Milton planning for future growth through charter changes

Town seeks additional tax power over potential large developments
April 15, 2021

Milton Town Council is planning for future growth and protection of the town’s infrastructure through a series of charter changes.

The changes have all been approved by town council and handed over to the General Assembly. The measures have not been formally introduced, but are sponsored by Sen. Ernie Lopez, R-Lewes, and Rep. Steve Smyk, R-Milton, who represent the Milton area. 

The last part of the package, approved unanimously at council’s April 19 meeting, sets up a mechanism for large-parcel developments to pay a special tax to help fund the additional police and town workers that would be needed to service the development.

Mayor Ted Kanakos said the change is in part a response to the potential annexation and development of 400 acres of land from Sand Hill Road to Route 30. While no plans have been filed yet, Kanakos said there has been talk about a proposed development that would add 1,400 homes over the course of 20 years. Kanakos said should that plan come to fruition, the development would double Milton’s size. 

In order to manage that potential growth, Town Manager Kristy Rogers said this charter change would provide a system that would not impact current residents. While a developer would have to pay for physical infrastructure, such as roads, sidewalks and water hookups, Kanakos said the charter change would allow the town to implement a tax to cover the cost of the extra expenses it would incur. Kanakos said any potential development is years away from happening, but this change would allow the town to be better prepared for potential impacts. 

Delaware Code covers what is known as municipal tax increment financing and the creation of special development districts. These are two interrelated concepts that, in a nutshell, grant municipalities the power to levy additional taxes on larger developments in order to pay for the extra infrastructure needed to service them. State code allows for tax increment financing and special development districts to be implemented by municipalities with populations over 35,000. However, the General Assembly has previously granted the same authority to towns with smaller populations, such as Dover, Lewes, Bridgeville, Millsboro and Millville. 

At council’s April 19 meeting, attorney John Stalfort, a legal expert in the creation of special taxing districts, explained that the process would start with the town designating the district and issuing special-obligation bonds. Stalfort said those bonds are sold to individual investors, and with the proceeds from their sale, the town is able to pay for whatever improvements are needed. He said the bonds would not be backed by the full faith and credit of the town. Instead, the money to pay the debt service on those bonds would come from the special taxes levied on the development. The upshot of this, Stalfort said, is that should the town need to borrow money for other projects, its credit would not be affected. He said the town’s financial obligations for the development would be covered with money raised by the bond issue, not out of the town’s general fund.

As for potential downsides, Stalfort said one is that while interest on the bonds is tax-exempt, the interest rate is higher than on a general-obligation bond, which would be used to pay for a large capital improvement town project, because the bonds in this special case are not backed by the full faith and credit of the town. Another is that the special tax district does go away over time, usually over a period of 25 to 30 years, whatever the life of the bonds is.

Town seeks to protect water system

A second charter change in the package, already approved by council on March 23, would require that any future mayor or council seeking to sell the town’s water system put it to a referendum. 

The charter change would institute a two-step process. First, the council would have to have a supermajority – two-thirds of council members – voting yes to schedule a referendum. Then, the matter would be put to the voters.

Kanakos said the change was proposed in light of a number of factors, including the town’s recent investments in its water infrastructure, attempts by previous officials to sell the water system and the sale of the town’s wastewater treatment plant to Tidewater back in 2007. 

“We’re putting in a system of checks and balances,” he said. 

Two smaller changes included in the package will shorten the time the town has to conduct review of requested annexations from 120 days to 90 days.

The town would maintain the same process for annexation: A request would go through town council, which would appoint a special committee to review the request and determine the pros and cons of annexation. Then the committee would have 90 days to deliver its report to council, not 120. 

The final change would allow the town to skip a referendum for capital improvement projects when the town is borrowing money but is receiving 100 percent loan forgiveness. 

The logic here lines up with recent experience: The town had to go to referendum on a $1.6 million water main improvement project in January where Milton receives state money, but simply has to make interest payments during construction, with the entire loan forgiven once the project is completed. While that would seem more like a grant, it was technically a loan, and by town code was subject to referendum. The January referendum was approved with nearly 100 percent voting in favor, 341-4. 

Lopez said of the proposed changes, “Steve and I are more than happy to support these modifications to the Milton Town Charter in order to bring greater clarity and efficiency to how the town governs. While the bill was brought forward by the town, these residents are our constituents as well, and we are grateful to offer the legislative support needed to make this enhancement and will ensure the bill gets voted on with the full support of our colleagues in both chambers before June 30.”


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