Budget shortfall forces cuts in Lewes

UPDATED*

Anticipating higher revenue from the transfer tax than what has been collected, Lewes Mayor and City Council is drastically reducing the budget to accommodate the shortfall.

In fiscal year 2022, Lewes received just over $3.1 million from the transfer tax fund after budgeting about $2.8 million. For fiscal year 2023, which began April 1, the city set the anticipated revenue from the transfer tax fund at $3.5 million. As of Sept. 30, not even 14% of the projected revenue had been received from the fund.  Anticipating a significant shortfall, mayor and city council adjusted the budget and reduced expected revenue from the transfer tax fund by $693,250.

The transfer tax fund is used for capital expenses; its revenues include transfer tax, building tax, sale of assets, investments and any money pulled from reserves. In terms of the transfer tax itself, the city has received about 37.5% of its budgeted amount as of Sept. 30. Council amended the budgeted amount of $1.75 million in revenue to $1.1 million.

Voting unanimously in favor of budget amendments Nov. 14, officials believe the immediate situation has been remedied.

Financial Officer Ellen Lorraine McCabe said because the city strives to maintain a balanced budget, expenditures must be adjusted if revenues are not meeting expectations. 

Canceled projects

Parking lot improvements appear to be the primary victim of the budget amendments. Mayor Andrew Williams said the city does not receive revenue from parking at Schley Avenue and Smith Avenue lots. While bids for improvements at the Schley Avenue parking lot were in line with expectations, those received for the Smith Avenue parking lot were significantly higher than expected. Removing both parking lot improvements from the FY 2023 budget takes $253,000 off the books.

Lighting projects totaling $400,000 between the two public beaches parking lots will no longer happen during FY 2023. Like many projects, officials decided to take the improvements off the books for the time being. Improvements to Adams Avenue and Railroad Avenue join the beach lighting project on the chopping block, clearing up $676,000 in expenses from the current budget. Officials have also canceled the wayfinding project that would have increased parking and pedestrian signage.

Reduced projects

One project saved from deletion is centered around improvements to the Lewes Police Department. Approved initially in the transfer tax fund at $99,500 for repairs to the main floor and basement, there will now only be $25,000 available for those improvements. Reductions were also made in the funds originally set for the maintenance of invasive phragmites.

Officials have discussed the possibility of bringing back canceled or reduced projects in next year’s budget or splitting the costs. In the case of a hook truck recently purchased, the city used the FY 2023 budget for the down payment, but will use the FY 2024 budget to pay the balance. 

Money moves

Amendments to the budget include moving money around to areas officials feel are in greater need. A $500,000 grant from Sussex County has been moved from the city’s general fund into the transfer tax fund, and $100,000 from the transfer tax fund now finds itself in the municipal street fund, providing monies for the Phase 26 street project. 

The phase involves marina and Fourth Street improvements, with Fourth Street set to be repaved in the coming months. Tapping into reserves from the municipal street aid, general capital projects and transfer tax funds opens up an additional $850,330 to balance expenditures. 

Funding increased

Anchored by the move of the Sussex County grant, the budget for some projects was actually increased with adopted budget amendments. Funds to improve Canalfront Park, Fisher Martin House, the city dock, George H.P. Smith Park and maintenance shop all increased. 

Williams noted the changes will reduce the city’s reserves from roughly $5.6 million down to $5 million. Council members believed that while the reduction is not ideal, it still leaves Lewes with a substantial nest egg.

*This article has been updated to reflect that the transfer tax revenues were related to the fund itself and not the transfer tax activity. The fund includes additional sources of income, such as investments and withdrawals from the City’s reserves. The percentage was also updated from nearly 12% to nearly 14%.