Fenwick takes a look at tax hike


Fenwick Island officials are considering a 20 percent property tax hike to help bolster the town’s revenue during a period when the failings of non-recurring revenue sources such as real estate transfer taxes are becoming ever clearer and more concerning.

The increase in property taxes could generate an estimated $100,000 in additional revenue for the town in the coming fiscal year, offsetting falloffs in both transfer tax and building permit fees under a slow real estate market. The current fiscal year has brought in $512,938 in property taxes.

Council members and the two citizens serving on the town’s budget committee considered the step at a June 20 meeting, targeting at least covering employee salary expenditures with incoming revenue not from transfer taxes.

Mayor Peter Frederick emphasized the need to avoid even the appearance of paying for salaries with the transfer tax funds the town has held in reserve for years. The state officially frowns on using the tax monies for salaries, though that’s the only real prohibition on their use. “Some towns do use it for salaries,” Frederick pointed out.

The town has been increasingly dipping into those reserves to make the budget balance; but with transfer taxes falling off, it’s become an even larger portion of the revenue side of the budget.

The initial tally of “salaries and benefits” came in at some $1.25 million for the 2007 fiscal year, but committee member Mark Tingle pointed out that the figure contained worker’s compensation, health insurance, life insurance and pension funding that is technically in the area of “benefits” rather than salary, some $250,000 worth of expenses that could technically be eliminated in a fiscal emergency.

With that delineation, the town has the salary issues resolved, though the overall difficulties of balancing the budget remain.

The effort Tuesday was toward “massaging” the figures, delineating recurring expenses from non-recurring ones, and likewise recurring revenues from non-recurring ones.

The committee more loosely defined “recurring” as numbers that would be relatively consistent or counted upon from year to year, rather than ones that precisely recur each year. And non-recurring expenses under that standard would include those that could technically be eliminated.

The goal: to match up recurring revenue with recurring expenses and balance the budget on a very basic level.

Thus, planned grants to local fire companies, ambulance services and libraries become non-recurring, since the town could eliminate them in a pinch. And even the $120,000 average in building permit fees is recurring, though it depends on individual property owners deciding to build or renovate in a given fiscal year.

Transfer taxes were conservatively budgeted at 50 percent of this year’s anticipated revenue, to allow for a possible second slow year in real estate sales. Rental receipt taxes, however, were buoyed in the budget from 40 percent of estimated receipts for this year up to 75 percent.

Council Member Chris Clark cited that figure as the standard used in the mortgage industry — a safe call the committee members agreed.

Committee members noted trends toward increasing salaries, as the town retains its existing staff and works to keep them. Also noted were increases in health insurance, up 50 percent to approximately $150,000, largely due to added coverage for family members and minor increases in base costs.

The estimated costs also include a salary and benefit package for the proposed town manager position — a figure that could vary widely depending on who is hired and their family and insurance situations. Council Member and Budget Committee Chairwoman Audrey Serio noted the figures related to salaries and health care would always fluctuate as town staff comes and goes.

Also part of that equation is the town’s reserve for “compensated absences.” Their auditor advised such a reserve be kept to compensate departing employees for unused sick and vacation days without dipping into the general fund. This year, $15,000 went into such a reserve as part of a plan for annual contributions.

But the committee also considered for the coming year a lump investment into the reserve for compensated absences, up to 100 percent of what would be paid if every single town employee quit on the same day, taken in one lot from their reserves instead of growing the fund annually.

That was the plan going into the meeting, but committee members were reluctant to so heavily impact their dwindling reserves. They instead considered a 50 percent funding of that reserve and finally agreed to consult with the auditor as to how best to fund the compensated absences reserve and earmark what remains in the general reserve fund.

While the 2007 budget has been called “no frills” by Serio, Clark said he didn’t expect citizens to really want a “no frills” budget in Fenwick Island. He said they would likely look to the town to provide expected levels of service with some tradeoff in higher property taxes.

The 20 percent hike was deemed sufficient by the committee to make a first step toward less reliance on transfer taxes for operating expenses.

The council and citizens will get a chance to discuss the issue again when the budget comes up for review and a possible vote, likely in July.

That’s a little later than usual. Council Member Vicki Carmean noted a previously used June 30 budget deadline designed to get property tax notices out by Aug. 1. But committee members said they felt outside contractors could prepare the notices for mailing faster than town hall staff could do on top of their other work. They held out hope for a late July or early August mailing.

The first stage of the process will be with the passage of the budget by the council. From there, they can agree on how to fund it, including the proposed 20 percent property tax increase. Once adopted, the new property tax would be due by Sept. 15 this year.