Sussex County Delaware

Council Discusses
Taxes, Surplus

Sussex County Council ...

Farm Tax Credit, Budget
Surplus Create Debate

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Farm Tax Credit | FY2000 Audit
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GEORGETOWN -- Taxes, finances and how much of a surplus is enough were the main topics of discussion at the regular Sussex County Council meeting on Tuesday, Feb. 20, 2001.

In a continuation of last week's public workshop on Councilman Vance Phillips' proposal for a property tax credit on all farm outbuildings in the county, council discussed everything from exempting only active poultry houses to a property tax discount for taxpayers who call Sussex County their permanent residence.

That issue dovetailed into council's review of the county's audit for Fiscal Year 2000, which showed the county operating in the black for the 10th consecutive year and the 12th time in the last 13 years and adding a surplus of $3.8 million in FY2000 on top of the $6 million surplus in FY1999.

The surpluses raised questions among council members about how much of a surplus the county should maintain and whether the county should start giving some of that money back to the taxpayers in the form of tax credits such as that proposed by Phillips for farmers.

Phillips quoted Federal Reserve Chairman Alan Greenspan's statements to the U.S. Senate last week, in which Greenspan questioned the wisdom of building up huge federal surpluses, and likened that situation to the county's current fiscal status.

Phillips noted that Greenspan expressed concerns about governments with zero or near-zero debts maintaining large surpluses and said, "That's the point we're at right now. This county has paid off all of its debt in the general fund and we continue to run surpluses. We're going to hear today in the 2000 budget we have a $3.8 million surplus."

Quoting again from Greenspan, Phillips said, "At that point, it brings to center stage the critical long-term fiscal policy issue of whether the government should accumulate large quantities of private assets. Thus, over time, having the government hold significant amounts of private assets would risk the sub-optimal perfomance of our capital markets, diminish economic efficiency, and lower overall standards of living that would otherwise be achieved. If long-term fiscal stability is the goal, it is far better in my judgment that the surpluses be lowered by tax reduction than by spending increases."

Phillips then went on to say, "I think that brings to center stage where we are today in this county government. We've had three years now of multi-million dollar surpluses, $3 million, $6 million, almost $4 million in this current budget. We have to decide, do we want to continue to accumulate private assets, do we want to increase spending, or do we want to provide tax reduction and allow citizens of this county to keep their private assets?"

Farm Tax Credit ...

For the second consecutive week, in response to a request for direction on the farm tax credit issue from County Administrator Robert L. Stickels as the county prepares its FY2002 budget, council wrangled with the farm property tax credit but didn't reach any conclusions.

The only consensus was to ask Eddy J. Parker, the county's director of assessments, to provide a figure on how much of an impact providing an exemption only for active chicken houses would have on the county budget at the Feb. 27 council meeting.

Councilman George Cole continued to object to the proposal, calling it a "targeted tax cut" that would be unfair to other taxpayers. He reiterated his position that the credit should be offered to all county taxpayers with outbuildings.

Phillips, meanwhile, continued to argue that the county provides targeted tax relief all the time and cited as an example a $600,000 payment to the North Bethany Sanitary Sewer District as one such tax relief program.

"I would think a quarter of a million dollars, that would be spent in this program, not even spent but simply allow the citizens who pay those taxes to keep, is not too much to ask when we're allowing Washingtonians and folks from Baltimore to keep, in essence, $600,000 of county revenue," Phillips said.

Others also spoke in favor of the farm tax credit.

Bill Satterfield, executive director of Delmarva Poultry Industry, Inc., contended that the credit, which would amount to a few hundred dollars of relief for most farmers, would actually save some farms from going under.

Council President Dale Dukes questioned Satterfield's logic, noting that a couple hundred dollars isn't going to save any farm or encourage any farmer to not sell their land.

Satterfield then said, "Every little bit helps," which brought a large chuckle from Councilman George Cole.

