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June 9,  2009

County's fiscal problems still
well short of being resolved

When County Council recently enacted the fiscal 2010 budget, it was something like a fifth-inning grand slam home run. It may have represented an accomplishment and looked good on the scoreboard, but everyone in the bleachers knew there were still several innings remaining. 

"I made it clear that this was not a one-year problem," County Executive Christopher Coons said, referring to his budget address in March. "We've made real progress in cutting our costs. We have to work even harder next year."

During the past few years, his administration has been forced to deal with a worsening financial situation. On top of what he and others termed a structural deficiency involving near total dependence on real estate to generate revenue, came the collapse of national and regional economies.

That showed up most dramatically in the county's share of the state tax on real estate sales, which plummeted to an estimated $16.6

million this fiscal year from $32 million last year and $40.5 million in fiscal 2006 during the boom in the housing market.

Even with the  25% increase in the property-tax rate which Council approved and a 5% across-the-board pay cut for county government employees coupled with other cost-cutting measures, it will be necessary to dip into previously accumulated reserves for $6.7 million in order to balance the fiscal 2010 budget.

The most-recent long-term projections, based on current resources and believable assumptions, indicate that the county is facing an $88.2 million budget shortfall between now and fiscal 2014.

During an interview with Delaforum, Coons declined to say specifically whether he felt the limit for tax hikes, pay cuts and service reductions has been reached. "Our biggest challenge is how few options we have," he said.

Prospective New Castle County residents -- likely transferees from Fort Monmouth, N.J. -- attend a county-sponsored exposition. Attracting them to live here is part of an effort to expand the tax base and boost the local economy.

He did reiterate his long-standing belief that the long-term solution lies with the state legislature.

He said his administration will redouble efforts to convince the General Assembly to allow the county to diversify its revenue streams. He emphasized that he is not seeking a bailout, but favorable action on "the concrete proposals we've made" between now and the time he submits the next county budget in March, 2010. The proposals are taxing hotel accommodations, cellular telephone service and cable utilities' assets and restoration of the county's share of corporation filing fees.

On the other hand, the county wants "to get through June 30 without losing any more money to the state," he said. Beyond an anticipated further reduction in state reimbursement for paramedics services, he said he is not aware of any other threats percolating in Dover.

With some indications that the national recession may be bottoming out and that the real estate market may be starting to stir, Coons, like his counterparts in local governments throughout the nation, have their eyes fixed on the tail end of the alphabet.

"The big question is whether it's going to be a U, a V or a W," he said. That refers, respectively, to the recession bottoming out but holding at a low level for several weeks or months before turning up; the economy recovering as sharply and quickly as it declined; or a short recovery which loses steam and slips back before growth finally resumes.

There are also a few more immediate hopeful signs. The county economy, Coons said, expects to benefit significantly from the relocation of Department of Defense communications research and development from Fort Monmouth, N.J., to Aberdeen (Md.) Proving Ground.

County government is making a significant economic development effort to attract holders of  as many as possible of the 28,000 jobs to be filled by civilian workers being transferred or new hires to make their homes and the firms which support the military operation to locate on this side of the Mason-Dixon Line.

Karl Kalbacher, director of the county redevelopment office, said surveys indicate that as many as 10% of the transferees would prefer to live in Delaware, with emphasis on the Newark area. The county is taking the lead in sponsoring tours of the area and linking them with companies and service providers to ease the relocation process.

Conversations with several of the folk who attended the third in a series of informational expositions and toured the area on June 6 indicated receptivity. "We prefer Delaware based on what we've seen," said Howard Chyatt.

Kalbacher said several local firms and private agencies are backing the recruiting effort. The exposition was co-sponsored by the homebuilders, apartment owners and realtor organizations. The University of Delaware and Delaware Technical & Community College are offering in-state tuition to members of transferring families.

To a large extent, he said, success in the effort depends on establishing a commuter rail link between Newark and Perryville, Md., the respective terminuses of Southeastern Pennsylvania and Maryland transportation authorities.

Coons said he is hopeful that the Chrysler plant site will be developed by the University of Delaware into a 'technology park'. Although the university would be exempt from the property tax, he added that he also is hopeful that the commercial nature of the venture would lead to some compensating arrangement.

During the Delaforum interview, he also dropped a tantalizing hint by saying that he is aware of an effort "to try to reopen the General Motors plant as an automobile plant with a new owner." He said he was not at liberty to comment further.

Meanwhile, with  about three-fourths of its operating expenses going to pay and provide health care, pension and other benefits to its employees, county government cost-cutting must necessarily focus first on the workforce. There currently are 1,471 employees, down from 1,574 in 2005 and another 97 positions are vacant.

About 40 employees have given notice that they intend to retire and, with a relatively  large proportion of long-service workers on the rolls, approximately 400 others are eligible to retire.

Although much of the general public is inclined to regard reducing the number of government workers a sign of efficiency, there is the inevitable other side to the equation. Fewer workers means less services to the public.

Governments do not produce and sell products; their function is to provide services, Coons pointed out. At a series of 'listening sessions' in each of the Council districts while the budget was being crafted early this year, he said, there was overwhelming support for maintaining, if not increasing, the level of county services and straw votes taken at the sessions demonstrated willingness to accept a significant tax increase to pay for them.

Despite what Coons considered recognition of county government's plight and a gratifying response, the fact remains that only a tiny portion of the county's residents attended the sessions. The 25% property-tax increase that Council enacted will hit home when the bills go out in July or mortgage companies adjust escrow accounts to cover it. Property taxes are due at the end of September.

Cuts in services imposed to balance the budget for the current fiscal have already generated measurable dismay among some segments of the public. Elimination of Sunday hours at the libraries is probably the most notable. Just becoming visible are the effects of reduced maintenance at county parks. More critical will be the results of layoffs of paramedics and the yet-to-be-determined cutback in the police force.

Coons emphasized that the nine paramedics involved were trainees and that redeployments will be used to preserve current levels of police protection.

He said negotiations are continuing with the police union. There were comments from both sides before Council's budget vote on May 27 indicating that agreement was close, but no further word has been forthcoming. The approved budget included a $1.2 million reduction in the salaries line of the Department of Safety component.

A set of ordinances will be introduced at Council's session on June 9 approving new salary schedules incorporating the pay cuts. A separate public statement, issued on June 6, said the administration is seeking to "negotiate new contracts with our workforce that better reflect our fiscal reality." Members of five of the six county unions have been working without contracts since April, 2008. The pay cuts that four of them agreed to were contained in amendments to previous contracts, which remain in force until new ones are approved.

Beyond public safety, he said, there are currently vacant positions that are crucial. "We'll have to see when we are in a position to be able to fill them," he said.

Coons has commented on several occasions that he enjoys being county executive. Asked during the interview if he was still enjoying the job, he replied, "I enjoy the challenge ... [of] fighting for the good things that the county does."

There is a certain satisfaction involved "in trying to help people through hard times" during what is likely to go down in history as the Great Recession, he explained.

"With the problems we face, it's not easy, but the people we work with make the job enjoyable," he added.

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Read previous Delaforum article: Council gives quick, quiet approval to budget, tax hike

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