Joint Finance Committee OKs Delaware taking a bigger share of realty transfer tax

DOVER — Legislators placed the state’s county governments on lookout by voting to alter the realty transfer tax, effective July 1, 2016. They also proposed a 5-percent cut to some state-funded programs as budget deliberations continued Monday.

Rep. Melanie Ceorge Smith

Rep. Melanie George Smith

With the Joint Finance Committee set to meet again Wednesday, “pass-through” programs such as the Modern Maturity Center, Children’s Advocacy Center, and First State Animal Center and SPCA could lose some of their promised funding.

While co-chairwoman Rep. Melanie George Smith, D-Bear, commended legislators for making tough decisions, more remain. Entering Monday’s budget meeting, the state was facing a $27.7 million shortfall for the upcoming fiscal year, which begins July 1. Legislators did make some cuts in projected spending, but a deficit of millions still remains in the way of crafting a balanced budget.

A proposal to move a portion of the realty transfer tax from the counties to the state was met with resistance almost immediately from legislators. They said the change — coming after counties had begun their own budget deliberations — was too drastic and sudden.

Instead of the state and county or municipality each collecting half of the 3 percent transfer tax, the state government will now take 2 percent, leaving the counties and towns with two-thirds of what they had previously received.

The realty transfer tax is estimated to total about $73.5 million in the current fiscal year. Of that, Delaware and its subdivisions each receive an even share, meaning the state brings in about $37.8 million.

According to Sen. Brian Bushweller, D-Dover, in 2014 the tax brought in about $99,000 for the town of Camden.

Had the share been reduced previously from 1.5 to 1 percent, the town government would have banked only $66,000.

Rep. Smith proposed making the change effective July 1, but quick dissent led to a vote that pushes the shift back a year.

“I can’t tell you how devastating this is going to be, particularly to Kent County and the municipalities in Kent County,” Sen. Bruce Ennis, D-Smyrna, said.

Sen. Bushweller agreed, while noting fiscal year 2017 is set to be “way, way worse.” The state government has projected it will be $170 million in the hole for that year.

Sen. Karen Peterson, D-Stanton, voted to delay the implementation but said she hopes the counties see the change as a warning.

“They need to assess the properties within their counties,” she said. “They can’t just keep relying on the state. They have their jobs to do too.

“And when you don’t reassess properties for 30, 40 years, you can’t keep turning to the state for more money. They have a responsibility.”

With only Rep. Joseph Miro, R-Pike Creek Valley, voting no, members opted to push back the change one year.
JFC did make some cuts in spending. Several outside programs in the Department of Health and Social Services will see less money, and legislators took $1.2 million from Sussex County for trooper patrols, necessitating the county fully cover the cost of the patrols.

A total of $1.5 million was also cut from the charter school performance fund, although JFC then moved $1 million from one-time money to the fund.

A vote on the pass-through programs figures to come Wednesday.

Afterward, Rep. Smith said lawmakers plan to hold much of the approximately $61 million received by the Attorney General’s Office in mortgage-related settlements. And $15 million from the settlement funds will likely be shifted to the bond bill, which provides money for capital projects throughout the state.

The Delaware Agriculture Lands Preservation Program and the Land and Water Conservation Trust Fund, both of which Gov. Jack Markell recommended in January to receive $3 million, might not receive any funding, Rep. Smith said after the deliberations.

Lawmakers still have the option to use the one-time money to fill the gap at the end of the month.
The committee meets Wednesday morning, and the Joint Committee on Capital Improvement will convene Thursday.

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