City of Milford considers tax increase

Terry RogersGovernment & Politics

City Hall Milford, DE

On Monday, May 17, the Milford City Council began two nights of budget hearings. As in the past, the first night reviewed each department’s budget, presented by Lou Vitola, City Finance Director and department heads.

“In our opinion, some changes need to be made,” Mark Whitfield, City Manager, said. “We are offering those changes for your review tonight and, on Wednesday, we can answer any questions you may have regarding the presentation. One of the things that is painful is that we need to look at raising real estate taxes. This is the last year we are taking money from the General Fund Reserves for the five new officers and now we need to incorporate that cost into our regular budget.”

Currently, police funding is supplied using Real Estate Transfer Tax (RTT) funds. Whitfield explained that this was a slippery slope because RTT funding can plummet quickly. Vitola provided historical details which indicated collection of $2 to $3 million in RTT funds in 2006 and 2007 while in 2008, the city raised only $335,000 in that fund.

“We believe that RTT should be used for capital expenditures,” Whitfield said. “The reason for that is that capital expenditures can always be delayed should there be a slowdown in RTT funds.”

The prosed 2021-22 budget for the City of Milford totaled $47.7 million, an 8.43 percent increase from 2020-21. The proposed tax increase was 14.13 percent, raising it from 46 cents per hundred to 52.5 cents per hundred. The average home value in Milford is $147,600 and this would result in a $7.99, or $95.94, increase per year for the average homeowner. Whitfield also explained that one of the largest expenses the city faced this year was property reassessment which must be done every five years.

“The American Rescue Plan Act (ARPA), which was adopted by Congress and signed by the president, will provide us with just under $6 million in funding over the next two years,” Whitfield said. “We will receive $2.99 million in June 2021 and the balance in June 2022. However, there are restrictions on these funds and we are planning to use these funds for capital projects. It will also help us address budget shortfalls due to the pandemic and may have kept us from having to ask for an even higher tax increase.”

Mayor Archie Campbell asked how a real estate tax increase would impact property owners once the increase from the new police building, an increase that passed by referendum in February. Vitola explained that the police building increase would not appear on tax bills until at least 2023 and would start as a small amount, increasing over time and then decreasing as the bonds were paid.

“With all these tax increases, the police building and now just to cover operating costs, I am concerned,” Councilman Andy Fulton said. “The school district is in the process of developing their own referendum, and I get that we are not connected to the school district, but I am afraid if we pass this tax increase, the school district referendum will be dead in the water and the middle school building will remain empty forever. I think we have to keep this in mind when we discuss this.”

Councilman Todd Culotta agreed with Councilman Fulton, suggesting that maybe council should consider cutting costs before proposing an increase.

“We don’t live in a vacuum,” Councilman Culotta said. “We need to remember that the district needs this referendum. Before we jump to raising taxes, we need to look at other towns to be sure we are not raising rates too high.”

Councilman Jason James also felt that it was important to look at other towns to see where Milford stood with property rates, but that it was also important to compare the services provided by those towns and how those services were funded.

“If we are on the higher end, there may be a reason for that,” Councilman James said. “Some of these other towns may be using enterprise funds to supplement their needs so they don’t raise taxes. Others may not be providing the same services to their constituents. WE may need to make some fundamental choices. Do we let our parks deteriorate? Or do we need to look at taking more from enterprise funds to avoid tax increases?”

Vitola explained that the current method Milford was using to balance the budget was structurally imbalanced, pointing out that although it is easy to transfer from enterprise funds like electric, water and sewer, that was a “slippery slope.”

“If we start doing things like pulling from enterprise funds, it is our commercial and industrial customers who suffer,” Vitola said. “Industries use a significant amount of power and water, which means they are the ones contributing to our reserves more than our residential customers. We also have to look at residential customers. If I am moving to Kent or Sussex County and I choose to live in a rural, unincorporated area, I am not getting the same services as I am getting by living in town. We have paved roads, beautiful parks, basketball courts, water and septic, we have a place where people want to come and raise a family. We have not had a tax increase since 2007 and we have been lucky our revenue has kept up with our growth, however, to be honest, it has only kept up with the non-public safety portion of our spending. Had council done a penny increase here and a penny there over the past ten years, we would not be in this position today.”

Whitfield explained that a tax increase would go to all property owners, including large businesses while tapping into utility reserves put the burden on those large businesses alone which could lead them to choose to relocate to a different municipality or discourage new industries from opening in Milford.

“I agree with much of what you just said,” Councilman Culotta said. “I also think there are advantages to living in city limits because of the available infrastructure. But, keep in mind, a lot of the things we offer are also available to people who live outside our municipality. I mean, Sussex County has paved roads. People from all around the area use our parks. If the heartburn is being caused by public safety, we have to look at that budget.”

Vitola explained that the tax a tax increase would not be used to balance the city budget, but to slowly stop using utility fund reserves to support general operating expenses. It would also be a way to phase out the use of RTT monies to fund the police department

Other issues facing the city include staffing across the board. The budget includes an increase in IT personnel and one position would be responsible for creating a live stream for council meetings. Parks and Recreation Director, Brad Dennehy, reported that he had just been given the okay to fill two positions in his department. He has also asked for a pay increase for seasonal casual employees who do more than just cut grass.

“We contract those services, using a temporary agency to fill the casual seasonal slots,” Dennehy said. “They do more than just cut grass, however. They water plants, they plant, they pick up trash, they help with festivals and they were out helping DMI on Sunday. I’ll put it bluntly. We pay these guys $10 an hour plus the fee to the temp agency. I am trying to give them a small nudge to keep them and not have workforce turnover every few weeks.”

Mayor Campbell asked if the $10 an hour was the reason staff turned over so often.

“Absolutely,” Dennehy said. “On a nationwide level, no one is working at this type of job for less than $11 and even at that rate, you will have regular turnover. There is a push for $15 an hour minimum wage and whether we get there or not, we just have to pay these people more. Using the temp agency, we shift a lot of the costs to the temp agency, like workers’ comp. As a comparison, we just bid out a cemetery for $56,000. If we hired a contractor for all of the parks, we would be looking at more than $600,000. We are not paying these guys benefits, but we need to pay them a better wage.”

Other changes to the budget included an 18.4 percent increase to Downtown Milford Inc. Earlier this year, the organization requested an increase for one year to cover the cost of rent after the city chose to sell the building they were using for their operations. The city’s Customer Service Department budget reflected a 44 percent increase, 81 percent of which was related to the required reassessment of property. The IT Department showed a 32 percent increase due to the need for additional personnel, while Parks and Recreation showed a 14.3 percent increase, 93 percent of which was due to staffing and contract costs as described by Dennehy.

Council will discuss the budget in depth on Wednesday, May 19 starting at 7:00 PM. The meeting will be held virtually and is open to the public. Council will vote on the budget at a future council meeting.

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