Voting rights for limited liability companies are on the agenda at a town hall meeting set for 2 p.m., Saturday, Dec. 2, at the Rehoboth fire hall in Rehoboth Beach.
The Rehoboth Beach Commissioners are considering a proposal that would allow residential property owners who own property in an LLC to vote if they own at least 50 percent of the entity. The ordinance specifies the principle of “one person, one vote,” meaning that if a person is a resident and owns property in an LLC, that person is entitled to one vote, even if the person owns multiple properties in LLCs. The ordinance also does not allow proxy voting on behalf of LLCs. The ordinance also requires those who hold property as an LLC to sign an affidavit attesting to their eligibility.
In addition, the ordinance brings the city in line with a state requirement that voters must have resided in the city for 30 days before becoming eligible to vote. The ordinance eliminates a law stating voters who fail to vote in two straight elections are purged from voter rolls.
While the city commissioners have settled on a framework for the ordinance, major questions still remain.
During discussion at the Nov. 17 commissioner meeting, Commissioner Patrick Gossett said allowing LLC owners to vote after merely signing an affidavit is insufficient. Gossett said people whose properties are held in revocable trusts must show trust documents with the name of the grantor/trustee on it. He said 10-year leaseholders, who are also allowed to vote, must show a copy of the lease.
“I don’t understand why we’re only asking for an affidavit for this purpose. I think for LLCs, you should have an ownership copy of the LLC,” he said. “You could fill out an affidavit and write in anyone.”
City Solicitor Glenn Mandalas said an ownership affidavit is signed under oath with the possibility of criminal penalty if in violation. No penalty is specified in the ordinance, but Mandalas said the most likely scenario is that a vote would be challenged.
“To go into an LLC is a choice,” Gossett said. “Voting is a privilege, and I think we need to address it in that regard. There are only nine communities that allow nonresident voting, and we’re extending that.”
“There’s got to be a better methodology to be sure that the eligibility requirements for each of these artificial entities are being met,” Commissioner Stan Mills said.
Mills and Gossett favored changing the ordinance to allow only LLCs to vote, a change council adopted. Even with the change, both commissioners were not sold on the ordinance as a whole. Mandalas said the ordinance now requires LLCs to provide copies of their certificates of formation, deed to the property and operating agreement.
One issue Mandalas admitted could be problematic is when ownership interest in an LLC is sold. He said if a voter sells interest in an LLC, there is no mechanism to remove that voter’s rights. It’s on the honor system, Mandalas said.
Gossett lamented what the ordinance will mean to the city.
“Sometimes I think Rehoboth is getting Alzheimer’s, because we’re really forgetting who we are. And making changes like this makes you take further steps,” Gossett said.
Citizens wishing to speak will have three minutes to ask a question. Those who cannot attend may send comments to the city Communications Department at firstname.lastname@example.org. To view an electronic copy of the draft ordinance, visit www.cityofrehoboth.com.
Residents should note Rehoboth Beach Marathon, which starts at 7 a.m., will also be held Dec. 2.