Analysis: Reassessment hit Black, brown Wilmington hardest

Why Should Delaware Care?
The first comprehensive property reassessment in decades reset how Delaware’s tax burden is divided among property owners. While many expected that it would bring new relief to some of the state’s lowest income residents, it has actually raised their tax burdens.

Visitors to Hilltop, the largely working-class community west of Interstate 95 in Wilmington, will immediately find signs of an immigrant diaspora and the people who call it home.

There are Jamaican jerk and Haitian creole spots, Dominican cafes, Puerto Rican bakeries, and Mexican restaurants. The heart of the community is William Judy Johnson Memorial Park, which is named after the Hall of Fame Negro League baseball player.

More than 90% of residents in the multicultural community are Black or Hispanic.

For all of its vibrancy, however, Hilltop is still very much a community that struggles with poverty. The median household income for the more than 7,000 residents in the area is less than $50,000 a year – or nearly half the statewide average.

And, according to the recent once-in-a-generation reassessment of property in New Castle County, the community is also the place where property saw the largest increase in median value.

That increase seemingly stands in contrast to one of the bedrock arguments behind the legal fight that prompted the reassessment in the first place: that low-income residents were subsidizing the education of their wealthy neighbors based on the state’s outdated tax structure.

For Deborah Smith, a resident of North Franklin Street for more than 40 years, it was a shocking revelation.

“I’m lucky to have a pension and Social Security, but there are a lot of people struggling out here,” she said.

Analysis finds wide New Castle County disparities

Spotlight Delaware completed a first-of-its-kind analysis of reassessment data for the entire state of Delaware, which underscored concerns raised by leaders in the city of Wilmington.

The data, compiled through Freedom of Information Act requests by Spotlight Delaware and mapped in partnership with Tech Impact’s Data Lab, show that in most areas of the state, property wealth and subsequent taxation moved to areas where they would largely be expected.

In Sussex County, the Rehoboth Beach area saw the median property assessment rise more than 5,000% while much of the more agrarian western Sussex land saw median assessments rise just 1,700%.

In Kent County, growing Dover-area suburbs like Magnolia and Cheswold, along with recreational areas like Bowers Beach and Kitts Hummock, saw median assessments increase more than 1,000%, while downtown Dover areas saw increases only about half as large.

In New Castle County, however, the largest increases came in less likely places: some of Wilmington’s poorest neighborhoods.

Communities like Hilltop, Eastside, Riverside and Southbridge saw increases between 700% and 1,000%.

Meanwhile, chateau country communities like Centreville, Greenville and Hockessin and the booming Middletown-Odessa-Townsend corridor saw increases of 300% to 450%.

Those values all matter, because assessed property values are now expected to match market rate as of July 1, 2024 – meaning a property should have been able to sell for that sum as of roughly 18 months ago. Those assessed values are also how a county, school district and municipality determine a property owner’s annual tax bill.

The median tax bill in Hilltop nearly tripled, adding more than $800 in new taxes to homeowners. Meanwhile, the median tax bill for the Centreville area – where the median home value is just under $1 million – actually dropped nearly $250.

Arguments for why NCC differs abound

Why New Castle County’s most expensive housing regions did not see the kind of assessment growth that both Kent and Sussex counties did is an open question.

Before the reassessment, New Castle County utilized an algorithm that computed a new-build home’s characteristics, including square footage, bedrooms, bathrooms, location, lot size and more, as if it existed in 1983.

If all homes were being held to the same standard, then presumably the homes that were worth the most in today’s value would have seen the greatest increase.

Wilmington Mayor John Carney, who has previously served as governor, congressman, lieutenant governor, and state finance secretary, said that there has been long-lingering suspicions that New Castle County wasn’t actually rolling the values of new-build homes all the way back to 1983 values in order to inflate the amount of property taxes to county coffers. 

The opaqueness of the rollback calculation made it difficult for property owners to contest whatever value was assigned, and the surprising findings in Spotlight Delaware’s analysis only further stoked his questions, Carney said.

New Castle County officials denied having ever strayed from the algorithm’s calculations, and argued that the smaller percentage increases in some of the most property-rich areas was likely evidence of more updated permitting info.

Anytime a homeowner built an addition, installed a swimming pool or finished their basement, those changes would be recorded by the county and reflected in updated property assessments. For homes in the unincorporated county, that meant assessors could literally walk across the hall at the County Administration Building to update their valuations.

Meanwhile, many of the smallest municipalities in the county give the larger jurisdiction oversight of permitting matters, but the largest ones, including Wilmington, process them in house.

“Any municipality that does those things on their own, be it Newark, Middletown or Wilmington, has the responsibility to send that info to the county. So we work with them frequently to make sure that we’re getting the information, but sometimes it doesn’t always come to us in the most efficient manner,” said David Del Grande, the county’s chief financial officer.

Recent sales detail issues

The questionable nature of assessments in communities like Hilltop has not been a secret.

Tyler Technologies, the assessment company hired by each of the three counties to complete the reassessment statewide, admitted in its final report that the results in several Wilmington communities did not meet industry standards.

It blamed two potential reasons for those shortcomings: that it did not have enough sample sales data for unimproved properties and that it could not see inside homes to judge the condition of the properties.

