Rehoboth facing $3.4 million shortfall in next year’s budget

Rehoboth Beach is facing a $3.4 million shortfall for its fiscal year 2025 budget. 

Rehoboth Beach commissioners and staff resumed budget talks Feb. 5, when Interim City Manager Evan Miller presented commissioners with a $37.7 million budget.

There’s a strong focus on city staff, said Miller, pointing to an increase in healthcare costs and an increase in pay for some staff following a recent compensation study that indicated lower-level employees were being paid less than counterparts in similar communities.

Rehoboth Beach’s annual budget runs April 1 to March 31. The proposed budget for next year is about 5.6% higher than last year’s approved budget of $35.7 million.

As part of his presentation, Miller also included several revenue increases and expense reductions that would bring the proposed budget into the black.

Revenue increases would be expected to bring in about $3 million – an increase to property taxes, $850,000; an increase in parking meter rates from $3 an hour to $3.50, about $1 million; an increase in the rental tax from 6% to 7%, $500,000; and an increase in metered wastewater rates from $14.70 to $17.79, $600,000.

The remaining deficit would be brought to zero by not filling half a dozen new positions – a deputy chief of police, an entry-level police officer, a 911 dispatcher, a deputy city clerk and a part-time communications specialist.

The other expense reduction would be to keep the city’s health insurance coverage at an 80/20 split between the city and employee. As proposed, the city would pick up 100%.

Commissioner Patrick Gossett thanked Miller for presenting commissioners a realistic budget, even if it includes a deficit. What’s been presented is eye-opening, he said.

This is what it takes to run a city that’s appropriately staffed and properly resourced, said Gossett.

Related to an increase in property taxes, City Finance Director Burt Dukes said the city charter doesn’t allow for more than $3 million to be raised through property taxes. Right now, he said, the city collects a little over $2 million, which means it would only take an increase of 1 cent to 2 cents per $100 of assessed value to reach that limit.

Currently the property tax is 6 cents for every $100 of assessed value, said Dukes.

Mayor Stan Mills said he thinks a lot of the residents in town would be willing to shoulder an increase in property taxes, so long as there’s also a parking rate increase.

There was a lengthy discussion about whether the 50-cent-an-hour increase to parking is enough.

Commissioner Edward Chrzanowski said there has to be an increase and $3.50 is modest.

Commissioner Tim Bennett, who has been pushing for an increase for months, said people are going to complain if it’s $3.01, let alone $3.25, $3.50 or $3.75. Nobody wants there to be an increase, he said.

The proposed budget includes nearly $10 million in capital improvements. Among the items included are $3.5 million for the beach patrol headquarters project; $750,000 to repave Rehoboth Avenue from Second Street to the Boardwalk; $2 million to complete Phase 3B of the wastewater treatment plant; and $500,000 each for the city’s street paving and water meter replacement programs.

Commissioners didn’t raise many concerns over this year’s capital improvement plan. Concerns were raised about the out years. The plan calls for about $13.6 million in FY 2026 and then about $21.5 million in FY 2027.

This was the city’s second budget meeting for the next fiscal year. The first was held in January and focused on financial requests from four of the city’s nonprofits – Rehoboth Beach Volunteer Fire Company requested $200,000; Rehoboth Beach Public Library requested $75,000; and Rehoboth Beach Main Street and Rehoboth Beach Museum each requested $60,000.

Commissioners and staff are scheduled to resume budget discussions at 9 a.m., Friday, Feb. 16.