County present 2011 draft budget at $140 million

Sussex County officials on Tuesday, May 18, unveiled their proposed $139.8 million budget for the 2011 fiscal year. The total budget is up from the 2010 budget, but officials emphasized that the increase is mostly because of a one-time infusion of federal “stimulus” funds for capital projects, not day-to-day expenses.

The budget proposal calls for no property tax increase and avoids employee layoffs and pay cuts, while continuing to fund public services, such as paramedics, sewers, libraries and land use.

The budget, presented by County Administrator David Baker, Finance Director Susan M. Webb, Budget and Cost Manager Kathy L. Roth and Accounting Division Director Gina A. Jennings is for the new fiscal year beginning July 1.

The draft budget, which was again touted as being balanced and refraining from dipping into reserves, keeps in place the county’s property tax rate of 44.5 cents per $100 of assessed value, which would be the 21st year without an increase.

The average county tax bill for a single-family home remains at about $100 annually, while manufactured-home owners pay about $40 per year in county taxes. (Neither figure includes taxes collected by the county for local schools, which generally adds $500 to $600 to each property’s annual tax bill.)

County officials warned, however, that some sewer users could see increases of up to $15 annually, as the county takes the first steps toward implementing a uniform service charge for the bulk of its 59,000 sewer customers. That annual charge, which now varies among the county’s sewer districts, pays for operations and maintenance of the county’s sewer systems.

“The proposal for Fiscal 2011 is a baseline balanced budget,” Baker emphasized. “Our challenge again has been to present a plan that allows the county to live within its reduced means while continuing to provide the services that Sussex Countians expect. Our general fund revenues are 15 percent below two years, yet the expectations of our residents remain high.”

The Sussex County Council will hold a public hearing on the proposal during its 10 a.m. meeting Tuesday, June 22, in council chambers at the County Administrative Offices building on The Circle in Georgetown. The council must adopt a budget by June 30.

Some funding restored, some remain tight

The 2011 budget again calls for limited spending in county government in the next year, with the general fund – the portion that pays for the day-to-day operations of county government – using no appropriated reserves.

Some line items that the county reduced in last year’s budget have been partially restored in the proposed budget, as expected revenues in 2010-2011 have been forecast to increase. Grants to local fire companies, local law enforcement and the Sussex Conservation District, for example, have been partially restored, generally at about 50 percent of last year’s cuts.

Baker noted repeatedly on Tuesday that economic development is a major focus of the proposed budget. The county will embark on more than $35 million in sewer construction projects in the year ahead, thanks to federal stimulus dollars that have kept those projects on track. Those projects alone stand to employ nearly 100 people as of July 1, Baker said.

Hazard-mitigation grants will both aim to tackle the problem of flood-damaged properties and make additional jobs available in the county, Baker said, while capital projects and long-delayed maintenance and repair work will be a focus of the county’s sewer department budget.

The county’s neighborhood stabilization and Community Development Block Grants programs will also be supported by $3 million in federal funding. The county has 57 housing rehabilitation projects planned, along with plans to aid with 30 sewer hookups and demolitions on four properties. The neighborhood stabilization program, which will see a funding increase from $1.9 million to $2 million, has already helped 11 homebuyers purchase foreclosed homes.

The proposed budget includes no layoffs or mandatory furloughs for county employees – steps that Baker noted governments elsewhere are considering. Also, no reductions in salary or working hours are proposed, and benefits, such as dental and vision reimbursement, vacation, sick leave and holidays, as well as a zero-employee-contribution pension plan, will remain intact.

County employees will not see a cost-of-living increase this year, though Baker said there were some merit raises recommended by department heads. The county is now paying 62.1 cents in benefits for every $1 of salary it pays.

The county has 22 fewer full-time employees than it employed last year, 48 fewer than were employed in the 2009 fiscal year. Baker noted that the county had offered two early retirement options, leading to 15 fewer employees, while the other reductions in staff were due to attrition.

Baker said county staff had adjusted to handle some of the workload by cross-training and filling vacant spots from within as much as possible. The workload in some areas has been decreased, he said, due to the natural impact of the economic situation on areas such as permits and planning.

That workload reduction has, in turn, reduced the county’s operating costs in those areas, but the costs for the Sussex County Sheriff’s Office have increased as the amount of work for the office has risen with the number of foreclosures in the area.

County officials noted, though, that revenues from the Sheriff’s Office have been used to supplement paramedic funding, which has lagged behind its costs along with the transfer tax revenues that originally were set up to fund it.

The economy has also led to a substantial increase in circulation and use at the county’s local and independent libraries, but Baker noted that the county had still cut the library budget from prior years, reducing the funding for local libraries, central services such as the Bookmobile and administration.

Spending conservative under economic uncertainty

Baker noted that the county would continue to look for savings by delaying purchases, limiting new hires and curtailing travel when possible, in reaction to the continued slow economy.

