'Abuse of power'? Rehoboth Beach citizens sue over million-dollar city manager paycheck

The weather has cooled, but it's getting pretty hot in Rehoboth Beach.

A lawsuit in Delaware's Court of Chancery this month alleges that the beachfront city's board of commissioners violated state law, the trust of citizens, all sense of proportion and the city's own charter in hiring a former Nevada city manager named Taylour Tedder.

"This case seeks to remedy an abuse of power by public servants elected to serve the people of the City of Rehoboth Beach, Delaware. Here, the breach has resulted in the City and its citizens being saddled with an illegal and outsized public contract," reads the lawsuit, filed August 15 by attorney Theodore A. Kittila on behalf of Rehoboth Beach residents Steven Linehan and Thomas Gaynor.

The lawsuit asks judges to void a million-dollar compensation deal awarded to new Rehoboth Beach City Manager Taylour Tedder, whose $250,000 salary and $750,000 forgivable housing loan have been the subject of town outcry since April. By most measures, the deal made Tedder one of the highest paid public employees in the state of Delaware.

The reasons behind Tedder's deal: Inside the Rehoboth Beach City Manager's million-dollar contract

The lawsuit alleges that Rehoboth Beach Mayor Stanley Mills and other town commissioners conducted negotiations and discussions illegally out of public view, and that Tedder's qualifications did not meet the requirements of Rehoboth Beach's city charter.

The lawsuit sues the mayor and each commissioner both personally and in their city roles, as well as Tedder and the City of Rehoboth. The city, for its part, says it doesn't comment on ongoing litigation as a matter of policy.

Here's what we know.

Why is Taylour Tedder's contract so controversial?

The public outcry likely has little to do with Tedder’s record as the former city manager of Boulder City, a Nevada tourist town outside Las Vegas that’s best known for its proximity to Hoover Dam. Rather, it's the size and terms of his contract.

Tedder's contract calls for a $250,000 base salary, a $50,000 allowance for moving expenses, and a $750,000 housing loan from the city.

That loan is to be forgiven in its entirety if Tedder stays in his position for seven years. Without bringing interest into the equation, the loan amounts to a benefit of at least $107,000 a year if Tedder remains till the end of that term.

Among salaries Delaware Online/The News Journal has tracked , Tedder is the highest-paid municipal or county employee in Delaware. He's better paid than city managers of Philadelphia and Baltimore, and nearly every city manager in a survey of hundreds of city managers in Texas , aside from cities the size of Dallas and Arlington.

City officials say the sweet deal was necessary to hire a good candidate in a tough market, and to get him to stay. The lawsuit argues the city did so illegally or beyond its authority.

Did Rehoboth Beach violate its charter in hiring Taylour Tedder?

In part, the lawsuit alleges that the city had no authority to offer Tedder a job because he didn't meet qualifications outlined in the town charter for the position.

The city charter, dating back to 1967, requires that city managers have a "degree in engineering from an approved college or university," serve "as City Manager of some other incorporated municipality for a period not less than four (4) years," or have "practical engineering experience for a period of not less than four (4) years."

Tedder was city manager of Boulder City, Nevada, for nearly three years. Before this, he was an assistant city manager in Leavenworth, Kansas, for five and half years. His master’s degree is in public administration, a more common credential among modern city managers . In previous days, city managers were often drawn from the engineering profession.

The lawsuit also alleges that Tedder's insulation from being fired violates the city charter by creating a supermajority voting requirement to remove Tedder within 90 days before or after an annual election – requiring near-unanimity of the seven-member board during almost half the year.

"The Employment Agreement is facially illegal since it does not comply with Charter Section 17c, which provides that the City Manager may be removed by a simple majority vote of the Commissioners," reads the lawsuit.

What state law violations are alleged in the lawsuit over Taylour Tedder's contract?

Here's where it gets sticky. The office of Delaware Attorney General Kathy Jennings has already found in June that the City of Rehoboth Beach violated the state's Freedom of Information Act by discussing the terms of Tedder's deal and his qualifications, as well as his hiring, in closed executive sessions shielded from public view.

"Public employees’ compensation is a matter of public record, as it is ‘well settled that citizens have a right to know how their public servants are compensated with taxpayer monies, in whatever the form that compensation might take,’” read the opinion of the Attorney General’s Office on June 26. “Accordingly, we find that the City violated FOIA by engaging in discussions of the City Manager’s employment contract, and especially the compensation package, in executive session.”

In the ruling, Jennings' office specifically outlined that these FOIA violations made the contract vulnerable to being voided by Delaware's Court of Chancery. The office also outlined a path forward for the city: The Board of Commissioners should re-ratify Tedder's contract in a public session, with citizen comment allowed.

That's what Rehoboth Beach did in a tense session on July 8, during which citizens stood up to declare Tedder's contract as "outrageous," "over the top" and "unfathomable."

Previous coverage: Threat of lawsuit over city manager's contract looms after tense meeting in Rehoboth Beach

Following public comments, Mayor Mills said he was not swayed against his original vote to hire Tedder. Mills has called Tedder the strongest candidate they found in a tough hiring market.

"I believe I, or we, did the right thing for the future of Rehoboth," he said, adding that Tedder's contract couldn't simply be nullified or amended. The commissioners voted unanimously to ratify the contract.

In the lawsuit, plaintiffs say this ratification process was insufficient to alleviate the FOIA violations found by the Attorney Generals' Office.

"The Board of Commissioners’ purported ratification of the contract on July 8, 2024, does not cure the substantive defects in the process, the violation of the Charter, the FOIA violations, or the illegal use of municipal funds," the lawsuit reads.

What do plaintiffs seek in the lawsuit against Rehoboth Beach?

Mostly, they want the contract voided. They also ask for Teddler to return compensation.

The lawsuit asks for a declaratory judgment that "the Employment Agreement is an illegal use of municipal funds, and the Mayor and the Commissioners’ purported ratification of the Employment Agreement on July 8, 2024, does not cure the Mayor and the Commissioners’ violation of the Charter."

The plaintiffs also ask for attorneys fees, and "any or all other relief the Court deems appropriate."

City officials have said prior to the lawsuit that they believe they’re in compliance with the town charter, but have also begun the process of revisiting the charter’s requirements for the position — a process officials say likely won't be complete until next year.

Matthew Korfhage is business and development reporter in the Delaware region covering all things related to land and money: openings and closings, construction, and the many corporations who call the First State home. Send tips and insults to mkorfhage@gannett.com .

This article originally appeared on Delaware News Journal: 'Abuse of power'? Rehoboth Beach citizens sue over million-dollar city manager paycheck