Cape residents get a tax break

Cape Henlopen taxpayers will get a break this year with a 2.7 cent decrease in the property tax rate.

The seven-member school board approved the tax rate decrease July 9 by a vote of 5-1. Board member Spencer Brittingham was absent and board member Jen Burton voted no. Burton said she voted no because she thought the money could go into an account, such as a building fund, to keep costs down when the district asks voters to approve another referendum.

However, Director of Business Operations Oliver Gumbs said districts are not allowed to bank money for future referendums. Nor can the district keep the debt service rate the same and use extra money to pay off more debt. “Only the state is allowed to prepay off the debt, and we do not receive any savings from them,” he said. “We decided it was more prudent to only ask for what we need.”

A favorable bond market and an expanding tax base helped keep taxes low, particularly in the debt service account that had a 5 cent decrease, officials said.

“When we did the referendum, we estimated high, and bonds came in lower than expected,” said Alison Myers, newly named vice president of the Cape Henlopen school board and also a member of the Citizens' Budget Oversight Committee that reviews district finances.

Myers said the 14-member committee examined district finances and came up with a proposal to lower the debt service tax rate by 5 cents. The debt service tax rate generates revenue to pay principal and interest associated with bonds sold for major capital improvements. The district had estimated a 6 percent interest rate for its new $31 million school, but the rate was 5 percent after the bond sale, district records show.

The state limits the amount of money a district can hold for debt service, Myers said, and the oversight committee recommended reducing debt service tax to avoid exceeding state limits. Too much money saved in a debt service account would be noted as an audit finding by the state, she said.

“A little bit of excess would be fine, but this came in as too large of an amount,” she said. “Holding that amount of money back is not a responsible use of taxpayer money.”

There is about $5.2 million in Cape's debt service account; the 5-cent decrease would bring down the amount by about $575,000, closer to the state-approved balance, Gumbs said.

Additionally, Gumbs said debt service drops each year as the district pays off debt. A $265,000 bond was retired in March 2014, he said.

A match tax for technology will also be reduced, according to the proposal. The technology match tax rate was established to raise local funds to be matched with state funds for technology purchases. The state stopped matching funds in 2001 but allowed school districts to continue collecting a local share tax at a reduced rate. Cape's technology tax rate is proposed to drop .1 cent, bringing it to the 3.15 cent rate maximum allowed by the state, Gumbs said.

Slated for an increase is another set of match taxes. The increase would pay for resource teachers, often referred to as Minner teachers. The proposed tax rate includes a .2 cent increase to pay for four reading resource teachers, one at each of the district's elementary schools, and a .1 cent increase to pay for a middle school mathematics resource teacher at each of the middle schools.

Also proposed to increase is a tax rate for minor capital improvements, which would go up 2 cents. The fund provides revenue to maintain facilities and to ensure compliance with health and safety standards. Director of Administrative Services Brian Bassett said minor cap funds will be used throughout the district for paving repairs, HVAC repairs, asbestos abatements, roofing repairs, flooring repairs and miscellaneous mechanical repairs.

Other tax rates will stay the same. An increase in the current operating expense can be done only through referendum; this year's rate stays flat at $1.628, but when voters approved a referendum in 2014 for a new elementary school they also approved an increase to operating expenses to pay for teachers and administrators at the new school. The operating expense tax rate is slated to increase by 17 cents by 2017 when staff for the new school are hired.

Tuition tax covers costs for special needs students in the district and those sent for instruction outside of the district. This includes costs for the Sussex Consortium, the Delaware Early Childhood Center, Intensive Learning Centers, Sussex Orthopedic, the Sterk School and residential programs. The district can adjust the tax rate depending on how many special needs students are in the district. This year the tuition tax rate stays flat at 88 cents.

Taking into account increases and decreases for all tax rates, Gumbs suggested the board reduce the total tax rate by 2.7 cents for a total tax rate of $3.04 per $100 of assessed value.

According to district property tax data, the taxable assessed value of an average residential unit is $22,464 with an average school tax of $684. The average resident would save about $6 a year as a result of the decrease.

Superintendent Robert Fulton said even if the district presents voters with a referendum in the near future, reducing the tax rate now is important.

“The right thing to do is give back some more now,” he said.

Assessments up

Property tax data provided by the district shows a nearly 4 percent increase in the tax base, about $43.4 million more in taxable property more than last year. This translates to more than $700,000 more in revenue for the district.

Myers has been a member of the Citizens' Budget Oversight Committee for three years and welcomes the increase.

“This is the first year that we've seen an increase in assessments that I can remember,” she said.

The $700,000 revenue increase should help keep costs down when the board approves a referendum for improvements to the district's four existing elementaries, she said.

Chris Keeler, director of assessments for Sussex County, said single-family and condo units continue to rise in the coastal area.

“That's our busiest area,” he said.

New homes in Sawgrass, Coastal Club, Senators and condos at Canal Point have all added more homes and taxable property to the area.

Board member Burton also works as a property manager in Rehoboth Beach where she said it is not just new homes that increase the tax base. “Look how many small cottages are being converted into large homes. Those are assessed higher,” she said.

Renovations and improvements to businesses also result in a higher assessment, she said.

The increased assessment is a boon to the district that Gumbs said he does not take for granted.

“If the economy goes south, we will review the impacts on an annual basis and adjust accordingly,” he said.