County Council and Executive Matt Meyer locked in budget showdown over tax increase

The debate over how much property tax New Castle County residents will pay going forward has both branches of county government accusing the other of being unreasonable. 

County Council rejected Executive Matt Meyer's 15 percent tax increase on Tuesday, setting up a standoff in which the two branches of government must come up with new revenue ideas or make millions in cuts to county service.

After the County Council meeting Tuesday, Meyer accused some on council of lacking political backbone, continuing to fight "the 2016 election battle" and being motivated by "animus" toward him and "not by reason." 

"I hate taxes. I don't want to increase anyone's taxes. I gotta pay too," Meyer said. "Nobody wants to pay taxes, but when you are delivering quality services at some point you have to pay." 

Meyer has argued the increase is the responsible way to fill what he calculates as a $21 million budget shortfall, a gap he refuses to use taxpayer reserves to bridge.

In recent budget presentations, Meyer has warned residents that drastic cuts to county police, library and park services will follow if council didn't support his tax increase. It is unclear if those will now materialize. At Tuesday's meeting, Council members accused Meyer of engaging in political "scare tactics."  

The government needs to pass a budget by the July 1 start of the fiscal year. This end-phase of negotiation began with barbs at Tuesday's council meeting as both sides accused the other of obstinance.

A last minute proposal by Meyer to pare back the proposed increase to 12.5 percent only seemed to agitate council further. After months of debate and pleas for compromise, the "11th hour" offering raised suspicion on council over whether Meyer needs the full 15 percent increase to bridge the budget gap.

"It is not what you are saying it. It is how you are saying it," said Councilman Jea Street. "It is the epitome of an insult to the other branch of government." 

The amendment failed with no affirmative votes. The 15 percent increase died with Councilmen David Tackett, Bob Weiner and John Cartier as the only supporting votes. 

Multiple council members that voted against the increase said they could see the wisdom in a smaller hike or could stomach the proposal if it was phased in. 

Under that backdrop, Councilman George Smiley, who chairs the council's Finance Committee, called a special meeting for Tuesday with the intent to introduce a new proposal that would raise taxes 7.5 percent, dip about $8.6 million from reserves and not cut services.

"It has been made clear to the executive branch that the majority of council members do not have the appetite for a double-digit tax increase," Smiley said. 

Meyer has characterized the 15 percent increase as "modest." County officials said the average taxpayer living in the unincorporated portion of the county currently pays $476 in property taxes and would have seen their annual tax bill increase by $71.

Councilwoman Janet Kilpatrick argued that pulling from the reserves this year is a reasonable way to delay a "large" tax increase while the state's General Assembly mulls pending legislation to give county government the authority to raise special taxes on real estate transactions and hotel stays. 

"I want some of that stabilization fund used. It is tax money," Kilpatrick said. "Someone in our districts paid for that fund to be there." 

Meyer has said it is irresponsible that the county has dipped from reserves in recent years even as the real estate market, where local government derives most of its revenue from, has been on the uptick. 

"You can't go spending down the reserves every year," Meyer said. "I'm committed to saying we need to fix this in a reasonable and sustainable way." 

The county's operating budget has two primary reserves: the rainy day fund and the tax stabilization reserve. The rainy day fund is considered a piggy bank of last resort while council members have more latitude to pull from the stabilization fund, which has a $19 million balance that has dwindled in recent years. 

Meyer argued that the council's proposal would put the stabilization fund at a level that would threaten the county's AAA bond rating. Smiley said that is untrue. 

Some council members said they could support the 15 percent bump but only if it is phased in over multiple years. Councilwoman Lisa Diller said that is the "simple solution" but "the issue is compromise." 

"I’m just so frustrated with this situation," Diller said. "We have made what I think are reasonable proposals. They have been turned down." 

Meyer said such phasing would just "kick the can down the road" and government would be in the same situation next year.

He stopped short of saying he would veto Smiley's proposal for a smaller tax increase coupled with the drawing down of reserves, but he was adamant he doesn't support such a solution and said council members are being unreasonable. 

"It is unheard of to have a County Council that supports building a $31 million library but not supporting the revenue to put librarians in that library," Meyer said. 

Smiley said he doesn't anticipate introducing legislation to cut services.

Meyer said he is having internal talks about what cuts would be necessary with a 7.5 percent tax increase but added, "It is county council's move to act." 

Tuesday's meeting was called with the specific purpose of introducing the new proposal. Other legislation to cut government could also be introduced. Debate on the legislation will not take place until July 12, Smiley said. 

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