Chestertown Council Passes Budget With Tax Increase

Share

The Chestertown Council in session on Monday evening, June 4, 2018. (L-R ) Ward 4 representative Marty Stetson; Ward 3 representative Elsworth Tolliver; mostly concealed behind Tolliver is Town Clerk Jen Mulligan; Chris Cerino, mayor; Bill Ingersoll, town manager; Ward 2 representative Linda Kuiper, Ward 1 representative David Foster          Photo by Peter Heck

The Chestertown Council, meeting Monday, June 4, adopted the town’s budget for Fiscal Year 2019 (FY2019). The budget ordinance, which includes a property tax increase of $0.05 per $100 assessed value, passed by a 4-1 margin. Councilman Marty Stetson cast the dissenting vote. This increase brings the property tax rate to $0.42 per $100 assessed value from the previous $0.37 per $100 assessed value. The Fiscal Year 2019 runs from July 1, 2018, through June 30, 2019.

The vote was preceded by a public hearing on the Constant Yield Tax Rate, required by state law if the town intends to change the rate in any way that would increase the amount of revenue over the current level. Mayor Chris Cerino read the notice of the hearing into the public record. The town’s base of assessed property has decreased by .099 percent, from $562,768,097 to $557,215,401. At the current rate of $0.37 per $100, revenues would decrease by 2.74 percent, or $20,544.98. To offset this, the tax rate would need to be raised to $0.3737 for a constant yield. The town’s proposed increase to $0.42 per $100 would result in additional revenue amounting to $257.990.73, Cerino said.

Town Manager Bill Ingersoll said the Constant Yield requirement was last triggered in 2006. when the town ended up reducing the rate by $0.01. The economy was better, and rising assessments were producing more revenue, he said. He said the town had operated on the principle that if the town’s revenues were the same as last year, “we’re in good shape and we’ll live with that.” But the drop in the assessed base, combined with generally higher prices, had made the adjustment necessary.

Ingersoll then gave “a thumbnail sketch” of the budget, referring to a handout that was available to the public. Real estate tax provides $2.578,608, and income tax another $650,000. Grants from the federal and state government provide just over $2 million, which are primarily designated for improvements to the town-owned marina. Kent County provides another $186,000, largely in the form of the hotel tax. The town’s total revenue comes to $6,053,131, including grants for the marina.

Projected expenses include $1,804,915 for public safety and $1,286,733 for public works. General government amounts to $535,318. The total, again including marina work, comes to $6,043,737 – leaving a surplus of $9,394 over anticipated revenue. An additional $37,400 is anticipated from this year’s revenue from the sale of the old police station and several town-owned lots on College Avenue.

“It wasn’t always this pretty,” Ingersoll said. It became clear in the three budget workshops held in April and May that the town would have trouble balancing the budget unless it made adjustments. He said the recession beginning in 2008 had effectively “flatlined” the town’s property tax base, and he had urged the council at several points in the intervening years to look at raising taxes to compensate. He also noted that the county discontinued its tax differential about four years ago, meaning that town residents since then have been taxed by the county for police protection and road work that the town was actually providing. He said the council has asked the county for relief, either in the form of a cash grant or a lower rate for town residents, but nothing concrete has emerged. “It’s very disappointing because we’re one of two counties in the state – maybe three – that don’t do this,” he said. “There are five towns in the county that need a bit of help,” he added.

Ingersoll said the town began with no capital projects other than the marina in its budget, and no raises for town staff. “We made budget cuts across the board,” including to nonprofits such as Horizons and the public library. Cuts in services were also considered, he said, and a few fees were increased. However, water and sewer hook-up fees were not increased, so as not to affect new development which could increase the tax base.

“We fiddled with one cent (tax increase), we fiddled with two cents,” Ingersoll said, but the figures didn’t work out. Finally, the council resolved – “not unanimously” – to impose the tax increase. “It’s painful and I’m sorry we had to do it,” he said. He said he hoped the town would be able to reduce the rate if growth permitted.

Chestertown Mayor Chris Cerino and Town Manager Bill Ingersoll      Photo by Peter Heck

Cerino said the town’s biggest problem was attempting to retain a consistent level of services while revenues remained flat. Raises in staff salaries are necessary to retain good people, he said. He also noted that no town roads had been paved in his five years as mayor, a record that “really gnaws at me.” It will cost the town more if it just keeps balancing its budget without maintaining infrastructure, he said. But the new budget does include $150,000 to be applied to bringing some of the roads up to spec.

