Next budget could be a challenge in Rehoboth Beach

November 3, 2023 29

Rehoboth Beach is a little more than halfway through its current fiscal year, but city staff have begun thinking about next year’s budget, and it appears it’s not going to be easy to present commissioners with a balanced budget.

Bert Dukes, city finance director, told the audit committee, meeting Oct. 31, that there will be some budgeting challenges in the coming year. He said it’s been a good year, but the city will have to be careful moving forward.

Specifically, Dukes said his biggest concern is the city’s capital improvement budget.

About one-third of the current year’s $35.7 million budget is being spent on capital improvements. That’s the largest ever, said Dukes.

Referencing $40 million in cash balance, Dukes said Rehoboth has the kind of balance sheet that everyone would envy for a town its size. However, he said, it can disappear a lot quicker than people think when the city starts to deal with big capital improvement projects.

The city is also near its limit on loan borrowing capacity, said Dukes, which means some projects might have to be pushed further out. Right now, the city can borrow up to $75 million; it’s already borrowed $62 million, he said.

Committee member William Perlstein asked Dukes and auditor Jeff Kowalczyk of Barbacane, Thornton & Co. about the city’s dependence on parking-related revenue. In the event of an awful season, a large percentage of the city’s revenue is dependent on other people coming here, he said.

There are opportunities in years that are good, and not necessarily more ways to spread the revenue, said Kowalczyk. What the city should do is recognize when it’s having a better-than-average year and don’t make that the new baseline, he said.

The dependence on non-property tax revenue sources has always been a concern, said Dukes. That’s why staff is likely to recommend a 1% increase in the city’s rental tax during budget discussions, he said.

If an increase is implemented, it would be the first since 2018, when the tax increased from 3% to 6%.

It doesn’t appear the city can count on excess revenue from the wastewater fund to balance the general fund in next year’s budget. The city’s budget for the current year takes $1 million from the wastewater fund to balance shortfalls in the general and water funds.

Dukes said 85% of the wastewater treatment facility was funded by the federal government when it was built in the mid-1980s. It’s been making money since the beginning, he said.

However, going forward, the city is nearing the end of a multi-year, multi-phased improvement program at the wastewater plant, and it will need to begin paying loans back, said Dukes.

As for the purpose of the meeting, which was to review the audit of last year’s $30 million budget, Kowalczyk said it’s a clean, unmodified report.

Rehoboth’s budget runs April 1 to March 31. A schedule on budget discussions has not been released by the city. In years past, commissioners have begun discussions in January, with an eye toward approving the budget in March.