Virginia Local Tax Rates, 2006

Transcription

1 Virginia Local Tax Rates, 2006 Information for All Cities and Counties and Selected Incorporated Towns 25 th Annual Edition John L. Knapp, Ph.D. William M. Shobe, Ph.D. and Stephen C. Kulp In Cooperation with The Virginia Association of Counties and The Virginia Municipal League

2 Copyright 2006 by the Rector and Visitors of the University of Virginia P.O. Box Charlottesville, VA (434) FAX: (434) TDD: (434) 982-HEAR Website: Richmond 700 East Franklin Street, Suite 700 Richmond, VA (804) FAX: (804) TDD: (804) 982-HEAR Southwest College Avenue Wise, VA (540) FAX: (540) TDD (540) Southside 1008 South Main Street Danville, VA (434) (434) FAX: (434) ii Tax Rates

3 Contents Tables... v Introduction... vii Section 1. Summary of Legislative Changes in Local Taxation, Real Property Tax, Real Property Tax Relief Plans and Housing Grants for the Elderly and Disabled, Land Use Value Assessments for Agricultural, Horticultural, Forestal, and Open Space Real Estate, Agricultural and Forestal Districts, Property Tax Exemptions for Certain Rehabilitated Real Estate and Other Exemptions, Service Charges on Tax-Exempt Property, Merchants Capital Tax, Tangible Personal Property Tax, Machinery and Tools Property Tax, Utility License Tax, Cable Television System Franchise Fee, Consumers Utility Tax, Emergency Telephone System Tax, Business, Professional, and Occupational License Tax, Motor Vehicle Local License Tax, Excise Taxes on Meals, Transient Occupancy, Cigarettes, Tobacco, Admissions, and Motor Fuels, Taxes on Natural Resources, Legal Document Taxes, Miscellaneous Taxes, Refuse and Recycling Collection Fees, Residential Water and Sewer Connection and Usage Fees, Impact Fees, Public Rights-of-Way Use Fees, Cash Proffers, FY Miscellaneous Fees, Appendixes A. Facsimile of 2006 Tax Rates Questionnaire B. List of Respondents and Non-Respondents to 2006 Tax Rates Questionnaire C. Websites of Respondents to 2006 Tax Rates Questionnaire D. Percentage Share of Total Local Taxes From Specific Sources, FY iii

4 iv Tax Rates 2006

5 Tables 2.1 Real Property Nominal Tax Rate, Assessment Procedures and Percentage Change in Assessed Value After Last Reassessment, Real Property Effective True Tax Rate, Administrative and Judicial Real Property Assessment Appeals, Real Property Owner Tax Relief Plans for the Elderly and Disabled, Summary of Real Property Renter Tax Relief Plans and Housing Grants for the Elderly and Disabled, Land Use Value Assessments for Agricultural, Horticultural, Forestal, and Open Space Real Estate, Agricultural and Forestal Districts, Property Tax Exemptions for Certain Rehabilitated Real Estate, Property Tax Exemptions for Pollution Control, Recycling, Solar Energy, and Energy Conservation Equipment, Service Charges on Tax-Exempt Property, Merchants Capital Tax, Basic Features, Merchants Capital Tax Provisions About Taxation of Inventories, Rental Vehicles, and Rental Property, Tangible Personal Property Tax for Automobiles and Trucks of Less than Two Tons, Tangible Personal Property Tax on Motor Vehicles, Payments and Assessment Schedules, Tangible Personal Property Tax Rates for Large Trucks Two Tons and Over, Tangible Personal Property Taxes Related to Business Use for Heavy Tools and Machinery, Computer Hardware, and Generating Equipment, Tangible Personal Property Taxes Related to Business Use for R&D and Furniture and Fixtures, Tangible Personal Property Taxes for Farm, Livestock, and Household Property, Tangible Personal Property Taxes for Boats and Aircraft, Tangible Personal Property Taxes for Antique Motor Vehicles, Recreational Vehicles, and Mobile Homes, Machinery and Tools Property Tax, Machinery and Tools Tax: Semiconductor and Forestry Harvest Equipment, Utility License Tax, Cable Television System Tax, Utility Consumers Monthly Tax on Electricity, Utility Consumers Monthly Tax on Telephone, Utility Consumers Monthly Tax on Gas, Utility Consumers Monthly Tax on Water, Emergency Telephone System Tax, BPOL Due Dates and Other Provisions, Specific BPOL Classification Fees and Tax Rates, Taxes and Fees on Peddlers and Itinerant Merchants, Motor Vehicle Local License Tax, Motor Vehicle Local License Tax Decal Displays and Exemptions, Meals, Transient Occupancy, Cigarette, Admissions, and Motor Vehicle Fuel Excise Taxes, Tables v

