Lewes council receives report calling for tax, fee hikes

Lewes Mayor and City Council formally received a financial report that calls for tax and fee increases and major changes to the city’s budget process.

Members of the financial stewardship subcommittee made presentations at a council special meeting Jan. 10.

The report considered six components: capital improvement plan, investment strategy, resiliency fund, standardized nonprofit grant applications, revenue proposals and efficiency studies.

The report is just a proposal, a starting point in the city’s effort to increase revenue.

Components of the plan, including any tax or fee increases, require approval from mayor and city council to be implemented. 

Councilpersons Amy Marasco and Joe Elder co-chaired the subcommittee, which was formed last year to help the city transition from an annual to a three-year budget cycle with a two-year forecast.

“Our goal was not a number or a budget; it was to reengineer an approach, to establish best financial management practices and standardized processes,” Marasco said.

The special meeting gave council an opportunity to ask about the proposed uses of taxpayer money.

Capital improvement plan

City engineers George, Miles and Buhr presented a detailed five- to 10-year capital improvement plan to identify, prioritize and budget for major infrastructure projects.

It addresses streets, gutters and sidewalks and requests from parks and recreation, the bicycle pedestrian advisory committee and the maintenance department.

GMB created a pavement condition index that indicates the severity of damages to street surfaces. GMB set 65 as the average number.

Charlie O’Donnell, president of GMB, said $29.1 million in 2024 dollars would be required to improve every city-maintained street to that standard within 10 years.

O’Donnell said a multi-year capital improvement plan would save money, allowing the city to identify budget needs, available grants and reduce extended disruption from construction.

He said delaying street improvements allows pavement to deteriorate even further and will cost more to address in the long run.

Tax and fee increases

The subcommittee is proposing across-the-board tax and fee increases.

City Manager Ellen Lorraine McCabe is calling for a 20% hike in real estate taxes for fiscal year 2026.

McCabe projected that increase would raise the average residential tax bill by $160 and generate an additional $593,000.

She said the rate would be reduced in 2027, because the city is proposing to use Sussex County assessed property values.

The city is also proposing increases in the gross rental receipts tax and possibly implementing a lodging tax.

McCabe’s proposal also calls for higher fees for bonfires, weddings and park events.

A study is expected to be completed in the spring to determine if parking meter rates should go up.

McCabe did not have a projection for how much additional revenue all of the proposed increases might generate.

Resiliency fund

“We’ve been building for luck, not building for smart,” said Brent Jett, an environmental engineer with GMB, while discussing the need for a resiliency fund, or rainy day fund.

The goal would be to create an account, containing millions of dollars, to mitigate the impact of disasters, such as storms or fires.

”What is appealing to me is that this would be used to fund proactive measures. It’s not a recovery fund. It’s things we can do to prevent a worse disaster,” said Mayor Andrew Williams.

Bethany Beach and communities around the country have resiliency funds.

McCabe presented four scenarios for creating seed money for a fund.

Each scenario proposes using a combination of various funding sources, including a flat rate $100-per-parcel fee, Chesapeake Utilities franchise fee, a portion of parking meter revenue and more.

The proposed scenarios would seed between $527,000 and $962,000 for the first year of the resiliency fund.

Nonprofit funding

The subcommittee is recommending changes to how the city meets funding requests from nonprofits.

City code gives council the authority to fund nonprofits that are incorporated in the city.

The subcommittee presented an example, proposing to double the amount the city gives to Lewes in Bloom each year.

The report recommends the organization receive a dedicated line item in the annual budget of $50,000.

Kerry Tripp, who focused on nonprofits for the subcommittee, said the city now gives $25,000 to Lewes in Bloom to buy bulbs for the annual Tulip Festival. She said the organization said it actually costs them $35,000 for tulips.

Tripp also said the subcommittee crunched the numbers and found Lewes in Bloom provides the city with about $650,000 in free services annually.

The subcommittee created a new process for nonprofits to request funding: an annual nonprofit grant application for requests greater than $5,000 and a community organization grant application for less than $5,000.

“We truly believe the city gets a lot of benefit from the volunteer organizations and a lot of that goes unsung. So, we want to sing their praises,” Tripp said.

The Lewes Finance Committee has invited Lewes in Bloom, the Lewes Fire Department and the Open Space Alliance to make presentations at its meeting at 10 a.m., Tuesday, Jan. 21 at city hall.

The subcommittee also started working with banks and investment firms to get higher yields on its money. The report also said the city should consider hiring a full-time treasurer.

Council did not make any decisions at the Jan. 10 meeting.

The financial stewardship subcommittee has completed its work. The recommendations will now be carried forward by the full finance committee.

The subcommittee’s full report can be found at lewes.civicweb.net.