Ocean View narrows budget supporters

Ocean View Town Council members met for a double-header — a special meeting and workshop — on Jan. 17, trying to set some priorities in the coming budget. In the end, they reached consensus to maintain the status quo, at least for the next couple of years.

There’s already more money going out than coming in. However, according to Mayor Gary Meredith, council was willing to let deficits ride on the town’s more than $5 million in reserves – for the time being.

“I think there’s a consensus that we don’t want to raise taxes, at least for the foreseeable future,” Meredith said.

Real estate transfer taxes make up the main part of the town’s reserves. While there’s an argument that Delaware primarily intended the towns to use those revenues for capital projects (infrastructure upgrades, for instance), state law does permit the towns to use transfer taxes to offset certain public safety and public works expenses.

Council Member Eric Magill has advocated for movement away from supporting the operating budget with transfer tax revenues, but other council members are recommending a more modest withdrawal. “We’re hoping to narrow that gap, but I don’t see it happening this year,” Meredith said.

But Town Manager Kathy Roth reported a sharp decline in transfer tax revenues at the Jan. 17 workshop, at least for December 2005. Roth said transfer tax revenues for last month were less than a quarter what they’d been in December 2004. There hadn’t been a month as slow since 2003, she added.

Whether that was a fluke, or the beginning of a trend, remains to be seen. But Magill suggested his colleagues aren’t being aggressive enough in weaning themselves away from transfer tax revenues.

“As far as the operating deficit, does anyone besides me care about it?” he asked.

Meredith said he wants to see those deficits reduced, but Magill said he didn’t see much movement in that direction, based on the consensus for: 1) continued budget growth, and 2) no new taxes. “I don’t see how today’s discussion got us any further,” Magill said.

“I’m not hung up on this transfer tax issue,” countered Council Member Bill Wichmann. “I’m not going to be gloom and doom. I see a lot of resales, and I think the market’s going to stay strong.”

Magill said he’d heard upper-class homes ($1 million and up) were selling well, but the market was adjusting to a surplus in the $300,000- to $400,000-range. He also expressed concern regarding the state’s possible take-back of at least a portion of the towns’ transfer tax revenues.

“I don’t want to sound like doom and gloom, but what if we lose the 0.5-percent transfer taxes?” he asked.

Presently, Delaware and the towns (or, for unincorporated areas, the state and the counties) split 3 percent down the middle. However, there was a time when it was a 1-percent/2-percent split (the state kicked down the additional 0.5 percent in 1998).

Last summer’s high-visibility reports of a budget crunch at the Delaware Department of Transportation (DelDOT) left town and county representatives concerned that things might revert to the old one-two.

By all indications, state budget makers have largely abandoned consideration of this politically unpopular option. But even if they hadn’t, Council Member Norm Amendt suggested Ocean View shouldn’t build its budget on “what ifs.”

“‘If’ is a big word,” Amendt said, addressing Magill. “You say, ‘if we lose the half-percent.’ But we haven’t.”

“My concern is we’re getting to be a lot like DelDOT,” Magill said, referring to the department’s depleted trust fund – which was originally intended for capital projects, but increasingly pressured by operational budgets. “I don’t want us to wake up in 2009 (with no reserves left), knowing we have a $1 million operating budget to cover in 2010.”

Still, Amendt exhibited enough confidence in the town’s continued fiscal strength to recommend a major whack at the existing reserves. He pushed for a $1 million down-payment on the pending police station project, rather than 100-percent financing.

The other council members said they’d rather wait until after the bid opening (Feb. 7) to consider financing for the 15,000-square-foot facility. The project is expected to cost roughly $3 million to build, although the town has authorized itself to borrow up to a maximum of $4 million.

Elsewhere, council members agreed they needed to take a serious look at health-care expenditures, with Wichmann recommending a taskforce to study their options, and Magill gained support for a six-month “emergency reserve.” He said Ocean View’s monthly operating expenses were running at about $175,000, so that would come to just slightly more than $1 million.