Rehoboth Beach approves $44 million budget

March 28, 2025 3

Rehoboth Beach commissioners approved a $44 million budget for next fiscal year during a meeting March 21. The budget represents a 13.5% increase over the current fiscal year, but the city is projecting an increase in revenue to account for no hikes in taxes or fees.

The city took a just-right approach, said City Manager Taylour Tedder, who oversaw his first budget process with Rehoboth. It’s not too aggressive and it’s not too conservative, he said.

It’s not a perfect budget, but it’s much better than before, said Commissioner Craig Thier.

Rehoboth Beach’s fiscal year runs April 1 to March 31. Commissioners and staff have been discussing the budget since early January. Commissioners voted 5-1 in favor of the budget.

Heading into the March 21 meeting, many of the big decisions had been made, including approval of a new police union contract, healthcare coverage increases for employees and community partner requests.

The budget includes $28.3 million in general fund expenses and about $15 million in its enterprise water and wastewater funds. Across those expenditures, about $11.4 million is dedicated to capital improvements. There is an anticipated $222,735 surplus.

As approved, city employees will receive a 3% cost-of-living increase and up to a 3% merit increase for eligible employees. The city also extended coverage of employees’ healthcare costs from 90% to 100%; dependents will continue to be covered at an 80% rate.

The city budget includes $435,000 worth of contributions to support several community organizations – $250,000 for the Rehoboth Beach Volunteer Fire Company; $75,000 for the Rehoboth Beach Public Library; $60,000 for Rehoboth Beach Main Street; $50,000 for the Rehoboth Beach Historical Society and Museum.

Among the capital improvement expenses in this year’s budget are $4.7 million to finish phase 3B and begin phase 4 of improvements to the wastewater treatment plant facility; nearly $2.5 million for completion of the Baltimore Avenue restroom/beach patrol facility; $585,000 for the annual city paving project, this year on Christian and Munson streets; $400,000 for stabilization of the Grove Park Canal Dock; $350,000 for replacement of the water main on Munson Street between Scarborough and Bayard; and $257,680 for a new hook hoist container truck.

The increase in revenue for FY26 without an increase in taxes is because the city anticipates higher revenues from property transfer taxes, parking, building permits and rental taxes. For example, in the current FY25 budget, there is $1.85 million in property transfer tax revenue, but the city is projecting $2.6 million, so next year’s budget includes $2.3 million in revenue. Another example: there’s $3.1 million in rental tax revenue for FY25, but the city is projecting $3.9 million, so next year’s budget has $3.6 million in revenue.

Some of the discussion at the meeting was related to future funding unknowns – primarily beach replenishment. The state has already indicated its wants local municipalities to pay more.

Commissioners Patrick Gossett and Thier recently attended a Delaware League of Local Governments Day at Capital Hill in Washington, D.C., to speak with the state’s federal legislators.

Thier said the city could be on the hook for beach replenishment in the future, but no one will really know until next year’s federal budget is complete. It’s the city’s biggest exposure, he said.

Beach replenishment has been a 65/35 split between the federal and state governments, said Gossett. There’s a strong discussion of eliminating both, he said.

Tedder said the city has additional revenue coming at some point, but it’s not included in the budget because he wasn’t sure on the timing. There are major hotel projects on both sides of Rehoboth Avenue and the Boardwalk, he said.

Commissioner Suzanne Goode was the no vote. This budget has been balanced by increasing debt and there was no significant attempt to limit spending, she said.

Goode made a number of motions to reduce spending, but they failed after no one would second them – removal of $80,000 for a fit out of office space; removal of the salary for the planning and community director because she recently left the city and the position is currently vacant; and a motion to stop using consultant AECOM once $147,000 allocated in the current fiscal year budget has been spent.

Goode also made a motion to roll back the property taxes in light of a projected surplus for the current fiscal year of more than $6 million. City commissioners increased property taxes nearly 30% for the current fiscal year, which netted the city about $590,000. This motion failed also, but it failed because the city sets its tax rate in June and Mayor Stan Mills said the issue will be back on the agenda then.

Public participation was limited, but residents Carolyn Diefenderfer and Cindy Lovett spoke in favor of keeping property taxes where they are.

Tedder is projecting a $6.35 million surplus in the current fiscal year, which ends March 31.

About half of that – a little more $3 million – is related to a loan for the new beach patrol project. The city had originally planned on spending $5.5 million on the beach patrol project in the current fiscal year, but about half way through commissioners decided to take that line item out of the capital improvement budget to free up cash. The remaining portion of the $5.5 million has been spent this year.

Another significant chunk of the surplus is about $2.3 million in the water fund, which is an enterprise fund.

At the urging of Thier, one of the things Tedder did this year that was new to the city’s budgeting process was the creation of a three-year outlook for the budget. It’s similar to what the city does for the capital improvement plan, said Tedder.

For this budget process, the three-year window included the current fiscal year, next year’s approved budget and the anticipated budget for Fiscal Year 2027. Tedder said one of his goals for the future is to turn the three-window into a five-year window for better accuracy in projections.