The city of Newark moves forward on rental tax hopes
Council will appeal to Legislature for authority
Newark’s next tax proposal lands on rentals.
The council passed a resolution 6to-1, appealing to the state Legislature to amend Newark’s charter to give the city the authority to tax lease revenues, despite hours of comment largely against the proposal. This pattern follows a February move to seek a “per-student tax” to be levied on its university neighbors, still looking for state legislative support to update the charter and set the charge.
The latter was “up to $50 per semester, per full- or part-time undergraduate or postgraduate student, at any college or university” attending in-person, the resolution reads, with that fee adjusting with inflation. It eyes more than $2 million in potential city revenue.
Monday night, the council agreed to propose a tax of up to 1% on gross rental receipts.
It’s another tax that stands to impact the University of Delaware, alongside all residential properties within the city being rented to students or other tenants. It would not apply to on-campus dorms, subsidized rental properties or those already facing such a lodging tax, according to the resolution. A portion of the revenue generated by this tax will be pledged toward affordable housing projects the city may fund.
“This tax shall, inter alia, be applicable to residential rental properties within the city owned by the University of Delaware and/or its subsidiaries,” the proposed tax reads, “regardless of taxexempt status.”
What have I missed?
Newark says about 42% of real estate within the city is tax-exempt.
That’s because the University of Delaware, like all nonprofits under state law, doesn’t pay property taxes. If it did, the city estimates they would total around $6 million. It does pay operating costs to the city, like water and electricity, as well as certain fixed payments in lieu of taxes — but the council says such
“PILOT” payments haven’t been adjusted in nearly 60 years despite the school quadrupling in enrollment.
Overall, the city contends that additional revenue sources are “imperative” to continuing to provide city services, with a looming deficit ahead.
The City Council said yes to a perstudent tax, unanimously, on Feb. 12, ahead of this latest passage.
Another paired proposal, looking to apply the rental tax on commercial properties — like retail, dining, office spaces — was postponed Monday. Together, City Manager Tom Coleman had put the rental taxes’ fiscal impact at around $3 million per year. He noted several beach towns already have the tax.
Next, Newark hangs in wait for the state Legislature to approve a charter amendment, get it signed into law, and allow the city to set a new tax. Movement there has yet to be seen, though the clock is ticking.
“If we hope to implement either tax early enough for it to be budget relevant for the 2025 budget year, we will need the state legislature to pass a charter amendment this legislative session,” Newark’s city manager wrote to the mayor and the council ahead of February’s first meeting. “Based on the remaining legislative calendar, that means we must act fast.”
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CHAMBERS/DELAWARE NEWS JOURNAL