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Rehoboth looks at 50 percent property tax hike

Next meeting is Feb. 15; workshops planned before budget vote
February 12, 2019

Story Location:
229 Rehoboth Avenue
Rehoboth Beach  Delaware  19971
United States

Rehoboth commissioners are three workshops into figuring out the next fiscal year’s budget, and it’s becoming increasingly clear they’re stuck between a rock and a hard place. Should they raise taxes dramatically or should many much-needed capital improvements continue to be defered?

During a meeting Feb. 4, Mayor Paul Kuhns said there haven’t been any tax increases in nearly a decade, and now it’s time. Holding up a spreadsheet showing the history of city tax increases, he said a large increase this year could have been avoided if previous administrations had implemented smaller annual increases.

“Unfortunately, we’re going to get the brunt of what went on before us, and that’s why we get elected to make hard decisions,” said Kuhns, shortly after saying he saw no way around at least a 35 percent increase in property taxes.

During the meeting, City Manager Sharon Lynn presented commissioners with a budget projected to have $22.5 million in revenues and $19.9 million in expenses between general, water and wastewater funds. The proposal calls for $1.9 million in general fund capital outlays, $380,000 in water fund capital outlays and $300,000 in wastewater capital outlays. Some of the capital improvement projects included are city-wide paving at $450,000, Bayard Avenue stormwater improvements at $315,000, drainage improvements for North First Street at nearly $470,000 and stormwater drainage issues for Wilmington Avenue at $455,000.

Included in the budget is roughly $220,000 in salary increases for employees - $60,000 related to a 2 percent increase across the board, and $160,000 related to wage increases to bring specific employee salaries up to minimums recommended by a compensation study the city had completed in 2018.

Lynn said there’s a $300,000 decrease in the city’s operation budget from the last version. She said after the last budget meeting, she went back to department heads and told them to cut 10 percent from their budget. Also removed from this proposed budget are eight additional seasonal police officers and two beach patrol members who would focus on ordinance enforcement.

Lynn presented commissioners a spreadsheet with property tax revenue options all the way up to a 50 percent increase. Things have changed, the city has debt, new services and requested services to maintain, she said.

It’s not just property taxes the commissioners are looking at. They’ve already approved a $1 an hour increase in parking meters for much of the commercial district. An update to business license fees in December is expected to bring in more than $70,000 of additional revenue. They also are waiting for the General Assembly to begin moving on a charter change that would allow the city to implement a lodging tax on hotels and motels of up to 3 percent.

Lynn estimated the lodging tax could bring in as much as $886,000 if a 3 percent tax were imposed by July 1, while a 50 percent property tax increase would bring in roughly $668,000.

Commissioner Toni Sharp described the city’s financial situation as stark, and she said, everyone needs to be helping with the burden.

Commissioner Pat Coluzzi said taxes have been kept artificially low, with the city balancing the budget with excess revenue from water and wastewater utilities. She recommended the city prepare people for the pending increases by telling them what they’re getting for their money.

Commissioner Lisa Schlosser said she recognizes the need for the capital improvements, but she cautioned against raising property taxes drastically the same year that wastewater service is going to increase 60 percent and water service is going to increase 30 percent to pay for the outfall and engineer-recommended capital improvements.

Schlosser’s concerns were eased slightly when the commissioners did the math related to a 50-percent property tax increase.

Evan Miller, an International City/County Management Association local government management fellow helping Lynn prepare the budget, said the average annual property tax bill in Rehoboth is approximately $413. A 50 percent increase on that amount would come out to roughly $17.21 a month.

Kuhns said that’s the average, which means some folks in town are paying less than that because it also accounts for the new houses being built who are paying higher taxes.

Commissioner Steve Scheffer said the percentages are big, but the dollar amounts are small. He said he was in favor of the 50 percent increase.

There was discussion among the commissioners of possibly creating an exemption, with proof of hardship, for individuals in town on a fixed income.

Kuhns said this year’s possible tax increase is just the beginning. He said he thinks taxes should go up 100 percent over the course of the next two or three years.

Lynn said there are three more budget meetings scheduled before commissioners vote on the budget for next year. The next meeting is scheduled for noon, Friday, Feb. 15, in the commissioners’ room of city hall, 229 Rehoboth Ave. The other two meetings are scheduled for Monday, March 4, and Friday, March 15.

Lynn said more could be scheduled if needed.