Ezra J. Temko

This is a summary/synopsis of the proposed 2010 budget.  It includes:
1) The goals/necessary steps our 2010 budget must accomplish
2) What makes that difficult
3) How the city has cut spending
4) How the 2010 budget raises revenue

There will be a public hearing on Monday, 11/23/09, at 7:30pm in city hall.
To read the entire proposed budget, go to http://cityofnewarkde.us/index.aspx?NID=616 

1) The budget must:
1.  Cover the city’s expenses for 2010.  The city has a $31.2 million operating budget and $4.1 milion in city expenses for our capital improvements program.  The proposed revenue budget is $2.1 million larger than last year’s budget to ensure the city’s expenses are covered.
2.  Move Newark in a positive direction towards increasing our cash reserve.  Ideally we would have $25-30 million in our cash reserve.  In 2005 the city had $21 million; as of October 2009 we had $12.6 million

2) It is difficult to meet these budget needs because:
1.  Realty transfer taxes are down considerably, over $1 million/year.  Transfer taxes are projected to be $0.8 million in 2009 compared to a budget of $1.9 million.  Actual transfer taxes in 2008 were $2.8 million including about $0.9 million from the transfer of the Chrysler site.
2. The reservoir lawsuit settlement directly cost $3.6 million and insurance costs increased about $200,000 in the first renewal after the reservoir settlement.
3.  The Chrysler site is being sold to the University of Delaware, meaning the city will no longer get that $280,000 of annual property tax revenue.
4.  In 2005, there was substantial electric utility revenue loss.  Electric margins were $9.1 million less than budgeted in 2005 and $3.5 million less than budgeted in 2006.
5.  Retiree health care costs increase $300,000 in 2010.
6.  Pension expense increases $300,000 due in part to poor investment performance in 2008.
7.  Health care costs are up about $100,000.
8.  The city conducted a resident survey to determine value of services.  The vast majority of services in the survey were rated as very important by 50% or more of respondents, limiting options for service reductions.
3) The city has worked to maintain and reduce costs by:
1.  Cutting 8 FTE (full-time equivalent) positions (savings:  $650,000)
2.  Making changes to health plan benefits (savings:  $260,000- costs are rising $100,000 instead of $360,000)
3.  Material and supplies cost containment (savings:  $74,00)
4.  Eliminating the print version of the city newsletter (savings: $21,000)
5.  Eliminating the trolley subsidy (savings: $7,000)
6.  Eliminating expenditures from the capital improvements program (2009 savings: $700,00)
7.  Postponing expenditures from the 2009 capital improvements program to 2010 (2009 savings of $1.3 million)

4) The $2 million+ shortfall is made up for in the 2010 budget through:
1.  A sewer rate increase (Revenue: $1,000,000)
Impact on homeowner:  $50/year average
Due to infrastructure costs and lower demand, without a sewer rate increase the city would lose money on its sewer utility in 2010.  The city has a target operating margin for its sewer utility of 20%.  With this sewer increase, the operating margin would be 16%.

2.  A 9 cent property tax increase (Revenue:  $700,000)
Impact on typical homeowner:  $89/year for single-family detached, $50/year for single-family townhomes
Property tax is the most stable source of funding the city has and is the city’s primary tool to raise revenue for its general fund.  Even with this increase, the city would still be collecting 20% less in taxes (property and realty transfer tax) in 2010 than previously.
Is Newark still a good deal with a 9 cent property tax increase?
With the tax rate increase, Newark’s tax rate would be 64.58 cents per $100 of assessed value.  This is below that of Wilmington, New Castle, Elsmere, and Newport.  The tax rate for the county is 70.18 cents per $100 of assessed value, and the city provides many services to its citizens that residents in the county must privately contract and pay for (i.e. refuse collection, snow removal, leaf collection).
3.  Developing a stormwater utility fee (Revenue: $350,000)
Impact on homeowner: $17-31/year, depending on zoning/minimum lot size
A stormwater utility fee will reduce reliance on the property tax for funding stormwater related expenditures and gather these funds in a more equitable fashion.

4.  Charging apartment complexes for dumpster collection (Revenue: $350,000)
Some apartment complexes may pass these fees on, but not all apartment complexes use the city for dupmster collection at present; some use and pay private contractors.