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1/3/2007
New Castle County Must Overhaul Financial Policies

Councilman Bob Weiner’s clarion call last year for fiscal reform in the face of a systemic budgetary shortfall by undertaking a benchmarking study of county salaries has finally been heard. New Castle County commissioned a study group called the Task Force on the Financial Future of New Castle County. One of the adopted components of the Task Force’s strategies was to commission a benchmarking study. This study, which is almost finished, compares New Castle County employees’ salaries with the salaries of other employees in nearby counties & states and with salaries in the private sector. “We cannot balance the shortfall on the backs of the taxpayers alone”, Weiner said. Noting that 75% of the county budget was comprised of salary related components, Weiner noted that a careful study would likely show that New Castle County union contracts with a guaranteed 8% annual salary increase packaged with liberal benefits were a main cause of the county’s structural imbalance. Weiner’s timely remarks a year ago were met with withering criticism from the County unions. At the time, no other New Castle County Councilman was willing to join Bob Weiner to support his Resolution calling for a benchmarking study in the face of a ballooning deficit. Instead a Task Force was commissioned. Now, a year later, the New Castle County Task Force conclusions are consistent with Bob Weiner’s previous position. Now after having reviewed the preliminary Task Force report, Councilman Bob Weiner has now asked the County Administration to pledge to implement the Task Force’s recommendations regarding adjusting the salary and benefits of our county employees to bring them in line with salaries in other similar public and private sector jobs.

The New Castle County Finance Department’s letter to New Castle County Council, Interim Report, Task Force Hypothetical Scenarios and Wilmington News Journal December 31, 2006 article are provided for greater detailed understanding of the county’s fiscal crisis.

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NCC Finance Department's letter: PDF File

Task Force Interim Report: PDF File

Task Force Hypothetical Scenarios: MS Excel File

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News Journal Article:

Overhaul financial policies, NCCo told

Ballooning deficit not easy to fix, task force report says

By ANGIE BASIOUNY, The News Journal
Posted Sunday, December 31, 2006

A task force formed this summer to examine New Castle County's financial problems is preparing its final report -- and the message is stern.

The county will not be able to deflate its ballooning deficit, which is expected to reach $45 million by 2009, through spending cuts and property-tax hikes alone, according to an early draft of the report.

Instead, an overhaul in many of the county's financial policies is needed.

"There are no easy budget cuts left," says the draft report from the nine-member Task Force on the Financial Future of the New Castle County. "There is no silver bullet to resolve the crisis."

The group's initial long-term recommendations include:

• Using predictable revenue streams to support basic operating expenses and setting tax levels accordingly.

• Following the state's model of putting together a budget that spends no more than 98 percent of expected revenue.

• Tying increases in salaries and benefits more directly to the county's fiscal conditions. Most of the county's employees are covered by union contracts that call for 3 percent annual raises. In addition, employees who pass their annual evaluations receive 5 percent step increases for the first 10 years.

• Implementing rolling reassessment of property values. The county's taxes are artificially low because all property is assessed using 1983 standards. The average annual tax bill is $342.

• Stopping use of volatile revenue sources, such as the real estate transfer tax, to pay for regular operating expenses. Money from the transfer tax, a one-time fee collected when homes are bought and sold, should be seen as a windfall to decrease debt payments or provide tax rebates in boon years, according to the report.

The county is projected to bring in at least $10 million less this year in transfer taxes, its second-largest source of revenue, because of the slowdown in home sales. Officials have scrambled to make up the loss through a hiring freeze, 10 percent across-the-board cuts and other emergency measures.

"You have to find something that's stable, and the transfer tax certainly is not stable," said James A. Wolfe, president and CEO of the state Chamber of Commerce and one of the task-force members. "That's why they are in the ditch now."

The task force, which formed in July, still has some work to complete before issuing a final report in mid-January, namely a study comparing salaries and benefits of county employees with their counterparts in other governments and the private sector. If the study reveals that New Castle County workers' pay is out of line with their colleagues, the task force could recommend a restructuring of pay and benefits.

Whatever the outcome, said task-force member Vincent D'Anna, it's going to hurt. "I think we're going to have to be enormously creative, and there will be a whole lot of pain for everybody to share," said D'Anna, a Realtor with Fox & Roach in Newark. "There is no posturing or politicking here. This is real."

The task force is working on a host of short-term recommendations as well. Some are already under way by County Executive Chris Coons' administration and the council, such as repealing a 5 percent annual cap on property-tax increases.

Others could be controversial, D'Anna and Wolfe predict.

Those recommendations include:

• Sunset and replace generous tax and sewer exemption programs. Currently, seniors with incomes that do not exceed $50,000 are eligible to subtract $50,000 from their property's assessed value. Disabled homeowners with incomes that do not exceed $40,000 are eligible for a $40,000 exemption.

• Implement a payment-in-lieu-of-taxes program for commercial sites that are exempt from paying property taxes. Those sites, including hospitals, government agencies and charities, account for $3.6 billion worth of tax exemptions.

• Reduce employee costs and the size of the work force. Salaries and benefits make up 75 percent of county spending and are growing at a rate more than three times the growth of the tax base.

• Consider new sources of revenue, such as a lodging tax, increased surcharges on 911 calls and billing for paramedic services.

Wolfe and D'Anna said the task force never intended to "cherry-pick" line items in the budget, but to take a big-picture look at why spending continues to outpace revenue.

What they found surprised even D'Anna, who has been a close observer of county government for years.

"If a fairy godmother descended upon us and gave us $50 million, that would just delay the inevitable," he said. "The thing we haven't been able to get through to anybody is that the problem is structural."

Ultimately, Wolfe said, the council will have to decide what to do with the recommendations. "They are going to have to make some hard decisions," he said. "They are going to have to decide what's going to hurt the least and what's most palatable for the people who elected them. And then, they are going to have to move forward."
Contact Angie Basiouny at 324-2796 or abasiouny@delawareonline.com.
WHAT'S NEXT

The task force, which formed in July, still has some work to complete before issuing a final report in mid-January.

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