Dewey gross receipts tax fair way to go

July 12, 2013

On July 12, the Dewey Beach Town Council will discuss, and on July 19 the council will discuss and possibly vote on a gross receipts tax on in-town businesses recommended unanimously by the Dewey Budget and Finance Committee.


If adopted, the voters of Dewey Beach in referendum would have the opportunity to decide whether to adopt the tax. This is a decision the voters should have the opportunity to decide.


Approving a gross receipts tax is the single most important step the council can take for the future of Dewey Beach. The town has a structural deficit, meaning that it does not have enough income each year to deal with the expenses of running the town and addressing long-festering problems.


These include infrastructure improvements (to avoid flooding on the bay side, for example), communications and technology upgrades to bring the town into the 21st Century, an adequate legal defense fund (given town businesses regularly bully the town with lawsuits), desperately needed improvements in Town Hall and other town facilities, funds to protect against rising sea levels and ravaging storms, and sufficient operating reserves to survive the next economic downturn, among other needs.


The town’s $2.5 million budget is now funded with permits, fines, fees, transfer taxes on the sale of property, a relatively new property owner accommodations tax, and a business license fee. It is extremely tight, always risking a deficit as the town experienced to the tune of $700,000 in 2008-09, with nothing left in most years for needed improvements.


With the permit fees and transfer and accommodations tax emanating from the new Ruddertowne Hyatt Hotel and condos, Dewey’s budget will momentarily have extra cash. But even one major infrastructure project (and many are needed) can cost $1 million (as did stopping the flooding at Bayard Avenue). That is the amount of the permit fees paid for the Ruddertowne project.


Dewey is now considering an in-town business gross receipts tax of just 1 percent with a $200,000 exemption. It is estimated to produce about $150,000 to $200,000. It is a small amount compared to the huge costs of police to control the crowds at the big bars particularly. Dewey’s police force costs the town $1.2 million a year (compared to Fenwick with no big bars where the police costs $500,000). Yet the in-town businesses pay the town now only $60,000 for their business license fees (out of town businesses pay more).


Even this paltry business license tax is being challenged by Alex Pires of Highway One in a lawsuit against the town. It apparently doesn’t matter how fair the town is, one of the big bars or developers will sue. To avoid any conflict with this lawsuit challenging the town’s authority to tax, the proposal for a minimal gross receipts tax will be contingent on not only a voter referendum, but also the court ruling that the town has the authority to enact taxes.


Thus, even if the current business license fee remains, a gross receipts tax and the license fee will yield only about $300,000 to $400,000. With the large bars making millions each year in Dewey, this is hardly a ripple in their profits. By comparison, the property owners pay $380,000 in accommodations taxes and $100,000 in business license fees for a total of $480,000.


Some years ago the town proposed a property tax that the voters soundly rejected. Last year the budget and finance committee also proposed a property tax that the town commissioners rejected. A property tax would make the individual property owners, not the business owners, pay the lion's share.


Dewey Beach has been struggling for years to develop new revenue sources without success. It’s time to bite the bullet and adopt a reasonable gross receipts tax for in-town businesses.


The next two town meetings will determine if the voters of Dewey Beach will have the opportunity to vote on a referendum in September on a modest new tax so businesses will pay a little more toward their fair share of the costs of the town that has made them so wealthy.


Joan Claybrook

Dewey Beach




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