Sussex council against school assessment fee
Sussex County Council will not move forward with an ordinance to create a school impact fee for new development in the county.
Although no formal vote occurred Jan. 30, consensus among council members was that a voluntary school assessment would be a new tax. As proposed, the one-time impact fee would be assessed to developers of new major subdivisions.
The possible ordinance came to be on council’s agenda after Sen. Russ Huxtable, D-Lewes, introduced a bill last session that gives Sussex County the tool needed to enact a VSA to address the impact of residential development on school capacity. The bill had strong bipartisan support in the General Assembly, passing 39-1 in the House and 18-2 in the Senate. It was signed into law last summer by Gov. John Carney.
Under a VSA, residential developers would pay a fee per unit built to the Department of Education on behalf of an impacted school district when the district lacks the capacity to serve additional students that result from new developments. VSA funds are released to districts to help pay for construction projects that increase capacity, for minor capital improvements and to lessen the debt service.
A VSA does not apply to low-income housing or 55-plus communities, and is voluntary because developers have the option of donating to the district a piece of land at fair market value. It would only be applied to new construction and not be assessed to existing homeowners.
Cape Henlopen School District Superintendent Bob Fulton said previously that Sussex is the only county in Delaware that hasn’t enacted a VSA or similar impact fee.
Councilman Mark Schaeffer kicked off discussion by saying he supports kids and teachers, but he cannot support a VSA.
“Building classrooms is the responsibility of the Legislature of the State of Delaware, it’s not the responsibility of the county,” he said. “Maybe the state Legislature should fix the problem instead of kicking the can down the road. It’s as clear to me today as it was 40 years ago that the way we fund schools in the State of Delaware is broken and has been broken for decades.”
Schaeffer pointed to the state’s recent decision to approve a land purchase for Cape Henlopen School District to build a new district office, but denied requests for more land for future growth and more classrooms at the high school.
He said the assessment is a tax that will most affect the lower-middle class and the middle class. He said his back-of-the-napkin calculation determined the fee would be about $17,000 to $18,000 per house, which would be cost-prohibitive for people who are trying to buy a $200,000 home. The fee would be the same no matter the cost of a home, he said. Meanwhile, he said people buying a $700,000 home in a 55-plus community would be exempt from the VSA.
“That’s not equitable and not fair,” he said.
Estimated VSA figures provided by Cape Henlopen School District show the fee per unit varies by district, from as low as $7,828 in Delmar and Laurel to as high as $15,655 in Cape Henlopen and Indian River. Department of Education spokesperson Alison May noted a VSA cannot exceed 5% of the cost of a residential unit, so a $200,000 home could only have a maximum VSA of $10,000.
Councilman John Rieley agreed with Schaeffer’s estimate of the cost per home. He said a previous estimate of $2,000 per unit is inaccurate. In addition to a VSA, he said buyers are also required to pay 4% transfer tax, which is highest in the nation.
“All of this is in the background of reassessment, which is creating a lot of uncertainty for a number of our people as far as what their taxes should be going forward,” he said.
He said this proposal shouldn’t be coming to Sussex County when the state is flush with money.
“The state has been running a billion-dollar surplus for several years now,” he said. “It is their responsibility to fund schools, not the county.”
Council President Mike Vincent said a VSA would not help with the affordability of homes in Sussex County.
“It could have the opposite effect and amplify it,” he said.
He also said a VSA would not be equitable to all students in the county.
“It shortchanges many students based on where they live,” he said. “Only school districts where development takes place will see added funding. This means schools on the west side of Sussex County will see little to no additional funding. This creates a system of winners and losers.”
He said every school district in the county has at least one school that’s considered over capacity.
“Everyone should qualify for it,” he said. “This law is fundamentally flawed.”
Councilman Doug Hudson recused himself from discussion.
School leaders disappointed
Despite Vincent’s opinion, the boards of the county’s seven public school districts, including all western Sussex districts, passed resolutions that were sent to Sussex County Council asking for support of a VSA in the months leading up to the Jan. 30 discussion.
As word of council’s decision made its way across the county, many aired their disappointment.