6 vi Tax Rates 2006

7 Tables (continued) 18.1 Natural Resource Taxes, Legal Document Taxes, Localities Reporting That They Levy a Bank Franchise Tax, Miscellaneous Taxes, Refuse Collection Fees, Recycling Collection Fees, Miscellaneous Refuse Collection Fees, Residential Water and Sewer Connection Fees, User Fees for Residential Water and Sewer, Public Rights-of-Way Use Fees, Total Cash Proffer Revenue Collected and Expended by Purpose, by Locality, FY Miscellaneous Fees, Tables vii

8 viii Tax Rates 2006

9 Introduction FOREWORD This is the twenty-fifth edition of the Cooper Center s annual publication on tax rates levied by Virginia s local governments. This comprehensive guide to local taxes is based on information gathered in the spring, summer, and early fall of The study includes all of Virginia s 39 independent cities and 95 counties and 146 of the 190 incorporated towns. The included towns account for 93 percent of the commonwealth s population in towns. In addition to survey data, the study includes information from two Department of Taxation studies, 2006 Legislative Summary and The 2004 Assessment/Sales Ratio Study; the Auditor of Public Accounts Comparative Report of Local Government Revenues and Expenditures, Year Ended June 30, 2005; and the Commission on Local Governments Report of Proffered Cash Payments and Expenditures by Virginia s Counties, Cities and Towns, ORGANIZATION OF THE BOOK The study is separated into 26 sections. We have reprinted as Section 1 the Department of Taxation s information on 2006 state legislation affecting local taxation, which also is available on the department s website: gov/web_pdfs/2006legislativesummary.pdf (9/22/2006). Sections 2 through 26 cover specific taxes, cash proffers, fees, and service charges. Most of the data came from a detailed questionnaire sent to all cities, counties, and incorporated towns (see Appendix A for a facsimile of the document). Appendix B provides a listing of names, phone numbers, and addresses, when supplied, of respondents and non-respondents to the questionnaire. Appendix C contains local government web addresses provided by questionnaire respondents. Web information is increasingly available for Virginia local governments. This year, all but one of the cities reported a web site. Among the counties, 88 (93 percent) reported a web site. Also, 75 (51 percent) of the 146 responding towns have a web site. Additional information on state and local government finance is available on the Cooper Center s VaStat website: government finance.php. Most of the information at the site is for Virginia, but there are also links for nearby states and national links. (The Schmidt Enterprises, LLC link is particularly useful for finding information for other states.) Appendix D shows the percentage share of total local taxes represented by each specific tax. Information is provided for each city and county and for 35 populous incorporated towns. PUBLICATION NOTES If a table shows, for a particular locality, a different tax than reported in the previous edition, this usually means that the tax has been changed. However, there is always the remote possibility that in one or both years the response was inaccurate or that we made an error. When web addresses are shown they are followed by a date in parentheses indicating the date we last accessed the website. In the tables three dots (...) are used to show there was no response and N/A is used to indicate not applicable. Readers may use the phone list in Appendix B to call local officials in order to obtain clarification and additional detail. STUDY PERSONNEL John L. Knapp, Ph.D., Professor Emeritus and Senior Research Economist in the Business and Economics Section, was the project director. In this capacity he designed and edited the publication and was responsible for final approval of the entire content. Stephen C. Kulp, Research Specialist in the Business and Economics Section, was responsible for all day-to-day work on the project. He refined the new database, administered the survey, translated the results into tables, checked relevant code sections, and made appropriate changes in the text. William M. Shobe, Ph.D., the Research Director for the Business and Economics Section, read the full manuscript and provided valuable suggestions for Introduction ix

