Newark Post | by Karie Simmons
The budget proposed by outgoing Gov. Jack Markell includes a slew of tax hikes and several agency and program cuts, but what could hurt Newark the most is the recommendation to reduce municipalities’ share of the real estate transfer tax.
Released last month, the $4.1 billion FY 2018 budget aims to address a $350 million deficit. Incoming Gov. John Carney will have a chance to suggest changes in the spring before the document is discussed by the General Assembly and put into effect July 1.
Delaware currently has a realty transfer tax of 3 percent, with that money being evenly split between the state and the city or county in which the property lies. Markell suggests raising the tax and shifting a quarter of a percent more to the state, meaning counties and municipalities would get 1.25 percent instead of 1.5 percent and the state would see an additional $11 million in revenue.
New Castle County – the largest in the state – receives approximately $10 million a year from that revenue source and would be hit the hardest by such a proposal.
Newark receives approximately $1.6 million, which goes into the general fund and is typically used to pay for public safety. However, if the budget is approved as presented, Newark would lose $125,000 of that money this year and $250,000 each year going forward.
“It’s an important funding source for this city, and it would be a big loss to us if we had to give up any portion of the realty transfer tax,” said Newark Finance Director David Del Grande.
In a worst case scenario, Del Grande said, the city could use its budgeted surplus to cover the loss and then supplement that through other cuts to offset the need for a property tax increase, such as allocating less funding toward the 2017 other post-employment benefits (OPEB) contribution. He said the city could also reconsider the Emergency Services fee, implement a hiring freeze on any positions that become vacant and are funded by the general fund starting July 1 and delay any general fund projects.
State Rep. Paul Baumbach believes Markell’s realty transfer tax plan will help curb the state’s budget deficit and that Newark would survive with less of the money.
“It would have a negative impact, but it’s not going to derail the city,” he said.
He thinks Carney will consider adopting the recommendation.
“He’s listening to it all, and I would imagine his financial folks would absolutely be looking at it and decide what level they want to put it in there,” Baumbach said. “I think we need sacrifices in all areas, and I would be surprised if this area got passed. There’s just too big a hole to not make sacrifices in all areas.”
State Rep. John Kowalko, however, doesn’t think the state should be pushing the burden onto the counties and municipalities.
“I don’t like it. It smells,” he said. “It’s a cowardly way to refute our own obligations.”
If Newark wants to keep its share of the realty transfer tax, Kowalko said city officials should say something.
“I think they should come down to Legislative Hall. It’s never too early,” he said. “I don’t care if it’s on the table or not, they should come down and speak.”
The 149th session of the General Assembly began Jan. 10 and will end on June 30.
Baumbach plans to continue recommending Newark be included in the state’s payment in lieu of taxes program, but he also has a few other priorities this legislative session. He wants to introduce a bill to allow people to donate their tax refunds to the Food Bank of Delaware and three local Habitat for Humanity branches, and he is also working on legislation that would increase flexibility and services for home healthcare.
“It would enable those who are helping take care of someone at home to do more services than they are currently permitted to do,” he said.
State Sen. Dave Sokola said he wants the University of Delaware to open its Board of Trustees meetings to the public and plans to reintroduce legislation that would require the school to do so. He tried to get the bill passed last year, but it didn’t make it through the state senate.
Sokola said many top universities have increased their transparency, but “the University of Delaware has been a little slow.”
He believes public input would be valuable in some of the Board of Trustees’ decisions.
“I’d rather [the university open the meetings] themselves, but if they need a nudge, I’m ready and willing to give them a nudge,” Sokola said.