Why Should Delaware Care?
The Appoquinimink School District is Delaware’s second largest district by enrollment, serving more than 13,000 students in the Middletown-Odessa-Townsend area. But a new controversy over accounting errors left the district with a difficult decision: raise taxes without voter approval or cut classroom positions.
The Appoquinimink Board of Education approved a 10% local tax rate increase Tuesday night, despite months of saying such a move would not be necessary, because a major accounting error left the booming school district in financial straits.
For an average $400,000 home, the increase will result in roughly an additional $142 in school district tax. It comes on the back of three tax increases improved by referendum for Appoquinimink residents in the last six years – by far the most of any district in the state.
The controversial decision made by the five-member school board came less than two weeks after issues were first made public at a June 25 workshop meeting. Most of the more than two dozen frustrated residents who attended the Tuesday meeting said they had only learned of the potential tax increase that morning though, following reporting by WDEL.
“I’m hoping we can get some transparency about how this all happened and when the issues came out,” resident James Metcalfe told the board. “To me, transparency is important. If you don’t trust us, we can’t trust you guys.”
The 10% increase was only available to district leaders due to an opportunity presented by the first-in-40-year property reassessment process that is underway in Delaware, and it allowed them to bypass the traditional referendum process to push through new funding that will rectify their books.
When the reassessment process was approved by courts in a 2020 ruling, it allowed school districts a one-time opportunity to raise up to an additional 10% in funding without voter approval. The law allows for such increases in any fiscal year succeeding a reassessment, which means Appoquinimink could face a similar situation in five years, when the next reassessment is scheduled.
LEARN MORE IN THIS PODCAST WITH EDUCATION REPORTER JULIA MEROLA
What happened?
In recent weeks, the school board learned that a projected $7.9 million savings balance for the fiscal year that ended June 30 had essentially been a mirage.
Numerous accounting errors, including a failure to notice that May had an extra pay period and that extracurricular pay to teachers hadn’t been applied, as well as funds for summer school programs having been appropriated to ineligible federal funds, left Appoquinimink facing a significant budget deficit.
The district’s former finance director, Eric Loftus, resigned last month, but officials have declined to discuss that departure.
They said they are nearing the replacement hire for Loftus, who oversaw Appoquinimink’s accounting for nearly the last seven years.
Reportedly, both the school board and a Financial Advisory Committee, made up of independent community members with financial backgrounds, had reviewed the monthly cash flow statements and also missed the errors.
In response, Appoquinimink Superintendent Matthew Burrows undertook $2.5 million in district-wide cuts to try to reduce that potential burden over the final weeks of the school year. That included the reduction of a few dozen open positions, reassignment of district staff to school-based roles, and cuts to both district and individual school budgets.
In the end, Appoquinimink ended the fiscal year with a cash balance of about $3 million.
That put the district, which serves more than 13,000 students, in a precarious situation though, because state regulations require districts to have at least two payrolls worth of cash on hand at year’s end. For Appoquinimink, it equates to $4.2 million.
Failure to meet that threshold could risk putting the school district into financial receivership of the Delaware Department of Education, where state officials would overtake financial decision-making, including the setting of tax rates.
To make matters worse, the district had already planned a Fiscal Year 2026 budget built on the now-faulty projections. Failing to find a way to bring in roughly $5 million in new funding would force the district to likely cut dozens of additional classroom positions, Burrows told Spotlight Delaware.
All of these factors came to a head Tuesday with the fact that state statute requires school districts to report their tax rates to counties by the second Thursday in July – in this year’s case, it’s July 10 – in order for the counties to prepare tax bills in time.
Public outrage at lack of transparency
While multiple residents decried the school district’s proposal to seek yet another tax increase, most were more frustrated at the lack of communication of the issues to the public.
Carolynn Kennedy noted that she receives a monthly email newsletter from Burrows that extols the successes of the school district and notifies families of events and celebrations going on district-wide. During referendum pushes, those communications also aim to sell the public on the merits of the district’s request.
Yet, no communication went out to families in the last month notifying them of the identified accounting issues or that the district was considering raising taxes without a referendum.
