March 23, 2009REASSESSMENT
Property taxes throughout the state are based on assessed values, which are supposed to provide equity and fairness in taxation for private property owners. Reassessments are typically conducted according to mass appraisal theory. Because tax revenues can be increased by raising the tax rate, the cost of reassessment is typically a deterrent to regular reassessment.
The three counties have not reassessed since 1986 (Kent), 1983 (New Castle), and 1977 (Sussex). The lack of regular reassessment tends to favor new construction in assessed values, and an unfair burden is placed on owners of older properties. Further, the property tax burdens shift from residential to non-residential, and school district "wealth," a component of revenue sharing based on overall assessed values in the various school districts, likewise tends to skew. Many argue that forcing the counties to reassess is not only fair, and will achieve a current market value, but will help local governments and school districts solve revenue shortfalls. Opponents believe the cost of reassessment is unnecessary given current economic conditions, is politically risky as the general populace is afraid of increased taxes, and reassessment in of itself does not cure revenues as increased tax rates are required to increase tax revenues. Further, the tax assessors have used the assessment issue to gain exemption from the state appraisal statute.
DAR has long supported general reassessment of all real property in a timely and consistent manner. While DAR does not believe it is the state's responsibility to conduct property reassessments, which are currently the responsibility of each county, DAR does recognize that the property owner funds the cost of reassessment regardless if the state or the county conducts the reassessment. DAR would support the cheapest alternative to the property owner and taxpayer. However, DAR only supports reassessment that treats all property owners fairly, contains a reasonable appeals process, is revenue neutral the first year the reassessment is booked, and the treatment of non-residential property is based on the Uniform Standards of Professional Appraisal Practice (USPAP). Finally, DAR believes that municipal and county tax assessors should be licensed and certified according to appraisal regulatory statutes.
Property tax revenues are required by statute to remain level the first year following reassessment. Nonetheless, the cost of reassessment is not counted in the revenue neutrality, so the cost of reassessment can be counted as a tax increase. Further, property tax burdens get shifted in reassessment, and new properties will have a relatively higher tax burden, and older properties will have a relatively lower tax burden. Further, tax burdens among types of properties, such as residential, commercial, and industrial, tends to shift somewhat. At the end of the process, tax revenues are determined by tax rates. While reassessment will result is higher assessed values, the tax rates will be reduced to achieve net revenue neutrality. Reassessment does not increase property tax revenues. DAR must be careful to ensure that assessment practices allow for reasonable appeals of fair valuations that are not biased against non-residential properties. All tax assessors should be licensed and certified according to existing laws.
The 2008 General Assembly passed House Joint Resolution 22 directing four members of the Governor's administration to review a general statewide reassessment that would be revenue neutral to state government.
DAR sent a letter to the Governor indicating our support and willingness to participate in the reassessment discussions.