Dover faces $7M budget shortfall, leaders mull tax increase

Why Should Delaware Care? 
With revenues decreasing and expenses rising, the city of Dover faces a multi-million-dollar budget shortfall heading into the next fiscal year. While city staff is sounding the alarm about dipping into the city’s savings as a way to close the gap, elected officials are divided as to whether they favor using the leftover funds, or levying a tax increase on residents.

Dover employees and elected officials are throwing a smattering of solutions at the wall, as the city seeks to close a $7 million shortfall in its budget for the 2027 fiscal year. 

But city officials are divided on whether a tax or electric fee increase will be necessary to make the finances work this year, and what Delaware’s capital city can do in the long term to make its budget more sustainable. 

The city has already proposed a number of cuts to departmental budgets, such as a hiring freeze, a postponement of new vehicle and equipment purchases, and a pause on capital improvement projects like repaving roads. 

These departmental cuts brought an initial $13 million budget gap down to $7 million, and city staff are still searching for additional ways to bring down the budget without taking away any of the services residents expect, like snow removal and trash pick up, acting city manager Sharon Duca said. 

Still, the city council will be forced to decide over the next month between dipping into the $10 million currently in budget reserves or raising taxes to resolve the rest of the deficit. 

Duca told Spotlight Delaware she and other city staff are warning city council against using the budget balance, as they have done in recent years to square the city’s finances, because the city needs some money in its reserves for costs that come up throughout the year. 

But city council members appear to be split as to whether they would rather use some of the budget reserves or levy higher taxes as a solution to the financial woes, saying they will need to come to an agreement as a group before the early June deadline. 

“I’m waiting to see what the figures are that [city staff are] going to bring down to us,” City Council President Fred Neil said. “How much would it cost on each penny if we have to raise the property tax? If we have to raise the electric rate?”

It remains unclear how much of the current $7 million shortfall the city would need to draw from either reserves or increased taxes, as city staff are still finalizing departmental budgets ahead of the May 12 deadline for them to provide a drafted budget to city council, Duca said. 

It is clear, though, that the city has faced substantial budget shortfalls in each of the past several years, and “we can’t continue on the path we have been,” she said.  

Council members have thrown around a number of ideas for how to remedy the gap between Dover’s revenue and expenses in the long term: building more homes to increase the property tax base, making nonprofit organizations pay for city-provided trash services, or hiring a grant writer to bring in more funds. 

But no one appears to have a concrete solution. 

‘You’re just kicking the can down the road’

A review of Dover’s preliminary fiscal year 2027 budget, which was presented to the city council finance committee in late April, shows relatively stagnant property tax revenue, and more substantial drops in revenue from both properties sold by the city to other entities and a citywide lodging tax. 

The document indicates that city revenues are projected to drop by 2.6%, or roughly $1.1 million, from last fiscal year. But Duca said city staff has been “further reviewing and analyzing” city revenues over the past several weeks and has now brought them to a “positive position.”

The draft budget outlines roughly $6 million in cuts to different departments’ budgets through a combination of removing unfilled positions and cutting down on travel and other technological or equipment upgrades. 

Duca said trimming the budget in these areas is necessary this year, but challenging because capital improvement upgrades to fire vehicles, roads and the sewer system will soon become dire, and costs for those improvements will only go up in future years.

“You’re just kicking the can down the road,” she said. “It becomes more of a backlog of issues that you have.” 

Notably, the only city department in the draft budget slated to receive a sizable increase in funds and add more positions is the police department. 

The draft lists an overall 8% increase in the police department budget, up from $25.7 million last year to $27.7 this year. The draft also calls for two new full-time positions — a total of 147 employees, including non-sworn officers. 

The Dover Police Department has been the subject of controversy over the past year. Last summer, the local police union publicly sought to remove Police Chief Thomas Johnson from his position. There also is an ongoing investigation into Mayor Robin Christiansen allegedly telling the union to attack city council members who criticized the police department. 

A spokesperson for the police department said it originally requested a personnel increase last fall to address inadequately high workloads among officers, before the department was aware of the city’s strained financial situation. 

Since then, the spokesperson said, the department has worked with city staff to pare back some other requests, like replacing uniforms and promoting more officers to supervisorial roles. 

“It’s really easy to stand up and say, ‘Hey, we need more cops. We need this. We need that,’” Mark Hoffman, the spokesperson, told Spotlight Delaware. “But at the end of the day, that comes with a price tag.” 

The budget balance — or the leftover dollars in the city’s general fund from previous years — currently sits at $10.2 million. However, Duca said, this balance has decreased by about $2 million each of the past two years, as city council members have opted to use those funds to balance the budget. 

The city charter requires the government to retain at least 8% of its total budget in the bank annually to cover costs that arise throughout the year before collecting any property taxes. 

In order to meet that threshold this year, the city would need to keep about $4.7 million in the bank. This would leave about $5.5 million that could be put toward closing the $7 million budget shortfall.

But Duca said she does not think simply pulling the maximum amount from the city’s extra funds is a sustainable solution to its budget stresses. 

“The warning signs are there,” she said. “We can’t continue on the path we’re on.”

City council responds

City council will be forced to make a decision within the next month about using last year’s budget balance or raising either property taxes or the city electric use fee in order to approve the budget. 

At the moment, however, council members appear reluctant to admit that a tax increase of some sort could be necessary. 

Two historically vocal council members, Brian Lewis and Roy Sudler Jr., told Spotlight Delaware they refuse to vote for a tax increase. Both councilmen want to look at any other possible avenues — including pulling money from the city’s Economic Development Fund or defunding the Dover Police Academy — in order to close the gap. 

“If the residents get a tax increase or [higher] electric fees, they’re going to go ballistic,” Lewis said. 

The city most recently passed a property tax rate and electric fee rate increase in Fiscal Year 2025, and a water bill rate fee increase at the start of this fiscal year, Duca said. 

She said city staff are preparing example property tax, water and electricity bills to present to city council at the upcoming budget workshops in mid-May, so that they understand what the potential tax and rate increases would mean for citizens’ expenses. 

Neil, the council president, said he needs to “wait and see these figures” in order to determine the direction the council should go. 

Council Members Julia Pillsbury, David Anderson, Andre Boggerty and Tricia Arndt were similarly vague when asked by Spotlight Delaware whether they believe council should use the budget balance or levy a tax increase to balance the budget. 

“I don’t have specific thoughts on it right now, but I think as we work through the budget hearings and the discussions and listen to staff recommendations, we can get to where we need to be,” Arndt said. 

Council members Donyalle Hall and Gerald Rocha did not respond to Spotlight Delaware’s request for comment. 

The council members agreed, however, that the options being considered this year are merely stop-gap measures, not permanent solutions to the city’s budget challenges. 

Their ideas about how the city can make long-term improvements range from relying on the success of the Downtown Dover Partnership in bringing in more business and residents, to starting budget planning earlier in the year, and taxing nonprofit organizations located within city limits. 

“The truth is, we’re just going to have to be a more attractive city for individuals to come do business in,” Boggerty said. 

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Maggie Reynolds is a Report for America corps member and Spotlight Delaware reporter who covers rural communities in Delaware. Your donation to match our Report for America grant helps keep her writing stories like this one; please consider making a tax-deductible gift of any amount today by visiting https://spotlightdelaware.org/support/.