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Plan that could lead to broad changes for Delaware property tax bills may be pushed to next year

Xerxes Wilson Jeanne Kuang
Delaware News Journal

The debate over how to conduct a reassessment of the property values used to calculate county and school tax bills throughout Delaware may carry into next year, new court filings indicate. 

At a hearing last month, both the county defendants and the plaintiffs that sued them over the tax system told a judge they hoped by the end of November to come to a settlement agreement that would set out a four-year plan for reassessment. 

But a status update letter by the parties posted in the court docket Thursday said the issue may require further litigation and ultimately, Chancery Court Vice Chancellor J. Travis Laster stepping in to sort out differences in how the parties feel reassessment should occur. 

Recent: Documents preliminary plans to finally reassess Delaware properties after decades

Attorneys representing the state's three counties have been discussing a resolution to the lawsuit that led to Laster ruling earlier this year that the values used by the counties to calculate residential and commercial property taxes are unconstitutional. 

The ruling essentially gives the plaintiffs and the court a stick to force the counties into reassessing those property values and making the system more fair.

The parties are now negotiating on what time frame and under what framework that reassessment would occur, with Thursday's letter indicating the parties are not as close to an agreement as they initially hoped. 

Last month, attorneys for the counties each said they envisioned a reassessment process that would see changes to tax bills by mid-2024 and that they were working toward a settlement that would formalize that process. 

Delaware's property tax system is being challenged in court by plaintiffs that say a lack of reassessment creates classes of tax "winners and losers."

Each of the three counties submitted planning proposals from an outside expert that set out how reassessment would work on that timeline. But now officials in the three counties are asking the judge for more flexibility on meeting the deadlines set forth in their separate proposals.

In the most recent correspondence to Laster, New Castle County officials said they don't want to resolve the lawsuit by a settlement. New Castle County Executive Matt Meyer declined to comment through a spokesman. 

Sussex County officials believe the deadlines in the reassessment planning proposal they commissioned are "extremely aggressive," attorneys for the counties wrote in the most recent letter. The county's finance director did not return a call seeking comment.

New Castle County officials wrote that they are working to meet their proposal's first deadline: drafting by Jan. 1 a request for proposals for an appraisal company the county would hire to help reassess properties over the coming years. 

Attorneys representing Kent County wrote that the deadlines in their proposal are manageable but "subject to fluctuation" and "unforeseen circumstances." The letter states that the county's Levy Court was to meet to discuss the potential of settling the matter earlier this week. That likely occurred in a closed, executive session. 

New Castle County reassessment proposed plan

Kent County reassessment proposed plan

Sussex County reassessment proposed plan

The hesitation on the part of the three counties means Laster could be asked to make a formal order on how reassessments should occur. In the letter to Laster, the plaintiffs, education reform activists, stated a formal ruling that would hold the counties to the planning proposals they submitted would be appropriate. 

Such an approach would require the counties and the plaintiffs to submit briefs to the court and wait for Laster to rule, which could delay the start of the reassessment from what the plans outlined in the proposals.

Both the plaintiffs and counties also disagree on what timeframe further litigation should take place. The plaintiffs have proposed a more aggressive schedule for briefing, while the counties' proposal for moving forward would see the issue litigated into April of next year. 

Further, the county defendants stated they are "aggressively pursuing a comprehensive solution" that would involve state officials, who are not parties to the property tax lawsuit, to come up with a statewide reassessment policy.

That could address fairness and accuracy in property assessments long-term, while a single reassessment would only be a "stop-gap measure," county attorneys wrote. 

Attorneys wrote that the counties' statewide proposal "would, among other things, provide for future reassessments," a policy that could need the approval of the General Assembly.  

Delaware is one of just a half-dozen states that does not require regular, comprehensive updates to property values used for taxing purposes, allowing county officials to avoid the politically unpopular process for decades.

Gov. John Carney has previously said a reassessment is needed, but on Thursday his spokesman declined to comment on whether he has been part of discussions with the counties on a statewide policy, or whether he would support a bill requiring property values to be updated periodically.

While the mechanics and timing are being debated, there is no question that a reassessment will be the resolution to the lawsuit. 

At trial last year, the plaintiffs were able to convince Laster that all three counties calculate tax bills with property values that are so outdated, some taxpayers get an unfair discount while others pay taxes on a greater share of their property’s actual worth.

Those inequities violate the state constitutional requirement that property owners be taxed equally, Laster wrote in a 149-page ruling in May. 

Vice Chancellor J. Travis Laster

Reassessment of all properties was last conducted in New Castle County in 1983, in Kent County in 1987, and in Sussex County in 1974. And taxing officials currently use a projection of what properties would have been worth at that time to calculate a taxable value. 

That value is then paired with counties’ and school districts’ taxing rates to bill individuals. 

Since those last reassessments, some areas and types of properties have grown rapidly in value. Others have not – or even decreased. This creates disparities between the value residents are taxed on and the actual market value of their property. 

The end result can lead to odd comparisons where one person is paying a tax bill that is based on the full, current value of their property and others – often those who own more expensive properties – pay taxes based on a lower percentage of their property’s actual worth.

Last year, Delaware Online/The News Journal detailed the mechanics of the problem, why Wilmington officials feel maligned by the current situation and why politicians haven’t acted on the problem for decades. 

THE SERIES: 

Contact Xerxes Wilson at (302) 324-2787 or xwilson@delawareonline.com. Follow @Ber_Xerxes on Twitter. Contact Jeanne Kuang at jkuang@delawareonline.com or (303) 324-2476. Follow her on Twitter at @JeanneKuang.