Newark wants to tax UD. Will state lawmakers let it?

A bill introduced last week could clear the way for a city tax on the University of Delaware, a push that has already faced strong opposition from university students. 

On Thursday, Rep. Cyndie Romer (D-Newark) introduced House Bill 384, which would amend the Newark city charter to allow the city to levy a tax of up to $50 per student, per semester on higher education institutions within city limits – which currently only includes the University of Delaware. 

The tax would be imposed on the university and collect up to $100 per year for each full or part-time undergraduate and graduate student attending in-person classes in Newark. The tax would be adjusted for inflation yearly and would not apply to winter and summer sessions. 

“As the campus grows, so will the student tax,” said David Del Grande, Newark’s director of finance.

The tax would be levied on the university, who would then decide if it’s passed onto students. It’s unclear how much of the tax burden would be put onto students. 

“This is not a tax on the students, it is a tax on the university,” Romer said. “It is up to the university to decide whether they want to absorb that.”

The state lawmaker from Newark expects to face strong opposition from the university and its lobbying firm as the bill is considered in Legislature Hall. 

The University of Delaware, similar to all state nonprofits, does not pay property taxes in the state but takes up nearly 40% of residency in Newark. City officials estimate the city loses nearly $6 million in revenue annually from tax-exempt land.

The tax is estimated to generate between $2 million to $2.4 million for the city’s revenue, according to Newark City Manager Tom Coleman. That revenue would be used to fund city infrastructure that the university’s students and employees enjoy, Coleman added, including public safety, road maintenance and parks. 

The university has paid the city for utility payments, such as water and electricity, since the 1960s, but those payments have remained the same despite the university quadrupling in enrollment, according to city officials. 

The city’s preference is for the expansion of the Payment in Lieu of Taxes (PILOT) program, which is meant to help municipalities offset costs incurred from tax-exempt land, to fully include Newark, Coleman said. 

“We’re always concerned about our relationship with the university,” Coleman said. “Neither one of us is going anywhere so we need to be able to work together.”

The initiative faced staunch opposition from University of Delaware students during the Feb. 12 Newark City Council meeting where a resolution requesting that the state legislature give them the authority to enact the tax was passed unanimously.The students argued that it would pose an increased financial burden on those who are already facing steep tuition costs.

The tax would limit access to higher education for students from lower-income backgrounds and would create the potential for future fee increases without adequate safeguards, they added. 

“This bill would financially compromise our students’ pathways to a UD education,” the University of Delaware said in a written statement. “The University of Delaware is closely monitoring this proposed legislation, to which we remain opposed.”

The total yearly cost of attendance for undergraduate students in the 2023-2024 school year ranged from nearly $34,000 for residents to over $57,000 for non-resident students. The university currently boasts a total enrollment of 23,613 students.

A Change.org petition, organized by the university’s Student Government Association, currently has nearly 4,000 signatures in opposition of the university tax. 

“College-aged young adults are among the most financially vulnerable populations, and it’s disheartening to see the City of Newark attempting to take advantage of this,” the petition description reads. 

The tax bill comes at a time when the University of Delaware is undergoing cost-cutting measures amid rising health care costs to stave off a deficit of at least $20 million. The university issued a hiring freeze in February and is limiting events, travel and discretionary spending. 

“The town wouldn’t be the same without (the students), but they do have an impact on the resources that we need to support the town,” Romer said.

The bill would need to pass both the House and Senate with two-thirds majority before being signed by the governor. If signed, the initiative would return to Newark City Council where an ordinance would need to be passed. 

The bill was assigned to the House Administration Committee where a hearing will take place within 12 legislative days. Given the legislative schedule, however, a hearing may take weeks to be scheduled.