HB 11 — AN ACT TO AMEND TITLE 9 OF THE DELAWARE CODE RELATING TO NEW CASTLE COUNTY PROPERTY TAX RATES.

Summary

This Act represents the work and recommendations of the Local Service Functions Task Force created by House Concurrent Resolution No. 54 of the 150th General Assembly (“Task Force”). The Task Force held 17 meetings during 2019 and 2020 and after considerable research and discussion, the members of the Task Force unanimously approved recommending these changes to the New Castle County budgeting process. In order to implement these changes for the Fiscal Year 2023 budget (“FY 23 Budget”), the first deadline in this Act that New Castle County must meet is January 31, 2021. This Act revises the process by which the New Castle County tax rate for owners of real property in municipalities is calculated so that the tax rate more fairly attributes the cost of services to property owners in municipalities and the unincorporated area. This Act is modeled on the process that has been used successfully in Prince George’s County Maryland for several decades. This Act does not affect mutual aid agreements because mutual aid agreements do not impact property tax rates. This Act creates 2 processes to determine the degree that a local service function (“LSF”) is fully or partially performed or financially supported by a municipality instead of New Castle County and to calculate the property tax rate for real property in each municipality based on that determination. There is 1 process for fire company contributions and 1 process for all other local service functions. The process for fire company contributions was enacted by House Bill No. 264 of the 150th General Assembly (“HB 264”) and is already in effect. This Act creates the process for all other local service functions, which will be implemented beginning for New Castle County’s FY 23 Budget and allows time for the necessary calculations and the development of forms and procedures. There are 3 different effective dates in this Act. The sections that are effective immediately and on January 1, 2022, keep current law in effect for the Fiscal Year 2022 budget (“FY 22 Budget”) process while allowing the new process to be developed and implemented for the FY 23 Budget. The sections that are effective July 1, 2022 reorganize and revise provisions for clarity and to apply to future budgets. Specifically, this Act does all of the following: Section 1 takes effect immediately and revises current law to update definitions and make technical corrections to conform existing law to the standards of the Delaware Legislative Drafting Manual beginning for the FY 23 Budget. Sections 2 and 4 take effect immediately and create new subparts of Subchapter III of Chapter 11 of Title 9 to create a clear subpart for local service function calculations and a clear subpart for general budget sections. Section 3 takes effect immediately and creates a new process to calculate the property tax rate for real property in municipalities for local service functions other than fire protection beginning for the FY 23 Budget. The range of services that can be local service functions is substantively unchanged, but where current law anticipates that a municipality provides all or none of a service, this Act recognizes that there are different degrees of performance of a service, some of which may be provided by a municipality, and some which are provided by New Castle County. The new process to calculate the property tax rate for local service functions is similar to the process for fire protection but does not consider the municipality’s cost and is based on New Castle County’s cost to provide the local service function, reduced by fees, grants, and other revenue that supports the specific service and increased by applicable indirect costs. This Act creates specific calculations that New Castle County will use to determine the county property tax for real property in a municipality based upon the municipality’s degree of performance of a service that New Castle County would provide if the municipality did not. This Act also creates a specific process, with deadlines, that New Castle County and municipalities will use during each budget cycle to determine the individual LSF tax rate for real property in each municipality. This Act also creates a binding, non-appealable dispute resolution process for disputes regarding New Castle County’s level of service determinations. Sections 5 through 9 take effect on January 1, 2022. Sections 5 through 8 revise current sections of Title 9 to be consistent with the new process and terminology enacted in Sections 1 and 3 of this Act. Under this Act, New Castle County must adopt the individual LSF tax rates for real property in municipalities as part of the annual budget process. These Sections also make technical corrections to conform existing law to the standards of the Delaware Legislative Drafting Manual. Section 9 creates the Local Service Function Review Committee. The Local Service Function Review Committee will meet annually to review the LSF calculation procedure and prepare a report that includes any recommendations for improvements. Section 10 takes effect on July 1, 2022, and revises Chapter 11 of Title 9 to remove the interim provisions and provide for all of the following: 1. Revises and clarifies how to determine if performance of a LSF should be used to calculate the property tax rate in a municipality. There are no changes to current law regarding how responsibility for starting or stopping a specific LSF is transferred between a municipality and New Castle County. This Section updates whether a municipality or New Castle County is responsible for all or part of a LSF by setting the baseline as how responsibility is set forth in New Castle County’s approved budget for FY 23 Budget, which is based on agreement between New Castle County and each municipality or the arbitration panel’s determination of any dispute. Future changes in whether a municipality or New Castle County perform all or part of a LSF, other than fire protection which is financially supported but not directly performed by a municipality, are handled as follows: A. If New Castle County performs the LSF under the FY 23 Budget and a municipality subsequently begins performing the LSF, then the municipality and New Castle County may pass ordinances transferring responsibility for performance of the LSF to the municipality. B. If a municipality performs the LSF under the FY 23 Budget and later desires to stop performing the service, then the municipality and New Castle County may pass ordinances transferring responsibility for performance of the LSF to New Castle County. C. If a municipality performs the LSF under the FY 23 Budget and later desires to increase or decrease its degree of performance, then the municipality provides notice to New Castle County by August 1 to be effective for New Castle County’s next fiscal year. D. If a municipality performs a service that is included in the New Castle County General Operating Budget, the municipality may request that the service be classified as a LSF and the municipality may demand arbitration if New Castle County and the municipality cannot reach agreement. E. If New Castle County establishes a new LSF, the annual negotiation and dispute resolution process will apply if a municipality performs that service. 2. Transfers the fire service provisions from § 1102(e) of Title 9 to § 1126(c) of Title 9 so that all local service function calculations are in the same section. 3. Revises deadlines in § 1128 of Title 9. The deadlines enacted in Section 3 of this Act reflect the additional time needed to transition to the new process. This section revises the deadlines so they are appropriate for the budget process once this new process is established. This section also revises §§ 1101A, 1125, 1126, and 1128 of Title 9 to repeal the language providing that provisions are effective beginning for the FY 2023 budget that was necessary to keep current law in effect for the FY 22 Budget process while allowing the development and implementation of the new process.

