Finance Committee reviews draft tax-policy guidance; discusses MSP disclosures, fee schedule and reserve targets

The City of Delaware Finance Committee on July 8, 2025, reviewed the second half of a draft tax-policy document that lays out how the city should treat growth-related costs, fee-setting and review, and use of reserves.

The draft, presented by Corey, described the document as a concise, long‑lived statement of how the city should approach taxation and development-related charges. "What you have in front of you is the latest draft as of an hour ago," Corey told members as the meeting opened. The committee did not adopt the policy at the meeting; members discussed wording, practice and priorities and asked staff to redraft portions for a future meeting.

The discussion centered on several recurring topics. Committee members debated how to express the city’s objectives for new development and growth. Several members favored language saying that new development should "internalize the costs of infrastructure, services and facilities it requires," while others had recommended wording about developers paying their "fair share." The draft directs the city manager and council to seek, "whenever possible," to align impact fees, service charges and other development‑related revenues with the true cost of expansion.

Members also discussed minimum service payments (MSPs) and charges from New Community Authorities (NCAs). Alicia, the finance staff member who answered questions about disclosure, said homeowners are supposed to be notified but noted limits in practice: "I think it's stated that they have to be notified, but like you said, there's a lot... I don't think that people read that much," she said. Committee members raised concerns that some recent buyers did not understand they would be billed NCA charges or MSPs and discussed whether the city should add explicit disclosure or additional caveats in the policy.

Committee members reviewed how the city categorizes services for cost recovery. Utilities such as water, wastewater and refuse were described as "businesslike" or utility enterprises that should aim to recover costs through rates and reserves; other services such as parks were described as public goods that may be subsidized. Parking was discussed as an example of a service that shifted from a public-good model to a utility/enterprise model; staff noted that recent changes moved attendant salaries to the parking fund and that some capital items still require subsidy.

The draft calls for a master schedule for fee reviews so fees, impact charges and rates are reviewed at set intervals to avoid abrupt increases. Committee members asked staff to specify review cadences (for example, every 3–5 years for particular fees) and to maintain a public schedule so fee adjustments can be more incremental.

On financial planning and oversight, the draft shortens a response timeline for the finance officer: if the general‑fund forecast shows a projected deficit, the finance office would provide recommended responses within 30 days (reduced from a 90‑day proposal). The committee discussed the tension between "minimizing expenditures" and preserving "best value" and maintenance funding to avoid deferred capital costs.

Members also discussed reserve policy and targets. Staff said the city's existing financial reserve policy requires the reserve account to equal 5% of prior‑year general‑fund revenue and that, if the reserve is used, it must be reestablished to that level within three years. Committee members asked staff to propose an upper threshold or target for accumulated balances so surplus dollars could be transferred to capital, economic development reserves, or other priorities instead of appearing as unspent operating balances.

Other topics included: whether certain funds (for example, the municipal court) are appropriate to treat as enterprise funds; the possibility of creating or changing impact fees (transportation, fire, etc.) to better align costs with beneficiaries; and adding an economic‑development reserve as a priority use of surplus funds. Staff suggested switching the five‑year forecast in the draft to a three‑year forecast to align with recent Government Finance Officers Association guidance.

Procedural actions at the start and end of the meeting included approving the motion summary (moved and seconded, no objection recorded), agreeing to excuse Councilman Haynes (moved/seconded), and adjourning the meeting (motion and second). No formal vote on the tax policy text occurred at the July 8 meeting; staff will return with a revised draft addressing members’ edits and with suggested language for reserve upper limits, fee review schedules and clarifications about MSP/NCA disclosure.

The committee scheduled follow‑up work: staff will redraft the policy text to (a) adopt "internalize the costs" language, (b) clarify which bodies review and approve MSPs and targets (city manager, finance committee and city council), (c) add a public master schedule for fee reviews with suggested cadences, (d) change the long‑term forecast reference to three years, and (e) propose an approach for an upper threshold for general‑fund balances and possible uses of excess funds.