Ocean View Town Council introduced an ordinance on Tuesday that would implement a rental tax in the town, but council members worried about its enforcement. The tax would charge landlords 3 percent of gross rental receipts but would likely also translate into higher rental rates within Ocean View.
“My concern is how in the world are we going to go about collecting this,” Councilman Bill Wichmann said on Tuesday. “We have to think about this before we implement more legislation we’re not going to enforce.”
Earlier in the year, Town Manager Kathy Roth said that a 3 percent rental tax would generate about $51,000 in annual revenues for the town. Roth said Tuesday that Bethany Beach enforces its rental tax with the assistance of real estate offices. Unfortunately, as Mayor Gary Meredith pointed out Tuesday, not everyone who rents their property rents through a real estate agency.
“That concerns me,” he said. “We obviously need to work on this.”
Wichmann suggested sending out surveys, asking town residents if they were renting their home. Town Solicitor Dennis Schrader doubted people would be so forthcoming if they were going to get taxed, instead suggesting that the town work through the State Division of Revenue to collect the tax.
Still, Roth said, not everyone will comply.
“You’re never going to get 100 percent compliance,” Roth said. “We don’t get 100 percent compliance on building permits.”
The idea of implementing a rental tax first arose during the budgetary process this spring to help cover decreasing revenues, especially from the transfer tax.
Ocean View, like all other towns in the area, receives a transfer tax, a percentage of the sale or resale of a home within town limits. In Feb. 2005, Ocean View received $203,162 from the tax as opposed to only $14,158 this year, as market sales continued to dwindle after a staggeringly slow December and January. The trend continued through May and June, when the town only brought in $105,897 from the tax, according to town officials. In May of 2005 alone, Ocean View received $238,037 from the sale and resale of homes in the town.
“Since January (the transfer tax revenues) has been decreasing compared to last year,” said Kathy Roth, Ocean View’s town manager. “We make predictions on numbers, but we knew the market would slow up. There was some feeling that the market may be saturated.”
A subcommittee was appointed by the town’s financial committee to study the feasibility of a rental tax, which was popular among most members of town council and the financial committee.
”It’s fair,” said Councilman Roy Thomas, then only a member of the town’s financial committee. “These are people that don’t pay tax (in Ocean View). They come in and enjoy our public works and public safety.
“It’s something we can do to raise some revenue,” Councilman Eric Magill added. “And hopefully it won’t fluctuate too much.”