March  7,  2008

Tax increase back in play as
county budget takes shape

County Executive Christopher Coons will propose "bare bones" operating and capital-spending budgets for the coming fiscal year and acknowledged that the possibility of a third consecutive increase in the property-tax rate is back on the table.

As recently as the turn of the year, Coons was talking about not only holding the line next year but also hoping to avoid a hike in fiscal 2010.

Asked after he and chief financial officer Michael Strine painted the gloomiest picture yet of county government's fiscal situation at the bimonthly meeting of officers of areawide civic organizations if a tax increase was now in the offing, Coons told Delaforum, "We are looking hard at all our options."

Strine said at the meeting that "if we do [nothing more than] what we're doing now," spending in the year beginning July 1 will be about 7% higher than this year. The administration, he added, is trying to squeeze that prospect into a budget that will grow by no more than 5%.

Coons is scheduled to present his budget request to Council at a special session on Mar. 18. Council must enact a budget before the end of May. The approval process this year will be conducted as Coons's job and seven of the 13 Council seats, including the presidency, are up for election in November.

In any event, Strine said, the budget reserve, exclusive of the 'rainy day' emergency reserve, on which the Coons administration has been living since taking office three years ago is projected to run out some time in late calendar '09. "We're about back to where we were before" the current property-tax rate was set last May. A 17.5% rate increase brought it to 56.14 for each $100 of assessed property value in unincorporated areas. There was a 5% increase in fiscal 2007.

Strine again primarily blamed this year's lower-than-anticipated revenue on a fall-off in collections from the county's share of the real estate transfer tax as a result of the slump in the residential housing market and the reduction in short-term interest on invested funds as a result of the Federal Reserve Board's efforts to stimulate a recession-bent economy by several cuts in its benchmark interest rate.

Also, since January, the county has come out on the short end of the consequences of court-related activity. The civic meeting on Mar. 6 followed on the heels of published reports that former chief administrative officer Sherry Freebery is seeking reimbursement of $3.7 million of legal fees incurred in defending against federal corruption charges. All but a token count, to which she pleaded guilty, were dropped.

County Council president Paul Clark said the reimbursement policy was put into place to protect police officers, code inspectors and county officials from liability in court actions related to their duties as county employees. He said Council already has hired an outside attorney to advise it concerning Freebery's claim. "This is being taken very seriously," he said. "You can bet we're going to be looking closely at every cent."

Coons said that, "on advice of counsel," he would not comment on the claim. The county is a party to a civil suit challenging the reimbursement policy. With apparent reference to Freebery's claim, he added, "Odds are there will be a lawsuit brought."

Coons and Strine both said the long-term solution to the county's fiscal woes is relief from the state legislature. The General Assembly failed to act last year on measures requested in that regard.

Strine said that efforts will be renewed this year to get authorization for an increase in the lodging tax from 8% to 10%. That would match what Wilmington government collects and would be "in keeping with that great Delaware tradition of getting tax revenue from people who don't live in Delaware," he said. People who come here on business would be the largest source. Visitors, he pointed out, benefit from taxpayer-supported public services while here.

The county also is seeking the ability to levy a tax on cellular telephone bills comparable to what it receives from taxing landlines telephone service.

Clark said it is difficult to explain to the public that county government doesn't have the authority "to tax all sorts of things without permission from the state."

Strine said there has been an increase in the number of sheriff sales and recording of mortgage satisfactions resulting from refinancings, but so far no indication that New Castle County residents are abandoning properties which are worth less than the debt on them. Instances of that are increasing elsewhere in the nation. Also, he said, although the inventory of listed but unsold houses is up, there has as yet been no significant drop in prices of those that are being sold.

Coons said it is not likely that the General Assembly will authorize -- and pay for --  a total reassessment of properties, much less approve setting up a system of 'rolling assessments' that would tie assessment to increases in property values. That would result in property-tax revenue increasing roughly in step with increases in the cost of providing services. The downside, however, is that when property values decline, so does revenue.

"If we had that since 1997, we'd be in good shape today," Clark said. The real estate boom was largely credited for allowing property owners in the county to go 10 years without a tax increase.

From a politician's point of view, he added, reassessment is a 'no-win' proposition: The third of property owners whose taxes increase don't like you; the third whose taxes don't change "don't like you anyhow" and the third whose taxes go down "soon forget what you did for them."

Get more information about this topic

Read previous Delaforum article: Sagging economy buffets county coffers

Read previous Delaforum article: Coons and Clark say no tax increase this year

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