Satterfield chastised the councilman, saying farmers' livelihoods "were no laughing matter". Cole said he wasn't laughing at farmers but at the notion that the small amount of tax the proposal would save farmers would actually help them in some significant way.

With that argument shot down, Satterfield switched gears, telling council that approval of the farm tax credit would send a strong signal of county support for such a concept to the Delaware General Assembly, which is currently considering House Bill 91 to provide a 75 percent property and school tax abatement to Delaware farmers.

"Don't you think we already send a message with our low tax base?" countered Councilman Cole. "You can't get much lower than we are, in this country. We do send a message. I told someone the other day, 'You make it sound like we're the bad guys, we don't support agriculture, but we already have in place a tax scheme that is already very favorable to everybody, including farmers.'

"Everybody keeps saying, 'a little more, a little more.' I didn't mean to laugh, but I keep hearing every little bit helps. We've already stepped up to the plate with keeping taxes low and not putting pressure on agriculture or residential housing or anybody in this county to try to force them out of business because of taxes. I think we're there. Everybody else should be trying to catch up to us."

Satterfield persisted, though, saying passage of the credit would send a message to Delaware lawmakers wrestling with H.B. 91, under which the state would reimburse counties and school districts for lost tax revenue.

Satterfield also contended that farmers deserve the credit because their buildings don't require county services and that it would be less expensive for government to provide a tax reduction than buy farmland to preserve open space.

Other farming organization representatives and farmers have also spoken in favor of the proposal.

Stickels read letters from county resident Bake Timmons Jr. and Robert Baker of the Delaware Farm Bureau Inc. favoring the credit. Georgetown farmer Daniel Scott objected to the characterization he had read of farmers as just wanting handouts.

As far as other tax reduction plans were concerned, council nixed the idea of considering a tax reduction for year-round county residents while taxing non-residents at current rates.

That idea is similar to the Homesteaders tax in Florida, but Phillips said such a program would involve Constitutional issues. County Solicitor Eugene Bayard said there could well be a problem with equal protection under the law when trying to apply different taxes to different people and that the Homesteaders program is currently under litigation.

Cole's idea of an across-the-board tax credit for all outbuildings again drew a negative response from Stickels. Stickels said such a program would be impossible to implement this year and that at a cost of $2 million, the county budget wouldn't be able to support it.

"We've had requests for more state police, county police, a parks and recreation department, paramedics, and libraries," he said.

Stickels also added that the surpluses county councilmen have used to justify tax relief are not from property taxes but from the county's share of the realty transfer tax.

FY2000 Audit ...

Council unanimously approved the Fiscal 2000 Audit Report by Jefferson, Urian, Doane & Sterner, P.A., which showed the county with a surplus of $3,882,013 in Fiscal Year 2000.

Again, the issue of the mounting surpluses arose, but this time over how much of a surplus is too much.

Stickels asked the county's auditors if they felt a 25 percent surplus for a $30 million budget was out of line and was told that given future spending requests, a surplus of 25 to 30 percent would not be out of line.

Stickels prepared a handout for council showing General Fund Future Expenditures and Outstanding Obligations for the county, as of Feb. 20, 2001, of $13.378 million.

Councilman Phillips, however, pointed out that the $3.141 million figure for General Debt - Outstanding had already been accounted for and should not have been included as a future obligation.

"It's disingenuous to put $3.1 million in that when it's already accounted for," he said.

Attention then turned to other future expenditure figures of $2.418 million for Landfill Postclosure Care and $2 million for Pensioner Group Hospital Liability.

County Finance Director David Baker said he wouldn't be surprised if the pension figure went much higher.

Last year, the county paid just $264,000 for retirees' health care costs but had only 85 pensioners receiving benefits. The county currently has 241 more vested employees waiting in the wings for that program to account for the expected increase.

Council President Dukes said he concurred with the county's staff and auditors that the county's surplus is not excessive.

Stickels then said to council, "I'm not going to feel guilty for us being in the black."

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