By Glenn Rolfe

GEORGETOWN — A virtual discussion Monday identified potential solutions to the town of Georgetown’s projected $2.3 million budget deficit for fiscal year 2022.

It was determined that departmental cuts and transfers could reduce the deficit to $466,000, as town officials head into a second workshop April 26.

As presented at the Monday workshop, initial 2022 projections show approximately $7.5 million in revenues and $9.9 million in expenses, resulting in a potential deficit of around $2.3 million.

“It looks like it’s going to come down to … we’re going to have to raise taxes,” said Georgetown Councilwoman Angela Townsend.

Town Manager Eugene Dvornick added, “The only way to balance a budget is to reduce expenses. There are really two things you can do: Grow your revenues or reduce expenses. The better question would be: If you were to entertain a property tax increase, what is the threshold? Start with that number, then you can whittle down.”

Possible budget reductions include a multiyear plan for the new Public Works Department pole building — which had been budgeted at $320,000 — a $150,000 savings on the 2% set aside for the rainy-day fund and several other smaller cuts.

The deficit also could be lowered significantly through transfers from water and/or sewer accounts, an option the town has employed in recent years.

“There are times we can draw on that money to make the budget work,” said Mayor Bill West. “It’s something that we don’t like to do, just like the real estate transfer. We don’t like using that money for the budget. But we have to, occasionally, to make it work. I don’t think any one of us wants to raise taxes. But it might come to that point.”

Entering the budget preparation for fiscal year 2022, the town’s debt stood at about $7.8 million. It’s mostly for sewer ($5,213,176), followed by funding for the new Town Hall and water.

“Every year, there is a debt service of about $1 million,” he said. “If we didn’t have debt service, we’d be a fat city!”

However, there is good financial news.

The town has received word from the state that it is earmarked for an estimated $3,856,423 in American Rescue Plan funding, a direct allocation that is to be used on water, sewer, broadband and infrastructure.

And on Monday, the town was notified that its Moody’s Investors Service bond rating has been upgraded from A2 to A1.

Councilman Penuel Barrett asked how ARP funding might factor into balancing the town’s budget.

Mr. Dvornick responded that any decisions are currently on hold, pending definitive guidance from the state.

“There is not a lot of guidance. We’re waiting for what the Treasury Department is drafting,” he said. “Any money that is used inappropriately from (the ARP) has to be repaid, so I would rather get the guidance from Treasury before we try to balance it. So you will not see anything from the American Rescue Plan on the revenue side in the town’s budget. I look at that almost as grant money.”

Town leaders are hopeful that replacement of 600 water meters — about half of them in town — can be covered by the town’s ARP funding. That estimate is $55,053.

Also, the town has asked its two state legislators — Republicans Sen. Brian Pettyjohn and Rep. Ruth Briggs King — to seek a one-time bond bill request for a Georgetown Police Department sallyport, a secure, enclosed addition at the rear of the station.

The proposed budget does include $125,000 from the realty transfer taxes, which was at $1.4 million in 2021 but has decreased to just under $900,000 with about a half-million dollars in encumbrances.

“You can take money from realty transfer tax to go into the operations. We have been resistant to do that because when the market collapsed (in) 2007 and 2008, the impacts to the town realty transfer tax (were) immediate,” Mr. Dvornick said. “We did budget $125,000 already from the realty transfer tax in street work.”

Since 2007, when the town imposed an 8-cent tax increase, there have been three other increases — 40 cents in 2010, 12 cents in 2012 and 3 cents (water rate) in 2015.

“By our history, it looks like we’re due for another tax-rate (increase), which I don’t think anyone really wants to do. But what is the alternative?” said Councilwoman Townsend.

The town’s current property tax rate is $3.17 per $100 of assessed value. A one-penny increase in property tax would generate $5,119.

“We’ve got to look at some ways to generate more money, so we can get these things fixed,” said Mayor West. “And I’m not one for raising taxes. I don’t like it. We’ve got some people in this town that are struggling.”

Mr. Dvornick said council might consider small tax increases more frequently, possibly annually, rather than large hikes every several years.

“We should consider an annual increase. This does avoid those negative press impacts. Delaware is fortunate in that we have very low tax rates. However, when you do an increase based on how the media attempts to report it, it can sometimes seem like a huge magnitude number, but it really isn’t,” Mr. Dvornick said. “Sometimes, it’s easier for residents to adjust to a smaller, incremental increase, maybe easier than trying to do something that’s a catch-up every four or five years.”

William Bradley, Georgetown’s public works director, had requested a new pole building and a $270,000 street sweeper.

“The new shop is not something that we necessarily have to have this year. But we have outgrown everything we’ve got,” said Mr. Bradley. “Most definitely, if we need to make some cuts, we’ve got to do what we’ve got to do to balance the budget and keep the town operating. At some point in time, those two pieces need to be in — but what year, I don’t know.”

Mayor West said the town is looking at erecting the pole building in several steps, with planning, construction and enclosure.

Council and staff also looked at $26,000 in savings by removing the additional percent increases for town staff salaries, leaving consumer price index increases and anniversary adjustments in place.

Councilman Penuel Barrett opposed that. “I don’t think it’s worth cutting that out. I think we’ve got a good group of people here working, and that little percentage we’re going to up their pay, I think it’s well worth it,” he said.

Town leaders initially thought they had realized approximately $290,000 in savings through police department staffing, in response to Chief R.L. Hughes’ request for 23 or 24 officers.

But upon further review, the proposed 2022 budget is for 21 officers, two positions of which are supported by outside grant funding.

“I understand the budgets. I understand your implications. We will do our best here. And we’re going to do a good job. But it would be nice if I could have the additional, to get to 23,” Chief Hughes said. “We’re going to be good stewards of the taxpayers’ money.”

Mayor West agreed, saying, “Well, I’m all about public safety, and I think the community is, too. We’ve got to try to fund that as best we can. It’s important for our supervisors to be able to supervise and make sure everybody is doing the right thing.”

The April 26 workshop will begin at 5 p.m. Budget presentation and adoption follows, on April 28.