New Castle County Council members are hearing rumors out of Dover that the state may cut the county’s share of the real estate transfer tax.

With both governments facing tough financial times, council members are concerned that the state will engage the county in a game of tug-of-war over one of its significant revenue streams.

The county currently receives 1.5 percent of a property’s sale value. In fiscal year 2007, the transfer tax accounted for $35.4 million -- almost a third of the county’s tax revenue.

And with no end in sight to a national real estate market slump, transfer tax projections are down $3.6 million from last year.

“We have a balanced budget now, but it’s very tight,” said Councilman William Tansey (R-Greenville), who told the Community News he had heard the rumors. “If they go a quarter percent, it will cost us about $5 million, if they cut a half percent, that’s just over $10 million.”

Councilman George Smiley (D-New Castle), who heads the council’s finance committee with Tansey, said there is reason to worry.

“I hear that everything is on the table,” Smiley said. “But it seems every time there is discussion about (state) budget trimming, they talk about taking the transfer tax away. I hope they wouldn’t, as we are in a hard-sell situation, too.”

If revenue drops any more, he said, it will likely come down to two choices: another property tax increase, or severely cutting personnel and services.

The county increased taxes in each of the last two years, after a decade of no increases. The two increases combined to raise an additional $19.8 million.

The County Executive’s office has not heard anything official from the state, according to spokesman C.R. McCleod.

“Obviously the state is facing a tough financial situation and we are still working through our financial challenges though we have done a lot to correct past problems over the last two years,” McCleod said.

The county also cut $14 million from its operating budget in 2007, streamlined operations, and began spending down cash reserves to put off further tax increases.