Newark City Council once again delayed voting on the controversial rental tax Monday, this time to explore alternative revenue ideas, including recouping credit card processing fees and charging residents a fee for trash pickup.
The surprise move came after new information came to light regarding the city’s ability to levy a surcharge on residents and businesses who pay their bills by credit card.
Mayor Jerry Clifton, who had been a strong supporter of the rental tax, said the council needs to take a step back and fully consider the new information before voting on the tax. City officials see the 1 percent tax on rental income as a way to help close a budget deficit, but landlords and tenants say the idea is unfair and discriminatory.
“I implore the city manager and his staff, you’ve heard the issues tonight,” Clifton said. “We need to maybe have a deep conversation to find out where we’re going.”
One of the main issues relates to the fees the city incurs when customers pay for utility bills or other payments using a credit card. Credit card companies take a small percentage of the amount paid, which costs the city more than $1 million per year. Of that, $350,000 is due to the University of Delaware, which has rebuffed repeated requests from the city to pay its bills through a different method.
During discussion of the rental tax over the past few weeks, several landlords suggested that instead of the tax, the city should pass the processing fee on to customers who pay by credit card.
City officials had steadfastly asserted that it’s not legal to have a credit card fee for utility bills. However, on Monday, City Manager Tom Coleman acknowledged that the city had been misinformed by its credit card processing vendor. The city is in the process of switching to a new vendor that will be able to impose the fee.
Council directed Coleman to provide more details at a meeting next month.
“There’s a strong chance we’re going to recover a large amount of money,” Councilman Jason Lawhorn said.
Customers could avoid the credit card fee by paying by check or automatic withdrawal from their checking account instead. Either way, it would mean the city wouldn’t lose money to credit card processing fees.
Council members also requested a more detailed discussion about charging a monthly or yearly fee for trash pickup.
The city has long provided free trash service to residents, which costs the city approximately $350 per house. That equates to about half the median tax bill, and 800 properties in the city don’t even pay enough in taxes to cover their share of the cost of garbage collection, let alone the other city services residents receive.
The idea of a trash fee was last discussed in 2019, when officials proposed charging residents $25 per month. However, the idea was abandoned after strong opposition from residents.
With the city facing a large budget shortfall next year, it appears the trash fee is back on the table. Proponents say it would reduce the need for a large tax hike and ensure that all residential property owners are paying at least the bare minimum it costs to provide them with trash service.
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