The City of Newark is proposing a 5 percent tax hike for 2022, as well as slight increases to water, sewer and stormwater fees.
If approved, the average resident would pay a total of $42.24 more to the city next year. Combined, the increases would bring in an additional $512,000 for the city.
Officials said the tax hike would help cover rising costs. The utility increases are all to cover increased debt payments as a result of the 2018 referendum, when voters overwhelmingly authorized the city to borrow more than $27 million for the Rodney stormwater pond and other capital projects, with the understanding that the loan payments would be paid for by increased taxes and fees.
No changes to electric fees are proposed.
The utility fee hikes would be implemented as increases to the customer fee, the fixed monthly cost that each customer pays on top of the rate based on usage. The monthly customer charges would increase by 53 cents for water, 12 cents for sewer and 35 cents for stormwater.
Officials explained that increasing the customer charge rather than the rate helps build stability into the budget. Many properties, in particular student rentals, have months in the summer and winter where they do not use any utilities, but the city still has fixed costs to maintain pipes and other infrastructure. A customer charge ensures that all customers are paying something, regardless of whether they used water or sewer that month.
The tax and fee increases will be voted on later this fall as part of the 2022 budget, but on Monday, the majority of council members signaled support for them.
Mayor Jerry Clifton said that even with the increases, the services Newark offers are a bargain compared with other jurisdictions.
“People will argue about how horrible things are and you can’t afford to live in Newark anymore,” Clifton said. “I’ll put a stake in the ground here – if you believe that, you probably haven’t lived any other place. You darn sure haven’t gone north into Pennsylvania. I would put our services up against any other governmental agency.”
Councilman Jason Lawhorn encouraged city staffers to continue to look for ways to reduce the need for a tax increase before the final vote in November.
“As we’re working through the process, if we could reduce that number, that would be preferred, obviously,” Lawhorn said. “But I think given the increase in ongoing costs we have to manage and will continue to have to manage over time, that seems reasonable.”
The only opposition came from Councilman Travis McDermott, who said that increasing taxes is unfair due to the county’s outdated property assessments. He added that a tax increase would disproportionately affect his district, which includes newer and more expensive neighborhoods such as the Hunt at Louviers.
“In the large scheme of things, $200,000 for the city really isn’t that much money when you look at the budget in its totality,” McDermott said, referring to the amount that would be generated by a 5 percent tax hike. “I think that there are areas in which the city could make cuts to pretty much eliminate the need for that specific tax increase.”
He also suggested the city consider increasing parking fines, noting that he recently got a parking ticket in Newark and was surprised the fine was only $20, which he called “a steal” compared to some other jurisdictions.
“I think that we should look at raising those types of fees for people who violate our parking laws, like myself I guess,” he said. “Something along those lines I think is more palatable for the residents that live here than a tax increase.”
The tax and fee increases are part of a proposed $99 million 2022 budget.
Finance Director David Del Grande said the city’s revenue is rebounding from its pandemic-induced slump and is expected to be on par with 2019 levels. However, he said, the city’s expenses are rising faster than revenue.
As usual, much of the increase is due to a rise in personnel costs, due in part to increasing health care costs and contractually-mandated pay increases.
City Manager Tom Coleman is also asking for four new full-time positions – a deputy planning director, two more city planners and an additional electrical engineer.
City council will hold a public hearing on the budget Nov. 1 and could vote to approve the budget the same night.
Newark’s last tax increase was a 13 percent hike in 2020, though water and sewer fees were increased in 2021.
The proposed 2022 budget includes $6.4 million in federal relief money from the American Rescue Plan Act.
In total, the city will receive $18.1 million from ARPA, which was approved by Congress and signed by President Joe Biden in March. The remainder of the money will be spent in 2023 and 2024.
Some of the ARPA projects slated for 2022 include $1.5 million to build Old Paper Mill Park across from the Newark Reservoir, $1 million to replace the wireless mesh network that sends smart meter data back to city hall, $644,000 for new software, $300,000 for stormwater repairs and $145,000 for security upgrades at city hall.
Lawhorn noted that the city needs to explain to residents why there will still be a tax increase despite the ARPA money.
“That’s the thing that is a little difficult to wrap your head around when we try to explain it to residents, that we get an influx of all this money but we don’t see the realized savings,” he said.
Del Grande said many of the infrastructure projects previously were slated to be paid for with bond financing, and using the ARPA money will ultimately save taxpayers from having to pay off the loans.
The city was planning another referendum in 2022 to pay for a new round of capital projects, but that can now be delayed until at least 2025.
If the infrastructure bill currently being debated in Congress passes, the city could see even more federal money, Coleman added.
Meanwhile, city officials also proposed several other ideas for council to consider later this year or next year.
For instance, Coleman is proposing an emergency services fee that would be tacked on to current building permit fees. The fee would be based on the construction value of a project and is intended to help pay for the development project’s impact on emergency services.
The city would use the money to increase its aid to Aetna Hose, Hook and Ladder Company.
In 2020, council approved a $10 ambulance fee that would be added to traffic tickets, but it was never implemented due to opposition from the State Fire Commission. The proposed emergency services fee would replace it.
Officials want to work with other towns to lobby the state for a fund to help municipalities cover the rising cost of police service. Municipalities are finding it harder to compete for recruits with Delaware State Police, which continues to increase the starting salary for troopers.
Coleman also suggested council consider implementing a homestead tax credit that would provide a property tax reduction for owner-occupied homes. Doing so would require state approval, he said.
Clifton said the credit could attract more families to Newark and encourage the conversion of rental properties into owner-occupied homes.
“If we’re going to attract people into owner-occupants, particularly in some of the areas that are affordable, maybe it’s time that we got serious about putting some skin in the game ourselves,” he said.