I just came across an article in a Delaware newspaper about plans to reassess the properties in a small beach town in Sussex County, Delaware -- Rehoboth Beach. The article makes a lot of sense, after the first two paragraphs. What on earth could the person who wrote that second paragraph have been thinking?
The sort of "thinking" involved has led to a lot of problems over the years. Clearly, both the Mayor (Sam Cooper) and the Commissioner (Stan Mills) understand fully. And perhaps the reporter did too, and someone else threw in the extraneous, incorrect and misleading assertion. Some people's taxes will rise as a result -- but they will be people who have been being subsidized for years, even decades, by their neighbors, who after a good revaluation will finally be paying only their own share of the costs of providing local services.
Putting aside the journalistic screw-up, I will cite an example of how bad the assessments have become. The land is a city lot, a bit larger than some others in the neighborhood, resulting from a subdivision about 10 years ago. The house was built in 2005. Here are the town's assessments:
Land $4,925
Building $27,700.
Combined $32,625
The city provided the information that the house cost $350,000 to build in 2005. A nearby vacant lot is for sale for $1,150,000. Let's say that it will bring $1,000,000. Let's say that the house is still worth the $350,000 it cost to build (houses depreciate at 1.5% per year, but at the same time, replacement costs rise; the replacement cost is less relevant than the depreciated value). The house is 26% of that total; the land 74%. And that's for a relatively new house!
| Assessment |
Value |
Assessment % Value |
Taxes 2011 |
Tax as pct of Value |
|||
| Land |
$4,925 |
15% |
$1,000,000 |
74% |
0.5% |
$76 |
0.008% |
| Bldg |
$27,700 |
85% |
$350,000 |
26% |
7.9% |
$429 |
0.123% |
| Combined |
$32,625 |
100% |
$1,350,000 |
100% |
$506 |
||
| ratio |
15.8 to 1 |
15.4 to 1 |
|||||
Taxes are low in this town -- $500 for the property I've described. The bill for trash pickup arrives separately, as does the cost of water/sewer. Year-round trash pickup runs $255 -- over half of the property taxes on this particular property -- but for some "folks" is more than their city property tax! -- and water-sewer runs $600. (The property taxes are deductible; the trash pickup and water/sewer payments are not, unless one rents one's property out, which many people do.)
City property taxes do not pay for the schools; those are financed through county taxes, which, interestingly enough, are based on different assessments ... the property described above is valued by Sussex County at $27,400 for the land and $82,900 for the building. Go figure. (And you might guess that those who own vacant lots or cottages they've not improved pay a tiny fraction of what owners of new homes in less desirable locations pay -- and you'd be right. And the folks who own manufactured homes on rented land pay far more heavily.)
-----
REHOBOTH BEACH -- Officials are considering a city-wide property reassessment, the first of its kind since 1969.
As a result, property owners' taxes are likely to rise.
"Everybody's assessment is going to go way up," Mayor Sam Cooper said. "The city's tax rate is going to go way down, probably below, I'm guessing, a nickel, rather than $1.80 per 100 assessments."
Cooper said the disparity in Rehoboth will be that back in 1969, the land was relatively cheap, while buildings were relatively expensive, but now that's shifted.
The two reasons Cooper brought the issue up at a recent commissioner's workshop were because of the cost of the assessment and inequities that have crept into the current system.
When he considered proposing a reassessment about 10 years ago, it could have been done at $300,000 to $400,000. Now, Cooper said he has received an offer to have the reassessment done at $40 a parcel, which would add up to $130,000 for the nearly 3,300 parcels in the city.
"(That's) not a small expenditure, but it's not $300,000," he said. "We're in budget time, and if we're going to do this soon, we need to get it into the budget."
The figure needed to conduct the assessment could be included in the budget for the city's next fiscal year. The first budget workshop meeting will be taking place on Jan. 20 at 9 a.m. in the Commissioner's Room at 229 Rehoboth Ave.
Commissioner Stan Mills used to be a property assessor in the city and said reassessments were triggered on individual properties upon applying for a building permit.
"Some of the things we would find when we went out to reassess some properties ... we would find buildings such as a garage that had never been assessed and had been there for 30, 40, 50 years," he said. "So that created an inequity unfair to all those that are paying their fair share."
He also said there were some properties that had buildings which did not have a building permit, so they were never assessed at all, which created an inequity.
Mills said he advocated for a city-wide reassessment when he was an assessor, when it was more expensive to do, and he is leaning towards favoring it now.
"It's a great equalizer," he said. "I think it will give us a truer assessment value and more fair values, especially as it eliminates the discrepancies that have crept into the system over the last 40 years."
Resident Libby Stiff said she is in favor of the reassessment.
"I support what you're doing as a step one towards equalizing a lot of things in Rehoboth," she said.
Depending on who conducts the assessment -- the city hasn't decided whether to put it out for bid or not -- a program would be assembled and the assessment would begin in the summer or early fall. It would be ready for the 2013 tax bill.
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