Bethany Beach officials unveiled the town’s draft budget for the 2007 fiscal year Jan. 27, in the first round of discussions by the Budget & Finance Committee.
Overall, the budget calls for modest increases in both expenditures and revenue, but the single line-item that may affect the town’s entire population is a proposed 30-cents-per-front-footage increase in water fees to help cover the sinking fund for the town water plant.
Bethany Beach refinanced the 1980 water fund in March of 2004, reducing the interest rate from 5 percent to 2.49 percent. The term was also shortened, resulting in a change from annual payments of $51,555 until 2020 to annual payments of $120,107 until 2009. The total savings to the town is $214,347.
According to Finance Director Janet Connery, at the time of refinancing, the town had sufficient cash in the sinking fund to pay the cost of the debt service for two years. Payments to be made in March and April of 2006 will bring the sinking fund into the negative range.
Connery said that in 2004, town officials discussed allowing the sinking fund to fall below zero, because when the loan is paid off in the 2009 fiscal year, fees would exceed the debt payments. With no additional infusion of cash, a positive balance would be reached again by the end of the 2011 fiscal year, she said.
However, anticipated capital needs for the water system are looming, and Connery has recommended the town consider raising its water rates to meet the current debt costs. That would free up some of the water department’s borrowing power, enabling it to consider a new loan in the 2009 fiscal year to cover some of those capital projects — versus having to wait until the 2011 fiscal year or raise the water rate even more at a later date.
The current rate — $1.40 per front footage — was established in the 2004 fiscal year. It was raised 10 cents from the $1.30 that was set in 2001, with 10 cent increases also being seen in 1999 and 2000. Each 10 cent increase results in $22,857 in additional funds. The $1.40 rate results in $320,000 in revenue for the town. And the debt service cost for the 2007 fiscal year will be $382,618. The proposed $1.70 rate would result in $388,571 for the town, covering that debt service cost.
If accepted — as the Budget & Finance Committee unanimously recommended after Connery’s review — the change would increase the minimum water fee from $70 to $85, based on 50 feet of front footage. Most properties — some 50.7 percent — would see an annual increase of just $15. It would be an increase of $15 to $25 for 18.5 percent of properties, $21 for 9.5 percent. The highest anticipated increase would be for just 7.6 percent of properties — between $25 and $50.
With those modest increases on the table, committee members quickly agreed to support the fee increase, saying it made more sense to raise the rate by 30 cents now rather than waiting until the sinking fund was well into the negative range and have capital project funding tied up in existing debt.
It was in line with similar recommendations during the 2006 fiscal year budget discussions that led to increases in garbage collection fees toward a capital improvements fund that would pay for future expenditures on trash trucks and other equipment.
Committee members also gave the thumbs-up to the overall draft budget after a review of Connery’s detailed report. With review of department heads’ requests and Town Manager Cliff Graviet’s administrative budget, as well as expected revenue, Connery laid out a full financial picture.
That includes a 6.1 percent increase in the town’s general fund operating budget — up $202,650 from 2006’s $3.3 million. Under the proposed budget, the water department — a fiscally separate entity — will see an operating budget increase of 5.5 percent, up $241,050 from the $4.3 million of last year.
Revenues in the general fund are anticipated to be up just $10,000, or 0.2 percent — to $5.15 million. In the water department, with the sinking fund increase, revenue should be up 0.6 percent, or $42,000, to $1.41 million.
Real estate transfer taxes — a large portion of the town’s annual revenue — were estimated to be at $1.44 million.
Graviet said recent concerns about the possible reduction of the transfer tax as paid to municipalities (due to state budget shortfalls) were unfounded. The town had been reassured that the municipal funds were unlikely to be touched and believed concerns might have been intentionally raised to get local support for state funding means other than dipping into the county’s coffers.
Connery also noted the loss of some grant funds — particularly the municipal street aid that helps the town pay for the street-light electrical bill, which would have been $125,000. But Graviet also noted the restoration of funding that would help pay for the design phase of the planned Garfield Parkway Streetscape project. Those funds will be paid by the town and later reimbursed from the state.
The town has also budgeted the $250,000 estimated as the cost of Phase 2 of the larger Bethany West stormwater improvement project as part of the 2007 budget, as well as an additional $152,700 to complete bandstand renovations — including a $90,000 unanticipated cost for pilings. Restoration of the handicapped-access ramp to the boardwalk at Oceanview Parkway is also slated in the budget.
Discretionary funds — $20,000 — to pay for a barge for the annual July 4 fireworks are also included, just in case last year’s early-summer beach erosion does a repeat and forces the town to move the display’s origin point from the narrow strip of beach. Town officials will make the final call on reserving a barge as the event nears, Graviet said.
And he recommended $5,000 in town funding to assist with the Fourth of July parade, noting increasing costs for entertainment and transportation that were ever more difficult for organizers to collect from community donations.
Overall, administrative costs were anticipated to be down 0.5 percent, largely due to the lack of one-time contributions made in 2006, including a $10,000 donation to the South Coastal Library building fund.
Anticipated budget costs in all departments are being impacted by increased fuel costs, for gasoline, electricity and propane. And additional personnel in Public Works and on the beach patrol are also making an impact. Three additional lifeguards will be employed in 2006, as well as an addition of one lifeguard stand and the replacement of two others.
Final figures on the police budget remained up in the air this week, however, with an anticipated vote by most of the town’s officers that could mean unionization and collective bargaining — which could in turn affect how much the department is paying in salaries and benefits.
Also nebulous is the issue of repayment of the debt on the former Neff property the town acquired last year. In budget discussions for 2006, the committee — and the town council — elected to not pay off the debt in full this year, in deference to the impact on the Neff family’s tax situation.
Graviet urged the committee to consider doing so this year, since the previous year’s discussions were a clear heads-up to the family that the town was looking to the bottom line in paying off the debt early.
The longer the town waits to pay the full amount, the less of a financial advantage it is, with a 7 percent interest rate and a penalty for early payment at 5 percent and decreasing each year. That means the decision on whether to pay it off in full really needs to come in the near future.
Committee members favored perhaps giving the Neffs some more time, putting the payment late in the coming budget year and into the next calendar year, but Graviet emphasized that clearing the debt now would restore a significant portion of the town’s short-term borrowing power.
The lingering question was exactly how much the town would save paying off the debt this fiscal year versus the next. Committee members opted to wait on making the decision for their recommendation on the issue until Connery could bring them precise figures.
The next meeting of the Budget & Finance Committee was set for Feb. 17, at 2 p.m. In addition to those remaining issues, the committee will eventually have to recommend a final budget for the town, which will then have to be approved by the town council. The town’s fiscal year begins April 1.