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1/5/2011
Financial realities demand NCCo change unsound ways - Delaware Voice by Dace Blaskovitz

NEWS JOURNAL
DELAWARE VOICE
By DACE BLASKOVITZ

New Castle County is broke, in my opinion.

NCCo is broke in structure -- and moving towards being broke financially.

... In a position paper, former New Castle County Director of Finance Ron Morris writes, "Failure to take (common-sense responsible) action will more than likely adversely affect the county's budget balancing responsibility, severely limit financial flexibility, and very likely impact the county's bond rating."

The financial success -- or failure -- of New Castle government is predicated on how it manages the cost of its employees and retirees. It really is that simple.

Roughly three-quarters of the county's costs are associated with its 1,420 full-time employees and its 1,248 retirees. NCCo also has nearly 500 seasonal and part-time employees. Almost 100 full-time county employees are paid close to or more than $100,000. With few exceptions, gold-plated health care extends to the grave.

Almost all retirees enjoy annual cost-of-living increases (COLAs). Of particular note, the current New Castle county police retirees receive a never-ending, no-cap 3 percent compounding COLA. Therefore, most NCCo police will average -- per life expectancy tables -- the same compensation in their retirement as when they were employed. For reference, an NCCo police officer with five years experience is paid around $85,000 a year (in salary alone).

Appropriate compensation is a lot like beauty, it's in the eye of the beholder. But most million-dollar compensation packages carry some risk. Not in New Castle County; retirement is guaranteed by the taxpayer.

Looking back, with NCCo's revenues largely tied to the real estate market, it was a heckuva run. Starting in the late 1990s, the value of local homes doubled and tripled, in relatively short periods of time. The compensation of county workers participated in that orgy.

Unfortunately the housing balloon popped, but the NCCo compensation packages did not shrink or even stall. The continued to grow until very recently.

Declining revenues and relentlessly escalating cost brings ramifications. The county's debt has almost doubled over the last five years. Also from 2005 to 2010, NCCo property tax rates increased 55 percent. Sewer rates increased more than 60 percent from 2005 to 2011. Even with the spike in tax revenues, general government spending outpaced revenues. From 2000 to 2009, pension assets increased $9 million, while the county's unfunded accrued actuarial liabilities increased over $140 million. (The county pension assets currently total about $350 million). Retiree health care cost is a nearly $250 million unspoken future black cloud.

So after years of delaying executive decisions, hoping an economic bounce would magically undo the dilemma, dwindling reserves are now forcing a day of reckoning. Unbelievably this scary story actually gets worse. Despite these tough economic times for many in the private sector there's an attitude of entitlement. In just the last couple of months, with NCCo nearing a financial calamity, the New Castle County Pension Board has had two groups requesting enhanced benefits.

... NCCo government is simply unsustainable, given today's new economic climate. Therefore, our elected officials should be asked if they endorse the status quo or oppose. Looking forward, will better informed voters choose to continue to reward municipal workers with million-dollar deals (from an actuarial basis)?

Instead, citizens should demand a reduction in head-count. NCCo's actuary has pension and health care proposals waiting for action. Salaries have to reflect the balance sheet. Perhaps a spending oversight board would assist in fiscal restraint.

Can New Castle County branches or departments be merged or combined with state or Wilmington units? Do these specialty investment firms that advise and/or assist strained municipalities see NCCo assets that can be monetized? What can NCCo outsource to the private sector?

Here is what we should not do. We should not raise taxes, nor raise fees, nor raise service charges. In my opinion, it is unconscionable for "revenue enhancements" to even be mentioned in our report. Other than those motivated by self-interest, who is asking for more-of-the-same?

... Like a hefty chunk of the local households who have already done it, New Castle County government needs basic, immediate belt-tightening. More than ever, leadership is needed.


Dace Blaskovitz has spent 34 years in the financial services business. He is a member of the New Castle County Pension Board and served on County Executive Paul Clark's Finance Committee transition team. This is a minority opinion from the committee's report. Wayne Smith, president of the Delaware Healthcare Association and former state legislator, another member of the five-person committee, also signed the dissenting opinion. The majority report is due to be released Friday, according to the county website.


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