Lewes hotels, rental owners raise red flag over proposed tax hikes

Mina Clark owns a rental property at 1603 Cedar St., about a block from Lewes Beach.

She joined other rental owners and representatives from Lewes hotels in raising a red flag about this year’s summer bookings.

“Usually by this time of the season, we have summer fully booked. We have two spring break weeks and most of May booked. We are five weeks behind,” she said.

Clark spoke at an April 7 public hearing held by Lewes Mayor and City Council.

The panel received feedback on proposed ordinances to increase its 5% gross rental receipts tax on short-term rentals by 0.5% and to implement a 2% lodging tax on hotels.

Both increases would take effect Jan. 1, 2026, if council approves them.

The lodging tax would be on top of an 8% state tax. Short-term rentals are subject to a 4.5% state tax.

Clark said 40% of what she charges a guest is taxes and fees. No guests for her means no tax revenue for the city.

“I would suggest [council] look at your proposed budget to assume what you’re getting for revenue this year. You’re not going to get it, if I don’t get any more bookings,” she said.

Judy Rolfe said she has had to pull her rental townhouse off the market this year for fear of losing money, after breaking even last season.

“I can’t do 5.5%. I can’t do 5.4, 5.3 or 5.1,” Rolfe said. “I’m heartbroken. My guests contribute to the economy in a big way. They’re not staying in cooking dinner. They’re out shopping, going to happy hours and booking fishing expeditions.”

“I fight for my guests,” said Rick Quill, owner of the Blue Water House bed and breakfast. He said he does not favor any tax increase, but he thinks a property tax hike is a more equitable solution for raising revenue.

Joe Stewart, owner of the Inn at Canal Square, said all of the hotels in Lewes are stand-alones, not national brands that benefit from a reservation system.

“We work with the chamber of commerce to see how we can attract clientele. The thing that we sell most is the charm. Lewes is still the jewel of Delaware,” Stewart said.

Deputy Mayor Khalil Saliba said it is important that the city not alienate visitors with tax increases.

“We have to be very conscious of how hotels and short-term rentals are doing with regard to these, and if there is a correlation between increased rates and fewer customers,” Saliba said.

Ed Tessein, who does not own rental property, told council that this is as good a time as any to raise taxes.

“We need the revenue, and we’re all willing to pay our share,” Tessein said.

A percentage of the GRRT and lodging tax would go toward the city’s new resiliency fund.

Mayor and council also took comments on a draft resolution for the fund during the April 7 hearing.

They have already approved $1.4 million in seed money for the fund in the FY2026 budget that went into effect April 1.

Council is still required to pass a resolution before money from the fund can be spent.

The fund will allow the city to enhance disaster preparedness, strengthen climate resiliency and protect natural resources. It will also be there to help the city recover from a major disaster.

Rich Innes, a Lewes planning commissioner, said uncertainty regarding the federal government makes the fund more important than ever.

“The president is talking about getting rid of [the Federal Emergency Management Agency], which is mind-blowing to me. Even if it’s hindered in a major way, we may well be on our own,” Innes said.

Council can only spend resiliency fund money with a 5-4 supermajority vote, and members are now proposing a city charter change that would require the same supermajority before a future council could dismantle the fund.

No one spoke out against the resiliency fund at the public hearing.

Mayor and council will take comments on the proposed tax increases and the resiliency fund until 4 p.m., Friday, May 2.