The Committee of 100 | FYI Archives

For weeks, the media was full of dire stories about New Castle County needing a 65% property tax increase by 2010 when the reserves, which currently help to balance the budget, will be depleted. To help set the stage for New Castle County Executive Chris Coons' Budget Address March 21, Michael Strine, County Finance Director, presented a "Long-Term Fiscal Outlook and Scenarios" to business leaders at their March meeting with County Executive Chris Coons.

Michael started his presentation by noting that Delaware has the 48th lowest property tax. As a consequence, percentage increases don't tell the real story. Currently the average residential assessment in New Castle County is only $325, with a $400,000 house only $550 and a $1 million house $1,350. The average assessment with Senior Exemption is only $100. Small businesses in New Castle County average $2,750, malls $150,000, and the largest employers $800,000. Whereas other counties, such as in Maryland, have income taxes, New Castle County gets 45% of its income from property tax, with real estate transfer taxes and fees for direct services (mostly land-use) making up the remainder of the County's income.

Forty-eight percent of County spending is for public safety, including police, paramedics, the 911 call center, and emergency planning; 14% goes to the County's 15 libraries; 13% to the 250 parks and facilities operated by the County; 8% for land use and code enforcement; 6% for sports, recreation, and community programs; and 6% to the County Executive Office, County Council, and administration, including law, purchasing, human resources, and information technology.

The last Gordon Administration budget, FY 2005, included a 9% increase over FY 2004, and deficit spending of $25.6 million. The first Coons Administration budget reduced the increase to 3.35% and reduced deficit spending to $6.1 million. It cut costs by eliminating grants to non-profits ($41 million in FY 04-05); reducing debt service by financing capital projects from current capital reserves; permanently deleting 39 vacant positions; reducing the County's fleet; re-biding significant service contracts; reducing contractual services and non-essential overtime; hiring inside counsel to assist with worker's compensation claims instead of outsourcing; reducing "questionable" expenditures such as full-page color advertisements, VIP tent at the Rockwood Ice Cream Festival, subsidy of the Butler's Pantry and library cafés; and reducing the Executive Office contingency by 28%. In addition, the County renegotiated labor contracts with health care changes that save the County more than $1 million a year. The County added income by increasing the land-use fees.

That wasn't enough to balance the budget. The FY 2006 budget still ran a deficit, even if considerably smaller than FY 2005. The FY 2007 budget will, as well. The underlying problem is that County property taxes have not been increased for 10 years, and County services have cost more, each year. No property tax increases, even with growing budgets, was possible during the Gordon Administration because the General Assembly, in 1998, increased the counties' and municipalities' share of the real estate transfer tax from 1% to 1.5%. That windfall, during a period of high real estate sales, added millions to the County's annual revenue. While the new transfer tax money enabled the County to steadily increase its budget and run surpluses that went into a reserve, the budgets eventually ran deficits that required tapping the reserves. In addition, all of the new parks, libraries, and other buildings acquired and built during the Gordon Administration now need maintenance and operational lines in the budget.

During the "Listening Tour" which County Executive Chris Coons, Council President Paul Clark, and Council members conducted in each councilmanic district during 2005, residents made it clear that they didn't want County services cut. The problem is that, even with cuts already made, if there is no property tax increase, the reserve will be reduced to $5.7 million in FY 2009, and by FY 2010 the deficit is projected to be over $40 million. The County would need a 37.8% tax increase to balance the budget, with another 5% increase the following year. Director of Finance Michael Strine calculated that there needs to be a combination of cost cutting and tax increases of 9.9% each year through 2012 to forestall the monumental problem the County will otherwise face when the reserves are depleted.

In his Budget Address, County Executive Chris Coons proposed a "roadmap" which calls for continuing to cut costs, restraining new spending, seeking state and federal financial assistance, and increasing property taxes by 5%, which would cost the average homeowner $16.

Nearly three-quarters of County Government costs are salaries and benefits, and salary steps and health-care costs provide little flexibility for cost containment. One-third of the FY 2007 Budget growth is for electricity and fuel costs. To cut costs in FY 2007, the County Executive calls for zero growth in the workforce by cutting 18 positions across government, then adding 10 police officers and 7 staff positions for the new Woodlawn Library. The proposed budget cuts $4.7 million from existing programs; funds no new requests; cuts overtime, seasonal, and part-time positions; reduces funding to the volunteer fire companies; and reduces funding for key programs such as the Emergency Services Corps, the Redevelopment Office, summer youth programs, cafés, and the Buy from Your Neighbor program. In addition, the County is conducting an energy audit and seeking bids from electricity suppliers outside of New Castle County to explore additional ways of lowering costs.

In search of additional revenue, the administration will request that the General Assembly change the Delaware Code to increase the County's real estate transfer tax revenue by eliminating the first-time buyer exemption. New Castle County, unlike other governments in Delaware, offers an exemption to the real estate transfer tax for first-time home buyers, regardless of their income or the price of the houses they are buying. Likewise, at the federal level, the County is lobbying against the Bush Administration's proposed cuts in Community Development Block Grants and Justice Assistance Grants. Last year, the County absorbed a 15% cut in federal funding for the senior home-repair program. This year's additional proposed cuts for FY 2007 cannot be replaced with County dollars.

The final decision on the County Budget and any tax increase rests with Council. With nearly half of Council facing re-election, a decision to raise property taxes, even by a small amount, may be difficult.

Wilmington Reintroduces Stormwater Fees Ordinance

Companion ordinances which would impose stormwater fees and reduce sewer fees were introduced as part of the City's budget package in City Council March 23rd for first and second readings. The goal of the ordinances is to separate the costs of managing stormwater vs. sewer by introducing fees to capture the cost of stormwater runoff from properties actually producing runoff. The ordinances are scheduled for action, along with the budget, the end of May.