New Castle County Council took early steps to fund and establish the framework for the upcoming revaluation of property values that will be used to calculate tax charges for local counties and schools.
First, the council passed legislation that would transfer $ 26 million from the county’s tax reserves to an account set up to fund the revaluation. This long-term process will lead to far-reaching changes in local tax burdens.
The council members also unanimously passed a resolution that the upcoming property tax revaluation – the first in nearly four decades – should be regular and not bring additional money to local government.
“We’re serious, we’re finally recognizing our responsibility and we’re going to move on,” said Councilman George Smiley, who has been a lonely voice on the city council for years, advocating the process.
That resolution only outlines the Council’s intent, which will be formalized when contracts are approved for future reassessment, Smiley said. The legislation on the allocation of funds will be voted on in the coming weeks.
Matt Meyer, New Castle County’s executive, said the resolution also sets out his position on funding the process and his priorities for carrying it out.
The two pieces of legislation represent the county council’s first formal contribution on how a reassessment should be carried out since the Delaware Chancery Court ruled last year that current tax values were unconstitutional.
The decision found that the long-term lack of revaluation creates uneven gaps between the value at which residents are taxed and the real market value of their property.
The end result can lead to strange comparisons where one person is billed based on a property value that is comparable to the actual, current value of their property and others – often those who own more expensive properties – taxes based on a lower percentage Paying their property real estate is actually worth it.
UNFAIRNESS PROBLEM: Delaware’s unequal, outdated property tax system is on trial
Earlier this year, New Castle County agreed to conduct a reassessment and resolve its end of the lawsuit that led to the verdict. The same ruling applies to Counties of Kent and Sussex, which share the same injustice issues in their tax base but have not yet agreed on a revaluation.
EXPLAINER: Taxpayers take note. Widespread changes in property tax bills
The county has received estimates from companies performing revaluations that estimate the cost of the process to be between $ 13.3 million and $ 26.4 million.
The legislation, passed on Tuesday, would add $ 26.4 million from existing tax reserves to the lawsuit, bringing the total amount for the lawsuit to $ 30 million.
Smiley, chairman of the council’s finance committee, believes the money can be allocated without the need for a tax hike over the next year.
He said any additional money left in the fund after the upcoming revaluation should be extended for future revaluations.
Delaware is one of half a dozen states that do not require regular updates to property values used for tax purposes. Proponents of the process said there should be regular reassessments so that tax base differences don’t worsen over time.
The resolution adopted by the Council on Tuesday states that the upcoming revaluation should also put in place the necessary infrastructure for updating property values every five years.
According to the decision, the revaluation itself should be revenue-neutral for the district government.
Since the current values for the taxation of real estate are very old, the taxable value of the vast majority of real estate will increase and thus the entire tax base of the district will be much more valuable.
USE OUR CALCULATOR: Are you a winner or a loser in the property tax system?
However, the revaluation will also affect the appropriate tax rate that local counties and school authorities apply to assess property tax to determine the final bill.
State law requires counties to lower their tax rates by an amount equal to the general appreciation of the taxable property so that the state receives roughly the same amount of tax revenue.
The law gives the districts the opportunity to generate 15 percent more income in the year before the revaluation. This is most often discussed as a one-off chance to cover the cost of a revaluation. The Council resolution advocates the 15 percent increase.
School districts that collect a large portion of property taxes are slightly different. They must also withdraw their tax rates, but can keep 10% of any increase that results from a revaluation. It will likely be up to each school district to decide whether to use the additional income.
The implementation of contacts is also discussed in the Council resolution.
Meyer said this includes “looking at” situations where some taxpayers may see an increase in their bill without being able to afford it, such as those who recently signed a mortgage without knowing that their tax bills could go up .
“I don’t know exactly what that means,” he said.
Meyer’s administration has spoken to potential contractors to conduct the re-evaluation. The offers for the job are due at the end of the month with the aim of hiring a company by the end of May.
The aim is to have the new tax values ready for invoices that will expire in July 2023 according to the dispute settlement.
The revaluation dilemma
Contact Xerxes Wilson at (302) 324-2787 or [email protected]. Follow @Ber_Xerxes on Twitter.