Extra

Good afternoon.

I first want to extend my thanks to President Cynthia Morgan and the members of the Wilmington Rotary Club for this opportunity to speak with you today. I am also sincerely appreciative of former Mayor Hal Haskell for his unswerving commitment to helping the City of Wilmington address very serious funding problems that have been left unresolved for too many years.  Hal, someone dropped the mold and broke it, when you were born!

Tomorrow will mark the 39^th anniversary of the untimely death of President John F. Kennedy.  I am reminded that President Kennedy, during his all too brief administration, often mentioned our nation’s great Latin motto “E Pluribus Unum”… “Out of many, one.” when articulating his vision for our country.  This motto was chosen by our founding fathers to illustrate the uniting of the thirteen original colonies into one nation.  It reminds us today that, in spite of our rich diversity resulting from differences in ethnicity, geography, religion, politics, and even so called “social status,” we are all united in a sacred historical belief in progress, justice, freedom, and the common good.

I believe that the notion of “E Pluribus Unum” also applies to our great State and its three unique counties.  Our strength lies in our diversity but our future depends on our ability to work together for the betterment of the entire State.

I come before you today, however, to alert you to a structural problem that hampers our City’s future and threatens the strength of our State.  I am here to plead the case for financial freedom and justice for the City of Wilmington. From that freedom and justice, we will be able, once and for all, to solidify our City’s position as the great economic engine for the entire State of Delaware. If we can meet the serious financial challenges before us, then we will become a greater City that is able to contribute more and more to the overall fiscal health of the entire State. If we have the courage and the will to come together with our friends from throughout the State to solve the structural inequities that threaten our ability to adequately fund City government, future generations will thank all of us.  They will view us as visionary, smart, caring, wise and creative, because we will have guaranteed a prosperous future for our great City and our great State.

            I refuse to accept our City’s current fiscal constraints as a fact of life that can’t be changed.  Wilmington simply lacks the revenue sources necessary to adequately fund an efficient, well-run and progressive City government.  I am not talking about some bloated misguided form of “Big Government” that tries to be all things to all people.  Nor am I advocating a City government that offers services beyond its means or beyond the bounds of its State-granted home rule Charter mandates.  But I am talking about a government that finds itself in a continuing cycle of recurring budget deficits in spite of its best efforts. In the past two years, we have done just about everything that a government can reasonably be expected to do to establish a professionally-managed, fiscally sound operation that provides basic services for its citizens.  Regrettably, but I believe responsibly, we have raised revenues twice in two years from the only significant sources we have, property and head taxes and water and sewer fees. We have cut discretionary spending across the board by about 5%. We have eliminated positions and combined two departments.  Unfortunately, we have entered into labor negotiations, having to look our labor union leaders (and by extension, our hardworking City employees) in the eyes to tell them that we have little to offer.  We have carefully refocused the philosophy of a City government which had too many spending priorities.  We are now putting our money where it should be, into funding for basic Charter-mandated core services, such as improving public safety, repairing and upgrading the water and sewer system, moving forward with long-needed environmental and health controls for our combined sewer overflow system, repairing and replacing streets, and improving constituent services and efficient code enforcement, to name a few.  We have done what most reasonable people would expect, and more, as responsible managers of the City government. Our fiscal management of the government has reaffirmed and increased the City’s bond ratings from Moody’s and Standard and Poors.  Yet we find ourselves facing a projected budget deficit totaling nearly $9 million over the next two years. We must find our way out of this fiscal crisis without imposing additional, and what I believe most of you would view as intolerable, tax and fee increases on the residents and businesses that are the very lifeblood of the City. If they leave, or if they give up on Wilmington, then we simply have no City!

In March, I presented my budget address that was entitled, “The Good, the Bad and the Ugly,” and for some very good reasons. I sounded the warning then that there is a need to open serious discussions about additional revenue streams for the City of Wilmington.

 The “Good” referred to the tremendous progress we have made in a relatively short period of time. Overall crime is down by about 16%. We are the only City in the United States that provides a safe, camera-monitored downtown district. We are turning neighborhoods around by striking back against vacant properties, irresponsible landlords, those who apply graffiti, and those who litter our streets. We have welcomed new business partners who are bringing people back to Downtown Wilmington to live, dine, or enjoy a movie or play, as part of the cultural and arts rebirth of the City.  New businesses like Advance Publishing and Fusura have discovered Wilmington and made us their base of operations. Our riverfront has grown stronger with the continued growth of new and exciting restaurants and retail establishments. With the help of the State government and the private sector, we have made far too much progress to allow a destructive backward movement due to the lack of adequate revenue sources for the City.

The ‘Bad” in my budget address referred to the current budget under which we are operating. Sadly, it is funded, to the tune of about 78%, through property and wage taxes. This situation demonstrates that even with sound financial management, tough decision-making, and a focus on maintaining an adequate, but not extravagant, level of service for citizens, Wilmington is going to continually find itself facing a dark financial future without the development of new sources of revenue.

