MSD Board Hears Recommendation for Tax Increase

At their regular monthly meeting, Milford School District Board of Education heard a presentation from Tammy Smith, Chief Operating Officer, regarding the tax warrant for the upcoming year. Smith recommended that the district consider raising taxes for 2027.

“Every year, school boards are required to approve the tax rates for the following year,” Smith said. “They are due to the counties by the second Thursday of July for tax bills that go out in August that are due in September.”

There are four components that make up school taxes in Delaware. Current expense is the main source of operating income that covers the local share of salaries and other operational costs like insurance, technology, buildings and grounds plus other expenses. That rate can only be changed by referendum vote of taxpayers.

“I’m sure you are all aware of the reassessment process that had not happened in about 50 years and now we are in the position that this will happen every five years,” Smith said. “There is legislation going through the General Assembly on that, so it keeps changing. The last current expense referendum here in the district was in 2015, but those tax rates were adjusted for the new reassessment.”

Because going to referendum every year is not feasible, the state requires districts to put aside some of the current expense funding each year. Districts must also retain a reserve to ensure they can meet the local share of payroll in the event of a fiscal shut down.

“Next is debt service which provides funding for the principal and interest payments on our bonds,” Smith said. “We can only issue bonds when we go to a major capital referendum and it is approved by the taxpayers. The taxpayers are not voting for a certain rate, but to authorize us to borrow the funds.”

Tuition tax was the third component discussed by Smith and that is funding used to provide services for students with special needs. Smith provided the example of students who were sent to Sussex Consortium or Howard T. Ennis for services. The districts that manage those schools can charge fees for those additional services.

“Those bills fluctuate every year with different expenses, different numbers of students, so to a certain extent, they can be unpredictable,” Smith said. “We could have a student move into the district that has a residential placement need which we pay 30 percent and the state pays 70 percent.”

The final component was match taxes which are set by the school board each year. Milford has historically collected a match tax for major capital improvements which are used for regular repairs and maintenance in the district. The state covers 60 percent of the costs with the district paying 40 percent. Other match taxes include technology, extra time, math resource specialists, reading interventionists, opportunity funds to support low-income and English learners and athletic trainers.

Smith explained that the new property assessments would only increase the district’s funding by 2.84 percent in Sussex County and 0.80 percent in Kent County. Smith suggested increasing debt service, tuition and minor cap taxes. She also suggested adding match taxes for extra time, reading resources, math resources, reading interventionists and athletic trainers. This would increase property taxes from 0.0749 per $100,000 assessed value in Sussex County to 0.0974. In Kent County, taxes would increase from 0.0704 per $100,000 to 0.0931.

“This would increase the property tax amount in Sussex County by $32.84 per year and in Kent County by $34.79 per year,” Smith said. “This is just a preliminary tax presentation, but one big concern I have is that I was notified by Sussex County that we have about a $5 to $6 million property tax appeal that could be reduced to zero which will significantly affect the calculations.”

Board member Jennifer Masotti asked if the board had healthy enough reserves to cover the additional costs. Smith said they did, but that technology costs continued to increase. Board Vice-President Matt Bucher felt that raising taxes at this time would not be prudent.

“The administration is doing their job in presenting us both options and relevant information to make the best possible decision,” Bucher said in an interview after the meeting. “Mrs. Tammy Smith, in particular, is to be commended for her due diligence in forecasting where the district may incur additional costs, and for her work on the annual budget, which will continue for the next couple months. These are things we needed to know.”

Bucher, whose term ends on the board in July, pointed out he will not be voting on the tax warrant. Smith originally wanted the board to vote in June, but the decision was made to wait until July when the new board members take their seat.

“I will not be able to vote on the tax warrant; that vote will happen after my term naturally ends at the close of next month,” Bucher said. “However, Milford School District is one of the financially healthiest districts in the state; reserves are at a record high, and revenues have been increasing year-to-year, simply as a consequence of organic housing growth. We’ve worked hard to get here.”

Bucher felt this was not the time to increase costs for area residents.

“Simply put, I have yet to see a compelling reason not to hold the line on taxes, and I believe the community and therefore the community’s representatives – the board – will see it that way,” Bucher concluded.

Others on the board echoed Bucher’s stance, especially when he pointed out that the budget had not been completed yet.

“I am not speaking for the whole board, but speaking for myself,” Board President Scott Fitzgerald said. “I would rather not add the extra match tax if we don’t have to. Whatever you bring back next month, prepare it both ways so we can compare and discuss it more then.”

Superintendent Travis Moorman explained that something that had been discussed quite a bit was the financial health of the district. He did agree that the district was in very good shape and that increasing the burden on local household budgets should not be taken lightly. He pointed out that the cost of laptops has almost doubled over the last five years and that the district has historically used Title I funds to support staffing, tutoring and other services.

“When it comes to tuition costs, we are at the mercy of other districts that just arbitrarily set their own revenue rates that they charge surrounding districts for those types of services,” Moorman said. “We’ve seen those costs increase significantly.”

The board voted to table the discussion until June when Smith could return with more details on the budget and other options to raising taxes.