During Monday’s meeting, Delaware City Council resumed its discussions on a looming income tax increase proposal that could be headed to the ballot as early as March 2024. The discussion was a continuation of talks from June 5, which largely centered on the merits of a permanent rate increase versus a temporary increase with the intention of renewal after a set period of time has passed.
As part of the June 5 discussion, Councilman Stephen Tackett suggested a sunset clause be added to the proposal as a way of allowing the city to show tangible results to the community when it’s time to ask for a renewal. Tackett pointed to the failed 2016 levy, which was turned away by residents by a large margin, and suggested a sunset clause might entice voters to support the increase knowing they will be able to reevaluate the increase in future years.
City proponents of a permanent levy have argued the city’s increasingly dire need for a dedicated revenue stream to support infrastructure improvements won’t subside anytime soon, and by helping the community to fully understand the challenges the city faces, enough support can be garnered.
“I think I come down on the side of trying to provide accountability, which is was a sunset provision does, but in the realm of a permanent levy,” City Manager Tom Homan said to open Monday’s discussion. “We provided City Council with a report last week, which we asked staff to put together, that kind of clarified, really, the trade-offs between a permanent and temporary levy. In looking at this matter and considering it at its fullest, I think the needs of the city with respect to its capital needs especially, but also its operational needs, are permanent. Those needs are there, they’re not going to go away, and I think they are best addressed with a dedicated, permanent, ongoing revenue source.”
As an example of what a permanent levy can achieve over time, Homan cited the fire levy passed in Delaware in 2010 to address ongoing needs in the Delaware Fire Department, which he said has led to a well-funded operation today. “That, to me, is one example of where that permanent, dedicated revenue source is obviously beneficial,” he said.
Further elaborating on his stance, Homan pointed to the funding discrepancies between the city’s Utilities Department, which is funded through user fees, and the Public Works Department, which relies on money from the city’s General Fund and available grants.
“In 2010, we presented City Council with a recommendation for a rate increase to support the upgrade of our water plant,” Homan went on to say. “As a result, we had three successive water rate increases that allowed us to build that water plant and today allows us to fully fund not only the capital needs of our water and wastewater operations but also our operational needs. And I would argue there’s probably no parity between those two Public Works operations … You have an underground infrastructure (through the Utilities Department), with respect to the collection system, the distribution system, the plants, that is up to date and constantly maintained.
“And that’s all below the road. Go above the road … we know all the different areas around the city where the roads and that infrastructure are crumbling. That is a result of not having that dedicated revenue source. That’s what we tried to accomplish in 2o16 and were, unfortunately, not successful.”
Homan acknowledged the prevalent comments from residents during the 2016 campaign suggesting a temporary levy would be supported. While he noted that’s still an option, Homan added that what the city is proposing now is “more complicated” than the straightforward road levy of 2016 in that the city is aiming to look comprehensively at the city’s needs, both short-term and long-term, and at the capital and operational levels, to address persistent needs.
To still achieve the primary merit of a sunset clause, Homan suggested creating a system of accountability for how the funds are spent by charging the Finance Committee with the annual task of reviewing and providing a report to the public. He also noted there is nothing preventing City Council from reducing the rate in the future if residents feel the city is not fulfilling its obligations with the new revenue stream.
Ultimately, whether with regard to the city’s hopes for a revamped riverfront or a parking garage, or any other future projects aimed at progressing Delaware forward, Homan expressed skepticism about the feasibility of such plans without an additional permanent revenue stream.
“We won’t get there. Or we won’t get there as quickly, but I don’t know, fundamentally, that you will get there because you’re going to be continually playing catch up,” he told the council. “And I think it just limits our ability to meet the needs and, I think, the aspirations of our community with its resources.”
Following Homan’s comments, Tackett reiterated he is not proposing a sunset clause as a way of making the tax increase a fixed-period, half-measure for the city that would die off over time. Rather, Tackett stated his belief that a proposed temporary increase with the expressed intention of asking for a renewal at the end of each cycle is the only way to mirror the city’s needs with the community’s tepid appetite for a tax increase.
“I have not met with someone in the past month and a half who has said, ‘Yep, I’ll vote for a permanent levy.’ Sure, that may be a small sample size, but history is also on my side (given the 2016 measure),” Tackett said.
Vice Mayor Kent Shafer noted the city’s finances have been reviewed by an independent expert, a task force, and the city’s own Finance Committee, all of which have reached the same conclusion.
“Our capital improvement budget is going to be in the red before long,” Shafer said. “In order to do some of the things that we want to do, and we’re not talking pie-in-the-sky parking garages but equipment and things we need, we have to borrow money to do that. Without a permanent revenue stream, it’s going to be difficult for us to do that.”
Shafer added, “There’s no guarantee that even if we make it a five-year levy, it’s going to pass. We know what we need, and I don’t want to saddle a council five years from now with having to go through this same painstaking process again when we know good and well this is an ongoing need.”
Speaking further on the possibility of the city not being able to get requisite loans for future projects with only a short-term revenue stream guaranteed, Mayor Carolyn Riggle asked City Director of Management, Budget, and Procurement Alycia Ballone about the number of years the levy cycle would need to span for the city to even be considered for additional debt.
Responding to Riggle, Ballone stated, “I would say that for most of our improvements that we’re issuing bonds for, we’re looking at, like, 20-year debt. So, if we’re going to issue it, I would say whatever purpose we have, we would need the 20 years.”
To end the discussion, council brainstormed on ways to engage the public, both for education on why the city needs the increase and for feedback on how they feel about a temporary or permanent levy. With the goal of getting the measure, regardless of how it is ultimately written, onto the March 2024 ballot, Homan noted the council needs to have reached a conclusion on what it will ask of residents by no later than November.
Reach Dillon Davis at 740-413-0904. Follow him on Twitter @DillonDavis56.
