Rehoboth eyeing use of reserve funds to balance budget

With fewer than three weeks until Rehoboth Beach’s next fiscal year begins, commissioners are considering using more than $1 million in reserve funds to balance the proposed budget.

Rehoboth Beach’s fiscal year runs April 1 to March 31. Over the past couple of months, commissioners have been examining the proposed budget presented by staff. During the most recent meeting, March 4, staff presented an updated budget proposal that included $38.9 million in expenditures, with a deficit of about $4.7 million.

At an earlier meeting, in a revenue-producing measure, commissioners increased parking sources of revenue across the board – parking meters went from $3 to $4 per hour and parking permits were increased 30%. These changes are expected to cut the deficit nearly in half, bringing in about $2.4 million. Commissioners also approved a 1% increase in the rental tax, which is expected to bring in $100,000.

In an effort to continue to close the deficit, staff has also presented commissioners with other revenue-producing measures. A 0.085% increase in property taxes would bring in an estimated $850,000, and a 21% or 28% increase in wastewater rates would bring in $595,000 or $790,000.

Staff also presented commissioners with cost-reduction opportunities, but those involve eliminating new positions pitched as being needed to appropriately staff city hall and other departments. The new positions include a deputy police chief, an entry-level police officer, a 911 dispatcher, a part-time deputy city clerk and a part-time communications specialist. If those positions are removed from the budget, there would be about $412,000 in savings. To date, commissioners have indicated they want to keep the new positions in next year’s budget.

City staff presented commissioners with a proposal for a fund balance policy, which would provide a financial base sufficient to sustain municipal services through the six busiest months of the year in the case of an emergency. Staff said the city has nearly $21 million in cash, which is about $1.2 million in excess of the proposed minimum fund balance.

After being presented with these numbers, commissioners reached a consensus to increase the wastewater rates by 28%, but to leave property taxes alone, which would result in a deficit of about $1.1 million. The consensus among commissioners was that it would use the excess reserve cash to balance next year’s budget.

As proposed, the budget also included 100% healthcare costs for city employees, a change from the current 80/20 split. Staff said if the 80/20 split remains, the budget deficit would be reduced by about $245,000. Commissioners reached a consensus that keeping the status quo is the prudent approach at this time.

The proposed budget continues to include the full funding requests for Rehoboth Beach Main Street, Rehoboth Beach Volunteer Fire Company, Rehoboth Beach Library and Rehoboth Beach Museum, which amounts to $395,000. The commissioners seem on board with the fire department’s request for $200,000, but the other requests aren’t as certain.

While the majority of commissioners at the March 4 meeting were in favor of no increase to property taxes, it’s unclear if that will be the situation once the budget is passed. During the meeting, Commissioners Toni Sharp, Tim Bennett and Patrick Gossett were in favor of keeping the property tax rate the same, while Mayor Stan Mills and Commissioner Francis “Bunky” Markert were in favor of increasing the property tax. Commissioners Edward Chrzanowski and Don Preston were absent from the meeting, so their opinions weren’t taken into consideration to reach a consensus.

Commissioners are set to resume budget discussions the morning of Friday, March 15, with the expectation they will approve the budget during a commissioner meeting later that afternoon.