Why Should Delaware Care?
A lawsuit filed by landlords across New Castle County is adding more turmoil to a long-running controversy over Delaware’s once-in-a-generation property reassessment that initially shifted the northern Delaware tax burden from homes to businesses.
New Castle County may have to postpone the issuance of property tax bills – again.
On Tuesday, a Delaware judge said it could take her until the end of October to fast track a resolution to a lawsuit, claiming that school districts’ portions of county-collected property taxes treat businesses unfairly.
The judge, Vice Chancellor Lori Will, made the statement during a hearing to consider a request from a coalition of landlords and hotel owners that the court order New Castle County to put a pause on its property tax billing process.
The coalition made the request as part of a lawsuit it filed against Delaware, New Castle County and six school districts, challenging the property tax system that now charges businesses a higher rate than homeowners.
Tuesday’s hearing occurred just days after New Castle County had said it had hoped to issue its long-delayed property bills by mid-October.
It also marked the latest in a drama that began earlier this year after New Castle County completed its first-in-a-generation property reassessment. The results of that reassessment shifted much of the tax burden in northern Delaware from business properties to residences, prompting a backlash from homeowners, some of whom complained that their bills had more than doubled.
In response, lawmakers last month convened for a special session to pass several reforms.
Among those was a bill that allowed school districts in New Castle County to charge higher property tax rates on commercially owned land in order to subsequently lower the rates on residential properties.
Each of the six districts in the county quickly followed suit, raising tax rates upward of 80% on commercial properties to move more of the overall burden away from homeowners.
The coalition of landlords sued in response, arguing legislators overreacted to the public backlash. The plaintiffs also warned that in order to avoid “financial ruin,” many landlords would have to pass increased costs on to tenants, less likely to be able to afford higher rents.
Judge doesn’t pause legislation
Tuesday’s hearing was scheduled to determine whether a judge would place a preliminary injunction on the ability of school districts to split their tax rates — essentially pausing the newly divided rates that would lower bills for homeowners and raise them for business owners.
Will did not agree to support such an injunction Tuesday, preferring instead to fast-track a resolution of the entire case within a month’s time.
Will acknowledged that she does not yet know how she will rule on the case, and asked the parties whether they could reappear in court on Oct. 20 for a final hearing. The date was her only “full open day” in October, she said.
Will also said she could issue a ruling following the hearing by the end of October.
“What I don’t want to see happen is to have bills go out in the interim before I can issue a ruling on the merits,” she said. “Because I think that could create some complications.”
Most of the parties in the case agreed with the scheduling, though one attorney noted that it would be “quite tight” for the county to then send out bills in time for property owners to return them by a Nov. 30 deadline.
He called that deadline “crucial to the county and the school districts and for their ability to function.”
Another lawyer said she would need to confer with her school district clients before she agreed to a pause on the tax bill process.
Still, she also noted that the decision to issue the bills sits squarely with the county, which collects property tax money on behalf of school districts.
“I think realistically, the bills are not going to go out (by Oct. 15) because the school districts themselves do not have any control,” said the attorney, Mary Dugan, of the Wilmington firm Young Conaway.
Will ended the Tuesday hearing by directing the attorneys to discuss scheduling and come up with a resolution. If not, she noted, she has a ruling “ready to go” on the the request to pause the tax billing process.
