How the Counties Have Screwed the Schools By Failing to Reassess Property

Property taxes in Delaware are a mess. Everyone who pays any attention to this wonky subject knows that it’s been more than 30 years since any of the state’s counties have reassessed property, so valuations on similar properties can be — excuse the pun — all over the lot.

Despite their knowledge of this inherent unfairness, the counties have evaded action over the decades for two reasons. First, county-wide reassessment of property is an expensive proposition — the tab was estimated at $20 to $40 million back in 2007, and the expense cannot be offset by the reassessment itself, which must be revenue neutral.

The second reason is public resistance. Though it’s estimated that taxes would rise on about a third of properties, drop on about a third and stay the same on the rest, studies have found that nearly three-quarters of taxpayers fear their rates would go up.

Chancery Court Vice Chancellor J. Travis Laster ruled last week that the counties are in violation of both Delaware law and its constitution, and his decision noted that the counties acknowledged that fact. But as today’s News Journal story noted, no remedy for this has been proposed yet. Even if the counties agreed to fix the situation by reassessing, it would take several years before the process would be completed.

But while the News Journal focused on the effects on property owners, its reporters ignored an important facet of the case, one that underpins Laster’s entire ruling.

Delaware law holds that property valuations must be based on the full, current market value of the property (for practical purposes, there’s a bit of leeway granted). Kent and Sussex counties are not merely relying on out-of-date valuations, they use a fraction of the full value (50% in Sussex, 60% in Kent). As a result, schools are receiving only a fraction of the money they are lawfully entitled to.

There’s an even more important aspect to this: Counties can increase their tax rates to make up budget shortfalls without direct public approval; school districts cannot. If a county wants to raise taxes, all it requires is a vote by its ruling body. School districts must take requests for tax increases directly to the public. If valuations were up-to-date, school district tax revenue would go up as the property increased in value. This is a key reason Delaware’s schools are starved for cash.

Delaware schools also work under an “equalization” formula, under which richer districts subsidize poorer ones. That, too, is out of balance because of the out-of-date valuations.

A couple of other points in Laster’s opinion deserve some mention. In the News Journal article, New Castle County executive Matt Meyer claimed that the county had several possible grounds for appealing Laster’s decision to the state Supreme Court. It would be interesting to know which grounds those might be. Most of the county’s arguments did not even attempt to justify its failure to reassess, and in fact two of the counties, including New Castle, acknowledged their failure to follow the law. Instead, it argued that the plaintiffs had no standing to pursue relief.

County lawyers also tried to discredit a report commissioned by the plaintiffs but offered no factual basis for doing so. Laster also chastised the county for raising a whole series of specious arguments to support its position, and shot them down one by one.

It’s hard to avoid the conclusion that the county is wasting money and trying to stall for time, and doing so even after acknowledging it is in the wrong. Meyer should do the right thing, stop fighting the lawsuit and preparing the public for the inevitable reassessment. In the News Journal article he said the county should reassess, but not at the order of the court.

The statement is preposterous on its face. A court order gives the political branches of government exactly the justification it needs to do what it should have done decades ago. Stop the stalling, Mr. Meyer, and do your job.

Link to Vice Chancellor Laster’s decision.