Delaware News Journal
The city of Newark and the University of Delaware have a symbiotic relationship. But, Newark officials and one of its representatives in Dover want the University to fork over some more cash to a city government needing another source of revenue.
The city of Newark relies on utility payments to make up the majority of its revenue. Newark is the third most populated municipality in Delaware, a significant part of which includes over 19,000 undergraduate and more than 4,000 graduate Blue Hens. The university also employs more than 4,700 people. A report from 2022 found that UD created more than $3 billion of economic impact for all of Delaware. It is the beating economic and cultural heart of the college town.
UD had a record number of applications in 2023 and continues modest but steady growth. Any land owned and operated by UD is not taxable, making up nearly 40% of land within Newark's municipal borders. The Newark City Council approved a hike in property taxes and utility rates for this year to contend with rising costs and inflation. If Newark could tax that land, they would have around $6 million more in tax revenue.
House Bill 34 would authorize a change to Newark's charter allowing it to levy a tax on UD. The tax would be up to $50 per student, per semester, allowing for future consumer price index adjustments. Newark Deputy Mayor and mayoral candidate Travis McDermott said it's a framework while they figure out an actual tax rate. If the city levies the full tax, it can receive up to $2.4 million in revenue and a 7% to 8% increase in the city's general fund.
The bill, sponsored by House Rep. Cyndie Romer, D-Newark, advanced through the House Administration Committee on March 12 and will be scheduled for a hearing on the House floor soon. It was approved by one member of the committee, voted on its merits by three members and denied by one member.
Last year, the idea of the per-student tax stirred the pot, leading to crowded City Council meetings with students, who the cost would be passed down to. If the bill is signed into law, then the city would have to create and pass its own ordinance on how much it would collect in the tax. The bill merely authorizes the city to change its charter.
McDermott has made generating revenue from UD to the city a major part of his campaign platform. He said UD is a primary economic and research driver in the entire state, but the consequences of the university's growth have started to come at the expense of the rest of the city.
"They do a lot for the state, and so they've had a lot of growth, which is a good thing, but the consequences are real for the residents of the city, and so someone needed to stand up and do something about it," he said. "If it continued down this path, the economic or the financial stability of the city was unsustainable."
Universities often use PILOT programs, payment in lieu of taxes, instead of paying a direct tax. For example, Yale pays taxes on its non-academic real estate to New Haven, Connecticut, and promised in 2021 to pay more than $135 million to New Haven voluntarily. Boston receives PILOT contributions from many of the universities and colleges within its city borders. Both of those cities are much larger in size and population than Newark.
According to Newark City Manager Tom Coleman, the city collects around $180,000 annually from the university from deals made in 1965 and 2002. The University of Delaware paid those in credit cards until recently, costing hundreds of thousands in processing fees.
Coleman said the city received $2 million from the state in a grant-in-aid bill this year, but expects that to go away if House Bill 34 becomes law.
Romer said a tax is better than a PILOT program because that money comes from the taxpayer-funded state general fund, and the new per-student tax would be paid through UD.
"It has a lot of impact on the town, and it uses a lot of town resources, and they should be paying their fair share," she said.
She said this policy has been an easier sell this time around because potential opponents have been more understanding of Newark's situation, and she is optimistic about the bill's future this legislative session.
The University of Delaware said in an email that it has productive conversations with city leaders and will continue working with the city to find short- and long-term solutions while advocating for steady revenue streams for the city. It did not elaborate on what those solutions were and did not make anyone available for specific information.
“We are understanding of and sympathetic to the City of Newark’s needs, which – in many ways – reflect ours, due to inflation-induced costs and other financial pressures," UD said in an email.
City officials stressed that the relationship between the town and the gown is not stressed and that this is one of the few speed bumps between them. Coleman, the city manager, said the city wants to work something out between them and the university first.
Deputy Mayor McDermott said the relationship between the two needs to bring a mutual benefit, and it usually does. This one issue does not mean the relationship is strained.
"We do so many great things together, and just because we disagree on one issue doesn't mean that we have some type of toxic relationship," he said.
Shane Brennan covers New Castle County with a focus on Newark and surrounding communities. Reach out with ideas, tips or feedback at [email protected]. Follow @shanebrennan36 on X, formerly Twitter.