Beach funding fairness debated statewide

While officials and citizens of Bethany Beach and South Bethany have in recent weeks been awaiting what could be a breakthrough in word on federal funding for the towns’ anticipated beach reconstruction project, some in Delaware have been asking themselves if the towns shouldn’t be directly contributing to the amount of money that will eventually go toward the work, rather than relying on the state to provide the entire “local” share.

Ocean View businessman Bill Winkler Sr. recently addressed the issue in a letter to state Sen. David McBride (D-13th), saying he believed state law required the towns to contribute half of the 35 percent state share, for which they then could be compensated through the state’s accommodations tax, and asking for McBride’s opinion and support on the issue.

Winkler said he believed the protection provided to the property owners by beach reconstruction and the resulting reduction in their flood insurance rates meant they should be footing half the state’s cost.

It’s not an uncommon view, with many from the northern part of the state on record as supporting significant or complete funding from the southern coastal municipalities for the replenishment of municipal portions of the state’s roughly 20 miles of beach. They have often cited a lack of parking at what are ostensibly public beaches, as well as the business that the towns enjoy as a result of the tourist trade and the property protection provided to those with apparently deep pockets.

The National Oceanic and Atmospheric Administration addresses public access in the context of beach replenishment as follows: “In cases where large amounts of public funds are expended to rebuild coastal beach and dune systems, the public should be able to access the nourished beach area. This right should include convenient perpendicular access at well-marked access points and the provision of adequate support facilities such as parking, shuttle services, restrooms and food services.”

Most Delaware municipalities make such provisions, save in lacking sufficient parking for all who would visit or, in some cases, shuttles to offset that lack.

The NOAA document also states: “Ideally, private coastal development fronting the restored beach should also be designed to provide for access to the beach for the general public, while avoiding structural designs which impede visual and physical access to the coast. The responsibility of the remaining project costs are divided among state, local and private funds. Individual state funding programs handle this cost share division differently,” they noted.

These kinds of concerns, among others, have led officials at the federal level to also challenge the share ratios of such projects, which have stood at a 65-35 state-federal share for many years. Under the last two presidents, the Office of Management and Budget (OMB) has resisted that high of a federal share and favored instead no funding at the federal level, desiring to shift the financial burden to the states and municipalities.

U.S. Sen. Tom Carper (D-Del.) wrote in 2002: “In 1999, the federal government reduced its funding obligation to 50 percent of the total costs. This plan made sense and should be given a chance to take effect. In Delaware, the beach nourishment project at Fenwick Island will be funded under this agreement, and I believe it represents a fair enough allocation of local and national resources and responsibility.”

“Recently, however, President George Bush suggested reducing the federal government’s obligation even further, to cover only 35 percent of the costs, shifting the majority of the burden of this replenishment onto local communities. This could have alarming effects on our local communities’ ability to protect their shorelines and is, at heart, unfair to towns that have already begun implementing long-term replenishment plans,” Carper wrote.

“It is unfair to ask communities that agreed to long-term contracts to increase their share from 35 percent to 65 percent, because it effectively doubles their costs for these projects. Many communities are barely able to afford the 35 percent burden but were able to secure necessary levels of funding based on the promise of a 65 percent federal share. To change the rules in the middle of the game will place these projects, and the communities that depend on them, at risk,” he concluded.

Both the OMB and opponents inside the state have focused on the local benefit from such projects, pushing for increasing the financial burden on the towns beyond work to collect necessary easements and dealing with the interruptions the projects eventually cause.

In the coastal towns, however, officials have noted that no town in Delaware has ever been asked by the state to contribute directly to replenishment projects. Asking now would be a new notion and something most of the towns have not planned for, saved for or budgeted for — likely forcing a property tax increase for their property owners in a time when municipal budgets are already strained under a real estate market slow-down.

Instead, the towns have invested minimally in lobbying for federal funding and encouraged area residents, property owners and visitors to contact their legislators in support of the federal funding that will finally get the project pumping sand onto their beaches.

