Indian River School District lowers property tax rate

Date Published: 
July 18, 2014

Property owners will keep a few dollars in their pocket after the Indian River Board of Education voted recently to reduce the school district’s property tax rate by 5 cents. The tax rate for the 2015 fiscal year decreased from $2.743 to $2.693 per $100 of assessed value.

“We are pleased to offer this tax break to the residents of the Indian River School District,” said Superintendent Susan Bunting in a written statement. “Our parents and community members have always been supportive of our educational initiatives, including lending approval to several major capital improvement and current expense referenda in recent years. Therefore, it is with tremendous gratitude that we not only reduce the tax rate but continue to offer some of the lowest property taxes in Sussex County.”

Property owners would save $5 for every $10,000 worth of property.

“Assume the average assessment is $26,950 for the average taxpayer — $13.48 cents would be average,” said Patrick Miller, IRSD chief financial officer, of the average reduction property owners will see.

Most of the decrease resulted from a reduction in the debt service portion of the tax rate. Although the district was required to sell bonds to finance a series of building expansion projects approved by residents in a Jan. 29, 2013, referendum, those costs were offset by the retirement of bonds from construction projects in 1994 to 1995. That allowed the overall tax rate to be lowered, despite a slight 1-cent increase in the minor capital improvement portion of the rate.

The 1990s project was construction of Selbyville Middle, North Georgetown Elementary and Long Neck Elementary schools.

“Last year was the last payment, so those bonds have been paid in full — principal and interest. Therefore, we do not need to pay that money anymore,” said Miller of the roughly $18 million in bonds now paid off.

“We have to go for a referendum to ask for an increase in current expenses,” such as going into debt to build a new school, he explained.

But after selling those bonds, IRSD is responsible for paying the bill and can assess citizens as needed because they approved that debt.

Taxes are evaluated every year, often with minor increases and decreases that cancel each other out.

On a similar note, voters approved a 14.7-cent tax increase in 2013 to build 38 new classrooms. Of that, 3.2 cents was for construction costs. That will reduce over the next 20 years as IRSD pays the debt, just as the tax rate was reduced this year with the expiration of the 1990s debt. (The other 11.5 cents is a permanent increase to accommodate salaries, teaching materials, utilities and other ongoing costs.)

The IRSD is allowed to tax residents as needed to pay construction debts. But that’s a 6-cent reduction.

That 1-cent increase for minor capital expenses included maintenance for existing buildings, asbestos mitigation and underground utility tanks.

“One cent generates about $140,000” for the district, Miller said. The State of Delaware provides 60 percent of $1.2 million that IRSD can use for minor capital expenses. The IRSD can raise taxes to produce the local 40-percent share.

“We’re not supposed to collect more than the principal and interest due,” Miller said. “We get audited every year on June 30. ‘Do we have enough money to pay bills through Oct. 15?’”

Then it’s determined if the tax rate should increase or decrease.

Miller has reported three total decreases in the past decade, 7 cents in 2008 and one-fifth of a cent (.2 cents, from $2.625 to $2.623) in 2012.

“People are paying attention,” Miller said. “People come up and thank me. ‘What are you thanking me for?’ ‘You lowered the taxes.’”

Residents will see the change on their current tax bills, due Sept. 30.

To calculate their IRSD school taxes, residents should divide their property assessment by 100 and then multiply that number by the tax rate of $2.693. That will determine their overall tax burden from the district for the 2015 fiscal year.