Dewey officials look to close budget gap

Businesses could see higher license fees
The town of Dewey Beach is facing a $300,000 deficit.  Town officials are searching for ways to close the budget gap. BY RON MACARTHUR
December 12, 2012

Dewey Beach could end its fiscal year with a deficit of nearly $300,000.  Town officials are searching for ways to cut spending and boost revenue by Friday, March 31, which marks the end of the fiscal year.

Acting Town Manager Marc Appelbaum said it is revenue shortfalls – not expenses – that have put the town in the red. Shortfalls include parking permits, which brought in $70,000 less than budgeted, business licenses, parking meters, delinquent parking fines and town ordinance fines.

At a Nov. 30 town council meeting, Appelbaum said he and Police Chief Sam Mackert would work to reduce expenses for the rest of the fiscal year.  He said he hopes to reduce the deficit to less than $200,000 in the coming months.

Appelbaum was asked to present a number of ideas for reducing the deficit to town council at its next monthly meeting.

Budget background

Before 2008, the town repeatedly went over its spending budget, but, Appelbaum said, revenue from transfer taxes brought in more than budgeted year after year, which made up for the spending.  In 2008, transfer tax revenue fell by about $500,000 per year, he said.

In 2009, council created an accommodations tax to help make up for the transfer tax shortfall, Appelbaum said.  He said the town also began budgeting more conservatively.

Appelbaum said in the last 10 years, payroll expenses have risen by $390,000 while the town’s income has remained the same.  He said legal expenses are also higher than they were 10 years ago, and the town has incurred about $100,000 in debt from a drainage project on Bayard Avenue and installation of smart parking meters.

The town’s budget woes would have been evident last year, but a spike in transfer taxes – totaling $585,000 – from the auction of a few buildings of condominiums hid the problem, Appelbaum said.

Possible solutions

Mayor Diane Hanson said town council could lift its $320,000 cap on transfer taxes.  Council voted to pass a set of guidelines in March, which caps transfer tax revenue at $320,000; additional transfer tax revenue would go toward the surplus.

Appelbaum said he expects transfer taxes to bring in between $350,000 and $375,000 in revenue.  Lifting the cap would increase the operating budget by $30,000 to $55,000.

Mackert said there is still money coming in from unpaid parking fines.  He said if all unpaid fines were collected, it would total more than $140,000.

Building Inspector Bill Mears proposed raising building permit fees as a way to create more revenue.  Mears said building permit fees have not been raised in the 12 years he has worked for the town, and the town does not charge to review permits for remodeling or minor home improvements.

Finance Officer Nancy McCloskey said 20 percent of each building permit fee is automatically added to the town’s streets account; council could vote to change that and put 100 percent of the money in the operating budget.

Business license fees could go up

Town council held a number of discussions last year aimed at raising business license fees, but ultimately fees were lowered following a suggestion from town attorney Stephani Ballard and the budget and finance committee.

Commissioners voted in February to standardize license fees for restaurants, without considering whether the establishment provides alcohol. According to Ordinance 690, bars, restaurants and eateries will pay a base fee of $273, plus $6 per person based on occupancy.

At two recent meetings – less than one year later – some commissioners have again proposed increasing business license fees. Commercial business license permits have so far brought in $30,000 less than budgeted.

At a Nov. 9 town council meeting, Commissioner Courtney Riordan said raising the occupancy rate charged for business licenses from $6 to $15 per person would bring revenue into this year’s budget.

At another town council meeting Nov. 30, Riordan suggested a business license gross receipts tax.  Riordan was recently appointed chairman of the budget and finance committee.

Highway One Partner John Snow, who attended the Nov. 30 meeting, said the way council is calculating business license fees is illegal.  Snow attempted to hand council copies of a letter written by Highway One attorney Stephen Spence threatening legal action.

In the letter, Spence accuses council of charging more for establishments licensed by Delaware ABCC, which constitutes an illegal tax on alcohol.

“This year, it has come to my attention that the town intends to increase the amount of business license fees to my clients.  The actions contemplated by the town are illegal and if instituted will be challenged in court,” Spence wrote.

Hanson said they had already received the letter and the town attorney had responded.  She also said council had not conducted business license fees based on ABCC licensing for a year.

Council is scheduled to vote on whether to push back the due date for business license fees from Tuesday, Jan. 1 to Friday, March 1 at its next meeting.  Council will also hold another discussion of the business-license fee structure at its next meeting at 9 a.m., Saturday, Dec. 8, at Dewey Beach Life Saving Station on Dagsworthy Avenue.