Why Should Delaware Care?
Every year, Delaware’s school districts vote to approve a new school tax rate to be collected in the fall. But the continued fallout from Delaware’s first property reassessment in 40 years has pushed back the deadline for when districts will collect the revenue, adding to a squeeze on their finances.
Several New Castle County school boards announced over the past month that they may raise local taxes before the end of the year. But those exact increases will not be known until later this fall because of delays caused by last year’s property reassessment controversy.
During their July board meetings, the Appoquinimink, Christina, and Colonial school districts each said tax increases could be necessary because of higher costs of special education.
But those districts also said they could not immediately vote on a new tax rate, as they normally would, because of a law passed earlier this year that gave New Castle County the ability to temporarily expand its property tax authority and conduct “quality control” reviews of its commercial property assessments.
Lawmakers passed the bill in response to complaints that New Castle County’s latest property reassessment undervalued several prominent business properties.
New Castle County has until Sept. 30 to complete the reviews. Once completed, the county will send school districts updated information about their tax base.
During the recent school board meeting, district leaders also said they are waiting for Gov. Matt Meyer to sign a bill to indefinitely extend their ability to charge commercial and residential properties different tax rates.
School board members will then be able to vote on a school tax rate during their upcoming October meetings.
New property tax bills will then be issued in November, and residents will have until Dec. 31 to pay.
In normal years, school districts collect their taxes earlier in the fall.
Increased student needs
Appoquinimink Superintendent Matthew Burrows said during his July school board meeting that a potential tax increase would fund salary increases and additional staff needed to address the growing needs of students with disabilities
The component of property taxes that pay for special education – called the tuition tax – is set by local school boards, and does not require votes by residents, like a broader tax referendum would.
During the meeting, Burrows said his district could face a legal challenge if it did not bring in more dollars to pay for special education.
“You either meet the needs of your students on the tuition tax side or … there’s lawsuits if you’re not meeting the needs of the students, and so you’re paying out on that end of it,” he said.
Burrows said the potential tax increase would cost the average home just under $100 per year with the new tax rate.
A property tax increase for residents within Appoquinimink’s boundaries is likely to draw more complaints than normal. Last year, residents expressed outrage after the district revealed that its projected $7.9 million savings balance for the year had essentially been a mirage.
Numerous accounting errors, including a failure to notice that May had an extra pay period, left Appoquinimink facing a significant budget deficit.
In response, Burrows cut $2.5 million from the district’s budget to reduce the financial strain, but ultimately taxpayers help to stave off issues by shouldering a 10% rate hike made possible by the first reassessment in decades.
This month, Appoquinimink district officials said they will continue to act in “austerity mode” through the fall.
Officials from the Colonial and Christina school districts also indicated that a potential increase to their districts’ tuition tax rates is likely.
“Our special education students, the complexity of their needs continues to ramp up,” Colonial CFO Emily Falcon said during a recent board meeting. “In addition to that complexity, the cost of providing services, you know, inflation is pushing those costs up as well.”
Red Clay Consolidated district officials also announced a possible 1.9% school tax increase during its recent board meeting.
Navigating cashflow concerns
Beyond higher expenses, school districts’ budgets are also likely to be strained this year because of the delay in collecting tax revenue.
The delay means some districts will be closely watching their expenditures during the first few months of the school year, starting in mid-August.
The new state law giving New Castle County its authority to review assessments also directs the state to provide emergency funding to districts if they experience shortfalls because of the delay.
Still, Falcon said school officials should hold off on purchases until tax dollars roll in – unless one is “mission critical” for a school.
If a purchase is necessary, the district will “figure out the cash flow concerns and how to navigate those,” she said.
Although the state has offered support, Colonial Board President Chris Piecuch expressed frustration with the ongoing fallout from Delaware’s property reassessment. Last year, resident outrage, lawsuits from businesses and last-minute legislation all followed Delaware’s first-in-a-generation property tax reassessment to become one of the biggest political controversies of the year.
Partially in response, the state allowed New Castle County’s ongoing review of business property assessments.
“It’s just crazy to think that we have no handle over something that’s dramatically affecting how we can operate,” Piecuch said of the delay in receiving property information.
To avoid relying on borrowed money from the state, Christina School District CFO Bob Vacca temporarily changed the classification of roughly 2,400 district employees so their compensation is drawn from money the district already receives from the state Department of Education.
Delaware school districts are funded through a combination of state funds and local dollars they collect through property taxes.
Vacca said the district will be “going 100% in the other direction,” and using local funds from January through the end of Fiscal Year 2027.
“It’s an extraordinary move because it takes a great deal of labor to do it, but it’s using our own money,” he said.
