Public Hearing (FY2019 Budget) – June 4, 2018

PUBLIC HEARING

FY 2019 BUDGET

JUNE 4, 2018

 

Mayor Cerino called the Public Hearing on the Constant Yield Tax Rate to order at 7:05 p.m. In attendance were Councilmembers David Foster, Linda C. Kuiper, Rev. Ellsworth Tolliver and Mauritz Stetson, W. S. Ingersoll (Town Manager), Jennifer Mulligan (Town Clerk) and guests.

Mayor Cerino read the public notice for the Public Hearing on the Budget for Chestertown for Fiscal Year 2019, which was published in the Kent County News on May 24, 2018 and May 31, 2018 as follows:

At 7:00 p.m. on Monday, June 4, 2018, the Mayor and Council will hold a public hearing on the proposed FY2019 Town Budget.   The hearing will take place at Town Hall, 118 N. Cross Street.  Citizens are encouraged to attend and make written or oral comments on the entire budget.  The budget proposes a 5¢ increase in the current tax rate and is available for review in the office of the Mayor and Council.

                                                                                    By authority of

                                                                                    Chris Cerino, Mayor

 

Mr. Ingersoll reviewed the revenues from real property at $2,578,608.00, income taxes at $650,000.00, large grants from the State and Federal government for $937,000.00 and $1,100,910.00 (marina grants). A grant from $186,000.00 from the County is mainly the Hotel Tax and various other revenue items totaled $6,053,131.00.  Mr. Ingersoll stated that about $2,000,000.00 of this budget were capital items for the Marina, making the Town’s actual budget closer to $4 million.

Mr. Ingersoll stated that highlights on the expense side were public safety at $1.8 million and Public works at $1.3 million. Capital outlay expected for the Marina was $2.153 million.

Mr. Ingersoll stated that in its preliminary budget work sessions the Town had real problems making revenues match expenses. One of the main reasons was because the assessable tax base had flat lined since 2008, when the “great recession” began.  He showed a chart of the assessable base over the last 10 years. Mr. Ingersoll stated that the tax rate has been $.37 since 2006.  The chart showed a history of taxing rates in the $.36 to $.38 range back as far as 1991.

Mr. Ingersoll reviewed the steps the Council had taken to balance the budget without proposing an increase. Mr. Ingersoll stated that the County Grant in Aid (tax differential) has been non-existent for the past 4 years.  He said that the Mayor and Council approached the Kent County Commissioners as a group last year and were rebuffed, being told that they had come in too late with their request.  He said that the Mayor and Council asked early in the fall and again in the spring this year and were told that they “were on their radar”.  Mr. Ingersoll stated that $3 million plus in the budget that he had just read were expenses for which Town taxpayers paid twice:  Public safety and public works (roads).

Mr. Ingersoll stated that the County was asked if they were ever going to reinstate a tax differential to the Town or tax offsets for Town taxpayers (cutting $.05 or $.10 from their County tax bill). He said that Kent County was one of only two or three counties in the State of Maryland that does not offer a tax differential or offset.  Mr. Ingersoll stated that he was aware that Kent County was having a hard time with their budget but he did not think that was always the case, having paid down a lot of their debt and installing the fiber throughout the County over the last few years.  He said that there were 5 towns in the County that were all in need of a bit of help from the County in financial support or an offset for the in-town taxpayers.

Mr. Ingersoll stated that when the Town began the initial budget process there were no capital items listed (other than the Marina). There were no salary raises included then either.  After the first meeting, there were budget cuts across the board including funding to numerous non-profits.  The Council then discussed cutting services such as recycling or closing the Visitors Center, but one of the things that the Town is most proud of is keeping their services when other towns may not have.  Mr. Ingersoll stated that smaller building permit fees were raised in an attempt to find revenue, but they did not want to raise impact fees for water and sewer as there was growth occurring in the Enterprise Zone.  After much discussion and debate, as well as comparisons of $.01 to $.05 increases, most of the Council agreed to the idea of raising taxes by $.05.  Mr. Ingersoll stated that he thought most people were satisfied with their representative government and happy with the services that they receive for the taxes they pay.

Mayor Cerino stated that the biggest challenge in this budget is flat revenues for a decade while maintaining the same services as the price of those services ticks up. Mayor Cerino stated that there has been no paving in Town in the 5 years he has been Mayor and he did not want the Town’s infrastructure to suffer.  He said it would cost the Town more in the long run and that the budget has been balanced by deferring much needed maintenance.

Mayor Cerino stated that with the tax increase, there is $150,000.00 in the budget to begin a paving program to in Town.

