Ocean View town officials will likely introduce an ordinance at their June council meeting that would require landlords who rent property for commercial or residential uses in town to pay a tax to the town.
Officials first talked about the implementing the tax during the budgetary process, to provide some revenue stability and make up for decreasing revenues, especially from the realty transfer tax.
Town Manager Kathy Roth unofficially introduced the ordinance — based on ones from Rehoboth and Bethany — at a Tuesday workshop.
“Basically,” Mayor Gary Meredith said, “We need to do it.”
According to the drafted ordinance, Ocean View would implement a 3 percent tax, based on gross rental receipts. When first recommended in April, Roth said that a 3 percent tax would generate $51,000 in revenues for the town. Although the tax would be the responsibility of the property owner, those owners would likely “pass that on to the renter,” Meredith said.
Also according to the ordinance, those taxes would only be due twice a year. For owners accepting rent from May 1 through Sept. 30, the tax would be due on Nov. 15. Tax on rent received from Oct. 1 to April 30 would have to be paid by June 15.
If the payment is not received by those designated times, the town, according to the ordinance, will charge an interest rate of 1.5 percent until the debt is paid in full.
No renewal rental licenses will be issued if those owners who are applying have outstanding debts with the town, the ordinance says.
The members of the Long Range Financial Planning Committee first recommended a rental tax to the town at a March meeting. After taking $600,000 out of forecasted transfer tax revenues for the then-proposed 2007 fiscaly-year budget at a recent meeting, financial committee members recommended the ordinance as a stable revenue source.
“It’s something we can do to raise some revenue,” Councilman Eric Magill said at an April financial committee meeting, “And hopefully it won’t fluctuate too much.”
And though the tax will likely be represented in increased rental rates in the town, current Councilman but then financial committee member Roy Thomas thought that was fair.
“These are people that don’t pay tax (in Ocean View),” Thomas said. But “they come in and enjoy our public works and public safety.”
Town wise to borrow station money?
At Tuesday’s workshop, Councilman Bill Wichmann again expressed concern about borrowing money for the new police station when there are millions left in the town’s reserve.
After awarding a construction contract to Willow Construction, the town had previously decided to put $1 million down on the station and borrow $1.2 million. By a 3-2 vote on Tuesday, that plan stood. Town officials took a 20-year plan with a 10-year fixed interest rate of 5.48 percent.
“I don’t know why we want to borrow the additional money,” Wichmann said. “We’re not using the (transfer tax) money for what it was intended. To not use it, I don’t understand the logic.”
Councilman Norman Amendt agreed.
“If I had the money and I was building, I’d pay for it,” he said. “I can’t see borrowing money when we’ve got it.”
Roth said, though, that there is no “pre-payment” penalty and the town could pay off the balance of the loan at any time. After hearing that, Meredith spoke for the majority.
“I feel we should still finance part of the building and see where the building trend goes,” he said.