CAPE MAY — For the first time in seven years, Cape May residents likely will see a tax rate increase.
The 2026 spending plan calls for a 2-cent increase in the tax rate to 38.1 cents per $100 of assessed value. With the average home assessment in the city at $750,000, the average municipal portion of a tax bill would rise to $2,857, an increase of $140. The number does not include county and school taxes.
Over the past six years, City Council has kept the rate at 36.1 cents, but rising costs have led to an increase. The city’s largest expense is salaries, which increased by 10.8 percent. The second-largest expense is operating costs.
City council introduced the municipal budget during the March 17 meeting, when auditor Leon Costello explained how the increase came about.
“The ratables went up $12 million, like the normal increase you’ve been having,” he said. “Your fund balance is up another million dollars [and] we’re using a lot of that to offset this budget.”
City Manager Paul Dietrich noted during his preliminary budget presentation March 3 that the tax increase would help the city avoid getting further behind or hitting the fund balance harder.
Costello noted that other municipalities are expected to have even larger tax increases of 2.9 cents up to 9 cents.
“Tonight, even though it has been a long time working on [it], it’s only the introduction and now we start the process,” Costello said. “The budget will go to the state for examination this year.”
He added that rising costs, including health care/benefits, are driving up taxes around the state.
“There’s no other place to get it from other than through taxes,” he said. “You are fortunate with a lot of different revenues you get from outsiders, the tourists who come in for parking, beach fees, hotel room tax, etc. That’s quite a bit of stuff that a lot of towns can’t get.”
Deputy Mayor Maureen McDade said she and the council thoroughly reviewed the budget with both the city manager and deputy city manager.
“I feel comfortable in understanding where we are,” McDade said. “I think that in the last six years, there’s been a concerted effort to keep the taxes with no increase, but the reality is there’s only so much revenue that does come in through the tourist base.”
She added that it would be a matter of keeping an eye on operating expenses and other expenses going forward.
“90 percent of our budget is people, and with that comes a cost,” she said. “Some of it is controllable and some of it not. I think we have the opportunity to understand what’s being done and how it’s being done.”
Mayor Zack Mullock said the Cape May Taxpayers’ Association recommended a tax increase over the past few years.
“To their point, we want to make sure we’re in healthy shape and that’s exactly what we’re doing in this budget,” Mullock said. “We want to make sure we maintain a good fund balance for that rainy day event. You never know what’s going to happen with a tourist-based budget, which is what we have.”
State spending caps
Mullock asked Costello to comment on the state caps. New Jersey municipal budgets have two caps: a 2 percent property tax levy cap and a 2.5 to 3.5 percent appropriation spending cap. The levy cap limits tax increases to 2 percent over the previous year, and the appropriation cap limits budget growth by the cost-of-living adjustment.
“The one you haven’t been raising taxes on has a bank of $2,000,971 and you could raise $2,000,971 more and be legal, but I know you don’t want to do that,” Costello said. “Every $290,000 or $300,000 being a penny and that would be quite a bit, but you would be allowed to.”
Costello added that if there was a bad year with rain every weekend, no beach fees and no parking, the fund would drop dramatically.
“The other cap is the spending cap, it’s the one that’s an issue [and] you’re right up against that,” Costello said. “That’s the people cap, the salaries and wages, pension, health insurance, that’s the one you have to watch out for going forward.”
Fitting within the spending cap will be interesting for the 2027 budget, Costello said.
Councilwoman Lorraine Baldwin said there have been budget adjustments to align with the utility to which it is charged.
“I had a conversation with Deputy Manager (Justin) Riggs just about that last week, and said that from a payroll standpoint, to be very diligent about that,” McDade said. “It certainly helps us recognize where those expenses are and putting them into those utilities as appropriate is critical.”
The public hearing and consideration of the budget for adoption are scheduled for April 21. The meeting starts at 5 p.m. in City Hall.
By RACHEL SHUBIN/Special to the Star and Wave