10 improvement. Student research assistant James J. Jenkins assisted Kulp with mailing, follow-up, layout, and other aspects of the work. He also assisted Knapp with the editing. Student research assistants Josh S. Levy and Mathew P. Neitzke also provided valuable assistance with follow-up and editing tasks. The Cooper Center Publications Division assisted in many ways. William H. Wood helped with the content and design of the publication flier. Jayne E. Weber designed the cover, consulted on the layout and formatting of the book, and did proofreading. David J. Borszich converted Appendix A to InDesign and assisted with proofreading. Cooper Center employee Albert W. Spengler, who authored this study for a number of years prior to 1991, laid the foundation for the study when it was his responsibility. The questionnaire was reviewed by William J. White, Department of Taxation; Mary Jo Fields, Virginia Municipal League; Joann M. Draughn, Virginia Economic Development Partnership; and John H. Garka, and Betsy Daley, Division of Legislative Services, although the responsibility for any remaining errors is our own. The strong support for this publication by the Virginia Association of Counties and the Virginia Municipal League adds to its acceptance as a basic reference on Virginia local taxes. FINAL COMMENTS We are grateful to the many local officials throughout the Commonwealth who supplied the survey information presented in this study. We thank them for their willingness to provide information and their patience in answering followup questions. Excellent response rates of 100 percent for the cities and counties and 77 percent for the towns could not have been achieved without their cooperation. Please let us hear from you if you have corrections or suggestions for possible changes or additions to future editions. Our addresses and phone numbers are listed below. John L. Knapp Professor Emeritus Senior Economist Business & Economics Section jlk6a@virginia.edu (434) William M. Shobe Director Business & Economics Section shobe@virginia.edu (434) Stephen C. Kulp Research Specialist Business & Economics Section sck7x@virginia.edu (434) Charlottesville October 2006 x Tax Rates 2006

11 Section 1 Summary of Legislative Changes in Local Taxation, 2006 This section summarizes the major changes in the Code of Virginia enacted by the 2006 session of the Virginia General Assembly for those taxes covered in this publication. The summary is based on the Virginia Department of Taxation s 2006 Legislative Summary. The department s study also includes information on state taxes and new provisions governing tax collection and administration that are not reprinted in this publication. The full text of the 2006 Legislative Summary can be found on the web at gov/web_pdfs/2006legislativesummary.pdf (9/1/2006). 1 Additional information can be found in the Virginia Association of Counties 2006 Regular Session Legislative Summary, located on the web at pdfs/legislative/legsummary06update.pdf (9/5/2006), and the Virginia Municipal League s 2006 Legislative Report, downloadable at (9/1/2006). This section provides a synopsis of enacted legislation. It is for informational purposes only. The listing is not a substitute for actual Department of Taxation regulations, state law, or local ordinances. TANGIBLE PERSONAL PROPERTY TAX Virginia Energy Plan Effective Date: Property placed in service on or after July 1, 2006 Code Sections Amended: , :6, , , , and Code Sections Added: through , through , , through , , , through , , , , , through , and through Senate Bill 262 (Chapter 939) creates a Virginia Energy Plan and exempts certified pollution control equipment and facilities consisting of equipment used in collecting, processing, and distributing, or generating electricity from, landfill gas or synthetic or natural gas recovered from waste, including equipment used to grind, chip, or mulch trees, tree stumps, underbrush, and other vegetative cover for reuse as landfill gas or synthetic or natural gas recovery from waste. The legislation also expands the definition of certified pollution control equipment and facilities to include, but not be limited to, any equipment used to 1 Whenever a website is shown in this study, we include in parentheses the last date that we accessed the site. grind, chip, or mulch trees, tree stumps, underbrush, and other vegetative cover for reuse as mulch, compost, landfill gas, synthetic or natural gas recovery from waste or other fuel, and equipment used in collecting, processing, and distributing landfill gas or synthetic or natural gas recovered from waste, whether or not such property has been certified to the Department of Taxation by a state certifying authority. These bills also include an individual income tax deduction for purchases of certain tangible personal property. Separate Classifications of Machinery and Tools Used in Business Effective Date: July 1, 2006 Code Section Amended: Senate Bill 417 (Chapter 375) provides a local real and personal property tax exemption for certified pollution control equipment and facilities placed in service on or after July 1, 2006 that consist of equipment used in collecting, processing and distributing or generating electricity from landfill gas or synthetic or natural gas recovered from waste, including equipment used to grind, chip or mulch trees, tree stumps, underbrush and other vegetative cover for reuse as landfill gas or synthetic or natural gas recovered from waste. All-terrain Vehicles and Off-road Motorcycles: Exempt from Personal Property Tax Effective Date: July 1, 2006 Code Sections Amended: , , , , , , , , , , , , , , , and Code Sections Added: , , and , , and Senate Bill 191 (Chapter 896) requires non-dealer owners of all-terrain vehicles and off-road motorcycles powered by gasoline or diesel engines displacing more than 50 cubic centimeters and purchased as new on or after July 1, 2006, to title their vehicles with DMV. Code sections and are amended to exempt all-terrain vehicles and off-road motorcycles from local property tax. Section is amended to exclude all-terrain vehicles and off-road motorcycles from the definition of qualifying vehicle for purposes of personal property tax relief. Summary of Legislative Changes in Local Taxation 1

