Milford School District Board of Education learned how the recent Kent County reassessment could impact school tax
At a recent meeting, Milford School District Board of Education heard from Dr. Sara Hale, Chief Financial Officer, how the recently completed Kent County property reassessment could have an impact on school taxes in Milford. Prior to the reassessment, Kent County used property values determined in 1986. Sussex County is currently undergoing reassessment as they were using values determined in 1974.
“So this year we’re in a unique situation. We’ve talked about this at length in prior meetings where Kent County has completed the reassessment process. Sussex County has not so as I present this information to you this evening, please keep in mind that it is still preliminary,” Dr. Hale said. “We are still working with Kent County to receive final information, but wanted to give you an update as we prepare to approve the tax rates in July so just a reminder, our school tax rate is made up of four separate components. There’s the current expense, tax rate, component debt service, match tax and tuition. And we’ll go through each one of those and kind of what they provide for the district.”
Dr. Hale explained the components of the school tax. The current expense tax is used to cover operating expenses, such as the local portion of teacher salaries, supplies and more. Typically, that tax rate can only be changed through referendum.
“So, the state does require every district to maintain a reserve to ensure that in the event of a fiscal downturn, we could make our local payroll obligations and support the district. But there is a structure in Delaware right now that supports a model where a district must go out and seek a plan or an increase that would leave them for many years with no additional increases to that funding,” Dr. Hale said. “So as an example, we increased our current operating rate in 2015. Here we are in 2024. We have not had an increase since, so you spent the first part of that kind of trajectory, creating that reserve that build up and then use the remainder of the downward side of that hill spending down that reserve until you’re in deficit spending and ensure that you then go back out for an operating referendum.”
Debt service is also set by referendum. When the district needs a capital improvement, such as a new school or a significant remodel of an existing school, they are required to go out for referendum to seek approval from residents to sell bonds to finance the project. As the bonds are paid down, the debt service rate also goes down. Dr. Hale explained that there are some projects coming off the debt service, but new bonds will be issued for the Middle School project in the next few weeks which may increase the debt rate.
“Our match tax components are also set by the board of education based on recommendation. We have, only since 2005, collected the minor capital improvement match tax and that’s so that we as a district can receive the state funding,” Dr. Hale said. “You have to be able to show that we’ve collected our portion in order to get that state funding. There are other match taxes that have been allowable that we have not chosen to exercise such as technology, reading and math specialists or interventionist in our state opportunity match.”
The final portion of the tax rate is tuition tax which covers the cost of special education services both inside and outside of the district. The district has monitored these costs closely, adding more in-district programs in order to keep these costs as low as possible.
“So, for fiscal year 2025, as we’re planning to look ahead and set our property tax rates, there are a couple of different considerations. The first is that our district has seen growth in the total property assessment or the total property value, which generates the revenue for our school district,” Dr. Hale said. “So, someone may have their own assessed value for their home. We collect revenue as a district based on the total property value for the entire district separate. There was also the completion of the reassessment process, as we discussed, our final bond sale which we were notified about today. And then just making sure that we’re looking ahead at how to make sure that tax rates are stabilized going forward.”
Dr. Hale continued, explaining that the school tax process could be complicated. She stated that in each county, there was a separate tax assessment office and that, in 2020, both counties were ordered by the courts to conduct a full property reassessment as Kent County was using values that were 38 years old and Sussex was using values that were 50 years old. Kent County has completed their reassessment and Sussex is expected to complete theirs in 2025 for use in fiscal year 2026.
“So, what does that mean for us tonight? Before reassessment some of you may remember my two little houses here, there is a process that has the assessment to sales ratio study, that’s a study completed by the University of Delaware, that applies a numerical factor to our property value to make sure that if you have one house in Kent County, and you picked it up and you move it across the county lines to assess it, that you would still have the same tax impact. So that formula has been applied for many years,” Dr. Hale said. ‘Our assessment to sales ratio has been frozen since 2010 waiting for this reassessment process to happen. So, with the property reassessment, that formula was applied, and you’ll see that the Kent County had a higher assessed value because their values were from 1986, where the Sussex County home had a lower assessed value because their values were from 1974. So, last year on the tax rates in Sussex County, you can see that the tax rate was set at $4.66, and the Kent County tax rate was set at $1.65, because of that difference in time for the assessed values.”
After the Kent reassessment, Dr. Hale explained that the assessed value for Sussex County homes will not change and average about $20,500. The district will use the assessment to sales ratio developed by the University of Delaware to base tax assessment. The average tax bill for Sussex County is expected to be around $932 annually. As for Kent County, the recommendation is to change the rate to 27 cents to accommodate for the changes in property value which would mean the exact same home in Kent would pay around $932 annually as well.
“So, because the reassessment process has taken place, there’s a couple of different things that are moving parts to this. Delaware code has a consideration for an increase to the current expense component of the tax rate post reassessment and the reason for that is because reassessment looks at a single point in time when that is completed,” Dr. Hale said. “That is the number and we’re moving forward. Typically in any given year, we would reach out to the county multiple times during the year to get that assessed value, which has been growing in Milford School District at a rate of five to eight percent between both counties and the reason for that is strictly the construction, the additional new homes in our area you can see that when you drive around the Milford School District we’ve been growing quite substantially so in order to ensure that the district does not lose out on that natural property growth that we’ve been seeing.”
Dr. Hale felt the district should apply the percentage increase permitted in the Delaware code to be sure they are accommodating for the natural growth. This would result in an increase in revenue of $321,000. She continued that a review of the reassessed values in Kent County demonstrate that the impact on property taxes would be specific to each property owner. A slide presented showed a home in Kent County that was previously assessed at $45,500 was now assessed at $306,000, increasing their taxes by almost $80 per year while another valued at $104,400 previously was now valued at $634,000, but their tax only increased by $0.57 per year.
“So absent the reassessment process, we would have had the exact same impact and been able to say that for the eighth year in a row, we were decreasing taxes in the Milford School District, but the reassessment process put a wrench in that narrative this year,” Dr. Hale said. “So what does this look like? Going forward? We’re anticipating that once the appeal process is complete, that final information is received from Kent County assessment office in June, we’ll do our final calculations and prepare the tax warrants for both Kent and Sussex County and those will be presented to the Board of Education for approval in July.”
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