be reassessed annually in, perhaps, three- or five-year cycles. The most recent general reassessment was in 1983.

Possible short-term recommendations are:

"Continue current service levels in core areas."

"Seek full cost recovery [from] discretionary services." They would include such things as contracted police services, and sports and recreation leagues. In-kind contributions, use of volunteers and corporate sponsorships would be possible

"Expand fiscal-forecasting tools." Regular analyses of trends would be part of the budget cycle. The continuing operating costs of policy changes, capital spending, and land-use agreements would be estimated in fiscal notes and considered as part of the approval process.

Tie capital-spending decisions to the ability to service the resultant debt in annual operating budgets.

Keep capital impact fees for parks, libraries and public safety up to date.

"Accept and implement the recommendations of the recent paramedic service study." They include vehicle deployment and station location as well as exploring partnerships with volunteer fire companies, Christiana Care and other providers.

"Initiate dialogue to rationalize delivery of specialized police services." This would reduce or eliminate duplication of such things as dog squads, bomb squads, and training academies with state and neighboring jurisdictions.

Issue requests for proposals to 'outsource' specialized services which could possibly be delivered more economically by the private sector. Some possibilities for outside contracting which have been mentioned are operation of the conference center at Rockwood Mansion Park, the equestrian activity at Carousel Park and the tennis program at Delcastle Recreation Center.

Increase productivity by use of techologies.

Tie any increase in the size of the county workforce to the increase in the amount of revenue to support it.

"Reduce the size of the current workforce to bring [it into] line with fiscal capacity." New facilities, enlargement of County Council and increased level of services have resulted in enlarging the county workforce by 275 positions between 1999 and 2005 at an average cost of $60,000 in pay and benefits.

"Diversify and align revenues with services provided." Suggested possibilities include a lodging tax comparable to the one levied by Wilmington, extending the 9-1-1 fee to include cellular telephones and charging for paramedic services.

"Increase property taxes." The current average property tax bill is less than $1 a day. Although the required increase in  percentage rate would seem high, the actual dollar amount would be relatively small.

"Sunset or replace overly generous tax and sewer exemption programs."

"Implement a payment-in-lieu-of-taxes program for commercial properties currently exempt from paying property taxes."

"Require fees for services where appropriate, especially for special events or programs that are not basic or core services."

"Encourage the state [government] to recognize the unique role that New Castle County and many municipalities play in providing public-safety services." This would see state support for police services in areas not covered by the state force in proportion to the number of officers and calls for service.

Read previous Delaforum article: Ordinance would repeal tax hike cap

Read previous Delaforum article: County financial-study panel looking at a variety of approaches

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