November  14,  2008

Huge county tax increase
likely to come next year

Property owners in New Castle County could be looking at a potential tax increase as high as 50% if current trends in the national and local economies continue.

The Coons administration is several weeks away from completing work on its proposed operating budget for the fiscal year which begins next July 1 and even further from presenting the request to County Council next March. County Executive Christopher Coons said that, while county government's fiscal situation is serious, there is no consideration being given at present to accelerating the budget-approval and tax-setting process.

"This is not today a crisis. ... We are not at that point yet," he said at a press conference he called on Nov. 14 to provide a forum to announce several internal cost-cutting measures in response to a precipitous drop in county revenue.

Later that day chief administrative officer Jeffrey Bullock, the second-ranking member of the administration, stunned officers of area civic organizations with the 50% estimate while responding to a question about what it would take in the way of a property-tax increase to recover the 'lost' revenue while maintaining public services at their current levels.

Coons added "about $200."

That figure is half the amount that officials say is the average residential tax bill in the unincorporated areas of the county. Residents of incorporated municipalities pay lesser amounts determined by rates scaled down to reflect public services provided by local governments. The tax on commercial properties is levied at the same rates.

Asked if a tax  increase of that magnitude, or anywhere near it, would be politically feasible, County Council president Paul Clark said Council would likely be reluctant to acquiesce to any tax increase. "I don't see this Council raising [the tax rate] because it is the right thing to do. ... There has to be a mandate [from the public]," he said.

He noted that a proposal to expand the county police force and pay for additional officers and civilian personnel with the equivalent of a surtax was deemed untimely in the light of the deteriorated economy and withdrawn despite the fact that public safety is considered the top priority among county residents.

As previously reported, the administration and Council members are going to seek a mandate at a series of public meetings in each of the 12 Council districts soon after the turn of the year. Attenders at those meetings will be asked what services "we can afford and what they're willing to support," Coons said.

Meanwhile, he said, new cost-cutting measures are required to respond to an operating deficit this fiscal year presently projected to amount to $29.9 million. Even so, the cuts he announced would cover only $5 million of that shortfall, he said.

The shortfall was projected to be $17 million when the current budget was approved in March. That would be covered by dipping into budget reserves accumulated in past years. The larger gap is now expected to cut those reserves by nearly half, to $34.2 million. At that rate, they would exhausted during fiscal 2010, two years earlier than previously thought.

County government is almost totally dependent on the real estate and housing sectors. The real estate transfer tax, second to the property tax as a revenue generator, is now estimated to produce $20 million this year, less than half its $40.5 million peak in fiscal 2006, during the real estate boom.

Although the federal government has come to the aid of banks, mortgage lenders and others in the financial sector and is considering helping the troubled automobile industry, there is no likelihood of a comparable bailout for local governments, Coons said. With state government's own budget woes, members of the General Assembly "will be less inclined to be helpful," he added.

There is little consolation to be taken from the fact that local governments all over the country are hurting.

The measures that Coons announced were:

A hiring freeze for non-essential positions -- exempting only 'front-line' jobs in public safety, Coons said. County government currently has about 100 vacancies in its workforce.

A limit on overtime except to meet "approved critical needs."

Reductions in spending for capital projects, of which there are few in process.

Limits on all travel and training.

Requiring prior approval for all requests for contractual services.

Reductions in purchases of both new and replacement major equipment.

Those cuts, Coons said, "are only a first step in addressing the severe revenue loss we have experienced and further measures will be coming in the weeks ahead," Coons said during his prepared remarks.

"When the next round comes, it will be a reduction of [public] services because there is no other option," Bullock told the civic association officers.

He and Coons both expressed reluctance to dip into the so-called 'rainy day' emergency fund -- currently $31.9 million -- or to lay off county employees. Both indicated, however, that either or both could occur if conditions do not improve.

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