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When that
happens, he said, taxpayers can expect a property tax increase
somewhere in the neighborhood of 15% followed by subsequent
annual increases of around 5%.
Sewer
fees will likely have to go up much sooner. That increase, also
about 15%, will have to show up in bills which will be due in
February, 2006, he said.
In a
detailed presentation to County Council's finance committee,
Morris revealed that combined reserves, built up during the
eight years of the Gordon administration, peaked at $242 million
as of the end of fiscal 2003 and dropped to about $230.5 million
as of last June 30. Fiscal 2004 financial statements have not
yet been audited.
Projected
for the end of the current year, on June 30, 2005, is a balance
of $196 million.
The $242
million figure was quoted frequently during the recent primary
election campaign and has generally been used for several months
in various contexts.
Calling
Morris's comments "sobering," Council president Christopher
Coons called for avoiding any new major spending projects to be
financed from reserves. He said there has been "a significant
run" on those reserves in recent months as a result of "a very
large amount of previously unbudgeted spending" which has been
approved by Council.
"If we
continue to take on new projects at a $10 [million]-to-$13
million clip, we are going to advance the day of reckoning
significantly," he said.
Coons is
the Democratic nominee for election to succeed Gordon as county
executive. It is the executive who, in the normal course,
annually proposes both operating and capital budgets and
advances most other major projects. Council approves the
proposals, with or without modifications, and actually
appropriates the money.
Morris
made his presentation at the finance committee meeting on Sept.
28 in support of a plan to go to the bond market to borrow $80
million. When that plan was first presented to the committee two
weeks earlier, questions were raised about its including $26
million to finance three projects which some Council members
said they and the public had been led to believe were to be
financed from the budget surplus.
As
Delaforum previously reported, Councilwoman Karen Venezky
decided not to introduce a resolution authorizing the bond sale
that evening, pending clarification the issue raised by
Councilman Penrose Hollins and auditor Robert Hicks. The
projects that they questioned were the county's $15 million
share of the buy-out of property owners in Glenville whose
houses were destroyed by flooding during the September, 2003,
storms; $10 million for a nature education center on the
Christina River waterfront in Wilmington; and $1 million for
Iron Hill Museum.
Morris
prefaced his presentation on Sept. 28 by declaring, "Council has
said you can do these projects and you can use bonds [to finance
them]." After his presentation, Venezky secured the necessary
support from three of her colleagues -- Councilmen Robert Woods
and William Tansey along with Hollins -- for an off-agenda
introduction of the resolution and an immediate vote at that
evening's Council session. Because of the tornado and storm
which hit northern New Castle County, however, the session was
cancelled and a special session in lieu of it was scheduled for
Oct. 5.
Morris
had asked for quick action to get the New Castle County issue to
Wall Street to take advantage of currently favorable interest
rates before the traditional rush of municipal offerings,
particularly more prominent ones from larger jurisdictions,
toward the end of the calendar year.
The
county sold $100 million worth of bonds in March after they were
given their highest rating by all three major rating agencies.
Morris said a new $80 million issue would keep county debt well
within statutory limits and would be "consistent with our
triple-A rating."
The
current county tax rate -- 45½¢ for each $100 of assessed
property value -- has held since fiscal 1996. Barring an
unexpected significant change in the pattern of county
government spending, Morris said, it should continue to hold
through fiscal 2009.
Although
the portion of reserves which has been identified by county
officials as the 'tax rate maintenance fund' and officially as a
component of 'general fund financial reserves' will go
away between now and then, Morris said both the mandatory 20%
budget reserve and the 'rainy day reserve' will remain intact,
providing an estimated $17 million spending back-up and averting
any sort of financial crisis.
The
gradual decline of the 'tax rate maintenance fund' was planned,
he pointed out.
The
fiscal 2004 budget will be the last for awhile that was written
with black ink. The current budget is expected to run about $6
million in the red. That and the $15 million public safety grant
the county is providing to the city government of Wilmington
will account for the major inroads into the 'tax rate
maintenance fund' this year.
The sewer
budget has been operating at a deficit with that shortfall
expected to increase this year from $6.5 million to $7.5
million. That will essentially wipe out the everything above the
required 20% reserve against the operating budget, although the
sewer fund's 'rainy day reserve' will stand at $11.3 million
when the fiscal year ends.
Morris
all but rejected a suggestion by Councilman Robert Weiner that a
new bond issue greater than $80 million be considered. The
finance officer had explained why a $200 million issue would not
only be imprudent but also violate federal law. The idea behind
the suggestion was that it would provide money at current
interest rates against future capital needs.
Morris
doing that, even as a lesser level, would result in borrowing
money at 4% which, when invested pending its later use, would
earn only 2%. He said no forecast of coming Federal Reserve
interest rate maneuvers expects that they would result in
anything coming close to justifying a $200 million issue. But he
agreed to provide an evaluation of issues of $100 million and
$120 million.
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