12 Classification of Watercraft Used for Business Purposes Effective Date: July 1, 2006 Code Section Amended: House Bill 327 (Chapter 400) provides for the following additional separate property tax classifications of boats and watercraft: those weighing five tons or more and not used solely for business purposes; those weighing less than five tons and not used solely for business purposes; and those weighing five tons or more and used solely for business purposes. Classification of Certain Aircraft Effective Date: January 1, 2006 Code Sections Amended: and House Bill 862 (Chapter 200) and Senate Bill 521 (Chapter 231) create a separate classification for local property tax purposes for aircraft having a gross empty weight equal to or greater than 20,000 pounds and that are not owned and operated by scheduled air carriers recognized under federal law. Rate for Generating Equipment of Electric Suppliers Effective Date: January 1, 2007 Code Sections Amended: Senate Bill 404 (Chapter 517) provides that generating equipment of electric suppliers utilizing wind turbines may be taxed by the locality at a rate higher than the real estate rate but shall not exceed the personal property rate for the respective locality. REAL ESTATE TAX Exemptions for Elderly or Disabled Effective Date: July 1, 2006 Code Sections Amended: House Bill 121 (Chapter 585) makes the following changes to the structure of the exemption and deferral programs that localities may offer to the elderly or handicapped: 1) Adds the cities of Norfolk and Richmond to the list of cities that are currently permitted to use $200,000 as their maximum net combined financial worth amount in determining eligibility for the exemption and deferral programs and increases that amount for all cities listed to $350,000. Removes the counties of Fauquier and Stafford from that list. 2) Adds the counties of Clarke, Fauquier, and Stafford to the cities, counties and towns in Northern Virginia that are currently permitted to use $340,000 as their maximum net combined financial worth amount in determining eligibility for the exemption and deferral programs, and raises the amount to $540,000 for those localities. 3) Delineates, by name, the localities in Northern Virginia eligible to use the higher total combined income amount in determining eligibility for the exemption and deferral programs. Constitutional Amendment to Exempt Certain Property from Taxation Effective Date: Chapter 572 requires a constitutional amendment to become effective (Proposed by SJ 87). Code Section Added: Senate Bill 357 (Chapter 173) provides for a referendum at the November 2006 election on approval of a proposed constitutional amendment relating to property tax exemptions. The proposed amendment authorizes the General Assembly to enact legislation that will permit localities to provide a partial exemption from real property taxes for real estate and associated new structures and improvements in conservation, redevelopment, or rehabilitation areas. Senate Bill 358 (Chapter 572) authorizes localities to provide for the partial exemption from taxation of new structures or other improvements to real estate located in redevelopment or conservation areas or rehabilitation districts. The partial exemption would be a percentage of the increase in assessed value as a result of the new structure or improvement or an amount not to exceed 50 percent of the construction cost of such structure or improvement. Assessments for Open Space Property for Golf Courses Effective Date: July 1, 2006 Code Section Amended: House Bill 916 (Chapter 817) declares that public and private golf courses are real estate devoted to open-space use for purposes of land use taxation. Valuation of Affordable Housing Effective Date: January 1, 2007, or the beginning of the next general reassessment cycle of the locality in which the property is located. Code Section Amended: House Bill 1173 (Chapter 688) requires that, when determining the fair market value of real property containing more than four residential units operated in whole or part as affordable housing, the locality must consider (a) the rent and the impact of applicable rent restrictions, (b) the operating expenses and expenditures, (c) restrictions on the transfer of title, and (d) evidence presented by the property owner of other restrictions imposed by law that affect these variables. Additionally, this bill would require that federal or state income tax credits with respect to affordable housing not be considered real property or income attributable to real property. For property in which only a portion of the units are operated as affordable housing, only that portion determined to be affordable housing would be subject to the provisions. 2 Tax Rates 2006