Bill Text

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This bill amends property tax laws in New Castle County by considering municipal performance in local service functions when determining property tax rates.

• § 1125

  none → (a) Beginning for the Fiscal Year 2023 budget, in determining the New Castle County property tax rate for real property in a municipality, New Castle County shall consider the degree that a local service function is fully or partially performed or financially supported by the municipality instead of New Castle County under § 1102 and § 1128 of this title.

  Establishes criteria for adjusting property tax rates based on local service functions provided by municipalities.

• § 1125

  none → (b) Beginning for the Fiscal Year 2023 budget, New Castle County shall establish a property tax rate for real property in a municipality based on the degree of any local service function fully or partially performed or financially supported by the municipality instead of New Castle County under § 1102 and § 1128 of this title.

  Mandates that property tax rates reflect the extent of municipal support in providing services.

• § 1126

  none → (a) Beginning for the Fiscal Year 2023 budget, New Castle County shall calculate the net county LSF cost for each local service function.

  Requires calculation of the net cost of local service functions for determining property tax rates.

• § 1126

  none → (b) Except as provided for fire protection under subsection (c) of this section, beginning for the Fiscal Year 2023 budget, New Castle County shall convert the net county LSF cost for each local service function into a real property tax rate for each municipality and the unincorporated area.

  Establishes a methodology to convert service costs into property tax rates.

Action History

1. February 23, 2021

   Signed by Governor

2. January 28, 2021

   Passed By Senate. Votes: 21 YES

3. January 27, 2021

   Reported Out of Committee (Executive) in Senate with 2 Favorable, 4 On Its Merits

4. January 27, 2021

   Assigned to Executive Committee in Senate

5. January 27, 2021

   Passed By House. Votes: 40 YES 1 ABSENT

6. January 26, 2021

   Suspension of Rules in House

7. January 21, 2021

   Reported Out of Committee (Administration) in House with 4 Favorable, 1 On Its Merits

8. December 11, 2020

   Introduced and Assigned to Administration Committee in House

Sponsors

• David P. Sokola · Primary
• Kevin S Hensley · Primary
• Bryan Townsend · Cosponsor
• Edward S. Osienski · Cosponsor
• Michael F. Smith · Cosponsor
• Paul S. Baumbach · Primary

Votes

Subjects