DOVER — Officials in Delaware's largest county have agreed to conduct a general reassessment of all real property to settle a lawsuit alleging that outdated assessments have contributed to inadequate funding for schools.

Under an agreement approved by a Chancery Court judge, New Castle County officials will reassess all properties by July 1, 2023, and use the reassessed values for fiscal 2024 property tax bills.

The agreement was reached after Vice Chancellor J. Travis Laster chastised attorneys for Delaware's three counties in November for looking for excuses to delay resolution of the lawsuit. He refused their request to put the case on hold and scheduled a hearing for late March to determine how and when the counties will bring property assessments in line with market values. 

Property taxes are a key funding component for school districts, but state law doesn't require reassessments on any particular schedule. Kent County in central Delaware last reassessed property values in 1987, while northern New Castle County's current assessment dates to 1983. Sussex County, home to million-dollar beach homes in southern Delaware, last reassessed properties in 1974. 

As a result of the outdated assessments, many owners of expensive homes in areas where property values have increased over the past several decades are getting a substantial break, while those living in areas that have become economically depressed are paying more than they should.

In 2018, the ACLU and Community Legal Aid Society sued state and county officials, alleging that Delaware was failing to provide adequate educational opportunities for disadvantaged students. The lawsuit pointed to the dismal performance on standardized tests among children from low-income families, children with disabilities, and children whose first language is not English. It alleged that the state has failed to provide adequate funding for those students, who number in the tens of thousands and are collectively described as "disadvantaged." 

The lawsuit also argued that school property tax collections based on outdated assessments were partially to blame for the lack of funding.

In May, Laster issued a liability opinion finding that the county assessment schemes violated a constitutional requirement that properties be taxed uniformly, and a state law requiring that property be assessed at "its true value in money." The Delaware Supreme Court has interpreted that to mean present fair market value. 

"It has taken decades to get into this problem, and we are committed to fix it," New Castle County Executive Matt Meyer said in a statement issued Monday. 

Meyer emphasized that the county will not use the court ruling as an excuse to raise county tax revenue. 

Local officials have argued that a statewide general reassessment and statewide reassessment policy are needed, rather than a county-by-county approach. They also have pointed out that reassessments are costly and suggested the state should help pick up the tab. State lawmakers have balked at the idea, and Democratic Gov. John Carney declined to include funding for reassessments in his budget proposal for next year.

Under the settlement, New Castle County is allowed to seek an extension if it fails to complete the reassessment by the agreed-upon date despite its best efforts. County officials issued a request for proposals last week from companies who could conduct the reassessment. Sealed proposals are due by March 10, and officials hope to award a contract by May 21.

Meanwhile, Laster has scheduled a Feb. 19 hearing on a proposed agreement to resolve claims against New Castle County by the city of Wilmington, which was allowed to intervene in the lawsuit. Wilmington officials, who base their property taxes on New Castle County's assessment values, argued that the city has suffered financially from the county's failure to conduct a general reassessment.

The plaintiffs have yet to reach an agreement with officials in Kent and Sussex counties on fashioning remedies in response to Laster's liability ruling. That means the judge could proceed with the March hearing and take matters into his own hands.

Meanwhile, Carney announced a settlement with the plaintiffs in October resolving claims against state officials. The settlement requires Carney to seek significantly higher funding from the legislature for disadvantaged students. 

Among other things, Carney was required to propose budgets for next year and the following year that include at least $35 million for disadvantaged students. He must seek appropriations of at least $50 million for the 2023-2024 school year and $60 million for the 2024-2025 school year. He also was required to propose legislation to make the so-called "Opportunity Funding" that his administration first proposed two years ago, after the lawsuit was filed, a permanent fixture in the state budget. A bipartisan bill making the weighted funding program permanent was introduced last week.