Mayor Cerino stated that the tax increase to $.42 is low compared to other towns on the Eastern Shore, sharing some of the current tax rates as follows:

  • Denton: $.75
  • Federalsburg: $.83
  • Greensboro: $.75
  • Ridgely: $.57
  • Goldsboro: $.47
  • Henderson: $.48
  • Cambridge: $.81

Mayor Cerino indicated that there were some towns that charged a lower tax rate but the vast majority are significantly higher, which was a testament to the leadership over the decades. He said that when revenues remain as flat as they have been, something has got to give.  Mr. Ingersoll stated that all the towns mentioned by Mayor Cerino also receive tax differentials from their counties.  Mayor Cerino agreed stating that the Mayor of Easton told him that their tax rate is $.52 and they receive a $.13 tax differential from Talbot County for the duplicate services Easton performs.  Chestertown has received nothing from the County in the way of a tax differential since 2014.  In years prior the Town received as much as $116,000.00.

Mr. Foster stated that he is supporting the tax increase because he could not see another way around it. Mr. Foster stated that the budget has been balanced in past years by deferring maintenance and said that postponing the work will not save anyone in the long run.

Mr. Foster stated that the tax base remaining flat is a clear signal that residents need to begin to do everything they can to support local businesses and encourage more small businesses to open. He said that was how the tax base would increase.

Mr. Stetson stated that he would reserve his comments until the vote.

Rev. Tolliver stated that he will also support the tax increase for the reasons already presented. He said that in order to maintain the lifestyle and quality of services that the Town provides, in light of the flat revenues, there had to be something drastic done now.  He said that he is not in favor of a smaller increase to only to have to do the same thing again this time next year.  Rev. Tolliver stated that he hoped when the situation improves there was the possibility of lowering the rate.

Mayor Cerino asked if there were questions or comments.

Mr. Jim Gatto, resident of North Kent Street, commended the Council for enacting the Enterprise Zone and asked Mr. Ingersoll to explain it to the audience who may be unaware how the program worked. Mr. Ingersoll stated that the improvements in the newly annexed area behind the Washington Square Shopping Center is part of the Enterprise Zone and the Town will not collect full taxes on the improvements to the property right away as they will be phased in over a 7 year period.  Mr. Gatto stated that the long term benefit for the Town would be evident after that timeframe.  Mayor Cerino stated that the Enterprise Zone was a tax incentive for developers and entrepreneurs to develop raw land where the full tax benefits are not recognized for 7 years, noting that the Town would have never received the future tax benefits if the developer did not build.  He said that the tax remains status quo at present, but was a short term pain for a long term gain.  Mr. Stetson stated that there were ancillary benefits from the additional workers that would be hired in income tax and if those employees decide to purchase a house in Town.

Mr. Gatto stated that he thought that the assessments would remain flat for at least 2 more years before the reassessments came in.

Mr. Gatto stated that he has lived in Town for 40 plus years and the roads have never been in worse condition. He said that if action was not taken at this point there would be major costs in the future, which went well beyond paving.

Mr. Gatto stated that there were notes both on the Marina property and new Police Department property when he left the Council. He asked when they would be paid.  Mr. Ingersoll stated that the Marina note is until 2031 but he was uncertain about the exact final payment date for the Police Department’s note.  Mr. Ingersoll stated that the Town took advantage of a great opportunity in purchasing a new police station at 600 High Street.  It was also financed through a local bank.  He said that the former police station on South Cross Street was sold and adaptively reused.  Mr. Gatto suggested that the Town see if refinancing would be an option before interest rates increase.

Mr. Gatto stated that the Marina was costing the Town even though it is a vital interest. He said that small grants cost time and it may be time to avoid the grants and get the Marina operating by borrowing the funds to do so.  He said that rates were at 2.3% for 30 years and the project would not be further delayed.   Mayor Cerino stated that the project would be mostly complete by the end of the fall 2018 and the funding is in place.  Mr. Ingersoll stated that they used USDA funds and received large grants, some of which have been converted to 100%.

Mr. Gatto stated that the Harbor Committee has a second level, which was a management organization and would manage the property as a “destination marina”. He said that this Marina had to be marketed to every boating club in existence.

Mr. Gatto stated that when he left the Council the depreciation or “reserve” was a little over a million dollars and asked why he did not see the data in the budget. Mr. Ingersoll stated that he does not use the unappropriated surplus to fund the annual budget.  However, at the end of the year the figure should be slightly under a million dollars.  Mr. Ingersoll stated that the unappropriated surplus has only gone to the annual principal payment of the Marina, noting that when in operation the Marina itself paid the annual interest on the loan until it was closed down this year.

Mr. Gatto stated that he worked with communities across the state for a number of years and agreed with Mayor Cerino’s statement that Chestertown has been fortunate enough to have a significant tax base to afford all of the activities available. He said that Chestertown has not come out of the recession yet and said it was going to be an uphill struggle to change the projections.  Mr. Gatto stated that he thought it was essential to maintain the services offered in taxes and if that meant a higher tax rate, so be it.  Mr. Gatto stated that some people will be hurt by the increase, but the hurt was now versus continuous.

Mayor Cerino asked if there were any other questions or comments.

There being none, Mr. Stetson moved to close the public hearing on the budget at 7:35 p.m., was seconded by Rev. Tolliver and carried unanimously.

Submitted by:                                                             Approved by:

Jennifer Mulligan                                                        Chris Cerino

Town Clerk                                                                 Mayor

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