“As a parent of high achievement and highly active students in this district, I appreciate your ability to problem solve and find the money. I’m also here to say that this is a tremendously fiscally irresponsible situation that you allowed to happen, and you all need to look really hard within this organization to determine how deep this problem really lies and how it could have even been allowed to happen at all,” she said. “Please, in the future, continue with the expected over-abundant communication on important financial pickles, rather than the recent approach of shoving the jar into the back of the fridge.”
Jacqueline McClain, a local volunteer advocate who works with disabled veterans and those burdened with medical debt, said that she has increasingly seen a new population in need: those who can’t afford their taxes. Between school referendums, the county reassessment and rising utility costs, McClain said she’s seeing more people who are financially drained.
“I’m dealing with people who are barely making it as it is, and you’re expecting them to pay yet another tax increase. I don’t know at what point you’re going to realize people are taxed out, and they’re going to lose their homes,” she said.
Board debates impact
When it came down to pushing through the increase, the school board was tortured by the impact.
Board member Nichelle DeWitt, who noted that she had recently lost a well-paying job and was forced to take one that paid less, sympathized with the public’s concerns. She openly wondered whether her family would be able to afford the coming increases, and if she couldn’t, whether she would have to leave her home and therefore her district seat.
DeWitt also questioned whether sending the district into financial receivership of the state would be the worst-case scenario in lieu of the recent issues.
Tim Higgins, who was serving on his first board meeting after being elected in May, intially said he could not support the full request for a 10% hike and opined that the district should “take a little bit of the brunt” of the financial hit.
An initial vote failed, but discussion of enacting a smaller increase than 10% was quickly dissuaded by discussion of further position cuts as a consequence.
For every 1% shaved from the increase, Appoquinimink would need to cut roughly $500,000, or about 14 positions, according to Burrows.
Ultimately, the board voted 4-0, with DeWitt abstaining, to approve a full 10% tax increase to the district’s operating rate. Its other rates for debt service were held essentially flat, while taxes to meet state funding matches and for special education services increased slightly, and would have been required to increase regardless of the recent accounting issues.
In total, the approved tax rate for Appoquinimink is now set at 63.75 cents per $100 of assessed value.
Board Chair Richard Forsten said that he was requesting an independent review of what happened with the accounting errors and hoped to release a public report on its findings by early this fall. Involved in reviewing the books would be Scott Kessell, a former Brandywine School District and Red Clay Consolidated School District chief financial officer, and Chuck Longfellow, a former Appoquinimink finance director.
“There were major mistakes that, for whatever reason, were made that weren’t picked up in our checks-and-balance system,” Forsten said.
Will vote impact next referendum?
With Appoquinimink ranking the fastest-growing school district in the state, it has had to build whole new campuses, hire dozens of teachers and launch new programs in the last decade.
Even though the district has managed to pass numerous referendums to fuel that growth, it still owns the lowest tax rate among New Castle County districts despite having one of the smallest taxable bases.
The MOT area lacks the commercial property base that much of northern Delaware boasts though, which puts more of the financial burden of school funding on residents.
Resident Jamie Pyle, whose wife long worked for the district, said he was struggling to support the board’s request in this instance because it stemmed from financial mismanagement at the district.
“If this district moves forward with this tax increase in violation of the community’s trust, how will you pass the next referendum, one that will secure vital funding for teachers, new school buildings and other initiatives that you deem important?” he asked.
Burrows told the school board that he’s eyeing the district’s next referendum for either the fall of 2027 or winter of 2028.
When asked by Spotlight Delaware whether he expects that pitch to voters to be more difficult in lieu of this year’s issues, Burrows said referendums in general have been more difficult to pass in recent years. It took Appoquinimink two attempts to pass its last referendum in 2024 – it was the first time it had to do that in a decade.
Since its successful vote in April 2024, no school district in Delaware has been able to pass a referendum by voters, including several failed attempts by Smyrna, Indian River and Cape Henlopen. Some districts, including Indian River, have also taken advantage of the reassessment process to enact 10% tax hikes without voter approval.
“I think our state needs to seriously examine the system and look at the current system that we’re in in order to fund education appropriately,” Burrows said, agreeing with some calls to join the majority of states that allow school districts to enact smaller annual tax increases for operating costs, usually pegged to the consumer price index, without voter approval.
