To understand public sector financing you’ve got to wade pretty deep into numbers. You’d better have a calculator handy.
But in this year’s race for New Castle County Executive you’re likely to need more tools at your disposal – a dictionary, some history books and perhaps a few over-the-counter pain killers. It’s enough to give you a headache.
In the final weeks before the September 9 primary, the campaigns of Chris Coons and Tom Gordon have become almost wholly focused on the fiscal legacy of the two candidates. Gordon, who did not raise taxes during his eight years in office and was able to amass record cash reserves and add services, says he can do the same this time around despite the sagging economy. Coons, who succeeded Gordon in 2005 after serving alongside him as County Council president for four years, has raised taxes twice and says more increases could be necessary if constituents want more police on streets.
So where’s the disconnect? How can two candidates have such divergent plans on the financial future of a county with which they’re both intimately familiar?
Numbers are numbers – or are they
Both candidates are handing out checkbook-style balance sheets outlining revenues and expenditures over the last decade. They basically agree on the final numbers each year, but how each gets there is different in meaningful ways.
This is the part where the aspirin might be handy.
There is a line in each budget for transfers out – one-time general fund expenditures that are used to cover things outside of normal day-to-day operations. This fiscal year, it’s projected to be $5 million, to be used primarily for maintenance and vehicle purchases.
Coons includes that figure in his determination of whether the operating budget is balanced. Gordon does not. As his former Chief Financial Officer Ron Morris puts it, they are one-time expenditures paid for with cash from the reserves, so they shouldn’t be factored into annual operating costs.
It may seem like a trivial point, but it’s central to understanding how the two candidates can differ so greatly on the facts surrounding county finances.
In 2004, transfers out totaled $20.7 million – $15 million of which was money Gordon gave to the City of Wilmington to help hire new police officers and paramedics. The year prior, that number was $10 million – mostly grants to various local non-profits.
Coons characterizes those payments as irresponsible deficit spending, but Gordon says he felt compelled to help at a time when others were not as flush as New Castle County.
“These are one-time grants I had to give out to keep a good rapport with some of the other governments,” Gordon told the Community News.
He said he was urged by the state – which in 1999 allowed the county to collect additional real estate transfer tax revenues – to spread some of its wealth to those in need.
“If Tom’s crime is he was generous to groups that needed the county’s help, then guilty as charged,” Morris said.
Dictionary, please
At times during the debate season, Coons has assumed the role of economics professor, lecturing on the difference between a surplus and a cash reserve.
Gordon has frequently referred to the cash account he built up during eight years in office – $150 million in the 2005 general fund and another $90 million for sewers – as a surplus.
And while Coons says he’s appreciative of the cash on hand, he says it's not a surplus but a reserve. Moreover, he is quick to point out its mere presence doesn’t mean the county is not facing significant financial issues. Pointing to those 2004 and 2005 transfers, Coons says they were possible because of the reserves, not because revenues outpaced spending.
“If you are spending more money than you are taking in during a given year, you have a deficit,” he said, “And the only way you are able to do it is to take out money you are saving for the future.”
And while at first, the back-and-forth over these definitions may seem petty, it sheds light on the property tax debate – perhaps the top issue on the campaign trail.
Vision for the future
Gordon has said that if elected, he will not raise property taxes during his term. The money is there, he says, to run the government for the next four years without additional revenue. Coons, who twice raised property taxes a total of 23 percent, said that might be the case, but he is looking farther down the line – at year five and beyond.
Coons points to a downward trending housing market, cueing further projected declines in transfer tax revenues over the next four years. That, combined with increasing energy costs, rising health insurance premiums and perhaps most significantly, increased calls for more police means more tough choices ahead.
“The most fundamental part of my job is keeping the county safe,” Coons said. “We will find a way to go ahead with the next police academy (later this year), and we’ll find a way to fund it. But over the longer-term, we have to continue the dialogue with the public about what services they want and how we’re going to have to pay for it.”
He said continually relying on cash reserves to pay for a recurring annual cost like new personnel is irresponsible and would ultimately bankrupt the county.
Gordon’s take is significantly different, reminiscent of George H.W. Bush’s now-famous “read my lips” presidential campaign promise.
Gordon believes the real estate market will rebound in the next few years, bringing in more cash than Coons is projecting. Some cuts could be necessary if that doesn’t happen, but he declined to identify when and where they could come. In the meantime, Gordon said he was willing to lean more on reserves if it means holding the line on taxes.
“I make the pledge because I plan on honoring it,” Gordon said. “If we get in there and there’s money, we’ll bring back services. If not, we won’t, but we’re not going to raise taxes under any circumstance.”
Coons says he has a different goal.
At $402 a year for the average family, county government is still one of the best deals going when you consider the parks, libraries and police it provides, he says. Yet he’s sensitive to the burden taxpayers are shouldering. In the 2008 budget alone, he eliminated $72 million in capital projects and $14 million in operating costs, and has promised to continue looking for places to trim, economize and bring in new revenue. But he candidly acknowledges that a future tax increase could be part of the plan to solve the county’s structural deficit.
