Rehoboth Beach raising property taxes

Rehoboth Beach commissioners adopted a $38.7 million budget for fiscal year 2025 during a meeting March 15, but it far from a unanimous decision. 

The approved budget is an 8% increase over the current fiscal year budget of $35.7 million, with extra funding to be put toward hiring additional staff, raises for existing employees and increasing health insurance costs.

Mayor Stan Mills and Commissioners Edward Chrzanowski, Francis Markert and Don Preston voted in favor of the budget. Commissioners Tim Bennett, Patrick Gossett and Toni Sharp voted against.

Mills said this has been the 16th budget he’s been a part of and it’s been the most challenging.

From the beginning of discussions in January, when Interim City Manager Evan Miller first presented commissioners with a budget that included more than a $4 million deficit, commissioners knew tough decisions would have to be made to balance next year’s budget, which begins Monday, April 1. Early in discussions, commissioners approved an increase to parking sources of revenue across the board – meters went from $3 to $4 per hour and parking permits were increased 30%. Expected to bring in about $2.4 million, these changes cut the deficit nearly in half. Commissioners also approved a 1% increase in the rental tax, which is expected to bring in $100,000.

Commissioners voted on the budget late in the day March 15, but most of the discussion took place during a budget meeting in the morning. Heading into the final day of discussions, there was really only one question – would commissioners increase property taxes or would they use reserve funds to balance the budget? At the conclusion of the previous budget meeting, a consensus had been reached to use reserve funds, but Chrzanowski and Preston were absent from that meeting.

When commissioners resumed discussions March 15, Chrzanowski and Preston were in attendance and it was clear the consensus had flipped.

Preston said he strongly disagreed with using reserves to make up for poor planning, and that taking money from reserves was also taking money from taxpayers. This is not a disaster, he said, this is poor planning.

Chrzanowski said most of the changes approved by commissioners at earlier meetings affected visitors and businesses the most. The homeowners are not paying their fair share, he said.

Gossett said the city had used reserves in the past – $1 million – when costs to build the new city hall had risen. Similarly, the city is building the new beach patrol headquarters right now, he said.

Sharp asked Miller if there was anything more that could be done to prevent a property tax increase. Before Miller could answer, Preston stepped in and said staff had presented the commissioners with an option to not fund the new employee positions, but commissioners declined to take that option, so now it was the commissioners’ responsibility to figure out how to balance the budget.

In the end, commissioners committed to an anticipated property tax increase of 29% –  from $0.06 per $100 of assessed value to $0.0775, which is expected to bring in about $592,000. The phrase anticipated is being used because commissioners will formally vote on the property tax rate at the June regular meeting.

One area in which all commissioners agreed was a 28% increase in wastewater meter fees from $14.70 per 1,000 gallons to $18.81, which is expected to bring in about $791,000 and will fund ongoing improvements at the city’s wastewater treatment facility. The general consensus among commissioners was that this increase shouldn’t come as a surprise to ratepayers because, a few years ago when the city changed its wastewater rate structure, a city consultant said the rate increases would need to happen to keep up with the needed infrastructure repairs.

The increase to wastewater fees is not likely to be the last one either. Miller said the consultant recommended increases for the next couple of years to pay for the millions of dollars in infrastructure upgrades to the city treatment plant.

About $140,000 in additional revenue from anticipated increases in mercantile license fees was included. Chrzanowski suggested the increases. He said many of them were too low and each one gets a free parking pass worth $325.

Adding this source of revenue does mean commissioners will have to get the changes made sooner, not later, because none of the mercantile fees were formally changed.

Miller said renewal notices for this calendar year were sent out in January. However, he said, if new fees are implemented in advance of January 2025, when those renewals are sent out for next year, the additional revenue could still be added to next fiscal year.

The budget includes about $10 million in capital improvements, including construction of the new beach patrol headquarters/comfort station on Baltimore Avenue, completion of Phase 3B of upgrades at the wastewater treatment plant, resurfacing of the first two blocks of Rehoboth Avenue, the annual citywide paving project, and water main replacement on Maryland Avenue.

In addition to providing for salary increases and a 27% increase in health insurance costs, the adopted budget allows for several new staff positions, including a reorganization of the police department that will result in a new deputy chief position and the hiring of two new entry-level patrol officers. Another dispatcher position has been added in the 911 communications center. In addition, two part-time positions have been added – a deputy city clerk and communications specialist.

The city’s FY25 budget also includes funds for development of a new city website and stormwater management plan, extended hours for restroom attendants in season, replacement of a street sweeper, and contributions to community organizations.

Commissioners also adjusted the projected revenue from Dewey Beach’s wastewater fees by $300,000 – $1.5 million to $1.8 million – and decreased the administration contingency fund by $100,000 – $250,000 to $150,000.

The budget includes contributions to the four organizations that had requested money from the city – $200,000 for the Rehoboth Beach Volunteer Fire Company, $75,000 for the Rehoboth Beach Public Library, $60,000 for Rehoboth Beach Main Street and $30,000 for the Rehoboth Beach Museum.

As part of approving the contributions, the fire company, library and museum also had conditions set that have them get half the requested amount in July, with the remaining portion held until those conditions were met. The museum had requested $60,000, but was docked half the amount because the organization’s paperwork for the request didn’t include all the necessary documents, specifically a strategic plan.