Delaware County Keeps $208 Million Surplus, Despite Ruling

Published June 1, 2005

Despite having a $208 million surplus and a court ruling that the funds were accumulated illegally, members of the New Castle County (Delaware) Council voted unanimously March 22 to keep the money by creating separate accounts for property tax and sewer funds.

“By voting to hoard millions of hard-earned tax dollars that were accumulated illegitimately in the first place, New Castle County leaders have created a government slush fund, not genuine savings accounts,” said Paul Gessing, director of government affairs for the National Taxpayers Union.

“County officials claim that this money is necessary to ‘bridge the budget gap,’ but what it really adds up to is a scheme to overtax county residents in order to pay for future government spending excesses,” Gessing said.

No legal action has been taken by interested parties since the vote.

Accounts, Budget Declared Illegal

The council’s action followed a February 10 Chancery Court ruling on a lawsuit brought against New Castle County by attorney Ronald Poliquin on behalf of taxpayers Richard Korn and Andrew Dal Nogare, who charged illegal stockpiling of tax dollars. In his ruling, Chancellor William Chandler declared the $208 million in off-budget accounts were illegal, as was the county’s 2005 fiscal year operating budget.

The sewer and property tax funds had been commingled. By creating separate reserve accounts for them and amending the current budget to move the $208 million from “off-budget” accounts into the new “reserve” accounts, county officials hope they will satisfy Chandler’s objections and be allowed to keep the money.

Chandler’s ruling, however, gave no indication the county could legally keep the money through the reserve account mechanism or any other means.

Chandler’s ruling handed Poliquin, a 27-year-old attorney in his first year of practice, what is believed to be the largest taxpayer lawsuit victory in the history of the State of Delaware.

Accounts Were Kept Secret

Poliquin said few people knew about the off-budget accounts or how much money was in them.

“We asked, ‘Where is this money? What’s it for?’ It’s just cash collecting interest,” Poliquin said. “We had to get the chancellor to force them to answer some pretty basic questions. The county code said there could be only a 20 percent surplus. Reserves in the sewer fund were more than 200 percent. It was a remarkable illegality.

“The Government Financial Officer’s Association recommends 5 to 10 percent reserves. Here we had reserves in excess of 100 percent of the total operating budget. Government isn’t there to accumulate cash. It’s so sad it’s almost funny,” Poliquin said.

County officials could not be reached for comment.

Peter J. Sepp ([email protected]) is vice president for communications with the National Taxpayers Union Foundation. Steve Stanek ([email protected]) is managing editor of Budget & Tax News.