New Castle County Council takes 1st step toward reassessment
Xerxes WilsonThe New Castle County Council took early steps toward both funding and charting the framework for the coming reassessment of property values that are used to calculate local county and school tax bills.
First, the council introduced legislation that would transfer $26 million from county tax reserves to an account set up to fund the reassessment, a yearslong process that will yield widespread changes to local tax bills.
Council members also unanimously passed a resolution stating that the coming property tax reassessment – the county's first in nearly four decades – should occur on a regular basis going forward and should not yield additional money for local government.
"We are serious about this. We recognize our responsibilities finally, and we are going to move forward with it," said Councilman George Smiley, who has been a lonely voice on the council advocating for the process for years.
That resolution only outlines the council's intent, which will be formalized as it approves contracts for the reassessment to occur going forward, Smiley said. The legislation allocating the funding will be voted on in the coming weeks.
New Castle County Executive Matt Meyer said the resolution also represents his position on how the process should be funded as well as his priorities for getting it done.
The two pieces of legislation represent the County Council's first formal input into how reassessment should occur since the Delaware Chancery Court found the current taxing values to be unconstitutional in a ruling last year.
The ruling held that the long-running lack of reassessment creates uneven disparities between the value residents are taxed on and the actual market value of their property.
The end result can lead to odd comparisons where one person is billed based on a property value that is comparable to the real, current value of their property and others – often those who own more expensive properties – pay taxes based on a lower percentage of their property’s actual worth.
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Earlier this year, New Castle County agreed to conduct a reassessment, settling its portion of the lawsuit that led to the ruling. The same ruling applies to Kent and Sussex counties, which have the same unfairness problems in their tax base, but they have not yet agreed to conduct a reassessment.
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The county has received estimates from firms that conduct reassessments estimating the cost of the process between $13.3 million and $26.4 million.
Legislation introduced Tuesday would allocate $26.4 million from existing tax reserves for the process and would bring the total amount dedicated to the process to $30 million.
Smiley, the council's Finance Committee chairman, said he believes the money can be allocated without the need for a tax increase next year.
He said any additional money left in the fund after the coming reassessment should be rolled over for future reassessments.
Delaware is one of a half-dozen states that do not require regular updates to property values used for taxing purposes. Advocates for the process have said there should be regular reassessments so disparities in the taxing base are not exacerbated with time.
The resolution adopted by the council Tuesday states that the coming reassessment should also set up the necessary infrastructure for property value updates every five years.
The reassessment itself should be revenue-neutral for county government, according to the resolution.
Because the current values used to tax properties are very old, the vast majority of properties will see their taxable value rise and thus the county's total tax base will be much more valuable.
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But reassessment also affects the corresponding tax rate local counties and school boards apply to the property tax valuations to determine the final bill.
State law requires counties to reduce their tax rates an amount that corresponds with the overall increase in the value of the taxable property so the government takes in roughly the same amount of tax revenue.
The law does give counties the ability to collect 15% more revenue the year before reassessment. This is most often discussed as a one-time windfall to help cover the cost of reassessment. The council's resolution endorses foregoing that 15% increase.
School districts, which bring in a large majority of property taxes, are a little different. They also have to draw back their tax rates, but can keep 10% of any increase derived from reassessment. It will likely be up to individual school districts to decide whether to take the additional revenue.
The council resolution also discusses conducting outreach.
Meyer said that includes "looking" at situations where some taxpayers may see increases to their bill without being able to afford it like those who may have recently signed a mortgage without knowing their tax bill could go up.
"What that means specifically, I don't know," he said.
Meyer's administration has been talking to potential contractors to conduct the reassessment. Bids for the job are due at the end of the month with an eye on hiring a firm by late May.
The goal is to have the new tax values ready for bills that go out in July 2023, per the lawsuit settlement.
The Reassessment Dilemma
- Delaware's unequal, outdated property tax system on trial
- 'Death by 1,000 tax appeals': Why Wilmington is fighting for reassessment
- Why are property taxes unequal? Delaware's politicians haven't acted
- Use our calculator: Are you a winner or loser in property tax system?
Contact Xerxes Wilson at (302) 324-2787 or xwilson@delawareon