Bill Bans School Property Tax Increases From Reassessments

DOVER, Del. (AP) — State lawmakers are considering legislation to prohibit local school boards from taking advantage of court-ordered property reassessments in Delaware’s three counties to increase school district taxes.

Under current law, if a county conducts a general reassessment of real estate values, each school board must calculate a new tax rate that would allow no more than a 10% increase in school property tax revenue compared to revenue in the fiscal year immediately preceding the reassessment.

A bill discussed Wednesday by the House Education Committee would strike that language, prohibiting school districts from realizing any increase in school property taxes as the result of a reassessment.

“We’re basically eliminating that opportunity,” said chief bill sponsor Michael Smith, a Newark Republican.

While Democratic lawmakers expressed concerns about the impact of the legislation, they said the topic was worthy of more discussion and agreed to release the bill from committee for possible consideration by the full House.

Funding of public schools in Delaware comes from a mix of state, local and federal tax money. The state provides about 60% of the funding, while local school property taxes generate about 31%, with voters approving the local property tax rate through referenda. The counties, however, establish the assessed values of the properties that are taxed.

While property taxes are a key funding component for school districts, state law doesn’t require reassessments on any particular schedule. Kent County in central Delaware last reassessed property values in 1987, while northern New Castle County’s current assessment dates to 1983. Sussex County, home to million-dollar beach homes, last reassessed properties in 1974.

Last year, officials in all three counties agreed to reassess property values to settle a lawsuit over school funding and woefully outdated property assessments. Those agreements came after a Delaware Chancery Court judge ruled that the outdated county assessment schemes violated both a constitutional requirement that properties be taxed uniformly, and a state law requiring that property be assessed at “its true value in money.” The Delaware Supreme Court has interpreted that to mean present fair market value.

Following that ruling, Democrat Gov. John Carney pledged to seek more money from the legislature for disadvantaged students, and the counties agreed to conduct reassessments.

State lawmakers subsequently approved a bill mandating that weighted funding for disadvantaged school students become a permanent fixture in the state budget, which was one of the requirements in the state’s settlement of the lawsuit brought by the ACLU and Community Legal Aid Society.

The bill codified the so-called “Opportunity Funding” that Carney’s administration first proposed after the lawsuit was filed in 2018. The settlement agreement required Carney to seek appropriations for disadvantage students of at least $50 million for the 2023-24 school year and at least $60 million for the 2024-25 school year.

Meanwhile, the reassessment process is underway in each county, but reassessments are not likely to be completed before fiscal year 2024.

State law requires reassessments to be revenue-neutral, with tax rates rolled back so as to provide the same tax revenue as was levied during the prior fiscal year. However, the law does allow a county to set the property tax rate for the fiscal year immediately following a reassessment at a level allowing a revenue increase of up to 15% for that year compared to the immediately preceding fiscal year. That provision is presumably intended to cover the multimillion-dollar cost of a reassessment.