Judge says outdated tax assessments violate Delaware law

DOVER — A state judge has issued a landmark ruling declaring that local government officials in each of Delaware’s counties are violating both state law and Delaware’s constitution in using woefully outdated property tax assessments to fund public schools.

The Chancery Court judge ruled Friday that the county tax assessment schemes violate a state law requiring that all property be assessed at “its true value in money.” The Delaware Supreme Court has held that a property’s true value in money is the same as its present fair market value.

But while the law requires that property be assessed at fair market value, it does not require that counties conduct reassessments on any particular schedule. As a result, Kent County in central Delaware last reassessed property values in 1987, while northern New Castle County’s current assessment dates to 1983. Sussex County, home to million-dollar beach homes in southern Delaware, last reassessed property values in 1974.

In addition to finding that the current tax assessment practices violate the law, Vice Chancellor J. Travis Laster ruled that the counties also are violating a provision in Delaware’s constitution that requires property owners to be taxed in a uniform manner.
“During the thirty-three, thirty-seven, and forty-six years since the counties’ base-year valuations became effective, different properties have appreciated at different rates,” Laster noted.

“Owners whose properties have appreciated more pay a lower effective rate than owners whose properties have appreciated less. The counties’ outdated assessments conceal a reality of non-uniformity beneath a cloak of uniformity.”

Local property taxes account for about one-third of funding for public schools in Delaware, with the rest coming from state government.

Laster said the thorny issue of determining a remedy for the counties’ wrongs will require further proceedings.

“Both Delaware’s public schools and the counties depend on the current, albeit broken, system of property tax assessments,” he noted. “It could cause significant disruption to important public services if the administration of that system was suddenly brought to a halt.”

Laster also said the financial strain being experienced by many households and businesses, as well as local and state governments, must be taken into account, particularly regarding the timing of a remedy.

The lawsuit was filed in 2018 by the American Civil Liberties Union and a group called Delawareans for Educational Opportunity. The plaintiffs alleged that state and local officials in Delaware are failing to provide adequate educational opportunities for disadvantaged students, partly because local school property tax collections have been based on assessments that are decades old.

They also argued that inadequate funding has contributed to the dismal performance on standardized assessments among children from low-income families, children with disabilities, and children whose first language is not English. Those students, collectively described as “disadvantaged,” number in the tens of thousands.

“The failure to provide an adequate education for disadvantaged students is not just a problem for disadvantaged students,” Laster wrote in a 150-page opinion. “It affects the in-school educational environment for all students, including non-disadvantaged students. Ultimately, it affects the larger community of which we are all a part.”

Friday’s ruling involves a lawsuit in which county officials are named as defendants. A separate trial in which state officials are named as defendants will be held later.

In refusing a request by state officials last year to dismiss the lawsuit, Laster said allegations regarding how the state allocates financial and educational resources, and how disadvantaged students have become re-segregated by race and class, suggest that Delaware’s public education system has “deep structural flaws.” He said those flaws are profound enough to support a claim that the state is failing its constitutional mandate to maintain a “general and efficient” school system that serves disadvantaged students.

After the lawsuit was filed, Democratic Gov. John Carney and state lawmakers agreed last year to set aside $75 million over three years, starting this year, for low-income students and English language learners in public schools. The funding also will support additional mental health and reading support services in 49 “high need” elementary schools.

In an amended complaint, the plaintiffs said the extra money approved by lawmakers last year was welcome, but not “sufficient.”