The following letter was set to the Rehoboth Beach Mayor and Commissioners, with a copy submitted to the Cape Gazette for publication.
I am writing in hopes of providing some explanations and answers to some of the issues raised over the past few weeks regarding the subject of extending voting representation.
The discussion regarding proposed charter changes is looking a lot like the discussion regarding residential pools, that is, assertions that are full of false, exaggerated and wildly hysterical so-called facts. It would be far more productive, fair and honest if the few vigilantes who are consistently against anything that might bring a degree of equality to the city government, would at least limit themselves to speaking the truth and providing evidence to bolster their so-called arguments.
In an effort to shed light on some of the questions and assist in being able to continue to enjoy our beloved resort community, I have taken the liberty of offering the following for your consideration.
Myth v. Truth
Myth - Rehoboth should not give voting rights to out-of-state companies
Truth - There have been no proposals to give voting rights to companies (in state or out of state)
Myth - The proposed charter changes give effective control of city affairs to more than a thousand anonymous companies
Truth - An examination of city land records will show that of the approximately 3,150 real estate parcels, about 618 are owned by trusts (the principals of which are not affected by the proposals), about 341 are owned by LLCs (of which 72 are composed of homeowners and condo associations) and about 155 are owned by other entities (limited partnerships, corporations, etc.). Many of these entities represent multiple properties which collectively represent only two potential voters. It is clear that there are not entity owners sufficient to "take over" the city. There is no proposal for permitting the human principals of entities that may qualify to vote to be anonymous. These persons will be registered to vote with their names on open and public voter rolls.
Myth - Permitting the human principals of entities to vote will more than double the voting rolls or add more than 2,000 new voters
Truth - Examining the property records and voter lists of the city will show clearly that there are not enough entity-owned properties (excluding trusts whose principals can currently vote) to have such an effect, especially when considering not every entity-owned property will have principals who qualify or intend to register to vote. This hysteria is unfounded.
Myth - Allowing the human individuals who own property through entities to vote will "hollowout" the city's stable tax base of full-time and part-time residents
Truth - The city's tax base will not be affected by allowing entity principals to vote. There are a number of entity owners presently in Rehoboth and there is no evidence that there are any problems collecting taxes and fees from them.
Myth - The entities are used to shield property owners from creditors
Truth - This is one of the many uses of entity ownership; entities are (and have been for many years) used by families for estate planning purposes; the LLC has become the favored entity for this due to its flexibility regarding voting control, profit distribution, and pass-through tax treatment.
Myth - LLCs shield property owners from current and future obligations (taxes, water/sewer, etc.) to the city
Truth - The obligations mentioned are secured by the property itself and not subject to "shielding." If an individual or entity becomes delinquent on city taxes, etc., the city (or county or State) does not go through the typical litigation process but uses its statutory power to have the property sold at sheriff's sale. The city is fully protected.
Myth - Businesses and LLCs do not pay transfer taxes, gross receipts taxes, or their fair share of funding for the city
Truth - There is no evidence that LLCs have avoided transfer taxes; there are ample ways for the city and the state to determine if there is avoidance and to enforce the tax. Businesses (not property owners) are obligated to pay gross receipts taxes to the state. Commercial properties pay their fair share since real estate taxes are based on assessed value and commercial property is generally more valuable than residential property, square foot to square foot.
Myth - There has been no reason asserted for providing voting rights to individual principals of LLCs
Truth - This has been explained a number of times but seems to be ignored by opponents. First, no one has proposed giving voting rights to entities. The proposals have been to permit the human owners (limited to two) of entities to register to vote so that they have the same right to participate in representative government as individual property owners.
Myth - Allowing the human principals of artificial entities to vote will reward and encourage entities that are known for evading transfer taxes, expose the city to legal suits, and court embarrassing media stories
Truth - Persons promulgating such false, unproven and unprovable assertions should offer up convincing evidence to back up such ridiculous claims. Without proof, they should be silent, for it is they who will bring embarrassment to the city as they did regarding the pool and noise issues.
Eugene M. Lawson Jr.
Rehoboth Beach
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