Bethany adopts budget, creates and funds reserves

Bethany Beach is now officially saving up for a literal rainy day, with the creation and funding by unanimous votes on March 18 of the new Storm Emergency Relief Fund (SERF), which would be used to repair infrastructure damaged in a natural disaster, such as a nor’easter or hurricane (but not to repair the beach itself).

The creation of the fund, which would require a supermajority of at least five council members to access, was allowed by a 5-0 vote of the council (with Councilmen Bruce Frye and Jerry Morris absent) to amend the Town’s Fund Balance Statement, which references all the Town’s various funds and reserves.

The second portion of creating the fund came in the form of adopting the 2017-fiscal-year budget, which included tax increases designated to fund SERF.

The council had previously voiced support for a plan to initially fund SERF from the building permit and transfer taxes from the Bethany Ocean Suites Hotel project, which will provide $491,000 for the 2017 fiscal year and is expected to increase to $644,000 total in the 2018 fiscal year, and continue its funding through a set of tax increases spread across both property owners and rentals, beginning May 1 and totaling $100,000 from each source in the 2017 fiscal year.

But, as Councilwoman Rosemary Hardiman had told the Coastal Point last week, local real estate rental agents had informed her that they had already sent out most of their rental contracts for the 2016 summer season and collected many of those rental payments, making it difficult to incorporate the tax until next summer’s rentals were on the table.

The Bethany Beach Landowners Association (BBLA) had expressed its support for a fair division of the tax burden to fund SERF across both rentals and property owners, but through Vice President Bob Mowry last Friday said it opposed implementation of the rental tax increase until after the summer season.

As a result, Hardiman on March 18 proposed revising the timetable for the tax increases, shifting back the implementation date to the 2018 fiscal year, beginning with rental agreements made on or after Sept. 1, 2016, with taxes due on those on June 1, 2017, allowing rental agents more time to accommodate the changes.

Delay in tax increase suggested

And, with that change proposed, Hardiman said she also had to propose the shifting of the effective date for the property tax increase to property owners to May 1, 2017, in order to maintain the notion of fairness of the tax burden that the council had sought in increasing taxes on both rentals and property owners.

“As a practical matter, it would not be equally shared,” she said. “Property owners would be paying their full $100,000 share this year, while renters would be paying only $25,000, if that.”

Hardiman said that she’d been told that, on average, only about 25 percent of rental agreements are made after May 1, and that most of the larger homes, with their larger rents, were booked already for the 2016 summer season, meaning even less than 25 percent of the rental revenue would come in after May 1.

Finance Director Janet Connery confirmed that the bulk of rental tax revenue is from the fall and winter — about 96 percent of it — with only about $35,000 paid for rental contracts made in May or June.

“Rent collection for this summer started last October,” Hardiman said, “so we’ve already lost a half a year of applying the tax to the renters. Property owners would end up paying the bulk this year.”

Furthermore, she said, in visiting nine local Realtors to ask about the issue, she said none of them were happy with the idea of having to make the change at this point in the season, and while five of them said they could manage it, two said it would present substantial difficulties, particularly owing to the nature of the software they use to track rental agreements, which doesn’t easily allow them to be altered mid-season.

Considering Hardiman’s suggestions, Councilman Chuck Peterson, who heads the Budget & Finance Committee, said, “I agree with the idea of fairness and equity, but there is some urgency, especially now, in getting the fund started — especially without the protective dune now.”

The loss of much of the constructed dune during two nor’easters this winter has left the town vulnerable to significant damage should a hurricane or another nor’easter hit before planned beach re-nourishment through the U.S. Army Corps of Engineers in 2017.

“I agree we can’t implement one half without the other, but seven of the nine said they could implement it by May 1 if they were notified today,” he said. “I have some reservations about cutting those $200,000 out of the process,” he added, noting that the change wasn’t a one-time loss for the Town, as the funding would have compounded if collected as proposed.

Hardiman noted that, with the loss of previously collected rental payments, if the funding was put in place as proposed, the total wouldn’t even be $200,000.

“I don’t know what it would be,” Peterson said.

“I don’t either,” she replied.

Tax increase on rentals bumped up and back

Town Manager Cliff Graviet took a moment to note that he hadn’t been an advocate of raising the rental tax a full percent, from the current 6 percent, but that a Realtor had asked him about the possibility of starting the tax increase later and had said they weren’t opposed to it being increased by a full percent — to 7 percent, instead of the 6.5 percent proposed.

He suggested the council consider raising the rental tax to 7 percent, but with the increase implemented at the end of the season instead, with the difference helping make up for the loss resulting from not collecting it sooner.

Hardiman agreed that the proposed hotel rental tax increase, from 3 to 3.5 percent on businesses that already pay the state’s accommodations tax, could still be implemented on May 1, since that is paid whenever guests pay their hotel bill.

“The only issue I have is springing this right here and not giving people an opportunity to weigh in,” Killmer noted. “We just doubled what we were going to do. The problem is we’ve been tabling this over and over again, and we’re now at a point where we’re dealing with contracts that have already been issued.”

