Ethical Challenges for City of New Castle

New Castle Street Scene

FightDECorruption.com was approached by residents of New Castle who are concerned about the decreasing transparency and accountability of City government. The City’s governing structure includes two organizations besides the Mayor and Council: the Trustees of the New Castle Common, which is completely independent, and the City’s Municipal Services Commission (MSC), whose Charter designates it as “separate.”

The New Castle City government depends on the smooth functioning of long- established interrelationships between the Mayor and Council and these two organizations. However, this spring the Mayor and Council requested that the Delaware General Assembly pass a new MSC Charter (SB 145) which would bring this separate utility provider under control of the Mayor and Council.  This new Charter passed on June 29, 2021.

This “take-over” of the previously independent and highly respected MSC is alarming to many citizens and has sparked a petition drive.  However, this latest coup is the culmination of disturbing trends in New Castle government which have been evolving during the past decade.

Stratagem for a Take Over

The City’s Municipal Services Commission (MSC) has historic roots.  The MSC was founded one hundred years ago in 1921.  The original name was the Board of Water and Light Commissioners (BWLC).   

Three Commissioners oversee the MSC. Under the previous Charter which was updated in 2016, one MSC Commissioner was appointed by the City Council, one by the Mayor, and the third by the Trustees of The New Castle Common.   

However, following a century of faithful compliance, in November 2020 the Trustees informed City leaders that they would no longer perform this historic duty, based on an unstated conflict of interest. No explanation of this conflict was provided by the Trustees or requested by City Council, despite repeated requests by some angry citizens.

This mysterious lapse by the Trustees triggered the City’s request for a new MSC Charter with the Mayor or City Administrator serving as one MSC Commissioner and the two others appointed by the Council. The MSC has lost its independence and is now under direct City control.

Loss of Charter Control

The passage of SB 145 providing a new MSC Charter would appear to be legislative malpractice because the City of New Castle leaders lacked the appropriate authority to request the General Assembly to enact a new MSC charter. Here is a link to a legal brief prepared by an attorney supporting the position of local citizens that the new MSC Charter is not valid.

There are other aspects of the new MSC Charter which haven’t been thought through properly. The MSC Commissioners are paid positions, so allocating one of those positions to the Mayor or City Administrator automatically makes those officials “double dippers”.  In addition, the employees of MSC are members of AFSME Local 3606, of Council 81. There is no indication that the City consulted with the Union about the new MSC Charter.

Concerns About Water and Power Infrastructure

With rising public concerns about both water quality and power infrastructure, this take over maneuver has alarmed citizen groups.  The MSC has had an outstanding record of service provision and pristine financial management.

In contrast, the City of New Castle has been under financial stress a number of times. One example: In 2004, the City was facing bankruptcy and appealed to the MSC for financial assistance.  The MSC Commissioners provided an additional $300,000 and agreed to pay the annual $400,000 MSC contribution to the City as a lump sum at the beginning of the next fiscal year. 

The Commission President, Robert Appleby, ended his letter offering this assistance with the following statement, “Council must recognize the MSC has its own long term capital expenditures which it is committed to and encourages Council to take a long and hard look at their financial requirements and plan accordingly.” With the charter revision in 2016, the MSC increased its annual contribution to $600,000.

With the 2021 Charter Amendment, the Mayor will now serve as an MSC Commissioner with the City Administrator as alternate, along with two appointees of the Council. This arrangement puts the City in charge of the MSC, creating the temptation to loot MSC reserves to balance the City budget.

This situation has two negative consequences. If the City can rely on MSC funds, the Mayor and Council will have less incentive to tax and budget responsibly. If the MSC becomes a cash cow to bail out the City, the Commission’s resources will be depleted, threatening the community’s water and power infrastructure.

A Trust Retreats Into Secrecy

At the heart of this ethical quagmire is the Trustees of The New Castle Common–a non-profit organization created in 1764. Its purpose is to preserve and protect the historic Common lands for the use and benefit of the inhabitants of the town of New Castle.

The Trust has financial assets of roughly $7,000,000 and owns about 80 parcels of land comprising roughly 600 acres.  Property leases generate an annual income of approximately $1,600,000. In the fiscal year of 2016-17, the operating budget was $1,386,000, and the capital budget was $1,132,000.

Until 2007 the Trustees sent out a 23-page Annual Report to every household in the City of New Castle.  The 2006 report included:

  • A list of what the tenants paid in Rental Income, which comprises most of the Trust revenue.
  • A Statement of Cash Flows
  • Notes on Long Term Debt, Property and Equipment, Depreciation, and Long- Term Leases.
  • Supplemental Information on Committees, Professional Fees, and Taxes.

Shortly after the election of Chris Castagno as a Trustee in June 2006, the Trust began to cut back on the distribution of public information. The minutes of the December 2007 meeting include the following statement:  “Mr. Alfree said that we are looking into publishing an abbreviated financial report for wide distribution…with the traditional full-length report available upon request.” 

