NCCo Executive Matt Meyer: No tax hike in coming year

New Castle County Executive Matt Meyer on Tuesday proposed closing a projected $13 million budget deficit for the coming year with reserves and cuts rather than property tax increases.

"Our expenditures are exceeding our revenues, and it is getting worse with time," Meyer said. "It is simply not sustainable."

Meyer, who took office in January, outlined efforts to restrict rising government costs in an address to County Council on Tuesday. The address marks the formal presentation of his administration's $284 million proposed operating budget, which the council will debate, amend and ultimately pass in the coming months.

For the coming fiscal year that begins in July, Meyer proposes $195 million in general fund spending, which covers much of the daily operation of government including employee salaries. It's an increase in general fund spending of about 4.6 percent over last year.

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Salaries, as well as employee benefits, are the primary driver of increased government expenses next year. The uptick is partially due to things like performance increases built into employee pay scales, but cost-of-living increases associated with employee union contracts are also driving those expenses up.

Those contracts were approved late last year and gave workers pay increases of 1 percent last year as well as 2 percent this year and the next.

"We were handed a situation where the county signed contracts last year without any plan to pay for them," Meyer said.

With revenues increasing more slowly than expenses, Meyer's administration projects a $13 million deficit over the coming year. That will be met with a mix of spending reductions as well as appropriations from the county's tax stabilization reserves.

Meyer's budget projects reducing personnel costs by cutting from overtime, reinstating premiums for Medicare retirees as well as cutting from contractual services. It also includes cutting back on planned vehicle purchases for police, ambulance and general government services. His administration projects it can save $5 million through these efforts.

The budget anticipates using about $8 million from one of the county's reserve funds in the coming year, though Meyer said his administration will be looking for other places to trim spending over the course of the year. Meyer noted the county's reserves have been reduced several times by the administration of former County Executive Thomas P. Gordon.

Meyer's proposed budget also contemplates $35 million in so-called capital budget spending on things like buildings, sewers and park infrastructure. It's part of what Meyer described as a "debt diet," reducing capital spending from $55 million last year. Meyer said the reduction required prioritizing projects that are crucial to government functions and deferring others.

"We can't keep putting large numbers on the credit card," Meyer said.

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The County Council will need to approve the budget by June 1.

It is unclear how the state's budget deficit might ultimately affect the county. Former Gov. Jack Markell's budget recommended shifting some costs from the state to the counties. Gov. John Carney's budget, unveiled last week, did not keep those suggestions.

A committee of state and county officials and lawmakers have been meeting in recent months about potential changes to how public services are funded through the state versus the counties. In the coming month, the committee is expected to make formal recommendations to the General Assembly's Joint Finance Committee, which is charged with hammering out the state's spending plan for the year.

Meyer's office has already had to address a projected $5 million deficit in the current fiscal year. Shortly after taking office, his administration partially froze hiring, limited overtime, suspended out-of-state travel for government employees, reduced executive office expenses and ended the practice of allowing government employees to "cash out" unused vacation time.

That has reduced the shortfall, but money from reserves will still be needed to cover the rest.

The county's primary sources of revenue are property taxes and fees charged when properties are sold. Those revenues are projected to increase more slowly than the cost of running the government. By 2020, Meyer's administration projects a $25 million gulf between revenues and expenses if the current trajectory continues.

On Tuesday, Meyer also announced an outside firm is being brought in to do a top-down review of the efficiency of each county department. He said that review will likely identify further cost reductions needed as the projected deficit continues to grow year over year. Meyer said the review is being done "pro bono."

"Let's be responsible. Let's fix this. Let's get this right," Meyer said. "It takes some hard decisions."

Meyer added that he is confident that he will be able to reduce spending bridge the gap in the coming years without a tax increase.

Councilman George Smiley, who co-chairs the council's Finance Committee, said the county will eventually have to raise new revenue, though that might come in a form other than a property tax increase.

"We have got to get new revenue," Smiley said. "We need the state's approval for a new revenue stream."

Contact Xerxes Wilson at (302) 324-2787 or xwilson@delawareonline.com. Follow @Ber_Xerxes on Twitter.