Fair and Equitable Property Assessments

Senate Joint Resolution No.12 of the 137th General Assembly established the Property Assessment Practice Review Committee to recommend procedures to standardize property assessment practices across all three counties. The committee was comprised of representatives from the three county governments, the state legislature, the state Department of Finance, state Budget Office, the Controller General's Office, the College of Urban Affairs at the University of Delaware, school districts and DSEA. A summary of its finding and recommendations are found in the table below.

The most frequently asked question about this proposal is, "Will my property taxes increase?"

Lets' say that you have a property that has a market value of $200,000. If you live in Kent County, your property should be assessed at 60% of actual market value or $120,000. However, your property is actually assessed at about 40% of market value, or $80,000. The discrepency is caused by the fact that the assessments in Kent County are old.

Taking your actual assessed value and assuming a tax rate of $1.20 per $100 of assessed value or a tax rate of $0.120 on your entire assessed value, you are paying a tax equal to $960.

Assessed Value	X	Tax Rate	=	Tax Paid
$80,000	X	0.120	=	$960

What will happen if this proposal becomes law?This proposal says that if the new assessed value on your property increases by a certain percentage, the tax rate being charged must decrease by the same percentage. (This statement assumes that your property gained value equal to the average in your county since the last assessment.) In this example, let's say your new assessed value increases to it total market value of $200,000 or an increase of 250%. The tax rate charged would have to decrease by 250%, from $.0120 on the assessed value of your property to $.0048. Your tax would be calculated as follows:

Assessed Value	X	Tax Rate	=	Tax Paid
$200,000	X	0.0048	=	$960

Again, this example assumes that your property's value increased at the same rate as the average property in your county gained value. If your property has gained value less than the average property in the county, you are now paying more than your share of taxes. Your taxes will actually decrease.

If your property has gained value more than the average property in the county, you are now paying less than your share of taxes. Your taxes will actually increase a little.

The Committee's report also suggested some other changes to make property assessments fair and equitable. The table below discusses several issues addressed by the Committee. It compares what is being done now, the problem that the particular practice is causing and the recommended solution to make property assessments fair and equitable.

Topic	What Exists Now In Law	Problem	Solution As Proposed By Committee
Uniform Standards for Assessment	No provision.	Each county can establish its own standard for assessment. Without adequate standards, the error in assessing property within a county has been significant, resulting in properties with comparable market values having significantly different assessed values. These disparities are a problem for all school districts because they erode the public view of the property tax as fair tax. This problem is exacerbated for school districts which cross county lines which must deal with these disparities within two counties. The result of this disparity is taxpayer inequity. Taxpayer inequity and unfairness is a mitigating circumstance which leads to defeat of local school referenda.	Adopt the "Uniform Standards of Professional Appraisal Practices" promulgated by the National Appraisal Foundation for county and municipal assessments. These standards are national standards for assessments used by governing bodies throughout the country. The real and perceived unfairness within the property assessment process is minimized.
Licensing and Certification Standards for County Assessors	Nothing is required.	If the standards for assessments are to be maintained, the assessors must have the knowledge and skills to perform the assessments according to national standards.	Require all county and municipal assessors to be licensed by the State Assessment Practices Board within 5 years of enactment of this legislation, in accordance with the Uniform Standards of Professional Appraisal Practice as promulgated by the Qualifications Standards Board of Professional Appraisal Practice.
Initial Assessment/ Standardized Base Year/ Assessment Base	State law says that counties are to maintain uniform tax assessments, but no clear standard has been established to define the meaning of uniform. Sussex County last reassessed in 1974; New Castle County in 1983; and Kent County in 1987. While Sussex County claims that its assessments are at 50% of market value, they are actually at 25%%. While New Castle County claims 100%, they are actually at 60%. While Kent County claims 60%, they are actually at 40%.	The longer the period between reassessments, the greater the disparity becomes between the assessment and the actual market value. The inherent assumption that relative market values are stable within a county over time is incorrect. Properties in certain areas within a county gain or lose value over time at different rates than other properties. Additionally, studies conducted in Kent and New Castle Counties suggest that the more valued the property, the less likely its assessed value reflects its true market value than less valued properties. This places a relatively higher tax burden on less valued parcels of property compared to more valued parcels. These disparities are a problem for all school districts because they erode the public view of the property tax as fair tax. This problem is exacerbated for school districts which cross county lines which must deal with these disparities within two counties and are a leading cause of the inequity found in the state's school equalization formula.	Require each county to conduct an initial assessment effective for the county fiscal year beginning July 1, 2000. The base year for valuation purposes would be calendar year 1999. Require all counties to assess at 100% of market value.
Subsequent Reevaluations/ Reassessments	Nothing is specified.	When revaluation does not occur on a regular and frequent basis, not only does the disparity among properties of equal market value become enhanced, but also the cost of the revaluation becomes greater. In addition, fluctuations (gains or losses) in assessed values of individual properties are greater. Such fluctuations are the major reason for the taxpayer complaints that are registered after a reassessment because they lead to dramatic changes in the tax burden of some individual taxpayers.	After the initial revaluation, adopt a system of annual adjustments to assessed valuations through computerized mass appraisal, a technique successfully employed in a majority of jurisdictions nationwide. This method of maintaining updated assessments has proven to be more cost effective than existing practice.
*Revenue caps after initial* reassessment**	The law requires that county tax rates be adjusted to reflect no more than a 15% increase in revenues after the annual growth from property improvements is factored . School districts are restricted to a flat 10% increase in revenues. School districts may not consider growth resulting from property improvements.	No problem identified.	As it exists in current law, for the year following the initial reassessment under this plan..
Revenue caps after subsequent annual reassessments	The law requires that county tax rates be adjusted to reflect no more than a 15% increase in revenues adjusted after the annual growth from property improvements is factored ; 10% increase in revenues collected by school districts. School districts may not consider growth resulting from property improvements.	Annual reassessments become a tax increase.	The caps for the counties and school districts are eliminated. If either jurisdiction is to collect revenue which is greater than the previous year adjusted to accommodate higher revenue due to improvements to property, it must raise its taxes through the authority provided in statute, either a vote by county council or levy court or a school referendum.
Appeals Process	Property owner appeals his/her property assessment to the County's Board of Assessment Review. Appeals from Board of Review filed in Superior Court.	The process at the county level is slow.	No change in current practice.
Oversight Functions	Nothing is specified.	If the system is to work, counties must be in compliance with the law.	Establish a State Assessment Practices Board to provide overview of the practices and standards actually employed by the counties.
Cost of Reassessment	Assumed to be funded by the approximately 15% increase in revenues collected by the counties during the year of reassessment.	None.	With the physical assessment occurring over a five year period, the cost can be borne by a minor increase in county property taxes. The committee recommended that the state should share the costs of purchasing the technology to employ mass appraisal with the counties.