Rehoboth Contemplates Increasing Rental Tax - WBOC-TV 16, Delmarvas News Leader, FOX 21 -

Rehoboth Contemplates Increasing Rental Tax

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Downtown Rehoboth Beach (Photo: WBOC) Downtown Rehoboth Beach (Photo: WBOC)

REHOBOTH BEACH, Del. - The City of Rehoboth Beach's commissioners are considering ways to increase the city's revenue. One of them is upping the gross receipts tax on residential rental properties from three percent to six percent.

The suggestion began as part of the commissioners' budget meeting for the 2017-2018 Fiscal Year Budget. Commissioner Paul Kuhns says the increase would help the city have funds for future projects.

"We have a balanced budget but there are some capital outlays we need to look into," he says. "If we go from three to six percent, then we have it each year going forward. So that could be set aside for capital outlay funds or maintenance funds."

The rental tax increase is just one of many ideas brought up at the meeting, including creating a commercial rental tax, increasing property taxes--which have not been raised for years--or possibly getting more money from parking meters.

Kuhns said if the city decides to increase the rental gross receipts tax, it's unlikely they would be instituted in the upcoming budget. Rehoboth Beach Realtor Sharon Palmer-Stauffer says she understands the need for more revenue, but worries about the effect it could have.

"In one sense, they need money," she says. "The problem is it's money they're taking away from our property owners." 

Heather Knowles with RE/MAX agrees, saying homeowners got mortgages based on expected rates. She says the gross receipts tax increase would either come out of homeowner's pockets or force them to increase rent, which may turn away tourists.

"People that come to our Delaware beaches--they're coming and bringing in a lot of revenue," she tells WBOC."If we're increasing the rates, it could get to a point where people can't afford it and they'll go elsewhere."

Kuhns says the 3 percent jump would be comparable to neighboring beach towns. He also notes that the tax would only be for rental contracts under four months, so it would not affect year-round residents. Commissioner Toni Sharp says she found the conversation very productive and conducive for future conversations.

"It was a great planning session focused on our budget where we were able to talk about our long-term goals, our vision for the city and our sources of revenue that we are able to tap into," she said.

The commissioners will meet again next week with a re-worked city budget. They will approve the 2017-2018 budget in March, with it beginning on April 1st. 

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