Hitting the pause button on property taxes
While the state track in the school funding suit is headed for a mediation session scheduled for Aug. 31, the county track is now on hold.
On May 8, Vice Chancellor J. Travis Laster ruled that the property tax assessment used in all three counties as the basis for the collection of local school taxes violates the state constitution because the last assessments conducted in the counties -- in 1974 in Sussex, 1983 in New Castle and 1987 in Kent – are so old as to be unreliable.
Laster asked both sides in the case to set up a briefing schedule. Instead, the county defendants, with no opposition from the plaintiffs, requested a stay in the matter until Oct. 31. The defendants acknowledged in their motion that “reassessment of every property throughout the state … presumably will be ordered” in the remedy phase of the suit and noted that the reassessment “will cost the Counties millions of dollars to complete.”
The counties asked for the stay so they can better determine their financial status after Sept. 30, the deadline for property owners to make their annual tax payments. The counties, which derive a little more than one-half of their own revenues from property tax and real estate transfer tax collections, fear that collections will be down this year because of the COVID-19 pandemic. They are concerned that high unemployment rates will result in fewer property owners being able to make full tax payments on time. They also worry that the possibility of a recession could slow the real estate market, resulting in fewer sales and less revenue from the transfer tax.
By postponing further action in the case until Oct. 31, the counties say they will have a better handle on their financial situations in order to discuss the impact of the reassessment that they believe is inevitable.
Property owners tend to fear reassessments because they believe that they will lead to higher taxes. Lawmakers have resisted calls for reassessments because of their cost and their fear of blowback from property owners. However, state laws place strict limits on the revenue increases permitted as the result of a reassessment.