Cape Gazette
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Business community speaks on proposed gross receipts tax

By Steve Montgomery, Jimmy O’Conor, Kelly Ranieri, Jim Baeurle, Rob Marshal, Harry Wilson, Zach King | Jul 19, 2013

Please consider this correspondence on behalf of the Dewey Business Partnership.  We write to address the town council's July 12 discussion of a potential gross receipts tax.

Discussion of this issue comes at a very difficult time of year for the business community. Nearly all of the town's businesses rely on the summer months to generate the majority of their annual revenue. For many, the revenue generated over the next few weeks may very well make the difference when trying to pay mortgages, utilities and other bills in January and February. This is the reality of operating a business in Dewey Beach.

The town's insistence to hold hearings at 6 p.m. on Friday evenings in July ensures a lack of attendance by the business community. Considering the tax some seek to impose will dramatically impact the business community, having meetings a time when the business owners cannot attend is unreasonable, unfair and sends the message that we have no voice on this issue.

A natural reaction may be to remind the business community that the budget and finance committee had seven meetings to address this issue.  I attended four of the seven meetings. My impression of the process was that the committee did not seek input from the business community and was instead focused on the nature and extent of the tax. In other words, the issue was not if but how much.

Notwithstanding, my colleagues in the business community cannot understand why we have no representation on the committee. Indeed, if the committee was comprised entirely of business owners, many property owners, like the business owners today, would likely be critical of the committee's opinion of fair share.

If the business community is a stakeholder when addressing the town's budgetary problems, why were no business owners invited to serve on the committee?

Additionally, I have found that it has been difficult to motivate my business colleagues to attend committee meetings because Citizens to Preserve Dewey’s Joan Claybrook is a committee member. Though I appreciate that Ms. Claybrook is a volunteer and, as all commissioners and committee members, donates her time to the town's business, she openly and aggressively attacks the business community in email blasts bearing her name and in letters to the editors of our local newspaper. This raises the issue of whether she has a conflict of interest.

Regardless, the idea that business owners would attend a meeting to hear Ms. Claybrook discuss equitable distribution, fair share and that she is doing what is "right" for the town only to return to their offices and receive one of her email blasts is, for some, intolerable. The business community understands that we cannot vote on this issue, another unfortunate reality. However, have we not at least earned the opportunity to express our ideas and concerns outside of the hostile environment of Ms. Claybrook's committee, and at a time of the year that will permit more business owners to be involved?

It was said that the business community has offered no solutions and has only rejected the idea of a tax. That is false. Personally, I spent several months working on various compromises which would have increased financial contributions from the business community. We are willing to continue that dialogue. To properly engage in that discussion, we would like to be provided with the specific data used to compile the current revenue figures of Commissioner Courtney Riordan's handout. I believe the figures distributed do not accurately portray the sources of revenue.

As simply one example, the business community is assigned $60,000 in revenue. Does this include the $5,000 that I pay in parking permits for our employees? Where is that revenue, for my business and others, captured on the graph? Considering the current revenues are the primary argument supporting imposition of the tax, the business community requests the opportunity to review the source of the figures in detail and discuss them as a group before addressing this issue with the town.

It was said several times by Commissioner Riordan that the businesses which serve alcohol should pass any tax through to customers, similar to landlords charging tenants for accommodations. I believe he said we should charge six cents per drink. A tax on alcohol is not permitted under Delaware law. Treating this tax like the accommodations tax is illegal. Regardless, this raises the specter that some on the council view the proposal as a tax on alcohol or is targeted at businesses that serve alcohol.

Many of the businesses have been advised by our legal counsel that enacting a tax without the approval of the General Assembly is in violation of Delaware law. Several of the commissioners have said that the town has been advised that the tax can be enacted without any involvement from Dover. We are receiving contrary advice. It would make sense for the town solicitor to meet with attorneys representing the various businesses to discuss this issue in detail. Such a meeting could avoid unnecessary litigation which would be expensive for all parties involved.

Another issue is whether the proposed referendum will be binding or non-binding. It was made clear by Claybrook that she is recommending that it be binding; Mayor Hanson publicly stated she would not support a binding referendum. The public notice posted for the meeting identifies it as binding. Clearly, there is confusion over the nature of the proposal and the process - all one week before a significant change in the town's tax structure which will have far reaching impact on Dewey Beach businesses. The business community seeks clarity as to what is being recommended by the committee and whether that recommendation has been accepted by council.

Finally, it is unclear why there is a need for the tax to be voted on this week. Under the current schedule, the gross receipts tax will be considered, discussed and voted on by council in seven days. Considering that the town had a $200,000 surplus budget last year, just received a "slug" of $480,000 in new money as reported by Commissioner Riordan, and will receive another lump sum of construction fees from DBE as the project nears completion, there is no immediate urgency. Furthermore, the town manager publicly stated several times that he is not requesting more money for the budget. Rather, his focus is on collecting revenues from existing sources and running the town more efficiently.

Objectively, this tax, which we believe to be illegal, is being rushed. Why? In addition to the issues raised above, imposing a tax which will have a serious consequences on the businesses of Dewey Beach (the same businesses that cannot vote on this issue) and at a time of year which ensures a lack of participation is disconcerting and could bring substantial legal challenges.

The Dewey Business Partnership hereby formally requests that this issue be tabled until the town provides the information requested above and can meet with the business community.

Steve Montgomery
president
Jimmy O’Conor
vice president
Kelly Ranieri
executive director
Jim Baeurle
director
Rob Marshal
secretary/treasurer
Harry Wilson
director
Zach King
director

 

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