Why Should Delaware Care?
Last year, the state conducted its first property reassessment in decades. As a result, school districts were able to implement an up to 10% school tax increase without voter approval. Resident outrage and concern over ballooning tax bills prompted Republican lawmakers to introduce two bills aimed at limiting those automatic increases. Those bills, however, both failed to make it out of committee.
Two bills seeking to limit Delaware school districts’ ability to implement automatic tax increases following property reassessments were both tabled in committee, or not advanced to a full House vote, by their sponsors on Wednesday afternoon after nearly two hours of debate.
The Republican-led bills were spurred by school districts across the state choosing to increase their property tax revenues by 10% last summer following Delaware’s first statewide property reassessment in nearly 40 years. But those tax increases, allowed under a little-known state law, only worsened the resident outcry that had been building following reassessment.
One of the bills, Rep. Bryan Shupe’s (R-Milford) House Bill 246, would have removed school districts’ ability to automatically implement a 10% tax revenue increase following reassessment and instead allow districts to take a smaller percentage, if needed.
Shupe’s bill would have required districts to demonstrate that they would have lost revenue following a reassessment in order to instill an automatic tax rate increase. That automatic increase would then be limited to 2% a year for up to five years, or until a district makes up its revenue loss – whichever happens first.
Delaware will begin reassessing property every five years now that a new foundation has been determined.
The second bill, House Bill 245 sponsored by Rep. Mike Smith (R-Pike Creek), would have simply eliminated the 10% tax increase option altogether. That would require school districts to pass a referendum to adjust their tax rate, which was typical before the reassessment.
Following nearly two hours during Wednesday’s House Education Committee meeting, both Shupe and Smith asked for their respective legislation to be tabled. That allows the bills to potentially come back later in session rather than being denied at the committee level.
Back to the drawing board
During Wednesday’s meeting, Shupe said he had spoken with school district officials in Kent and Sussex County about his bill, but not New Castle County.
He decided to table his bill, he said, in order to speak with school district leaders in Delaware’s northernmost county before introducing a new version of the legislation.
New Castle County communities were hit hard by the reassessment results, but the largest increases came in 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%.
Colonial School District Chief Financial Officer Emily Falcon, who also serves as the president of the Delaware Association of School Administrators, said that although there are aspects of Shupe’s bill that districts can work with, it ultimately would be operationalized differently than how he intended.
Based on her interpretation of the bill, it could adversely affect school districts whose boundaries cross county lines and those who pass a referendum before a property reassessment takes place but are still awaiting the revenues afterward, Falcon said.
If a district falls within those categories, Falcon said, HB 246 would require it to reset its tax rate to a revenue neutral level. Districts who fall outside those categories, though, would be exempt from that rate reset unless they projected to lose revenue because of a reassessment.
During the meeting, Rep. Kim Williams (D-Stanton) also pointed out that, as the bill was written, there was no financial measure to determine which districts would be applicable to the annual 2% increase.
Instead, a district could lose as little as $1 and implement up to 2% in tax revenue increases per year for five years, she said.
“My intention is not to put something out there that I think works in writing, but is not going to work on the ground level,” Shupe said, ultimately deciding to table his bill.
Eliminating the 10% increase?
Although Smith’s bill, HB 245, saw less debate than HB 246, it also did not pass through the House Education Committee to consideration within the full House of Representatives.
Smith told Spotlight Delaware that rather than districts automatically being eligible for an up to 10% tax rate increase, they should instead show the public why additional funds are needed by going through a request process.
“We’ve set the precedent for special session, and we have the budget markup process where they could come and ask the state for money, if it was necessary,” Smith said.
But multiple House Education Committee members, and members of the public, expressed concern that eliminating the tax increase would increase districts’ reliance on referendum votes.
School referendums are the only time that voters in Delaware have a direct say in their taxation rates.
But multiple referendum requests have failed across the state in recent years, making it more difficult for school districts to continue funding staff recruitment and retention efforts, bus programs, and other operational costs.
While Smith’s bill would require districts to demonstrate where money is needed, he said voters must also be accountable for referendum outcomes.
“Not enough people do vote in those referendums, but then they have an opinion after,” Smith said.
Like Shupe, Smith also decided to table his bill for further discussion.
What led to this?
This past summer, multiple school districts, such as the Appoquinimink, Christina, Capital, and Indian River school districts, chose to implement the full 10% tax increase during July board of education meetings.
At the time, some leaders said taking advantage of the increase would prevent their district from needing to hold, and pass, a referendum.
Others, like the Brandywine School District, announced in July that it would implement a 1.7% tax rate increase, citing concerns over the future of federal education dollars. The following month, the Brandywine school board changed course, opting to reduce rates for residential properties and increase them for business properties.
Still, post-assessment property tax bills prompted outrage from many New Castle residents over the sticker shock of the increases in their bill. For some residents, tax bills doubled after the reassessment.
By August, state lawmakers held a one-day special legislative session in response to residents’ outrage. They allowed the public school districts in New Castle County to split their property tax rates to provide additional relief to homeowners.
The school boards for the Appoquinimink, Brandywine, Christina, Colonial, and Red Clay Consolidated school districts then approved new rates that lowered tax burdens for homeowners and raised them for commercial property owners.
Christina, Appoquinimink, and Colonial also chose to retain the extra revenue they raised through the automatic tax increases.