Visitors to Rehoboth will not pay a 3 percent hotel tax this year. Property owners, however, will pay a 50 percent increase in property taxes.

Rehoboth commissioners passed a $24.3 million budget March 15 that does not include revenue from a 3 percent hotel tax passed by the city commissioners in the fall. The next fiscal year begins Monday, April 1.

The hotel tax requires a charter change, which must be approved by the General Assembly. Last year, commissioners requested a charter change that would allow the city to charge up to a 3 percent tax on hotel and motel bills.

During a budget meeting prior to the commissioner meeting, Mayor Paul Kuhns announced the charter change would not likely be approved this year, and after receiving comments from local hotel keepers, the city would postpone pushing for the tax until January 2020.

Kuhns said March 20 the city would continue to work with the city’s legislative representative on the hotel tax charter change.

Speaker of the House Rep. Pete Schwartzkopf, D-Rehoboth, said the city didn’t present him with proposed language related to a hotel tax until February, but at that time the General Assembly wasn’t in session because its Joint Finance Committee was meeting to discuss the budget. He said he had reservations about introducing the legislation because the city’s vote was taken without talking to hotel industry representatives, and he said he wanted the city to work with that group of people before a bill was introduced.

Schwartzkopf said he is aware other municipalities have implemented a hotel tax – Seaford, Milford, New Castle County – but he said the hotels in Rehoboth are different because there’s competition immediately outside of town that customers could go to. He said he didn’t think the tax was a good idea and that it definitely puts hotels in town at a distinct disadvantage.

Sen. Ernie Lopez, R-Lewes, said he thought the city did the prudent thing by not including the projected revenue as part of the budget. He said he was aware of the potential charter change, but hadn’t had an opportunity to review a draft bill and discuss it with city officials.

Instead of a hotel tax, the city is using surplus revenue in the general fund to pay for capital improvements.

After the budget meeting, City Manager Sharon Lynn said the city’s general fund has a surplus of a few million dollars and the amount to be used would be the projected revenue amount of $890,000 if the hotel tax had been implemented July 1.The city has used these funds before, Lynn said, most recently during construction of city hall. She said those funds have since been repaid.

Asked March 20 about surplus funds, Kuhns said the city could not say how much money is in the surplus because Lynn and city accountant Burt Dukes were both on vacation.

Included in the budget is roughly $680,000 for improvements to the city’s three public restrooms on the Boardwalk. Kuhns said work on those improvements – painting, flooring, plumbing, doors, frames, hardware and more – is expected to begin soon and be completed by Memorial Day.

The budget includes a 50 percent increase in property taxes, from $.04 to $.06 per every $100 of assessed value. The tax rate will be set at the June 21 commissioners meeting and goes into effect beginning July 1.

Expenses includes $1.9 million for city administration, $2.9 million for the police department, $3.6 million for the streets department, and $1.5 million for the parking department.

The budget calls for $5.9 million in parking revenue generated from meters, permits, fines and other fees charged; $1.9 million in real estate tax revenue; $1.4 million in transfer tax revenue, and $2 million in rental tax revenue. There’s also an increase to residential trash service of $25 for both seasons.

The budget includes a $100,000 donation to the Rehoboth Beach Volunteer Fire Company, $50,000 to Rehoboth Beach Main Street, $15,000 for the Rehoboth Beach Public Library and $38,700 for the Rehoboth Beach Historical Society. Commissioners did not approve a request by Clear Space Theatre Company for $100,000 for each of the next two years.

In addition to restrooms, capital improvements include stormwater upgrades, water main replacement, street paving and a new trash truck. The budget for capital improvements is $2.3 million.

The budget also includes a 60 percent increase in sewer services and a 30 percent increase in water services. The increases were recommended by city consultant The Abrahams Group after conducting a rate study in 2018. The additional revenue for city utilities is being used to pay for the ocean outfall project and future capital improvements that were recommended by city engineer GHD.