3/22/2006
5% tax increase proposed for NCCo

By ANGIE BASIOUNY
The News Journal

03/22/2006

WILMINGTON -- New Castle County Executive Chris Coons unveiled a 2007 budget proposal Tuesday night that calls for a 5 percent property tax increase, but he said that hike alone won't solve the county's budget problems and more increases will be needed in coming years.

The budget for the fiscal year that begins July 1 would increase spending by 7.35 percent, with one-third of that amount going to pay the county's rising energy bills. The proposal also contains more than $4 million in cuts and recommends no new programs.

"Over the past year, I have said that our county government has to run more like a business," Coons told the crowd at his annual address. "My budget proposal is balanced and fiscally responsible and lays out a positive path forward with five parts."

Coons said his approach is based on cutting costs, restraining new spending, using cash reserves, asking for more state and federal help, and the property tax increase -- the first in a decade.

If the budget is approved by County Council, the average annual tax bill will rise from $326 to $342, or $16 a year. The amount would be about $5 a year for disabled residents and seniors who qualify for a property tax exemption.

The proposal also includes a 4 percent sewer-rate increase that would add $9.36 to the average yearly bill.

Council must vote on a new budget by June 1. Reaction among the 13 members was mixed after Tuesday's speech.

"I think the work starts now," said Councilman Penrose Hollins. "We are quite divided on the issue of the tax increase, and that's the part that's going to get the most scrutiny."

The property tax increase would bring in $3.2 million extra, not enough to close the budgetary gap. Coons has spent the last year telling the public that revenues are flattening while spending continues to grow to meet the demands of a burgeoning population.

Cost-cutting measures

Coons wants to use $10 million of the remaining $80 million in cash reserves to balance the next budget. He said he plans to draw down the reserves each year until they are tapped, most likely by 2009.

He likened the county's finances to living in a house that costs more than a family can afford, forcing the residents to dip into their savings account each month to make the mortgage payment.

"You can keep taking money from the savings account, but you know eventually you will have to either get a second job or move to a smaller house," he said. "We are in the same situation in New Castle County."

To make revenue grow, Coons said he will approach the state about repealing a law that gives first-time home buyers a break on the real-estate transfer tax, which is collected when property is sold. Currently, half of the 3 percent tax goes to the state; the other half goes to the county. New Castle County does not collect its 1.5 percent from first-time buyers. Officials estimated the lost revenue this year was $4.2 million.

"I'm pleased to see that we're asking Washington and Dover for assistance," said Councilman Robert Weiner. "I'm also pleased to learn that the discussion of how we compensate our employees is on the table. There can be no sacred cows."

More than 60 percent of the county's operating budget is spent on salaries, wages and benefits. The county code provides 5 percent merit increases for most employees for the first 10 years. And labor contracts, which cover nearly all of the county's 1,657-person work force, include 3 percent cost-of-living adjustments yearly.

Coons said he met with union leaders early Tuesday to discuss the possibility of reducing the merit increases.

Reaction on speech is mixed

The budget proposal drew praise from civic activist Marion C. Stewart, who said she thought Coons' approach was "balanced" and "refreshing."

"The only catch is will council cooperate?" she said.

Council President Paul Clark thinks the question should be put to the residents. He said he wants to talk to constituents before making up his mind.

"Do they want to keep their taxes extremely low and not have some of the services they are used to?" he said. "Or are they willing to pay the $16?"

Councilman Bill Bell, who said last week he would not support a property tax increase, remained unconvinced.

"I'm still optimistic that we can take a look at everything and avoid [it] this year," he said.

Councilman John Cartier agreed with Coons' proposal, saying he advocates the same approach of balancing revenue growth with spending cuts. Cartier said he also wants to push for more redevelopment to make the tax base grow. "I think Chris laid out the challenge that we face," Cartier said. "We are asking our residents to give just a little bit more."

Contact Angie Basiouny at 324-2796 or abasiouny@delawareonline.com.

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