They have, for their part, noted the public access available, while acknowledging its limitations. And they have focused on the cost-efficiency of replenishment not only for the municipalities, their businesses and citizens, but also as a benefit that increases state and regional revenue and allows approximately 6 million visitors each year from around the nation to make use of the state’s beaches.

Accommodations tax set aside for replenishment

Despite the suggestions to the contrary, according to Tony Pratt, program administrator of the Shoreline and Waterway Management Section of the Delaware Department of Natural Resources and Environmental Control (DNREC), the municipalities are already paying their state-mandated share.

“The municipal portion was required by state policy instituted in 1988 under Gov. Castle,” Pratt said March 8 while attending a workshop on the infamous 1962 nor’easter that devastated the state’s coastline. He emphasized that the requirement was not a part of state law but instead a policy that was not as well known as the related accommodations tax with which it is now so deeply linked.

Pratt said that the same 1988 policy of then-Gov. and now U.S. Rep. Mike Castle (R-Del.) that specified that the towns pay a share of the cost of beach replenishment led to the passage in 1989 of changes to the state’s accommodations tax, which had originally been instituted in 1971.

Those changes included raising the tax from 6 percent to 8 percent of rent, and earmarked an eighth (1 percent of rent) of the resulting funds to the state’s beach preservation fund and an identical amount to each county’s visitor’s bureau — and those two portions making up the entire 2 percent increase. (Some 75 percent of the accommodations tax revenue goes to the state’s general fund.)

Funding standards, mechanisms possible

The National Oceanic and Atmospheric Administration (NOAA) notes in documents on the subject of local funding shares that one method of raising such funding is through an accommodations tax, citing the benefits commercial businesses reap through improved beaches.

The NOAA documents also reference Florida statues that instituted beach conservation districts by county, allowing special taxes to be collected in unincorporated areas to help support the beaches that are used by those residents and garner business even for those not directly on the coast.

In Delaware, Sussex County — where most of the state’s ocean beaches are located — does not collect such a tax or directly provide a share of replenishment funding, though a portion of transfer tax does go to the towns for primarily infrastructure costs. And requests for financial support for a Congressional lobbyist from the towns to the county were refused in recent years, though county officials have stated their support for funding the projects on the federal and state level.

In discussing how best to decide financial responsibility for replenishment, NOAA also cites the benefits provided to the larger region and to the nation from beaches.

“It has been shown that coastal tourism and recreation provide a substantial positive economic benefit in the United States in terms of jobs, income, and governmental revenues,” the document reads. “Over 90 percent of foreign tourism spending is concentrated in coastal states where beaches are the leading tourism destination (Houston 1996).”

“For example, ‘Miami Beach reported more tourist visits (21 million) than were made to any National Park Service property’(Houston 1995),” the NOAA author cites. “Houston estimates that the federal government receives annually about six times the tax revenues associated with foreign tourism spending at Miami Beach than it expends to restore beaches for the entire nation (Houston 1996).”

Indeed, Pratt has estimated the annual cost of nationwide beach replenishment at just $117 million, if it were to be fully funded by the federal government and taken care as part of national shoreline protection, instead of shared out with states on a lesser basis and just sporadically, based on earmarks, as has been the case in the recent past.

Harry Simmons, president of the American Shore and Beach Preservation Association, has publicly noted his belief that Congress should increase funding for beach-replenishment programs that minimize storm damage and offer protection for coastal communities.

A 2002 Delaware study conducted for the National Oceanographic and Atmospheric Administration, he noted, showed that it was much less expensive to replenish the state’s beaches than to allow the shore to shift naturally as a result of storms.

The NOAA study estimated the cost of replacing lost sand on beaches would range from $48 million to $60 million over the next 50 years, compared to property loses of between $120 million and $250 million over the same period due to destruction of the coastline if no steps are taken. Some 95 percent of Delaware’s coastline is estimated to have already been developed. Period replenishment schedules have run every four to five years, on average.

