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The Dewey Beach Budget and Finance Committee faced hard numbers and harder decisions during its Friday, May 2 meeting. A comparison of actual income and expenses for the first quarter of 2008 with amounts projected in the town’s budget for the same time period revealed a net deficit of $226,000.
To address the deficit, the committee is recommending a 3 percent accommodation tax and research for a possible property tax.
The accommodation tax “will provide a stable, permanent income for the town that is not dependent on fluctuating transfer taxes,” said Chairman Dale Cooke. If approved by the town council, the proposed tax would go to referendum in September, he added.
Town Manager Gordon Elliott said he believes the tax, if approved, would go into effect in January, 2009. Affecting approximately 750 rental properties out of 1,700 total properties, current estimates are that it would generate close to $150,000 annually, he added.
Based upon reports that the state is considering an accommodation tax, committee members concurred that timing is critical. “Under current proposals, if the state imposes a 5 percent accommodation tax and we already have a 3 percent tax in place, we will be able to keep our three percent and the state will get the 2 percent difference,” Cooke explained.
Property tax?
Some residents and committee members said they did not believe the accommodation tax was enough and suggested the committee also recommend a property tax.
“We’re going to be asking the renters to carry the town through the hard time,” said resident Vivian Barry. “Can’t the other people do something to help the town get through this crisis?”
“Yes, it’s called a property tax,” said committee member David King, adding that residents already have a property tax. “It’s called the beach tax.”
“It’s embarrassing what we pay for what we get,” said resident Larry Silver. “You could have a pretty low rate; snap your fingers and your problem is solved.”
Member Bob Barry supported the suggestion, adding that he has been in favor of a property tax for more than 10 years. “It’s long overdue. We’re the only town in Delaware without a property tax,” Barry said.
Cooke said citizens of Dewey do not want a property tax. Committee member Mary Nelson cautioned those present to be careful what they wished for because they might get it, and member Steve Hulse said he would have to be certain no other stone was left unturned before he would consider a property tax.
Not willing to dismiss the possibility of recommending a property tax to the commissioners in the future, the committee unanimously voted to conduct additional research and to form a committee to consider the possibility of a property tax.
What the numbers show
Spurred by loss of real estate transfer tax and building permit income, Dewey’s actual income was approximately $182,000 less than anticipated in the annual budget. Its expenses were $44,000 more than expected, with more than half of that amount attributable to unexpected professional fees.
The transfer tax generated only $47,000 instead of the projected $150,000. Next, building permit fees of approximately $20,000 were $69,000 less than projected.
Though money for business licenses for rentals was $29,000 less than expected, general commercial business licenses generated over $42,000 more than projected. All business licenses combined generated approximately $15,000 more than expected.
Other heavy hitters in the budget-busting category were parking fines, which generated almost $17,000 less than projected, and interest income that was almost $13,000 less.
The committee intends to examine other ways to generate additional revenue at its next meeting.
Possibilities include imposition of an impact fee for contractors and a demolition fee.
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Dewey legal fees are skyrocketing
Professional fees represent the single greatest culprit for increased expenses in Dewey Beach so far this year. Approximately $31,000 was spent in the first quarter while the budget only anticipated $8,500 in expenditures, accounting for more than half of the budget’s combined expense increase.
“We need to get control of the legal expenses,” said committee member Don Ziegler. “The bills are skyrocketing. They’re so far over budget already and it doesn’t look like there’s any end to it.”
Chairman Dale Cooke agreed. “I think it’s way too much but I don’t know how to stop it,” he said. Ziegler called for the town to place controls on what will be done and how much time can be spent on it, but Mayor Dell Tush said the biggest expense is related to the lawsuit brought by Dewey police officer Erik Campbell against the town manager, chief of police and the police department.
The problem, Tush said, is that the town’s insurers have refused to provide coverage for the suit. That puts the town in a situation where it now has to file another lawsuit against the insurance companies to get the insurance, meaning the town will be looking at even more legal fees as it tries to force the insurance companies to pay to defend the lawsuit.
“You have to follow through or you have to forget it,” Tush said, making no suggestion that the suit be settled while the town awaits the next wave of legal invoices. “We’ll just have to wait for them to drop their little bomb. What else can I say?”
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