South Bethany’s town council began the town’s annual budget process last week, with the first in their planned series of budget workshops, on Feb. 8. The workshop focused on the town’s revenue picture, which has been a subject of concern in the slow real estate market of the last year.
Financial Administrator Renee McDorman said the town had collected just $266,000 in transfer taxes through Jan. 31. With the fiscal year set to end of April 30, only two months remain to finish out the year on that particular financial source, which was budgeted at $540,000 for the current fiscal year under both capital and operating budgets.
McDorman noted that the town’s revenues continue to exceed its expenses, but the shortfall in transfer taxes was a moderate point of concern. The taxes make up some 39 percent of the town’s operating budget, among tax sources alone. It’s less than the permitted two-thirds of the money that can go there, versus to capital expenses, but still a significant source of revenue.
Rental taxes actually make up the largest portion of the town’s operating budget, at 42 percent of all of what comes from tax sources. Property taxes come in at 19 percent of that tax total in the operating budget.
McDorman said she expected rental taxes to come in higher than the amount budgeted for the year. But she noted that the property taxes, while just $3,000 shy as of Jan. 31 of the $228,000 she planned to budget, were just 19 percent of the tax-based portion of the operating budget for a reason.
“What we collect in property taxes doesn’t pay for much of anything,” she told council members. “Many people are under the impression that their property taxes cover the lifeguards, police department… But it doesn’t.”
With the town’s revenue sources laid out that way, it underscored the importance of the other two tax revenue sources.
“It just shows how reliant we are on transfer taxes,” said Council Treasurer John Rubinsohn, “and on rental taxes also.”
Rubinsohn questions ‘conservative’ approach
McDorman said she had budgeted the town’s rental tax at the same $450,000 in the initial draft budget as in the current year’s budget. Some $498,000 had been collected as of Jan. 31, she said, suggesting that there needed to be some room for a possible downward swing in those revenues.
There, Rubinsohn took issue with the conservative approach to budgeting that has been the council’s preference in the past. “It seems there’s been an upward trend,” he said, referring to the past few years of rental tax receipts. He wondered why she had budgeted the same amount in the face of an upward trend.
Town Manager Mel Cusick said the conservative figures were something the council had wanted as their budgeting starting point. Rubinsohn — a Wharton business school graduate — said he could understand that desire but, “It’s reasonable to budget $498,000 as conservative. Conservative is realistic,” he said, referring to the amount collected in the current fiscal year.
Rubinsohn said he felt the 10 percent reduction in revenue expectations implied a significant decrease, rather than reflecting either the current trend of growth or a realistic, conservative budget figure.
Mayor Gary Jayne and longtime Council Member Marge Gassinger defended the figure. Jayne said, “I see nothing wrong with being conservative.” And Gassinger said was concerned that the move away from an “owners’ market” might even mean a reduction in rental tax income for the town.
But Rubinsohn said he was concerned about the potentially more extensive impacts on the town if its anticipated income was underestimated. “We might end up raising taxes because of what you consider conservative,” he said.
Councilman Richard Ronan again noted that the initial figures were a draft number – one with which the council could start the budget process. And Jayne told Rubinsohn the council was in the habit of returning to revenue numbers at the end of the budget process to see if just such an upward adjustment was needed.
But Rubinsohn was not assuaged. “This is not how I believe people should budget. They should give the most realistic estimate to the council, because it serves as guidance to the council,” he said, setting the tone for the remainder of budget discussions for the night.
Council members had mixed opinions on the number that was the origin of the dispute. Most favored a number above the $450,000 draft figure, narrowing in around $490,000 on consensus.
On the subject of the transfer tax figure, McDorman noted that she’d based the $276,000 figure on both the amount collected for the fiscal year to date and upon the Sussex County standard budgeting formula of 70 percent of the prior year’s collections for its budget figured. That number was down from the $360,000 budgeted in 2006.
Again, Rubinsohn said he felt the number was too low, with $47,000 in transfer taxes collected between January and April of 2006. Though the budget will have to be finalized before that final April figure is known, he said he thought $300,000 was a better starting number, with more information to be considered as the budgeting process proceeds. “I just want us to be realistic,” he reiterated, as they settled on that figure.
Under the town’s lesser sources of revenue, McDorman budgeted $25,000 for building permits — $2,000 more than in 2006, but less than the $30,700 collected so far. Councilman Jay Headman noted, however, that the council had voted a significant increase in building permits in recent months. While Jayne said he remained wary of the market. The council settled on $50,000 as a likely figure.
Rental licenses remained budgeted at the same $30,000 figure, with $12,000 collected in the fiscal year to date, but the bulk of license fees expected between February and April, as usual.
Council members were set to move on to expenses at their next budget workshop, set for Thursday, Feb. 22, at 4 p.m. The session was expected to be lengthy and include a dinner break as a result. The council may also adjourn to executive session to discuss employee salaries.
Council approves land trade deal
During the special meeting portion on Feb. 8, council members also voted unanimously to pursue a land-trade agreement with the Mann family for property on the cul-de-sac and canal bulkhead area of Carlisle Drive at York Beach.
Jayne described the deal as a “win-win situation for us and the Manns,” who agreed to pay the legal costs of the transfer in order to have better access to the bulkhead-fronting property that was originally supposed to be part of their parcel. There was apparently an error in drafting the road and property lines, and Jayne described the land deal as a way to fix the mistakes while benefiting both the family and the town.