Property tax system on trial (Xerxes Wilson)
This story reports various purported discrepancies in property assessments/tax payments. For example: (A) Newly-built house in Sussex Country, purchased for $354K, owner pays $217 in county taxes based on valuation of $109K (31%); (B) Developer spent $2.35M on a waterfront property, pays $118 in county taxes based on valuation of $59.5K (2.5%). Properties are in different school districts, so that part of the equation is excluded from the example.
Demand for reassessment is part of a pending case (in Chancery Court) over the adequacy of school funding in some school districts. “Because of the complexity of the lawsuit, fairness in the state’s property tax system is being tried separately as other aspects of schools’ funding move through the court.” A key issue is whether the current property assessment procedures comport with the Delaware requirement that properties be assessed based on their “true value in money,” which the DE Supreme Court has held should correspond to fair market value (FMV). However, “no one has enforced that requirement” over the years.
Current estimates of average valuations vs. FMV: Sussex (17%), Kent (34%), New Castle (30% or so). In other states, the generally accepted standard is that property valuations should be between 90% and 110% of FMV.
If all the property assessments were reset to FMV, tax rates would be reduced to avoid a huge windfall for local governments (school districts are allowed to keep 10% of any additional income generated by a reassessment, and counties get a one-year increase [15%] to pay for the reassessment).
While all concerned seem to agree that reassessment is needed, there are questions about whether the plaintiffs and the City of Wilmington have standing to bring the lawsuit. Also, should this decision be made by an appointed judge, vs. by country officials, etc. New Castle Country Executive Matt Meyer is quoted as asking whether the judge was “elected to make that decision?” NCC attorneys in the case assert that “this is not the right case, and these are not the right plaintiffs or defendants, to achieve [reassessment]."