Dewey Beach paid an additional $22,000 in legal fees during October, reaching $163,000 in total year-to-date expenditures for legal fees through Oct. 31. Now exceeding the amount budgeted by $78,000, legal fees top the town’s list of expense overages.

In a town still battling to reach a balanced 2009 budget, community concern is growing as a result of the increased fees and a professional liability insurance policy that has a defense expense policy limit of $50,000 for each claim and an aggregate defense expense limit of $100,000 for all claims during the policy’s one-year period, which runs until June 14.

With the town already involved in an appeal from a ruling by its board of adjustment, Dewey Beach Budget and Finance Committee member Dale Cooke said the town’s defense expenses could easily exceed its coverage, leaving Dewey to pay its own legal bills.

“Attorneys’ fees add up very quickly,” said former town commissioner Cooke. “This has the potential to screw up the entire budget.”

Adverse effect

The impact of legal fees on Dewey’s budget has already been felt. The 2007 independent auditors’ report prepared by Sombar & Co. said Dewey’s expenditures made in excess of its annual budget were primarily due to increased legal fees.

Of the $163,000 spent through October, $115,000 was for regular legal fees and $48,000 for lawsuit legal fees. A total of $85,000 was budgeted through Oct. 31 and $102,000 budgeted for the year. The budget covered regular legal fees with no provision for lawsuit or litigation expenses.

Though the increase in fees seems alarming to some, Steve Huse, a member of the Dewey Beach Civic League and of the town’s budget and finance committee, says the projected increase is not a significant factor in Dewey’s current budget difficulties. It has the potential to become significant, however, if a lawsuit is brought claiming malfeasance on the part of a town official, he added.

Budget and finance committee member Bob Barry said during the Nov. 21 meeting he is concerned by the town’s professional liability policy limit of $1 million per claim and aggregate limit of $1 million per year. He added that his individual policy coverage is three times greater.

Committee Chairman Marc Appelbaum told committee members he has not reviewed the professional liability policy. He said he wants to create a task force to review all insurance policies to ascertain if the town has appropriate coverage at the best price.

Meanwhile, the committee recommended the town commissioners budget $75,000 for regular legal expenses in 2009. Appelbaum said the regular legal fee projection does not include litigation expenses, which would not be the part of the operational budget controlled by the town manager but would be a below-the-line item controlled by the town’s commissioners.

The commissioners will conduct a workshop to discuss the 2009 budget at 5 p.m., Thursday, Dec. 4, at the Life-Saving Station. Public comment and a vote on the budget are planned for the meeting of the town council at 9 a.m., Saturday, Dec. 6.

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Learn more about Dewey finances

• The Dewey Beach year-to-date statement of actual profit and loss through October 2008 as contrasted with the 2008 annual budget is available at townofdeweybeach.org and is accessed by clicking on “budgets” in the left column and then clicking on “2008 Profit & Loss Budget vs. Actual [11/26/2008]” in the center column.

• Dewey’s 2008 annual budget is accessible from the center column and is listed as “2008 Town Budget.”

• A recent analysis of Dewey’s year-to-date financial situation is available at deweybeachcivicleague.org under the heading “2008 September YTD Finance Analysis.”