“It is clear there is some misunderstanding about the program and the benefits to our school districts in response to the rapid, exponential growth in our area,” said Dr. Sara Hale, chief financial officer of Milford School District, a district that is split between Kent and Sussex counties. “Recognizing the need, New Castle and Kent counties both have similar, longstanding programs in place to mitigate the impact of said growth, while Sussex does not. We will continue to support all efforts to have this very important program enacted.”
Even administrators in western Sussex County were unhappy with the decision.
“Something is always better than nothing, as we all know,” said Dr. Andy O’Neal, superintendent of Delmar School District. “Being on the western side of the county, we would not expect the same amount of funding from VSA because at this time we do not have the amount of growth as our neighbors on the eastern side of the county.”
Cape Henlopen School District Superintendent Bob Fulton described county council’s action as a missed opportunity.
“VSA is a fee charged to developers – and most likely passed on to the buyer of a home in a development – to be used by the school district, if it has reached its school capacity thresholds,” Fulton said. “This would allow us, and other districts in Sussex County, to use funds collected by the county from developers to offset ongoing district construction costs due to growth and infrastructure concerns.”
He continued, “Most importantly, if you already live here and are not purchasing a home in a development impacted by this legislation, you can only benefit from a school district being able to offset construction costs by using these funds.”
The Cape school board has set a referendum for Tuesday, March 26, to seek a tax increase to all district residents to pay for the purchase of land to move the school district office. While VSA funds wouldn’t be eligible for this project, the future plan to use the district office footprint to expand Cape Henlopen High School would.
Fulton vowed to continue to fight for property owners so further tax increases can be minimized.
Indian River School District Superintendent Dr. Jay Owens said his district has grown by 1,300 students in recent years, which has created capacity issues. It is the main reason the district is building a new Sussex Central High School building, he said.
“Market fluctuations and supply chain issues caused by COVID have resulted in the Sussex Central construction project coming in millions of dollars over budget,” he said. “This is a shortfall that we continue to address. Availability of VSA funds would help us close these types of gaps while lessening the burden on our district taxpayers.”
He said schools in Kent and New Castle counties have benefited from school impact fees for years.
“Sussex County is the fastest-growing area of the state, but its public schools are at an extreme disadvantage due to this lack of impact fees,” he said. “Under the current system, our only solution is to ask our current taxpayers for additional funding through the referendum process.”
Huxtable said council’s claim that it is a tax is inaccurate. A tax collects generalized revenue that can spent on any purpose, while a fee is collected exclusively to cover the cost of a specific service, he said.
He said council’s assertion that eastern Sussex school districts would see more funding is accurate, but that’s the purpose of a VSA.
“It is true that school districts where development is occurring would see added capital funding. That’s precisely because those schools need expansion due to the growth and impacts created by development and new home construction,” he said. “Schools where development is not happening are less likely to become overcrowded and therefore less likely to need this added financial support. That is until the growth of the county expands into their areas and they then see the impacts. Why not plan ahead like the other jurisdictions in our state?”
Huxtable also said there are ways to address council’s concerns.
“Fifty-five-plus communities were exempted, [but] many of our communities aren’t officially designated that way,” he said. “If [county council members] don’t want to enact this because they believe developers and builders will then market and build exclusively that way to get out of this fee, amendments can always be made if the intent is being circumvented. If this tool isn’t exactly what they’d like to adopt, they are always welcome to change their land-use rules and adopt their own set of Adequate Public Facilities Ordinances like Kent and many other jurisdictions across the country. They could even propose a different fee structure; even call it something else. They have that ability.”
He said taking no action is not the right move.
“They are welcome to propose something, anything to help with the situation,” he said. “By not taking the VSA up – or something of their own creation – they seem to be indicating everything is just fine as it is. That is not what has been indicated to me and hence the reason for our legislation to put that tool in their toolbox. They don’t have to take up that tool, but they should do something over nothing.”
Estimated VSA per unit
Cape - $15,655
Delmar - $7,828
Indian River - $15,655
Laurel - $7,828
Milford - $9,785
Seaford - $9,393
Woodbridge - $9,785
Source: Cape Henlopen School District
