Special tax district on table

Special taxing districts within developments continue to generate interest locally. Developers on Tuesday asked Sussex County Council to consider legislation that would allow them to create a district near South Bethany to fund infrastructure costs.

Jack Haese is a project manager with Michael T. Rose Company, for The Estuary, a 1,052-lot community slated to be developed adjacent to the Assawoman Wildlife Refuge outside of South Bethany. He briefed council on the concept without directly citing wishes to create a taxing district within the controversial community.

Taxing districts are created within communities to finance public projects, such as road improvements or park enhancements. Only property owners in that development pay the tax to offset the development’s impact on the community.

The concept is gaining popularity in Delaware among developers, who are being asked to pay millions for public improvements, and town officials who historically have relied on development dollars to expand infrastructure after the fact. Developers say upfront public improvement costs can tack thousands onto the price of a home.

Bob Harris, developer with Gulfstream overseeing the Millville by the Sea project, said state transportation officials are asking for more than $25 million to pay for improvements on Route 26 and its back roads.

“Everybody says developers pay nothing,” Council President Dale Dukes (D-1st) offered Tuesday. “I beg to differ.”

Council did not take a vote on Tuesday but most on the council seemed to support the concept. George Cole (R-4th) was alone in his worries that council was catering to the development community by allowing lobbyists to hold the podium for nearly one hour. While seemingly supporting a workshop, council did not set up a time for further discussion.

Tuesday’s discussion was, in fact, a continuation of recent legislative discussions on special taxing districts. The towns of Millville and Milford, following the leads of Bridgeville and Millsboro, asked the state legislature earlier this year to approve charter changes to allow them to create special tax districts. Those bills were not acted upon before the General Assembly adjourned its six-month session last month and will wait until January for potential approval.

Sussex County would need a similar change to create a special district.

In creating such a tax district, governments can sell bonds to pay for public projects and repay those bonds with taxes levied on homes and undeveloped lots within large-scale communities, such as The Estuary. Towns and counties can reimburse the developer for road and sewer improvements, for instance, and put that money toward other public projects, such as adding more police vehicles or building a park.

Haese said that some special tax bonds in Maryland helped pay for asbestos removal in an area school.

The bonds are protected by liens on the property.

Bridgeville and Millsboro have created the only two development tax districts in the state. Single-family homeowners in Bridgeville’s Heritage Shores pay $1,040 annually, with owners of townhomes paying $700. The developer pays anywhere from $900 to $1,400 for undeveloped lots.

The Millsboro and Bridgeville tax districts, however, are more restrictive than the plan for The Estuary, allowing officials only to pay for improvements on city-owned streets, officials said Tuesday. A desired plan for The Estuary would allow the bond money to be used for public improvements on streets such as Route 26 and its back roads, which are controlled by the state.