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May 27,  2009

Council gives quick, quiet
approval to budget, tax hike

In uncharacteristic fashion, County Council zapped through a half dozen fiscal measures. In just 20 minutes, it approved a $224.5million spending plan and a 25% property-tax increase to help pay for it; polished off some non-substantive resolutions; and adjourned its most significant session in many years.

Although there was not total agreement among the lawmakers on the key measures, there was no floor discussion or debate. Only one attender in an audience, composed mostly of county officials and other employees, took advantage of the public comment session to offer testimony.

With County Executive Christopher Coons standing by to immediately sign the five ordinances into law -- the one fiscal resolution did not require his signature -- the session on May 26 brought to near resolution a crisis which has been dramatically escalating for nearly a year.

Still to be resolved is how the police department will handle its portion of the $2.2 million that was lopped from the salaries-and-wages line of the Department of Public Safety budget by an amendment approved by an 11-to-two vote just before the budget ordinance was enacted. Layoffs of trainees and rookie paramedics already have been announced in the other divisions of the department.

Chief administrative officer Tracey Surles told a Council finance committee meeting earlier in the day that the administration was "very close" to an agreement with the police union on a new contract. That presumably will involve concessions to meet its role in what Coons has called a 'share-the-pain' approach to the financial pinch. The public has been told so far that the choice is between lay-offs and a 5% pay cut, but there is no way to tell what else may be on the table in the secrecy-shrouded negotiations.

"We do not have a ratified agreement we can publicly talk about yet ... [but] we hope to bring them (the negotiations) to a conclusion soon," Surles said. After the meeting, Joe Lavelle, president of Fraternal Order of Police Lodge 5, corroborated Surles's report, but did not reveal any details.

Lynn Truitt, president of the New Castle County Volunteer Fire Association, testified at Council's plenary session that the paramedics layoffs and possible layoffs of police officers will adversely affect county residents.

The budget ordinance was approved 11-to-two with Timothy Sheldon and Jea Steet casting the negative votes.

Sheldon and Street also voted against the amendment which apportioned a total of nearly $4.8 million in pay cuts among the departments and constitutional 'row' offices. They were joined by David Tackett in opposing amendments which spread out over five years the additional 'contribution' county government has to make to its employees' pension fund to make up losses in asset value of its investments as a result of the recession and one that made additional cuts in the constitutional offices' budgets.

An amendment extending to Council's administrative staff and the county auditor the 5% pay cut other county employees are taking while restoring the structure of annual 'merit' increases to match what the other employees are receiving was approved unanimously.

The ordinance imposing the property-tax rate increase -- clearly the most controversial of the batch -- drew the narrowest support with William Powers and Robert Weiner joining Sheldon, Street and Tackett in voting 'no'.

It sets the rate for the coming fiscal year at 70.18 for each $100 of assessed property value in unincorporated areas of the county. That will be scaled down to 24.36 in Newark and Wilmington and 25.29 in Delaware City, Middletown and New Castle. The rate in municipalities is determined by subtracting the estimated cost of county services property owners there do not receive because they are provided by the municipal government. The current rate in unincorporated areas is 56.14.

 The administration has said that the increase will cost owners of residential property assessed at the countywide average about $100 more a year. The tax is due before Sept. 30. For the majority of homes it is paid by mortgage holders from escrow accounts financed by the owners' mortgage payments.

Street sparked discussion at the finance committee meeting when he proposed introducing an amendment to the tax ordinance which would specify that the higher rate would apply only to the fiscal 2010 obligation. While acknowledging that a rate increase is necessary because of the "extreme fiscal crisis" in which county government finds itself, he said that "at the end of the [fiscal] year, [it should] revert back to the current rate."

He withdrew the idea when county attorney Gregg Wilson pointed out that state law directs County Council to annually set a tax rate which balances the budget it approves. That means that, theoretically, it neither increases nor decreases a rate, but sets a new one each year. As a matter of general law, Council cannot bind future Councils to set a lower tax rate or, for that matter, to do anything, Wilson added.

William Bell said the size of the rate increase this year points up the need to reimpose a ceiling on future increases. Council three years ago removed the former 5% ceiling and enacted a 17.5% increase the following year.

George Smiley, who co-chairs the finance committee, pointed out that, despite a 25% tax-rate increase, the budget for the coming year actually will be lower than it was this year. It calls for spending $161.2 million on operations, or 3.7% less than $167.5 million, the most recent estimate of expenditures during the current fiscal year. The sanitary-sewer budget for fiscal 2010 will be $63.3 million, or 2.4% higher than estimated $61.8 million being spent this year.

Council at the plenary session unanimously approved a 10% increase in sanity-sewer rates to finance that budget.

It also approved -- with Powers, Sheldon and Tackett voting 'no' -- spending $57 million on 20 capital projects while deauthorizing $58.7 million for 17 projects. That ordinance authorized sale of $19.9 million of general-obligation bonds. Acting chief financial officer Ed Milowicki told the finance committee that the administration does not anticipate going to the bond market until 18 months to two years from now.

Council president Paul Clark said during the committee meeting that Council should approach the fiscal 2011 budget in a more fundamental way by looking at "what we want out of this government ... [and[ what that is going to cost" as it goes along rather than waiting for the county executive to make a proposal in March. He noted that some of that has been done in the past -- having achieved, for instance, such things as limiting the number of automobiles county employees are authorized to take home -- but said the effort should be more systematic.

Except for the amendments drafted by the administration, the approved budget  is unchanged from what Coons requested in March. Only one of the four amendments -- the one involving its own staff -- originated with Council.

"We haven't, as a Council, suggested any substantive changes," Street said. The budget hearings that Council held "were basically information sessions," he added.

Referring to Council's role in determining what county government spends, William Tansey said, "All it has been is a lot of rhetoric. We don't do anything ... but tax the taxpayer."

Smiley disagreed. He said that he and other Council members have been carefully monitoring the fiscal situation and contributing ideas and suggestions as the administration put together its budget request. "It isn't a case of where we start looking at the budget in March," he said.

John Cartier said much of what drives the budget "is beyond our control." While it is generally agreed that county government needs more diversified sources of revenue, "very reasonable proposals ... have been before the [state] General Assembly for a number of years" without any action being taken to implement them.

Penrose Hollins pointed that New Castle County is "not unique in the fact we're having a challenge now in balancing the budget."

The state of the national economy has affected local governments all across the nation. Unlike the federal government, they are not permitted to finance deficits by borrowing or the proverbial 'printing money' which the federal government can do.

"I can't see an economic indicator that [shows that] next year we will be better off than we are now," Hollins said.

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