SEA ISLE CITY – The City Council has introduced a 2024 municipal budget that calls for an 11.3% increase in the local purpose tax rate. The owner of a home assessed at $750,000 will pay $315 more in local purpose tax in 2024 than in 2023.

The general fund budget is set at $30.15 million, and at $10.4 million for the self-financing water and sewer utility. The introduction came at the council’s Tuesday, March 26, meeting.

The budget calls for a $2.4 million hike in what property owners will be expected to pay. The local purpose tax levy in Sea Isle has never topped $20 million; this year it will go from $18.8 million to $21.25 million.

The budget makes less use of surplus this year than last.

Revenue

For 2024, the tax levy represents almost 71% of the city’s total revenue. The use of surplus funds contributes another 11% to total revenue. All other sources combine to equal 18% of total revenue.

Those figures make Sea Isle heavily tax-dependent, with the most significant non-taxpayer sources of funding for the budget being beach tag sales and beach vendor fees. The point is that other sources of revenue do not play as large a role in Sea Isle’s budget as they might in other county island communities.

Almost all municipal budgets start out with very little in the way of grant revenue. That revenue is added as grants are awarded over the course of the budget year. In many cases grant revenue is not a major contributor to the operating budget; it is more directed at capital projects.

Surplus

New Jersey municipalities build surplus accounts from budget allocations that were not totally spent. As the surplus builds, it is available each year to be used as income in the next budget.

The goal when surplus is used is to have the budget be able to repay the surplus by the end of the budget year, keeping the surplus balance strong. Using the surplus and then being able to repay the balance used, and perhaps even grow that balance, at the end of the year helps build a cushion for difficult years and aids in keeping individual-year tax rates down.

The Sea Isle general fund surplus took a curious turn last year. After several years in which the surplus balance grew each year, to a high of $8.8 million in 2023, the surplus used in the 2023 budget was not repaid back into the surplus balance at the end of the budget year. The surplus balance going into 2024 was $1.3 million less than the balance going into 2023.

This inability to fully repay the surplus funds used in the 2023 budget might have contributed to the decision to reduce the use of surplus in 2024. In 2023 the budget made use of $4.7 million in surplus funds; in the 2024 budget as introduced, the budget uses just $3.3 million.

The wisdom of that decision cannot be determined strictly from budget documents. What can be seen is the fact that a reduced use of surplus dollars almost inevitably means an increase in the tax levy, especially when the overall bottom line of the budget has increased.

Sea Isle does not have a large number of alternative sources of revenue. Where a town like Cape May has imposed a state-allowed occupancy tax on short-term rentals, for example, communities like Sea Isle and Stone Harbor have elected not to do so. The fewer the revenue sources, the greater the dependence on the local tax levy.

The one variable affecting all this is the use of surplus funds, which, as noted, was lower in 2024.

Appropriations

Total spending in the 2024 budget is up $1.65 million over 2023. Much of it went to the priorities identified by Mayor Leonard Desiderio when he previewed the budget at a council meeting Tuesday, March 12.

At that meeting Desiderio said the city had to “budget significantly more funds for our first responders.” He referenced adding stipends to the Fire Department budget and budgeting 10 full-time positions in the EMS division. Later in the same presentation, the mayor focused on the need for “significantly more funds for seasonal employees, including police, lifeguards and public works” employees.

Holding the line on expenses became, in Desiderio’s word, “unsustainable.”

The added expense in the 2024 budget is largely being driven by salaries and wages, as well as “other expense,” a category in the Fire Department that would accommodate the stipend program.

What the 2024 budget displays is a city decision to take the needed tax increase as one 11% hike following years with a flat rate for the local tax. The increase was not built into the budget in steps over more than one year.

The 2024 budget also shows a $330,000 increase in municipal debt service payments. Debt service in city budgets for several years has consistently hovered at roughly 20% to 21% of total general fund appropriations. In 2023 debt service claimed 21% of total general fund budget revenue, the second-highest such ratio among the shore communities, and amounting to one in every five dollars of revenue collected.

In the budget as introduced, projected debt service costs remain at roughly 21% of total budget revenue.

Water/Sewer Utility

The 2024 budget shows little change in the basic structure of the water/sewer utility budget. In 2023 the utility budget stood at $10.3 million, and in 2024 it is proposed at $10.4 million.

The utility budget is supported by user fees for roughly 80% of the total, with almost 20% in additional revenue coming from use of previous years’ surplus.

The single largest expense is $4.2 million for the Cape May County Municipal Utility Authority. Debt service claims $1.4 million, salary and wages $1.5 million, and insurance $1 million. Department non-salary expenses, payment to an unfunded ordinance and state statutory expenses round out the appropriations.

The introduced budget is available on the city’s website in two formats. A public hearing and vote to adopt the budget is planned for the council meeting on Tuesday, April 23.

Contact the author, Vince Conti, at vconti@cmcherald.com.