“Sussex County is not out of the tunnel yet, so we must keep a watchful eye on our spending, weighing carefully each project and each request before us to ensure our most critical needs are met,” Baker said. “That is responsible budgeting, and that’s something on which the county government prides itself.”

The proposed total budget, which comprises the general fund, water and sewer, and the capital budget, is up from the 2010 budget by approximately $11.8 million, or 9.2 percent. Most of the increase is due to capital projects aided by stimulus funds. General fund revenues and expenditures, however, are expected to increase by $600,000, or 1.3 percent.

As is the case in many local municipalities, those developing the county budget for the 2011 fiscal year had to be mindful of revenue from the real estate transfer tax – the 3 percent levy attached to most property sales, which split between the State of Delaware and the county or town in which the property is located.

In the current year’s budget, the estimated revenue from realty transfer was $12.7 million. For 2011, Sussex County expects to collect the same amount in realty transfer tax, representing no change, Baker said.

“The economy-sensitive revenues, such as realty transfer tax, building permits, building inspections and Recorder of Deed fees, are at the same level as the previous year,” noted Webb. “We’re not losing any ground, and given the recent state of the economy in the last couple of years, not losing any ground is good news.”

Baker pointed out that this was the second year in a row that property tax revenues were expected to come in slightly higher than transfer tax revenues, with the increase largely due to increased assessments. Property and transfer tax revenues together total about 50 percent of the county’s total revenue. Another 19 percent comes from building permits and other fees.

The county will see $1.2 million in increased expenses due to reduced levels of funding from the State of Delaware in paramedic grants. The public safety budget comes in at about 24 percent of the county’s overall expenses.

Consolidation of sewer districts beginning

Webb on Tuesday noted that the county was aiming for a “uniform approach to sewer,” looking to consolidate sewer district funds and to make service charges more uniform across and inside the districts. (That uniformity will not apply to assessment fees – at least not yet.)

The county will look to reduce its number of sewer funds from 23 to four, with all but two (Dewey Beach and West Rehoboth, due to different funding restrictions) to eventually go into a single fund, partially to help reduce administrative costs.

Webb said the 23 districts’ rates will be made more uniform in a phased approach over seven years, to minimize the impact on customers, as there are 40,000 who will see changes as a result.

The consolidation effort will also create a future replacement repair and renewal fund, into which all users would pay for major costs down the road.

There are some potential disadvantages to customers in the concurrent change to uniform sewer service charges, Webb acknowledged, with some seeing up to $15 of increase in that annual charge, but the existing 11 rates for service will be reduced down to six.

Council warns on transfer tax, state funding

Councilman George Cole, of Bethany Beach, said after the presentation that he would like to see the county look at its pension plan for new hires, calling pension plans a “bugaboo” in other jurisdictions.

“We need to draw line in the sand,” Cole said. “We can’t continue on being as generous as we have been. Some governments have gotten in trouble because of these generous pension plans.”

Cole also said he had continued concerns about the county’s reliance on transfer tax revenues.

“Other local governments have gotten in trouble with this. It’s economy-driven, and I don’t like to see too much emphasis on our transfer taxes paying for county services,” Cole said. “The last couple years it’s been 50/50. Previously, it was huge. We thought Santa Claus had arrived. I would caution that we don’t want to have budgets too dependent on transfer taxes, or even the stimulus money.”

Cole praised the move toward uniform service charges for the county’s wastewater service, but he said he would also like to see the county look to address uneven assessments for the service.

“There’s a lot of unfairness out there,” he said. “I’d like to also look at front footage charges that are really inequitable, make some small changes and go toward unit pricing and uniformity – maybe within subdivisions, with neighbors all paying the same, maybe in the course of seven years.”

Cole said some property owners in the Salt Pond community outside Bethany Beach have been paying $100-per-front-foot assessment rates, while neighbors across the street pay just $6 per front foot.

Councilman Michael Vincent took the time to praise the balanced budget in the draft on Tuesday.

Phillips, for his part, noted the county’s ability continue paramedic service despite a reduction from a peak of $35 million in annual funding to just $12 million in the 2011 proposal. “I don’t think too many people thought we could maintain that level of service, but we did,” he said.

He pointed to the council’s previous suggestion that the State of Delaware look at shifting its paramedic funding formula to a 50/50 state/county split, as well as lingering concerns over what state legislators might change in the transfer tax formula.

“It’s a little nerve-wracking to think that the state may be looking at some of these other revenue streams, because that could really put our public safety services in jeopardy,” Phillips said, noting that the state had also added some “unfunded mandates,” such as “dropping $600,000 in our lap” with the costs of the county taking over dog control.

Phillips praised the budget team for furthering the council’s vision of government that should be responsible and spend reasonably.

“It is comforting to know that our Sussex County government is able to work within its means, without raising taxes or cutting essential services,” Phillips said. “Once again, Sussex County taxpayers are the big winners in this budget.”