By Rep. Vanderwende
As the process of property value reassessments moves forward, many questions are being asked about how we got to this point.
Why?
New Castle, Kent, and Sussex county governments committed to conducting a reassessment to settle a lawsuit filed against them in 2018. The plaintiffs in the action—Delawareans for Educational Opportunity and the Delaware NAACP—contended that the counties’ failure to assess property values regularly shortchanged Delaware students and public schools. The Court of Chancery ruled in favor of the plaintiffs in 2020 and ordered all parties to work toward a remedy that ultimately resulted in the settlement.
The counties are legally charged with inspecting properties and adjusting valuations, but until recently, the law was silent on how often this expensive and controversial process needed to be done. With nothing to compel them, the county governments had no incentive to initiate it. Before the lawsuit, Sussex County had last assessed property values in 1974.
Understanding the Process
Property valuations are not an appraisal of a property’s market value. Instead, valuations eliminate housing market volatility using standard, separate methodologies applied equally to residential, commercial, and industrial properties. Property taxes are used by county and municipal governments, public school districts, vocational school districts, and to support libraries. The lion’s share of property taxes (75%+) pay for the local portion of revenue to fund public schools.
Sussex County’s reassessment contractor, Tyler Technologies, will send tentative assessment notices to property owners this fall. Property owners should follow the instructions they receive, examine their tentative property values, and schedule an informal review if necessary. Click here for more information.
Why Are Taxes Increasing for Some?
Reassessments are supposed to be “revenue-neutral” for the counties and the school districts, with total collections about the same following the process as they were before. After the new valuations are made, the tax rates must be adjusted so that the total revenue remains approximately the same. However, state law provides some leeway, with schools allowed a one-time revenue increase of up to 10% and counties of up to 15%.
A bill that would have eliminated the potential 10% revenue hike for school districts, House Bill 42, was introduced in the General Assembly in early 2023. It was tabled in the Democrat-controlled House Education Committee and was not considered further.
Some property owners will see a tax decrease or pay roughly the same after reassessment. Others will have a higher tax bill. For some in this last group, the hike could be significant.
Remember that Sussex County’s last reassessment occurred when Richard Nixon was President. The sticker shock some property owners will likely experience after reassessment is due to changes over the 50 years during which comprehensive property assessments were effectively suspended. New taxable structures, existing building expansions, and the property’s suitability for development are among the many factors that may have driven valuations higher over that period.
A new state law will prevent this situation from occurring again. House Bill 62, passed and enacted with bipartisan support last year, now requires property reassessments at least once every five years.
Conclusion
The state does not levy a property tax. State lawmakers have no role in determining property values or imposing property taxes. Still, legislators have taken action to ensure that potentially disruptive reassessments, like the one Delaware is going through now, will not occur again.
Property Reassessments and Taxation: How We Got Here & Why
As the process of property value reassessments moves forward, many questions are being asked about how we got to this point.
Why?
New Castle, Kent, and Sussex county governments committed to conducting a reassessment to settle a lawsuit filed against them in 2018. The plaintiffs in the action—Delawareans for Educational Opportunity and the Delaware NAACP—contended that the counties’ failure to assess property values regularly shortchanged Delaware students and public schools. The Court of Chancery ruled in favor of the plaintiffs in 2020 and ordered all parties to work toward a remedy that ultimately resulted in the settlement.
The counties are legally charged with inspecting properties and adjusting valuations, but until recently, the law was silent on how often this expensive and controversial process needed to be done. With nothing to compel them, the county governments had no incentive to initiate it. Before the lawsuit, Sussex County had last assessed property values in 1974.
Understanding the Process
Property valuations are not an appraisal of a property’s market value. Instead, valuations eliminate housing market volatility using standard, separate methodologies applied equally to residential, commercial, and industrial properties. Property taxes are used by county and municipal governments, public school districts, vocational school districts, and to support libraries. The lion’s share of property taxes (75%+) pay for the local portion of revenue to fund public schools.
Sussex County’s reassessment contractor, Tyler Technologies, will send tentative assessment notices to property owners this fall. Property owners should follow the instructions they receive, examine their tentative property values, and schedule an informal review if necessary. Click here for more information.
Why Are Taxes Increasing for Some?
Reassessments are supposed to be “revenue-neutral” for the counties and the school districts, with total collections about the same following the process as they were before. After the new valuations are made, the tax rates must be adjusted so that the total revenue remains approximately the same. However, state law provides some leeway, with schools allowed a one-time revenue increase of up to 10% and counties of up to 15%.
A bill that would have eliminated the potential 10% revenue hike for school districts, House Bill 42, was introduced in the General Assembly in early 2023. It was tabled in the Democrat-controlled House Education Committee and was not considered further.
Some property owners will see a tax decrease or pay roughly the same after reassessment. Others will have a higher tax bill. For some in this last group, the hike could be significant.
Remember that Sussex County’s last reassessment occurred when Richard Nixon was President. The sticker shock some property owners will likely experience after reassessment is due to changes over the 50 years during which comprehensive property assessments were effectively suspended. New taxable structures, existing building expansions, and the property’s suitability for development are among the many factors that may have driven valuations higher over that period.
A new state law will prevent this situation from occurring again. House Bill 62, passed and enacted with bipartisan support last year, now requires property reassessments at least once every five years.
Conclusion
The state does not levy a property tax. State lawmakers have no role in determining property values or imposing property taxes. Still, legislators have taken action to ensure that potentially disruptive reassessments, like the one Delaware is going through now, will not occur again.
