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Analyzing Rehoboth’s spending processes

March 23, 2017

The following letter was sent to Mayor Sam Cooper and Rehoboth Beach commissioners with a copy submitted to the Cape Gazette for publication.
I have been following the annual budget process, and have come to some conclusions that I would like to share with you and the public for what they are worth.

City Hall
The commissioners approved a contract for the construction of the new City Hall. It was presented in a manner that led citizens to believe that the amount of the contract was what it could reasonably be expected to cost the city (i.e. citizens and taxpayers). I do not recall the commission approving the addition of over $ 1 million in change orders nor delegating such approval authority to the mayor and city manager. When pressed at a workshop by Commissioner McGuiness, the mayor went through a number (but not all) of the change orders, and explained what they were for but did not submit them for approval by the commissioners.

The City Hall change orders seemed to fall into several categories:
a. Items added after the plans and specs were completed;
b. Items changed due to reasonably unforeseen circumstances;
c. Items changed or added due to negligence of design or supervision.
Those change orders included in a. or b. above should be carefully reviewed by the city's professional consultants and negotiated to the least cost. Those change orders included in c. above should be charged back to the responsible party (that is why professionals carry professional liability insurance). Any changes that require funds not previously approved by vote of the commissioners should be placed on a regular meeting agenda to be approved before payment.

Legal expenses
This is a significant budget category that should be under the direct control of the commissioners pursuant to the charter. It has been quoted in the newspapers that the city's annual legal expenses have been over $600,000 but that is expected to be less in the future. Sadly there is no procedure for oversight of the expenses to assure that. I spoke with most of the commissioners, who agreed that this budget category was not being monitored or controlled.

Every commissioner with whom I spoke agreed that despite raising the issue, there was little or no communication to the commissioners about the subject or cost of legal matters involving the city, and most importantly no procedure for the commissioners to review, understand or approve the various legal entanglements of the city. None of those commissioners recalled an instance where a disagreement was referred to mediation or arbitration or to any kind of negotiated settlement. The automatic response was litigation. One sure way to save money is a policy of litigation being the last resort.

Actions have consequences
During this budget cycle there have been a number of conversations about the city's personnel costs and the significant benefit add-ons to the direct costs. One major shortcoming of the Rehoboth governing process is the lack of attention to the cost of the various ordinances when they are being considered.

The recent ordinances concerning pool regulation, rental regulation, tree protection, among others, have resulted in more personnel engaged in work that doesn't provide any visible benefits. For example, some of these ordinances were intended to slow or stop construction of new homes in the city.

All one needs to do to see the lack of such effect is to drive through South Rehoboth (note Laurel Street) and view the multiple construction sites.

Perhaps those who propose such regulations should be asked to fund their cost or at least propose how they should be paid without burdening those who prefer that the city use its limited resources to deal with its infrastructure deficit. Finally, over the years I note that budgets have been passed but when the next year arrives, it seems that money has been spent with little regard to budget category limitations.

I have not witnessed a city department or official halting its work because it has reached its budget cap. I have not seen employees furloughed because of lack of budgeted funds. What is the purpose of the budgeting process and what responsibility do the commissioners have to enforce their budget? Maybe it is time to begin treating the budget as though it meant something.

Eugene M. Lawson Jr.
Rehoboth Beach

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