Therefore, the homes in Hilltop and other impacted communities were assessed against comparable sales that primarily featured renovated homes being sold by flippers.

The median assessment in Hilltop now sits north of $180,000, but recent sales of unimproved properties have fallen far under their assessed values.

A four-bedroom townhome on West Third Street sold three months ago for $125,000 – or about 46% less than its $234,800 assessed value.

A five-bedroom row home on North Harrison Street, whose bones date back some 136 years to before cars even traveled the city’s streets, was assessed by Tyler Technologies to be worth more than $250,000. It was sold last month to investors for just $140,000, or 44% less than its assessed value.

Another five-bedroom home on West Third Street sold for $130,000 – or about 46% less than its $214,700 assessment.

Each of those sales seemingly demonstrates that longtime residents of Hilltop who have not invested in significant renovations are likely paying more than their fair share in property taxes.

Smith, of Franklin Street, is likely counted among those homeowners.

Her 1,100-square-foot home was assessed by Tyler Technologies to be worth more than $178,000. She said she periodically receives offers from flippers in the neighborhood, but the highest offer she’s ever received was $128,000.

City leaders decry assessment

Since last spring, Wilmington Mayor John Carney and members of the City Council have been criticizing the assessment of city properties.

The concerns over whether to accept Tyler Technologies’ work nearly resulted in a budget impasse last spring, but the city council ultimately relented without a firm alternative plan.

In September, as the public outcry over the reassessment results had only grown louder, Carney announced the city’s plan.

Wilmington will hire a third-party company to conduct samples of interior assessments and appraisals of residential properties on a block-by-block basis for neighborhoods that were assessed “too high.” They expect those reviews to help prove that many homes in the city are overvalued – and therefore taxed too highly – and will present those results to New Castle County in the hopes that the managing jurisdiction will amend its assessments.

“If the valuations are right, that’s OK from the perspective of being fair, but if it’s higher for some other reason, which we believe it is, that’s not fair,” Carney told Spotlight Delaware.

The city has budgeted $500,000 for the consultant, which Carney’s office expects to hire by the end of March. The project would run over the spring, with results being submitted in the summertime, officials said.

“We’ve got to find answers. We can’t accept [Tyler’s results],” Carney said. 

It’s a message echoed by City Councilwoman Christian Willauer, who represents the Hilltop community and has been a vocal critic of the reassessment’s results.

She asserted that New Castle County adopting the admittedly flawed assessments by Tyler Technologies in Wilmington were evidence of the county’s lack of oversight on the consequential process.

“I don’t think that [Tyler Technologies] didn’t make mistakes in Sussex or Kent. I think that the mistakes didn’t get through there because the county was in charge, but New Castle County chose to wash their hands of any kind of oversight,” she said. 

Whether New Castle County would accept the results of Wilmington’s independent review and incorporate them into the broader assessment remains to be seen.

County Executive Marcus Henry, who took office last year after the reassessment work had concluded, said that he would “talk with the mayor’s office as that scope is further defined,” but his staff expressed concerns with potentially adjusting the assessments of just some homes in the county.

Assistant County Attorney William Martin said that accepting those adjustments could defy the Delaware Constitution’s uniformity clause, which stood at the crux of the Chancery Court ruling that ordered the reassessment.

“That’s because we’d be using different methods to assess similarly situated property, i.e., homes in the city,” he said. “Throughout the county, you can imagine there would be other folks who would say, ‘Please check out the inside of my house. I would like my assessed value to be reduced.’”

Whether the city’s spot assessments could withstand a constitutional challenge or whether the county would rather pursue a different course of action remains to be determined.

For now, county officials stress that any homeowner has the ability to appeal their assessments. Obvious errors in their assessment, such as incorrect square footage or number of bedrooms, among other factors, can be corrected without a formal appeal.

But in a formal appeal, a homeowner would be required to show comparable sales that refuted the results issued by Tyler Technologies. In communities where such sales may be hard to find, county officials conceded that the best course of action would be to commission a personal property appraisal – something that would result in upfront costs to homeowners.

County hopes for new foundation

For New Castle County Executive Henry, who walked into office just months before a firestorm of public criticism over the reassessment process was sparked, the findings of Spotlight Delaware’s analysis only further solidified his resolve.

“This is why you can’t wait 40-plus years to do a reassessment,” he said.

Henry, the son of famed Wilmington State Sen. Margaret Rose Henry, said that his hometown’s changing dynamic also likely led to a problematic reassessment.

Major redevelopment and infill property flips have rejuvenated the Wilmington housing market after decades of stagnation, while the commercial property market has softened considerably following the departure of DuPont’s downtown headquarters and the post-COVID move away from offices. In the 1980s, the city was also still grappling with a legacy of redlining that undervalued properties of Black and brown families.

“All of these factors were going on back in the ‘80s and into the 90s, through multiple administrations, but none of that’s captured in reassessment,” he said.

Henry said his administration would begin “quality control” reviews to correct under- and over-valued commercial properties. His office is also reviewing a half dozen other proposals related to the reassessment that could lend additional tools.

“We have this data from 2024 now and we want to balance out that data for the next reassessment,” he said. “That includes being vigorous in terms of our appeals process, and looking at what’s available to us administratively to do some level of review to potentially help the city of Wilmington.”