Newark proposes property tax increase

ARPA funds to be used for capital improvements

By Rachel Sawicki
Posted 10/7/21

NEWARK — City Council reviewed the proposed 2022 budget during its meeting Monday with few objections.

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Newark proposes property tax increase

ARPA funds to be used for capital improvements

Posted

NEWARK — City Council reviewed the proposed 2022 budget during its meeting Monday with few objections.

The total operating budget proposal is up $4.2 million from last year for a total of $99,112,761.

Under consideration is a 5% property tax increase to fund revenue requirements from a $28 million referendum passed in 2018 that included four capital projects for the city. The budget proposal also says the increase is to help offset rising Newark Police Department expenses.

The rise in taxes would amount to $30.19 per year for each taxpayer.

General fund expenses are up $1.7 million — or 5.6% — from 2021 for the police department, the Parks and Recreation Department, the Public Works and Water Resources Department and administration. The police budget is up $599,364 from last year, for a total of $17,024,680. NPD has the second-highest operating budget behind utility purchases.

Mayor Jerry Clifton, however, said that it is unfair to blame the tax increase solely on the police department. He said NPD is approximately 10% of the size of the Delaware State Police, which pays a significantly higher wage. This limits the number of qualified candidates applying to work for NPD, and although it doesn’t want to compete with DSP, the city department still has to be competitive, the mayor said.

“We need to start petitioning the state to say, ‘How about giving us an offset?’ so that we’re not at a competitive financial disadvantage to the state or any other department,” Mayor Clifton said. “It’s just as important to the state that other jurisdictions have a well-qualified, fully staffed police force.”

Questions about reassessments

Citing upcoming property reassessments, Councilman Travis McDermott, who represents District 6, raised concern over the proposed tax increase, which would generate around $200,000 in funding. In 2020, Delaware’s Vice Chancellor J. Travis Laster ruled the property tax systems in all three counties unconstitutional. Reassessments have yet to happen in Newark, so it is not yet known how a tax increase would affect some homes, Councilman McDermott said. Although the estimate is only around $30 now, a reassessment could cause that price to skyrocket.

“Especially here in the 6th District, many of the homes out here have a more recently assessed value than homes in other portions of the city,” the councilman said. “So many of the residents here in the 6th District are disproportionately affected by a tax increase, as opposed to other homes that were assessed decades ago, so I’m not sure it’s a fair system.”

Councilman McDermott added that most properties have not been assessed since the 1980s. He also noted that 43% of the city’s tax base — much of which is the University of Delaware — is exempt from paying property taxes. He said that UD and other properties that are exempt likely still purchase utilities from the city, so an additional rate increase for utility customers would be much fairer.

Another alternative is increasing parking ticket fines, which he said would be more “palatable” for Newark residents than a tax increase.

“My ultimate goal is really to get them to lower that (tax) percentage,” Councilman McDermott said. “I would like to see the city make (budget) cuts to make up the $200,000 that they say they’re going to get from the property tax increase.”

Additionally proposed to cover debt service charges from projects approved in the city’s 2018 referendum are some utility rate increases: a water charge increase of $6.36 per year, a stormwater increase of $4.25 per year and a $1.44 increase per year for sewer charges.

The 2022 debt service is expected to increase by almost $973,000, largely due to the completion of the Rodney Stormwater Project, which accounts for $470,000. The city was only making interest charges on that project during construction but will need to start paying back the full amount once it’s completed this year.

“We have a very conservative approach to budgeting and spending money,” Mayor Clifton said. “We all know where those cost savings would be. … If we cut deeper, then it’s going to mean there will be a lack of services. Sometimes, people beat on parks like, ‘We don’t need more parks,’ but the family down the street that has children doesn’t feel that way.”

The referendum projects are estimated to result in $1.3 million in debt service payments in 2022. This is the peak of the debt service, however, according to City Manager Tom Coleman. He said Newark will see a decrease in debt costs in following years once all the projects are paid off.

Additionally, Mayor Clifton said that rising budget costs for stormwater are partly due to more runoff water coming from upstate and creek overflow. The Rodney Stormwater Pond and Park was built to ease some of the flooding in the Newark area, collecting surplus rainfall that runs downhill in the pond.

ARPA funding

Newark received $18.1 million from the American Rescue Plan Act, but Mayor Clifton said spending large amounts of money on projects in a small town can be tricky.

“It wouldn’t be reasonable that smaller governments take on some of the expenses that have long-term implications,” he said. “If you spend $500,000 on something that’s going to have a continuing expense, then that just kicks the can down the road, and at some point, you’re going to have to figure out how to pay for it.”

Priority capital projects include new electric lines and services and underground distribution on the University of Delaware’s Star Campus; backup generation at water facilities; well-restoration and water main-replacement programs; storm drainage improvements and stormwater quality improvements; a sanitary sewer study and repairs; Taser X26P replacements and ballistic vests for the police department; and City Hall security upgrades.

The budget also outlines a five-year capital improvement program for equipment replacement across all departments.

“We are going to use ARPA funding to make capital improvements to strengthen support for critical government services, including information technology and cybersecurity,” Mr. Coleman said. “We are not planning any premium pay for essential workers, but we are planning to spend the majority of the money on investments in our water, sewer and stormwater infrastructure.”

All-around revenue is on the rise and nearing 2019 levels, as the city comes back to life from the pandemic and UD students return to their campus homes. Electric revenue is up $461,000 due to revised sale projections, water is up $300,000, and sewer is up $200,000, due to usage increases as the student population returns.

There is no electric rate increase proposed in 2022; however, Mr. Coleman said that natural gas prices are creeping up, along with transmission and capacity cost obligations, which feed into the city’s wholesale electric expenses, estimated to increase by 2%. They are also considering an electric vehicle-charging rate in 2022 to encourage off-peak charging, which will help reduce capacity impacts on Newark’s infrastructure.

Mayor Clifton said that Newark has one of the lowest number of outage minutes in the state, thanks to investment in infrastructure.

“Our citizens own the electric company, they own the water company, and it is only through investments in infrastructure and the people to do the work that we manage to keep the lights on and the water flowing cleanly,” he said.

Mr. Coleman added that the city was designated as a reliable public power provider by the American Public Power Association in 2020.

“This designation is held by less than 10% of the 2,000 public power utilities in the USA,” he said. “The designation lasts for three years and recognizes public power utilities that demonstrate proficiency and reliability, safety workforce development and system improvement. Our renewal process will begin next year in 2022.”

Newark will continue its sustainability efforts, as well, through the Efficiency Smart program, which incentivizes electric customers to use energy-efficient appliances and HVAC systems and lighting. The purchase of five new electric vehicles is also recommended in the budget.

Additionally, the Energy Saving Performance Contracting project, approved in 2020, will be completed in 2022. It includes changing all streetlights to LEDs and installing several solar panels throughout the city.

Mayor Clifton also asked council to consider expediting the completion of the Lumbrook Park Pavilion, located in District 2, presided over by the late Councilwoman Sharon Hughes. Ms. Hughes died unexpectedly Sept. 25.

The pavilion is a level four project, meaning it is on a “wish list” of items that are not high priority, Councilman McDermott said. The project is estimated to cost around $41,000, which Mayor Clifton said has been in the budget for several years.

“We should have a permanent memorializing of (Ms. Hughes) right in her district,” the mayor said.

There was no opposition to expedite the construction.

The final budget hearing is Nov. 1. A second budget hearing is scheduled for Nov. 15, if needed.