Graviet noted that, with Hardiman’s amendment, the change in rental tax rates was not going into immediate effect but would be for next summer’s rentals, meaning there was some advance notice being provided.

Killmer said everyone hadn’t realized during prior discussions that there would be consideration of a full percent increase, versus the proposed half-percent.

“At the public hearing, we discussed that rate, and now we’ve changed it to something else,” he said. “Are you prepared to vote on that right here?”

Graviet said the change was responsive to the Realtors, some of whom had previously suggested the rate be 7 percent. Hardiman said the BBLA had also suggested 7 percent.

The council settled on that idea, keeping the hotel tax rate at the 3.25 percent proposed (up from 3 percent) and implemented on May 1 (as originally proposed) and increasing the property tax rate from 17.5 cents per $100 of assessed value to $18.5 cents per $100 of assessed value as of May 1 (also as previously proposed), but raising the rental tax rate to 7 percent (up from 6 percent, and .5 percent more than originally proposed) and implementing that change for all rental contracts made on or after Sept. 1, 2016.

Councilman Joseph Healy objected to the change and voted against it, and the resulting budget, with both passing on the 4-1 vote. The 2017-fiscal-year budget, in all, includes $9 million in total revenue, $7.4 million in operating costs and $1.5 million in capital costs and debt repayment.

Delegation pushes to repurpose funding

Addressing the Town’s concerns about the vulnerability of the beachfront due to the compromised dunes, Mayor Jack Gordon said Graviet he had been told by DNREC’s Tony Pratt that U.S. Sen. Tom Carper (D-Del.) was “working hard to get some of the funds designated for Sandy relief that haven’t been spent and are not ready to be spent in New Jersey, to be redirected so we can tap into the replenishment planned in Rehoboth Beach and Dewey Beach this year.

“We’re grateful for his efforts,” Gordon said, adding that many of the area’s coastal towns had called the Congressional delegation to thank them for their efforts for funding a repair of the dunes sooner than 2017.

Graviet said he echoed the thanks for Carper, who he said is “leading the charge for the Congressional delegation to find funding to replenish our beaches.”

With another (mild) nor’easter anticipated over weekend, he said the Town could expect more erosion of the sand already pushed to the dune line, and that had meant that the Town was holding off on re-constructing some of the damaged steps from the boardwalk to the beach, instead just working to construct new steps at the south end of the boardwalk plaza, which staff hoped to complete by the weekend.

“We’re reluctant to try to construct them in other areas so they don’t end up in the ocean again,” he said.

Healy sounded a further note of caution about the beach’s condition and its future condition, reporting that, having attended a meeting of the American Shore & Beach Preservation Association in February, he hadn’t found things “as helpful as past events,” despite getting time with Carper and members of U.S. Sen. Chris Coons’ and Rep. John Carney’s (both D-Del.) staff.

He said official focus was on regional management plans, with a focus on natural features for beach preservation — particularly on “soft” features, such as dunes.

“I would love to see a melding of sand and the hard, but that requires we maybe have an overall regional plan,” he said. “One of ASBPA’s tenants is implementation of state and regional coastal plans. I’d like to see us support that. ‘Wide beaches and high dunes’ — that’s what protects us.”

Council declares opposition to seismic testing, drilling

Further addressing concerns about the long-term future of the town’s beaches, the council on March 18 also proceeded with a vote to adopt a resolution in opposition to seismic testing and offshore drilling activities along the Atlantic coast, despite the Obama administration’s decision last week to drop plans for opening up the Atlantic coast to oil and natural gas leases in the next five years.

“The council had a presentation at its February workshop about seismic testing and the idea of oil drilling out there as the administration had been presenting,” Gordon said. “Since then — when they found out the Town was talking about passing a resolution opposing it,” he asserted with a laugh, “the federal government decided to withdraw wanting to have that done.”

Gordon said the Assateague Coastal Trust, which had made the presentation last month, had since advised the council to proceed with considering the resolution — because oil and gas exploration might be considered in the future, and because seismic testing could proceed at any time, as preparation for possible future exploration.

The resolution opposes seismic testing and drilling for oil and natural gas in the mid- and south-Atlantic generally and off the Delaware shore specifically.

Healy noted that the ACT representative had been “very much opposed” to such exploration and drilling, and that was a concern for him. “We have yet to hear a speaker in favor,” he said. “I would love to hear the other side of the story.”

Rich King, a Millsboro resident who heads, said documents laying out the case in favor of exploration and drilling were available on the federal government website as part of the previously considered documentation from those supporting it.

“They still have permits in play,” he said of seismic testing, noting also that the council’s resolution would make it the 110th municipality to declare its opposition to seismic testing and exploration in the Atlantic.

The council voted 5-0 to adopt the resolution of opposition.

