Just as transfer tax revenues continue to disappoint, Fenwick Island town officials are depending more heavily on those taxes to balance a proposed 2007 fiscal-year budget.
Peter Frederick said that the town might have to use as much as $300,000 from the town’s reserves — which is made up mostly of saved transfer tax monies — to balance the proposed budget at about $1.6 million.
“That’s such a loose number,” said Councilwoman Audrey Serio. As town treasurer, she said that $300,000 is possible but not definite. “That’s taking into account that every number that’s plugged into the budget from each department is a solid number,” she said.
Fenwick town officials discussed the transfer tax issue and more at a budget meeting on Monday morning. Serio said that the town doesn’t budget for transfer taxes but uses their revenues to balance the budget.
The problem: a slow real estate market has dried up much of the transfer tax money town officials have grown accustomed to in the last three to four years. Since the beginning of the 2006 fiscal year, on Aug. 1, 2005, the town has collected just $145,000 in transfer tax revenues. At this same time last year, the town had collected about $500,000, a number that had been steady since at least 2002.
That is the other problem: despite the recent trend, transfer tax revenues are not predictably steady. And municipal governments across the coastal region are just beginning to accept that fact.
“If you run the town based on non-recurring income and next year we do the same thing, we don’t have a reserve anymore. Then what to you do?” Frederick asked. “Then you have to raise your taxes an incredible amount.”
Frederick said that there is about $1 million left in the town’s available reserves, but if the transfer taxes’ downward trend continues, that amount could drain quickly. Fenwick Island officials used about $60,000 from those reserves to balance the 2004 budget. And after only using $32,000 for the 2005 plan, they transferred $93,000 from the reserves to balance last year’s budget. This year’s number could triple last year’s at a time where everything is more expensive, Frederick said.
“Look at your personal expenses,” he said. “Everything costs more money now. Be it gas, oil changes on police cars or town trucks: The cost of everything seems to have gone up,” Frederick said, adding “We have not raised taxes in five years.”
And while the town’s expenses rise, another previously-dependable budget line has disappointed the town through April. After budgeting $200,000 for building permits based on 2005 totals, the town has only brought in just more than $112,000 through the end of April.
“That area is the weak area that we’re making sure we take into account next year,” Serio said. “That’s a large amount to make up in small budget such as ours.”
On the bright side, Fenwick officials have added $15,000 to the town’s property tax goal for next year, after already meeting the $500,000 expectation for the 2006 fiscal year. But at Monday’s meeting, they did discuss other possible added expenses. Frederick said that they added $16,000 to replace street signs. Another $6,000 might be added to the 2007 fiscal year plan for roof work on town hall.
And the town is considering renting or buying a car for its building official and town manager — if one is hired — which will add thousands to the expenditure side of the budget while its backup source of revenue continues to disappear as the housing boom subsides.
“Those are our savings,” Town Councilman Harry Haon said of the transfer tax-dependant reserves. “The more that we transfer money from our savings to pay for operating costs, the less savings we have and therefore the less flexibility for the future.”
And, as he added, no one knows what that future will hold.
“The building boom has subsided tremendously. Will it come back? Absolutely. When? Who know? We’ll have to make some kind of predictions on what that market is going to look like over the next five years.”