In the first of three budget hearings, Milford City Council was provided an overview of city finances. The proposed budget is balanced and totals $65,465,360. Expenditures in the budget are covered by a mix of utility transfers, property tax, grants, investments and other sources of revenue. Property tax covers the majority of the budget at 41 percent with utility transfers making up 33 percent.
“We have been dealing with a number of personnel issues this year,” Mark Whitfield, City Manager, said. “We switched healthcare providers which will provide a significant savings with little impact on healthcare coverage. We did a job classification compensation study and will use that in setting salaries for this year at an average wage increase of 1.5 percent, effective July 1 for all non-union employees. Those employees will also be eligible for a 3 percent merit increase following their service anniversary date.”
Whitfield felt that the city needed to do a staffing study to make sure there is adequate staff to meet the growth in the city. He also stated that healthcare costs will continue to be a concern in the budgeting process, even with the lower rates with the new provider.
“We continue to rely on transfers from utility accounts,” Whitfield said. “We have to be careful that we do not increase utility rates, so I would recommend setting a limit of transferring no more than 12.5 percent from each of the utilities, capping it so we stay within balance while utilizing Real Estate Transfer tax (RTT) to fund the general police expenses.”
Whitfield pointed out that this was the fifth and final year that RTT funding would be used to balance the budget. This was a change in 2022 as RTT funding is not a reliable source of income. Whitfield stated that utility rates were established over a three or five-year period. Electric is normally three years as it is the most volatile of the utilities in terms of cost.
“Solid waste continues to be a challenge, although Willis has done a great job getting the system up and running without the same issues we had in the past,” Whitfield said. “But it is something that council may want to revisit at some time, possibly using contracted services in lieu of inside staff.”
Both Kent and Sussex County plan to use the new tax assessments for FY2026, Whitfield said, so the city needs to take the necessary legal steps to use the county’s assessment values for FY2027. A legal notice must go out by February 2026 if the city plans to use county assessment rates. Whitfield also felt the city should consider a stormwater utility plan to address drainage issues throughout the city. A utility fee could be levied based on impervious surface on a property.
“As you look through the CIP, there are a tremendous number of stormwater projects that are needed,” Whitfield said. “WE also have the responsibility of maintenance of a number of stormwater ponds. Again, that utility fee could address those in terms of income.”
Another addition to the city that Whitfield felt would save funds was adding an Alderman’s Court rather than using JP Court. Using USDA bond proceeds to construct the police evidence building in 2026.
“Although using the bonds could result in a two and a half cent tax increase in 2027, there is a strong likelihood that the revenue growth would offset the need for some, if not all, tax increases,” Whitfield said. “The police and general government facilities enhancement fund could also reduce the total borrowing, but I think it is important to leave the building that the police department needs.”
The building Whitfield was discussing was a larger evidence storage and processing location for vehicles and other items needed during the investigation of a crime. The building was proposed when the new police station was constructed but removed from the budget in order to keep the project below $17 million, something former Mayor Archie Campbell was adamant about as the project moved forward. However, the state has recently changed how evidence is processed, requiring local municipalities to conduct their own investigations and evidence processing.
“At the end of the projected year budget, if we have excess income over expenses, where does it go?” Councilman Dan Marabello asked. “Do we put it back into the budget or do we use it for things that we didn’t have money for?”
City Finance Manager Lou Vitola explained that the amount left over at the end of a budget year was very small and this year would only be about $20,000. Although that was good news, Vitola stated, it was also the lowest in the past six years, as last year the surplus was around $56,000. Marabello thought the amount was higher.
“If you recall, we were having some difficulty filling staff positions and had about a 10 percent vacancy rate,” Vitola said. “We were rolling close to a $1 million in those years. But a lot of things were not getting done because we didn’t have the staff. We also are not transferring as much from utilities.”
Vitola explained that the city does diversify revenue as much as possible and that the city was in an enviable healthy state as far as revenue. Electric is the largest generator of revenue for the city. According to a chart provided, electric is expected to bring in $48.6 million in gross revenue with $5.3 million in transfers, $3 million I pass throughs, ending with a net revenue of $40.4 million. This results in 64 percent of the city revenue coming from electric.
“Looking at that graph, in the absence of those transfers, we would at least have to double property taxes to make up for that,” Vitola said. “At the same time, we need to maintain a healthy, viable utility fund, so Mark’s recommendation to cap transfers at 12.5 percent is strong. We are not subject to the Public Service Commission as we are home rule. Mayor and council set the rates for those utilities. You determine how much we need in reserves, what we are going to invest in projects and how much to transfer into the general fund.”
Transferring from utility reserves is justified and has a rational basis as it provides a return to the city that owns the utilities, according to Vitola. He also stated that revenues were up $1.6 million, and those increases are not grant or capital funded. Vitola stated that the finance office used a strategic plan to achieve structural balance and were 99 percent within reach of achieving goals set in that plan. He felt it would take about $2 million in revenue to achieve the gap and he did not see that happening without the establishment of the Alderman’s Court and the red-light cameras which would also be new sources of revenue.
“I want to talk about property tax revenue,” Vitola said. “It looks like they should increase by about 8.5 percent this year as we had an interesting jump of 1.9 percent in assessed values. In FY26, that looks to be an almost 3.1 percent increase.”
Overall, the city is in excellent financial condition and, although council needs to be careful about how much is transferred out of utility reserves, the budget will be balanced using $5.3 million in transfers, less than 11 percent of the total revenue collected. Already approved tax and utility increases will result in an average $80 per year increase to property owners. The majority of the increase in utility costs is due to the Kent County sewer treatment pass through.
“Without the utility transfer, however, property taxes would increase by 77 percent,” Whitfield said. “Milford is fortunate for its diversity of operations and multiple income streams in order to keep real estate taxes at an attractive rate while providing competitive rates for utilities and services. The current fiscal condition of the city is stable, and the proposed budget is balanced. The water and electric reserves are healthy and building permit revenues are growing”
The tax increase was approved five years ago when council chose to stop relying on RTT funds to balance the budget as well as continued payments on the police referendum bonds. There is no increase proposed to balance the current budget. The entire budget can be viewed here.