The “Ugly” in my address captured my deepest fears about the future viability of our City. Without new and varied revenue sources we will eventually face a financial disaster that will harm the City and the State for years to come.  This bleak forecast is based on a number of factors which all point to the need for more financial freedom for Wilmington.

• More than 42% of the property in Wilmington is exempt from taxes because it is either owned or controlled by non-profit organizations or by the County, State or Federal Governments, representing a tremendous loss to the City’s tax base.

• The City cannot increase the wage tax rate, which is set by the General Assembly. And, any change in this tax would first require a careful analysis of the political, economic development and business impacts, which might negate any perceived benefits.

• The City has no authority to create any significant new revenue streams without the consent of the State, so it is imperative that the City and State work cooperatively on solutions.

• Unlike all the other Delaware municipalities, the City cannot freely annex land or ‘grow its boundaries.’  We are land-locked which also makes us financially-locked when it comes to geographic growth.

• The City is wisely reducing its dependence on budget transfers from the Water and Sewer Fund to the General Fund to balance the City’s general fund budget, which had grown to alarming levels in the final years of the last City administration.

• Likewise, we are prohibited by State law from using our Commerce Fund (the bulk of which comes from the sale of the Port of Wilmington) for anything other than purposes of economic development.

• We are also prohibited from using bond proceeds for anything other than capital projects.

This combination of circumstances severely constrains the City’s ability to raise sufficient revenue for core services.

As I ask for discussion and consideration of additional revenue sources for Wilmington, it is incumbent upon me to offer independent verification of the City’s dire financial projections. To that end, we have contracted with the nationally recognized municipal strategic consulting firm, Public Financial Management (also known as PFM), which some of you will recognize as the firm that helped former Mayor Ed Rendell turn around Philadelphia’s finances during the last decade.

PFM has been hired to conduct an in-depth review and validation of the City’s own five-year baseline revenue projections.  To further ensure the independence of this review I have asked a distinguished Delawarean, Mr. Fred Sears, to supervise the PFM study team.  Fred, who chairs the Wilmington Economic and Financial Advisory Council (WEFAC), is working with the other private sector members of WEFAC who are graciously volunteering their time and talents to assist PFM with this study.  The City’s financial team is acting as a resource to PFM and WEFAC, by providing all necessary City financial data.  However, the final report will reflect the unbiased findings of PFM and the members of WEFAC, not those of the City administration.

In addition, PFM and WEFAC will work with the City to develop a list of potential new revenue sources or revenue alternatives which we will then use as a starting point for what I hope will be productive and fruitful discussions with Governor Minner and her key cabinet officials and the leadership and members of the incoming 142^nd Delaware General Assembly.

            I very much appreciate the willingness of Governor Minner and the State legislative leadership to entertain a serious discussion of the revenue constraints facing the City of Wilmington.  I have also been encouraged by the interest and support conveyed to me by individual legislators from throughout the State and by peers like New Castle County Executive Tom Gordon and Dover Mayor Jim Hutchison, as well as other members of the Delaware League of Local Governments. 

Throughout these first two years of this administration, I have also been the thankful recipient of the strong support of the entire bi-partisan Wilmington Delegation to the General Assembly.  I have also been blessed with the kind assistance provided by City Council, especially President Ted Blunt, Finance Chairman Norman Griffiths, the Council leadership, and other individual members of the Council.  Finally, I owe a debt of gratitude to the City employees, especially their Union leaders who have listened patiently and with great understanding as we have explained our financial dilemma.  I believe that they will be a great asset as we all work together to strengthen the City’s financial situation.

In the new year, I will take the City’s financial message to the broader community of Wilmington, and all three counties, to engage all who will listen in a discussion of Wilmington’s financial future and its vital importance to the economic health of the entire State.  I am not naïve about the tough fiscal constraints facing the Governor and Legislature at this time and I realize that Wilmington’s problems, as unique as they may be, are part of a larger problem.  I remain convinced, however, that improvements to Wilmington’s revenue streams will produce big dividends for the State as well.  I am intent on starting the process to find acceptable solutions by working cooperatively with others.  I would welcome any solutions which broaden and strengthen Wilmington’s revenue base, including the revenue sharing Franchise tax option proposed by Mayor Haskell, but I remain fully open to other suggestions, as well.  In the end, it is likely that Wilmington’s revenue picture will not be addressed by any one single “silver bullet” solution but by a variety of well thought out measures.

Let me end where I began with you today.  “E Pluribus Unum” … “Out of many, one.”  We have a great State.  Its greatness comes from the strength and resolve of all of its people in New Castle, Kent and Sussex Counties.  The problems of one area of our State are no more or less important than those of another.  But the problems of any one of us should be the concern of all of us.  I am reaching out to people of goodwill throughout the State to help preserve the financial future of the City of Wilmington and the financial future of this real gem that we call the Diamond State.  Thank you again for this opportunity to speak to each of you today.

God Bless the City of Wilmington and God Bless the State of Delaware.