2-cent increase would boost municipal rate to 38.1 cents
CAPE MAY — Cape May residents could see a municipal tax increase in 2026, something that has not happened in seven years.
According to City Manager Paul Dietrich, the 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.
“Few’ve done such a great job over the years. Council has been holding that 0 percent for six years running,” Dietrich said. “It came to a point where with all the different things going up over the years, we ran out of things to tap to add additional revenue.”
Dietrich noted during his preliminary budget presentation March 3 that the increase would help the city avoid getting further behind or hitting the fund balance harder.
“We’ve been working on the budget since last year and it’s been great working with our new CFO Lauren Read,” Dietrich said, adding that Read has done a great job for all the departments.
Council members will meet with Dietrich to review the budget before its anticipated introduction March 17. If approved, the budget would be adopted during the April 21 meeting.
The budget allocates $987,000 for capital work, including security cameras, repairs to municipal buildings and city vehicles, police safety equipment and fire safety equipment.
The city has budgeted $3.78 million for general capital items, including: police building/future technology, Convention Hall renovations design, Lafayette Street Park, ADA grant match, Bank Street retaining wall, Office of Emergency Management automated weather warning system, equipment and vehicles, sidewalk project phase II, road paving projects, traffic safety improvements and bond costs.
In 2025, the city’s $27,985,635 spending plan required a tax levy of $10,932,100, which was $750,505 below the state cap on increases. The municipal tax rate was 36.1 cents per $100 of assessed value. The 2025 budget was up $1 million from 2024.
Current fund
The city’s largest expense is salaries, which increased by 10.8 percent. Dietrich said the city is budgeting more than $10.5 million, which represents a base of 144 full-time and approximately 65 seasonal/part-time employees for the police department and public works.
The other direct costs associated with salaries are health care and pension payments. Dietrich noted the city was successful in negotiating health care renewal rates below 9 percent.
As of last year, the city completed negotiations with six collective bargaining units. The city had a goal to bring its employees close to the 50 percentiles in wages compared to other Cape May County municipalities and the county.
“We had to really negotiate to keep competitive salaries to attract some of the good employees that can be effective in operating within the city,” Dietrich said.
The second-largest expense is operating costs, which the city has budgeted at $7.2 million, a $300,000 increase over last year.
The total debt service for 2026 is $5.3 million, which Dietrich said is in line with the bond payment schedules.
“When we look at all of the term capital projects that we do spend on that debt service, the number really stays pretty consistent as a capital payment that we make over the years,” Dietrich said.
Water/sewer utility
The city is projecting $7.2 million in revenue, which is in line with the previous year. The water/sewer surplus has grown to $3.4 million, of which the city is using around $820,000 to fund the budget. The debt service is $1.7 million.
“Last year we spent a lot of time doing an allocation of manpower across all departments to really determine where our employees are spending their time,” Dietrich said. “That’s where you see some of the jumps in the different utilities; a lot of their time and allocation was charged to the current fund when it really should have been charged to different utilities.”
Dietrich said they are increasing the salary line by $100,000 to $1 million to allocate various city departmental salaries based on work done for the utility.
In 2025, the city issued a bond for water and sewer projects through the New Jersey Infrastructure Bank, and a supplemental bond is needed to cover a change order that increases the contract by $835,603. It would also add Wenonah and Swan avenues to the project.
During the Feb. 17 meeting, Dietrich noted this change will maximize principal forgiveness and work with the state Department of Transportation grant of $110,733. He also said the city is ready to go out to bid on the water tower, but believes they might need more funds to finish and cover construction administration costs for the project.
Beach utility
The city anticipates $3.6 million in revenue, up $200,000 from the prior year, driven by strong beach tag sales.
“We’re going to continue to have a strong, robust beach and we’ll continue to help grow beach tag sales,” Dietrich said, adding that the city did see a decrease in the beach utility surplus from $2.3 million to $2.2 million as $930,000 is being used to fund the budget.
The beach utility budget considers increases that have taken place in both lifeguard and beach tagger salaries based on both union negotiations and minimum wage increases.
Tourism utility
Like last year, the city is projecting $1.6 million in revenue generation from the tourism utility. The surplus has remained steady at $2.7 million, of which $818,000 is used to support the 2026 budget.
Dietrich noted that the city is appropriating funds toward celebrations of the nation’s 250th anniversary, Cape May City’s 175th anniversary and the National Historic District Landmark’s 50th anniversary.
Looking forward
Dietrich noted the tax assessor added $12.3 million in assessments from 2025, which allowed for $45,000 in spending in the 2026 budget with no effect on taxes. The city is anticipating $34,658 in state aid this year.
“Looking forward, as you can see across the board, all of our revenues have continued to grow,” Dietrich said. “The only thing that didn’t grow last year was interest rates. We did see a little drop of interest rates.”
He added that the CFO is working to leverage additional funds to secure a better interest rate.
“We’re looking at doing an RFP for banking here over the next month or two,” Dietrich said. “To make sure that we’re getting the best interest rate for the money that we have on hand.”
Dietrich noted that the debt ratio continues to fall, due to additional bond payments and funding capital projects within the budget to avoid accruing additional debt.
By RACHEL SHUBIN/Special to the Star and Wave