Retreat an option,but not practical

Of the notion of retreating from coastal areas because of the risk of damage or death from natural erosion and coastal storms, Simmons said he felt people might as well be forced to leave the Mid-West due to tornado risk or California due to earthquakes.

The NOAA documents also address this issue, favoring retreat, but only where coastal populations and infrastructure are not already entrenched and where storm damage makes the move more feasible.

“Limiting post-storm redevelopment in areas subject to severe erosion is an example of a broader strategy of coastal retreat. Retreat programs favor removing or relocating structures further back from the eroding shoreline rather than repeatedly repairing storm damaged structures and hardening the shoreline,” they wrote.

“The National Park Service has implemented a retreat policy for years for the barrier islands of the Cape Hatteras National Park. More recently, the Park Service has relocated the Cape Hatteras Lighthouse inland, rather than armoring the beach in front of it.

“Land use controls are effective at preventing the future coastal erosion problems in undeveloped and low density coastal areas, but they are less effective in addressing erosion problems in highly developed and urban shorelines where the extent of public and private investments may limit the fiscal and physical ability to retreat,” the document reads.

Benefits of beaches widespread

Of funding mechanisms such as the accommodations tax that Delaware uses to fund the local portion of such projects, NOAA said, “The requirement that only spending by tourists increases local or regional expenditures, income, and tax revenues is essentially based on the common sense approach — the tourist would not be in the area spending money and generating taxes if it were not for the beach.”

Also included in the NOAA document: “A 1998 study for the State of Delaware concludes that without continued beach nourishment at Delaware beaches, over a five-year period more than 268,000 beach visitors would choose other vacation locations, decreasing tourist related expenditures by more than $30 million, and reducing state and local revenue by $2.3 million. Without continued nourishment, beach area properties were estimated to drop nearly $43 million in value (Jack Faucett Associates 1998).”

The NOAA document further notes: “Beaches create recreational and storm damage reduction benefits. These benefits create National Economic Development (NED) benefits. The increase in NED benefits is important in an economic analysis of project benefits, but this increase in NED benefits does not, in and of itself, finance the project.

“Financing must come from increased tax receipts, increased user fees, or increased borrowing. Of course, increased borrowing today means increased taxes tomorrow. To the extent that government can capture some of the increased benefits as a result of an increase in tax receipts or user fees, there will be less pressure for a general tax increase.”

Such pressure already exists in many of the area’s towns, both on the coast and inland, due largely to the fall-off in real estate sales over the last two years, while at the same time extensive growth inland and the increase in year-round and seasonal populations on the coast have both mandated increased services from the municipalities.

It further strains the purses of the coastal towns in a time when beaches have dwindled and pressure has ramped up in some sectors for the towns to directly pay a share of replenishment costs.

But Pratt said March 8 that the one-eighth share of the accommodations tax that goes to the beach preservation fund contains the entire municipal share mandated in the state policy. No additional funds are required or being requested from the towns, he said.

Their portion of the fiscal responsibility for replenishment projects is instead directly controlled by the state through the accommodations tax, instead of being collected by the towns and then forwarded on to the state at a later time.

Pratt, in fact, said he already has those funds lined up when, and if, the federal funding comes through for the beach reconstruction project planned for the final two coastal municipalities to receive reconstruction. The state share is also ready to go, along with some $3.3 million in federal funding banked in the 2006 fiscal year. All that’s needed is the remaining federal funding and a go-ahead from the U.S. Army Corps of Engineers.

That has the project tentatively lined up to begin in the fall, after Labor Day, after years of waiting and worrying, of lobbying and political debate. But final word on the federal funding for the 2007 fiscal year has been delayed over continued opposition to federal funding of renourishment from the executive branch. That word was expected imminently this week.

For the latest updates on federal funding for the Bethany-South Bethany project area for the 2007 fiscal year, see our story on that subject in the front section of this week’s paper.