South Bethany considers 154 percent tax hike

On Thursday, April 9, at 7 p.m. (after Coastal Point press time), the South Bethany Town Council was set to hold their regularly scheduled council meeting. Among the items on the agenda for the meeting was discussion and possible approval of the 2010-fisca-year budget and Resolution 2-09, to increase the town’s current property tax rate by 154 percent.

The property tax increase was suggested during the town’s budget meetings last month, as a way to make up for declining transfer tax revenues, which, in the past four years, have plummeted by more than 50 percent.

The tax hike would be the first for South Bethany in 33 years. The increase, if passed, will change the current property tax rate of 65 cents for every $100 of assessed property value to $1.65 per $100 of assessed value. Homeowners last year paid an average of $206 in property taxes, and that figure will jump to nearly $550 in the 2010 fiscal year.

Growing awareness of the proposal has drawn strong concern from some South Bethany homeowners and members of the town’s home owner’s association. While many have acknowledge the diminishing transfer taxes, coupled with the past years’ budget shortfalls, timing appears to be among the primary concerns as home owners address the tax proposal.

Al Rae, president of the South Bethany Property Owner’s Association (SBPOA) reported that the SBPOA Board of Directors had passed a resolution in opposition to the proposal.

Jim Gross, a SBPOA board member, wrote in a recent e-mail to the council, “During these financially difficult times, many salaried people and retirees alike are experiencing shrinking income, while at the same time [they] have expanding obligations.”

South Bethany resident Frank Spingler shared his concern in an e-mail addressed to the council, stating, “We are all feeling the pain of the current economic downturn. Our 401Ks and IRAs are depleted. Our stock market portfolios and other savings are down dramatically. Our incomes have been impacted and our real estate values are depressed. Many of us have children in college and are struggling to pay the tuitions. I am truly stunned by the measures that you are proposing and hope you will reconsider all available alternatives.”

Numerous homeowners, including Gross, recommended examining surrounding municipalities, suggesting that the budget increase “be in line with those of surrounding municipalities.” Many local towns are struggling with a strong drop in the transfer tax revenues that ones made their coffers flush with cash and are considering or have instituted both tax increases and cost-cutting measures.

The Town of Bethany Beach recently increased property taxes by a half-cent for the 2010 fiscal year, roughly a 3 percent tax increase, after having instituted a 100 percent increase – from 8 cents to 16 cents – in the 2008 fiscal year as a way to reduce reliance on transfer tax revenues and ensure the town wouldn’t have to dip significantly into its reserves in coming years.

Bethany has also reduced its full-time staff by not filling vacant positions and has cut off-season trash service to facilitate that staff reduction. The town’s finance director, Janet Connery, has also recommended ongoing half-cent property tax increases in coming years as a way to stay ahead of ever-growing costs.

Ocean View’s new budget calls for a tax increase of 8 percent over each of the next five years, while also cutting costs related to the town’s police department, such as staff health benefits, take-home cars for officers and the anticipated cutting of police officer positions as they come open again. Ocean View Town Manager Conway Gregory noted that, due to the trying economy, Ocean View is also freezing staff salaries.

The breakdown of South Bethany’s 154 percent increase would be equivalent to approximately a 4.7 percent property tax increase in each of the preceding 33 years in which no tax increase was taken. Such a sudden, large increase in the tax rate was one reason Bethany’s Connery has advocated the ongoing, smaller increases for her town.

In addition to the proposed property tax increase and in contrast to the cost-cutting measures taken in other local towns, a recent 3-2 vote by the council favored a 5 percent salary increase for town employees – a change that would account for nearly 10 percent of the revenues raised by the proposed tax hike. This, too, has stirred much opposition form the SBPOA and residents.

Some property owners also voiced their concerns over the public notice about the April 9 meeting itself. With the meeting falling on the same week as the Easter holiday, some homeowners said they will not be able to attend.

Pick up the April 17 issue of the Coastal Point for information on the outcome of the council’s budget vote and more on local municipalities’ efforts to deal with their budgets.