Since Rehoboth's first budget meeting this year, the focus has been on cost overruns associated with the new City Hall complex, and has overshadowed both the true state of the city's finances and the essential functions of City Hall.
Inaccurate information has appeared in letters and on social media. Having sat through most of the budget meetings, I offer these facts and observations:
Some have contended that the City Hall complex will benefit few, and that it will produce no revenue for the city. False. City Hall does not exist solely, or even primarily, to serve the residents here.
Rather, the employees and operations located there allow us to meet the expectations of millions of visitors each year and in turn, support dozens of small businesses and restaurants, in addition to essential services for full- and part-time residents.
Most importantly, the largest spaces - over 14,000 square feet – house the police department and a nationally accredited 911 center that serves not only people living and visiting in the city, but all of the surrounding areas.
Regarding revenue, City Hall will house employees who collect sewer/water, trash and tax payments from property owners (over $6 million/yr).
Moreover, the building and licensing division oversees residential and commercial construction in the city, work valued at $25 million annually, and collects revenue from permits for the work. Not only does this generate revenue, it also supports jobs in the city. Revenue from parking, at nearly $6 million in the fiscal '18 budget, is handled out of the City Hall complex as well. The entire city budget, $23 million in revenue, is managed out of City Hall.
The increased cost of building the new City Hall complex was not breaking news this year. More than a year ago, in January 2016, only two bids were received, the lowest being $1.5 million over original estimates. At that time, the commissioners held a special meeting and voted unanimously to accept the low bid, understanding that total costs would exceed original estimates and need to be accounted for in the next several budget cycles.
As with most public and private construction projects, the cost will be higher than the original budget and construction will take longer than originally projected. Construction overages can run 10-20 percent of a project's initial budget.
Current approved and pending change orders on the City Hall project total about $1 million, well below that average for an $18 million project.
On the plus side of the equation, the city manager announced in December that the city has been able to secure a bond in the maximum principal amount of $18 million at a fixed rate of only 2.375 percent, instead of the 3.5 percent rate that we approved in the referendum vote.
The city will save about $123,000/yr and $3 million over the life of the loan. At the budget meetings, it was a relief to learn that the immediate additional costs could be covered using a portion of the city's funding reserves. So, when the budget process was all said and done a few weeks ago, there were no tax or fee increases. How many cities and towns could do that?
Our growth and continued success as a premier East Coast resort area are not without challenges. This year's budget process unveiled some of those challenges, most notably the need for a better process to deal with cost overruns and getting a better handle on future expenditures.
With a new City Hall comes a larger maintenance budget. What other long-term capital improvements are necessary? How will we deal with the inevitable cost overruns on the ocean outfall project?
Civic pride was evident last September when hundreds turned out for the ceremonial beam signing. I have no doubt the citizens of Rehoboth Beach will once again come out to cheer when it is completed, not just because it is a fine building but because the city police department and many city employees will finally have a safe, secure, and fully functioning work environment. Until then, let's be grateful we live in a city whose past fiscal management practices have allowed officials to meet the challenges of their largest project ever without an adverse impact on services or budget for the coming year.
Susan Gay
Rehoboth Beach
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