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News Journal confirms referendum funding gap, opens door to broader investigation

February 15, 2012

The News Journal yesterday verified the observation on this blog last week that:

…in the 2009 Appoquinimink referendum, the state contributed $3 for every $1 from Appo. But for Red Clay’s current referendum, the state is contributing only $1.50 for every dollar from Red Clay.

It was pretty clear from the referendum documents that this was the case. But it is nice to receive independent confirmation from professional journalists.

Raising more questions than answers, the News Journal report also included links to state law here and here, providing formulas for calculating the state share of referendums. State worksheets for the Appo and Red Clay calculations were not provided.

The law prescribes a dizzying series of calculations which are difficult to verify independently. Each step itself requires initial calculations using tax and market information that is not readily available. I worked on it for about an hour last night and didn’t get very far, lacking information required by the formula. At some point I will put up a post laying out the steps in detail, but I can’t devote any more time to it right now.

The formulas are based on assessed value of property in the district. So even if the formulas are followed, the result can be manipulated significantly by the assessment values, and indications are that this is in fact the case.

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I made an unscientific calculation comparing the assessed value of a house in Hockessin vs. a house in Appo with a slightly higher market value. Contrary to my expectations, the Appo house was assessed more than 20% lower than the Hockessin house.

In an earlier and more professional effort than mine, the News Journal provides many more such examples confirming my comparison. Unfortunately the link to the News Journal’s excellent Special report on reassessments is broken.

However, the 2007 article by Mike Chalmers is available to regular citizens via the NCC public library (login requires NCC library card). Chalmers states: “The financial problems of local governments are exaggerated by outdated assessments.”

In New Castle County, real estate assessments are based on 1983 values. What was the value of a home in Appo in 1983, which may not have existed yet? Route 1 was opened in 1978, and the bridge was opened in 1995. Furthermore, in 1983 the nation and Delaware was still reeling from a deep recession, and the Appo region had not yet established itself as the bedroom community for the exploding growth of Delaware’s banking industry that it later became.

In residential property, seniors are also eligible for exemptions. I assume there is a higher concentration of seniors in Red Clay than Appo. I’m not sure what effect this has on the calculation of the state share.

The News Journal yesterday also suggested taking a look at including business property assessments, implying that Red Clay had enough business property value to account for the difference in the state referendum funding. I took a preliminary look for this information, and found that the state reports total assessment values per district up until 2007-2008. But in following years the assessment information, key to the funding formulas, was dropped from Delaware’s Educational Statistics Report. Perhaps it has moved somewhere else?

But the latest assessment numbers from those reports show that in 2007-2008, Red Clay total assessment was $5,045,915,844 vs. 1,500,809,472 for Appo, a ratio of about 3.3 to 1, which is not nearly as high as I had expected. And once the number of households are taken into account, the assessed value in Red Clay may be brought much closer to parity with Appo.

Businesses may in fact be taxed at a lower effective rate, since some businesses are eligible for exemptions.

One very useful document is this: NCC property tax rates per school district.

Presumably there was some kind of state committee charged with performing these calculations, and possibly even a public announcement. But for most citizens, obscurity appears little different from secrecy.

I have an idea that the blogging community can crowdsource the verification of the funding formulas. If I get the time to follow through, I will put up a worksheet page for this purpose, where anyone can contribute missing information for the calculations (verifiable of course).

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