Compared to other towns on the Shore, the tax rate of $0.42 is “still pretty low, actually,” Cerino said. He cited rates from Denton ($0.75), Federalsburg ($0.83), Greensboro ($0.75) and Ridgely ($0.57) as examples. “Yes, we’ve raised taxes. It’s a bummer. But I still don’t feel like we’re way out of the realm of where we should be.” He praised the previous councils for running “a pretty tight ship” in keeping the rates low for so many years. He said the expected expansions of Dixon Valve and LaMottte would produce tax windfalls a few years from now.

Ingersoll noted that most of the towns Cerino mentioned also received tax differentials from the counties they are in.

Councilman David Foster said he supported the tax increase. “As we went through the numbers, I didn’t see any other way out,” he said. Foster said that in previous years, the budget had been balanced by deferring maintenance, which he said was a short-sighted policy. He said the flat tax base made it clear that everyone in town needed to do whatever they could to support local businesses and to encourage new ones to locate here.

Councilman Ellsworth Tolliver said he also supported the increase because it was the only way to support the level of services that the town provides. “I was not in favor of a small increase only to have to come back to the table next year and ask for more.” Compared to the rates in the other towns Cerino mentioned, “I think we’re still getting a bargain,” he said.

Former councilman Jim Gatto testifies during the budget public hearing.     Photo by Peter Heck

Responding to a call for comments from the public, former councilman Jim Gatto took to the podium. He said he thought the council did a great job enacting the increase. He said the town had made a good decision by enacting the Enterprise Zone in which the new Dixon Valve buildings are being constructed. While there is a tax deferment that will keep the buildings off the tax rolls for five years or more, the company could easily have built elsewhere and deprived the town and county of any of the revenue.

Councilman Marty Stetson said the employees in the new buildings will buy houses and pay income taxes, so the benefit to the town will come in sooner.

Gatto said he expected the economy to remain flat for another two years. He said it was a good time for the town to refinance loans it had taken for the marina and the new police station. He said he expects interest rates to be as much as 25 percent higher in three years’ time.

Gatto also said it was in the town’s vital interest to bring the marina into full operation as a destination marina, “an operating business the way it was proposed.” He said the marina is a potential magnet to bring boaters and other tourists into town. Part of the process should be to bring in a management company to market and operate the marina as a money-making business and make it profitable.

Ingersoll said work on the marina should be completed by the Fall and the facility ready for full operation by next season.

The council turned briefly to other business before conducting its vote on the budget. Cerino called for a roll call vote.

Stetson said he opposed the budget because 60 years’ experience in government had taught him that when governments get more money, they spend more. He said the council made some cuts he had been advocating for years, such as the July 4 fireworks display. He said that increasing the town’s revenues would mean that more entities would come to the town asking for handouts. He said the budget could have been balanced with a $0.02 cent raise. He said the town could have paved a lot of roads with the annual cost of running the marina. “Five cents is a lazy man’s way to solve the problem,” he said. He said what disappointed him most was that the town was unable to give raises to its employees.

Councilwoman Linda Kuiper said she had gotten phone calls, including one person who said they were going to sell their house and move. She said the town’s providing police services to events like Tea Party, Legacy Day and Downrigging is a necessity. She said she hoped that once the marina is up and running, the town will become a tourist destination. Kuiper said she had to vote for the increase – “there’s no way we can get by without the tax increase.” She told constituents she would work to decrease taxes if it becomes possible. She also asked that the funds for road construction be put in a separate account to be disbursed with the oversight of the council.

Ingersoll said the funds would be accounted separately as a matter of policy.

The budget was passed without amendment by a 4-1 vote. Copies of the budget are available at town hall.

Other topics discussed at the council meeting, including the Utilities Commission report, will be covered in another report later this week.

###

*

Letters to Editor

  1. Phil Ticknor says:

    I’m amazed by the stark contrast here between the budget process that Chestertown went through and the one the county went through. Yes, clearly, there are some “bummers” here – such as no raises for employees in spite of a tax increase – but there was clearly a lot more thought, effort, and long-term vision at play here than in the county budget discussion. I would welcome members of Chestertown government to consider running for county commissioner in the future.

Write a Letter to the Editor on this Article

We encourage readers to offer their point of view on this article by submitting the following form. Editing is sometimes necessary and is done at the discretion of the editorial staff.