Also on March 18:

• The council voted 5-0 to remove hotels, motels, boarding houses and tourist homes as permitted uses in the C-1 Commercial Zoning District, citing the change of zoning in recent years for the only such uses that had been in existence — the Blue Surf Motel and Bethany Arms Motel. Both properties were re-zoned into the new CL-1 Commercial Lodging district.

• The council voted 5-0 to add “freeboard” to Footnote (p) of the Town’s Table of Dimensional Requirements, after having approved in 2015 an 18-inch mandatory freeboard (increased building start height, to reduce flooding impacts) for all new construction and substantial improvements to existing structures.

• The council also voted 5-0 to amend Section 425-85 (Dimensional Exceptions Sections) (B) and Subsection (D-1) of the Zoning Code, pertaining to bay and bow windows and residential front steps, per changes proposed and approved by the Planning Commission after a public hearing in February. The revision dictates that chimney eaves, and bay and bow windows may project out a maximum of 2 feet from a structure and that bay and bow widows are limited in size to 10 linear feet. It also revises encroachment limits for front steps and landings, and dictates that they must fall within a 10-by-10-foot area.

• Graviet reported that Town staff were working on bid documents for construction of a storage complex for the Town’s property in unincorporated Frankford/Clarksville and should soon be ready to open the project for bidding.

He also reported that the contractor who will be refinishing the Town’s water standpipe would be beginning that work in the next week or two, with three to four weeks of work anticipated, and hopes to be done before Memorial Day. He said they had also scrapped the notion of using a pole barn for the water plant’s mineral pond and would instead be putting a new pond in roughly the same location as it was before the site was re-developed to put in the new water tower.

• The council voted 5-0 to appoint William E. Baxter to the Town’s Audit Committee, replacing the late Mike Horne. Chairman Pat Shepley noted that Baxter had already attended a committee meeting and, as the Town’s annual outside audit is pending, would be an important addition to its membership.

Shepley also reported that the internal auditing process in the last fiscal year had specifically focused on payroll procedures, as well as the process for voiding parking tickets. For the coming fiscal year, he said, they would include a statistical review of a report from the parking department manager on the numbers of tickets written and avoided, as well as a review of new municipal software. The committee also recommended the Town continue to use the TGM Group for the external audit. The committee will meet again in May, after the external audit field work is done.

• The council voted 5-0 to appoint retired municipal attorney Tempe Steen, whose family also operates the town’s beach rental concession, to the Charter & Ordinance Review Committee (CORC). Hardiman, who had asked as the committee’s chairperson that Steen be added to its membership, said she felt Steen would be “a very valuable addition to the committee.”

• The council voted 5-0 to approve awarding beach and boardwalk exercise class concessions to providers for another season of bootcamp classes, yoga on the beach, yoga on the bandstand and Pilates, adding barre classes for 2016.

• Cultural & Historical Affairs Committee (CHAC) Chairwoman Carol Olmstead reported that the committee had recently discussed their February cultural evening and its presentation on Fort Miles, which was so heavily attended that they needed to bring in extra chairs.

On April 19, she said, Saul Brody, an expert in American occupational folk song, will bring his guitar and harmonica and discuss music’s role in the lives of workers over the years. A planned program on the First State National Historical Park, which was approved three years ago, will be aimed for the fall, due to scheduling issues involving Carper, who pressed for the park’s creation.

Committee members had also recently attended the Small Museum Association Conference in Ocean City and visited the Dinker Cottage for a tour led by Christina Edgar.

• Killmer reported that the Non-Residential Design Review Committee had unanimously approved signage applications from Atlantic Shoals Surf Shop at 113 Garfield Parkway, which is re-using the existing sign box for the former Sandy Toz/Sandy Pawz but with external illumination; and from Patterson Schwartz Real Estate for new vinyl decal signs at the bottom of its storefront windows and on its recessed front door.

• The council heard appeals from neighbors of the Town’s property in unincorporated Frankford/Clarksville that was proposed to include a new shooting range for the Bethany Beach Police Department’s use, under an application before the Sussex County Board of Adjustments. (That application was denied on March 21 — see story on Page 1 — with the County BoA having heard from many of those residents about their opposition to the proposal.)

Resident Jane Richards said that while she supported the Second Amendment and law-enforcement, she opposed the shooting range location and felt it would lower the property values of the property’s neighbors, so she had invited the neighbors to speak at the council meeting “as a goodwill gesture.”

Speakers cited their concerns and encouraged the council to withdraw the application, while Steen said she had had some difficulty finding in Town documents the purchase price of the property or the council’s approval to apply for the special-use exception needed from the County. She urged the council to publish more information on Town actions, such as the figures for grants to the fire company and library that were made March 18, and to add live online streaming of council workshops, at which much of the council’s discussion of issues takes place.

• Peterson reported that for the current fiscal year, through the end of February (92 percent of the fiscal year), the Town had received 101 percent of budgeted revenue and had spent 89 percent of budgeted expenses, with revenue having already exceeded the budgeted expenses for the fiscal year.