CAPE MAY — The Cape May Taxpayers Association submitted a proposal March 31 to City Council, requesting that it establish an annual long-term debt-reduction plan.
CMTPA President Peter Cole presented council with a copy of a resolution the CMTPA unanimously adopted March 19.
“Currently, the only debt reduction is based on two payments annually, for each outstanding bond indebtedness,” Cole said. “This payment is a direct reduction amount calculated on each bond debt, amount of interest and return of principal to pay off, liquidate, redeem each debt within the prescribed term.”
Cole added that in 2025, the total debt reduction for all bond debt was $5.32 million.
He said the current long-term debt is approximately $47 million and is expected to increase annually, primarily for city-owned utility infrastructure.
“Cape May has bond terms that vary from five to 50 years, with all the long-term debt varieties, variables and plans to increase our debt,” he said. “It is therefore understandable that the city of Cape May needs a debt-reduction plan going forward.”
Three upcoming major projects will cost the city about $130 million, Cole said, adding that the financing will be composed of federal and state grants, low-interest loans and bonded debt.
“The TPA strongly believes the budget can support accelerating debt reduction by an annual lump sum payment in the amount of 15 to 25 percent from the budget surplus account at the end of each year,” he said. “For the CFO and auditor to determine the most beneficial debts to be reduced, the surplus amounts have increased each year.”
Cole said the surplus was $4.5 million in 2018 and $14.6 million in 2024. He added that the 2026 budget is scheduled to use $6.4 million as revenue and to carry forward more than $7 million in surplus.
“Based on the TPA proposal, 15 percent of the surplus of $14 [million] is $2,129,316 and 25 percent is $3,548,860 and represents the amounts payable to reduce existing debt,” Cole said. “The 2026 revenue does not need to change and remains at $6,490,500 and the surplus carry forward would be $5,575,627 to 15 percent, at a reduction of $4,153,087 to 25 percent.”
Cole added he hoped the council would give the TPA proposal serious thought.
“It will increase both the financial strength of the city and may achieve a higher rating for our bonds, providing lower costs,” Cole said.
Mayor Zack Mullock said he would be happy to go over all the information with the city manager and chief financial officer.
City property owners likely will see a tax rate increase this year after seven years without one. A public hearing and consideration of the budget for adoption are scheduled for April 21. The meeting starts at 5 p.m. in City Hall.
The city’s 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.
Rising costs have led to an increase, despite the past six years in which City Council has kept the rate at 36.1 cents. The city’s largest expense is salaries, which increased by 10.8 percent. The second-largest expense is operating costs.
During the March 17 meeting, auditor Leon Costello explained that the increase was curbed due to ratables going up $12 million and the fund balance up $1 million, a lot of which is used to offset the 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.