For some years the Trustees replaced the full report with a trifold brochure distributed annually to all New Castle residents. The initial summary trifold reports stated: “This information is excerpted from the independent auditors’ report prepared by Barbacane, Thornton & Company. The full report is available for review by calling (302) 322-2809 or by emailing trusteesncc@comcast.net.”  By 2012, this final sentence had been eliminated.

By about 2015, the Trustees decided to post the auditors’ brief fiscal information on the Trustee website instead of printing and sending the trifold. A year or so later, Trustee Henry Gambacorta requested that sending of the trifold be reinstated. A majority of the Trustees refused.

The most recent report for the year ending March 31, 2020 is four pages posted on the Trustee website.  Nothing is distributed to the beneficiary owners of the Trust. Even  some Trustees haven’t had access to the full financial information, including the critically important Rental Income list.

After Trustee Fred Gallagher became treasurer in 2011, he realized that for several years there had not been an annual audit. He was shocked by such carelessness and brought it to the attention of the Board to be corrected. 2009 was one of the years audited late, as was 2012. Presumably the years 2010 and 2011 were also delayed.

With the pandemic, the Board of Trustees moved to virtual meetings.  However, they chose not to offer public access through Zoom as most public bodies have done.  Instead, they have conducted their meetings in private.  Only two non-members are permitted to attend, taking notes for minutes and the local newspaper. 

No minutes are taken at Trustee executive sessions or committee meetings. The voice recording used to provide minutes of the monthly Board meeting is always destroyed after the typed (not verbatim) minutes have been approved by the Board at the subsequent meeting.

Sometime after 2008, the Board made a unilateral decision that it would not comply with The Freedom of Information Act. This decision was based on an opinion by Trustees attorney Andrew Taylor. In 2017, one of the Trustees in the minority appealed this decision to the Delaware Department of Justice (DOJ), which determined that the Trustees is a public body subject to FOIA. Despite this, when citizens have requested information, Mr. Taylor has wrongly responded that the Trustees are not a “public body,” and stonewalls all FOIA requests.

This is an extraordinary assertion from a group of Trustees holding millions in assets that belong to the 5,500 citizens of the City of New Castle.  The Trustees are essentially attempting to privatize the New Castle Commons.  The increasing secrecy of Trust operations is consistent with this privatization scheme. 

Mayor and Council

Of course, the Mayor along with the City Administrator and Council represent the third player in this drama. They appear to be the driving force behind the MSC take over.  As stated above, the City has flirted with bankruptcy and has a checkered record of fiscal management, at times relying heavily on revenues from both the Trustees and the MSC.

The 2.5 page “Purchasing Procedures” section in the New Castle Municipal Code makes no mention of competitive bidding.  In an email exchange, the City Administrator stated that the City did not use competitive bidding.  Major projects are divided between two favored contractors: Cirillo Bros and Antonio Lawn and Landscaping.

Antonio Lawn and Landscaping is owned by John Antonio, whose wife Brenda Antonio is the Assistant Treasurer for the Trustees of the Common. Cirillo, a favorite of the Trustees, has recently completed paving Delaware Street at a cost of $1.7 million. This was paid for with a $2 million loan, which is being repaid by the Trustees.

Major new projects for Trustees and Council

The Trustees of the New Castle Common have leased or sold ten farm properties in recent decades, leaving only one remaining farm as part of the Trust. Originally, the Trustees developed plans for renovating farm buildings and improving the land to lease the last remaining farm to a working farmer, who would open the property for public education and recreation.

However, this proposal has been set aside because the Trustees are currently moving ahead with plans to convert the old farmhouse into their “corporate headquarters” at a projected cost of $1.5 million, instead of a dwelling for one of the farmers currently working the farm. At the same time, the City is planning an office complex for Council and the MSC at a projected cost of nearly $11 million.

There are at least two issues with both plans. First, the public offices would be moving from the center of town to the outskirts, reducing accessibility for citizens. Second, the scope and cost of these projects seem unnecessary for a small town, particularly the absurdly overblown City offices proposal, whose already massive cost of many millions could increase significantly with time.

An Insider Cabal

The City of New Castle, along with the historic Trustees of the New Castle Common, has evolved into an insider cabal lacking any semblance of ethical oversight. Delaware has no Inspector General and the State Public Integrity Commission lacks the resources to police local government.

Local governments in Delaware have promulgated some prohibitions against conflicts of interest, and there are statutes addressing public corruption (Title 11 CHAPTER 5. Specific Offenses Subchapter VI. Offenses Against Public Administration). However, without enforcement machinery, these prohibitions and statutes are meaningless.

Those New Castle residents who are aware of what’s happening feel helpless to stop it. The uninhibited rapaciousness of public officials who conceal information and shortcut rules makes their constituents despair of public accountability.