Laurel sets property taxes based on 1974 county values

By Tony E. Windsor

Residents of Laurel are receiving their assessed property taxes for the 2018-19 fiscal year and will have the opportunity to appeal any they do not agree with during an upcoming Mayor and Council meeting on Aug. 20.

During a recent meeting of Laurel Council, Town Manager Jamie Smith said this year, like years in the past, Laurel's property taxes will be based on the Sussex County property tax assessments; assessments that were last evaluated in 1974.

"The Town of Laurel, each year utilizes the Sussex County 1974 assessments for our annual real estate taxes and assessments for properties located within the municipal boundaries," she said. "The Town has received for this fiscal year, the assessment list from Sussex County and mayor and council need to adopt the list so we can move forward with the town assessment for properties for the annual tax billing and scheduling as the Court of Appeals."

It is common for municipalities in Sussex County to use the county tax assessments, as any type of reassessment can be expensive. Mayor John Shwed said for Laurel it would be "thousands of dollars" to perform a town-wide property tax reassessment.

"Unlike those communities that are updating property tax assessments, Laurel at this point does not have the new development that makes it worth spending the kind money it would take to do a reevaluation of property," he said.

Currently, the city of Seaford is undergoing a citywide property tax reassessment. According to information from a March Seaford City Council meeting, Finance Director June Merritt said the city last underwent a full reassessment of properties in the city 10 years ago at a cost to the city of about $140,000.

She said according to the city's current vendor, Property Tax Assessments Delaware Valuation (PTA/DELVAL), Inc., who was the only vendor to reply to the city in an advertised request for proposal to do an updated assessment, a full assessment now would cost as much as $205,500 ($68.50 per parcel). However, because the city has up to date records kept by PTA/DELVAL since the last assessment, the cost will be $130,500 ($43.50 per parcel).

Unlike a full assessment, PTA/DELVAL will conduct assessment that entails a visual review of each property and only those with significant changes from the existing records would receive a full re-measure and corrections in the tax records. The city budgeted $200,000 in this year's budget to address reassessment.

At present, Seaford's assessments are based on 2008 market values. The taxes are assessed at 100 percent of appraised value and taxed at $.31 per $100 of assessed value.

Throughout Delaware, municipalities by in large rely on county tax assessments to set their own property taxes. While Sussex County has assessments based on 50 percent of 1974 market values, Kent County was last evaluated in 1986 and New Castle did reassessment in 1983.

In 2015 the Delaware Senate introduced Senate Joint Resolution 4 which established the "Education Funding Improvement Commission" to conduct a comprehensive review of Delaware's public education funding system "and make recommendations to modernize and strengthen the system."

The Commission, which identified property tax inequities as an issue directly related to the equitable funding of education throughout the state's 19 school districts, submitted a 2017 report outlining recommendations for 2018. Referring to the "Equalization Formula," which is how the state funds education utilizing each districts ability to raise funds through property taxes.

In the Commission's report, members cited property tax assessments as a detriment in gaining actual equity. "This allocation is an attempt to ensure that each district has substantially the same level of resources with which to educate each student," the report states.

"The committee unanimously agrees that a major issue in attempting to equalize school finances is the inconsistencies in current assessment practices related to property valuation. As the committee has tried over time to correct misalignment of equalization dollars due to the lack of reassessment, the formula has grown more and more unreliable. The Equalization formula relies on data from property assessments, which must be made current for the formula to adequately serve its purpose."

Void of what the committee feels is a lack of up to date property tax assessments, it recommends there be a new methodology used to address public education allotment. "It has been decades since the Equalization formula last underwent a major revision and many years since the last significant review of education finances," the report states. "While the committee has previously reviewed these areas and provided recommendations that would enhance the overall equity of the programs, it believes that without statewide reassessment, action must be taken by the General Assembly to establish a new methodology to determine the distribution of equalization dollars in the future."

It is estimated that county-wide property tax reassessments could cost each county millions of dollars and take years.

Sussex County Council President Mike Vincent says he has estimates that indicate as much as $9 to $10 million to do reassessment of Sussex County properties. "You are looking at in excess of 150,000 properties in the county that would require actual physical contact in order to perform a reassessment," he said. "This would take years in terms of the reassessment itself and it is likely there will be a high volume of appeals that property owners would file afterwards. There would be no financial return for at least five years."

Vincent said this would be a major investment for the county and one that would provide little in way of dividends. He said 86 percent of county tax bills represent school taxes and the county only sees the benefits from 14 percent. "The idea of a county-wide property reassessment with an investment of as much as $10 million when you are only gaining 14 cents on the dollar doesn't seem to be the best use of tax dollars. Reassessment cannot be looked at as the goose that lays the golden egg," he said.

Vincent says he can understand the issue of equity in property taxes that could be realized through reassessment, but feels it would best be served by having it be a statewide process paid for by the state. "The schools see the most benefit from the county property taxes, so it would make more sense for this to be a state project," he said.

The idea of windfall of money for counties and municipalities that reassess is also not necessarily the case. According to state laws as a part of the reassessment process, counties and school districts are restricted in the total amount of dollars they can take in following reassessment. Delaware Code specifies that counties may not realize any more than 15 percent increase in actual revenue over the revenue derived in the fiscal year immediately preceding reassessment, presumably to cover the cost of reassessment, and once reassessment process is complete, the taxes are "rolled back" to provide the same revenue as was realized prior to reassessments.

Section 1916 (b), Title 14, Del.C provides school districts must limit the increase in actual revenue to no more than 10 percent. This translates to overall lower rates based on higher property values to generate no more than 15 percent in additional revenue over the previous year. This 15 percent increase would also include the revenue received for any new properties being built and added to the tax rolls that year.

While there seems to be no active state efforts to mandate reassessments by counties, counties like Sussex County and communities like Laurel also have no immediate plans to delve into the expensive, labor intensive and controversial issue of property reassessment; at least for the time being.

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