Rehoboth property tax cap is outdated

Rehoboth Beach officials are considering a proposal to change the city charter, which currently limits annual property tax collection to $3 million. The proposed change would replace the hard cap with a system that collects 0.15% of the fully assessed value of real estate located within the city. If adopted today, that approach would generate a little more than $5.3 million in revenue.

The specific percentage included in the charter is and should be open for debate. But the broader issue is clear: Rehoboth Beach can no longer reasonably operate under a fixed revenue cap that does not reflect current property values, inflation or the level of services residents expect.

The existing cap provides predictability and reinforces the importance of fiscal discipline. However, predictability alone is not sustainability. A hard cap offers no ability to adjust for growth, and it limits the city’s capacity to proportionately collect property taxes as property values rise and costs increase.

It is unrealistic for a city – particularly one experiencing as much growth and change as Rehoboth Beach – to continue operating under a revenue limit that hasn't been adjusted since 2006, when the cap was lifted from $1 million to $3 million.

Holding to the cap will eventually leave the city with few options beyond raising fees, deferring maintenance or cutting services to close future budget gaps.

A percentage-based approach offers a more flexible and transparent framework. Pairing that model with charter language requiring regular reassessments, as Commissioner Patrick Gossett suggested, would help maintain balance over time. Regular reassessments ensure the tax base remains current, prevent distortions from outdated valuations and provide stability for long-term budgeting.

Removing the hard cap does not mandate a tax increase. It simply modernizes the city’s ability to manage growth responsibly and plan for the future without relying on workarounds that ultimately shift costs elsewhere.