13 Computation of Deferral of Real Estate Taxes Effective Date: July 1, 2006 Code Section Repealed: House Bill 1231 (Chapter 356) eliminates the current requirement mandating how localities must calculate the amount of taxes eligible for the local deferral program for real estate taxes that exceed a locally designated percentage of the tax on the property in the previous year. Sale of Tax-Delinquent Real Estate Effective Date: July 1, 2006 Code Section Amended: House Bill 194 (Chapter 333) allows the circuit court, where there is no dispute as to title or value of the real estate, to use the written report of a licensed real estate appraiser instead of a deposition to authorize the sale of tax-delinquent real estate. Sale of Tax-Delinquent Properties Effective Date: July 1, 2006 Code Sections Amended: and House Bill 1421 (Chapter 616) provides detailed rules concerning nonjudicial sales of tax-delinquent real properties of minimal size and value, including requirements that 1) each parcel shall be sold at public auction, 2) the sale shall be free and clear of the tax lien, but shall not affect any easements recorded prior to the date of sale, 3) the treasurer shall convey the parcel by a treasurer s deed, 4) if the sale proceeds are insufficient to pay the taxes in full, the remaining delinquent taxes remain the personal liability of the former owner, 5) the sale proceeds shall be applied first to the costs of sale, then to the taxes, penalty and interest due on the parcel, and then to any other taxes or other charges owed by the former owner to the jurisdiction, 6) any excess proceeds remain the property of the former owner and shall be kept by the treasurer in an interest-bearing escrow account, 7) if no claim for payment of excess proceeds is made by the former owner within two years after the date of sale, the treasurer shall deposit the excess proceeds in the jurisdiction s general fund, and 8) if the sale does not produce a successful bidder, the treasurer shall add the costs of sale to the delinquent real estate account. This legislation also declares that judicial sales of real property do not affect easements recorded prior to the sale. Roll-back Taxes; Local Use Value Assessment Ordinances Effective Date: July 1, 2006 Code Sections Amended: Senate Bill 186 (Chapter 221) eliminates the current requirement that a landowner who subdivides land into parcels that meet the minimum acreage requirements for land use taxation must attest that the land is still devoted solely to agricultural, horticultural, forest or open-space use in order to continue to qualify for land use taxation. The legislation does not, however, eliminate the requirement that the land must be devoted solely to agricultural, horticultural, forest or open-space use in order to continue to qualify for land use taxation. This legislation also authorizes localities not to impose roll-back taxes when real estate subject to use valuation is subdivided, separated or split-off pursuant to the locality s subdivision ordinance into parcels that do not meet the minimum acreage requirements for land use taxation if title to the resulting parcels is held in the name of an immediate family member for the first 60 months following the subdivision, separation or split-off. Notice of Real Estate Assessment Change Effective Date: July 1, 2006 Code Section Amended: House Bill 491 (Chapter 255) and Senate Bill 731 (Chapter 509) require localities to provide the following information to property owners on each notice of change of their real estate assessment: (1) the immediately prior appraised value of the property and (2) the immediately prior assessed value of the property if different from the appraised value. 2 BUSINESS, PROFESSIONAL AND OCCUPATIONAL LICENSE TAX Definition of Jeopardized by Delay Effective Date: July 1, 2006 Code Sections Amended: and House Bill 1366 (Chapter 611) makes a technical correction to the Business, Professional and Occupational License (BPOL) Tax, Local Business Tax and Local Mobile Property Tax administrative appeals statutes to make the definitions of jeopardized by delay consistent with the original use of the term in Virginia state income tax law. The original use of the term jeopardize by delay in Virginia state income tax law refers to situations where a taxpayer designs to do certain acts. Localities to Select Date to Apply Tax Effective Date: July 1, 2006 Code Section Amended: House Bill 869 (Chapter 119) and Senate Bill 522 (Chapter 181) authorize localities that impose the BPOL tax or fee to adopt a license application due date that is on or after March 1, but no later than May 1. 2 This would be relevant in a situation where the land is subject to landuse taxation. The property s appraised value would differ from the assessed value. Summary of Legislative Changes in Local Taxation 3

14 Separate Rate for Fuel Distributors Effective Date: July 1, 2006 Code Sections Amended: and Senate Bill 597 (Chapter 763) limits the amount of local BPOL taxes paid by persons engaged in the business of selling motor fuels at retail on a daily basis ( gas retailers ). This limitation applies in the license year following any year in which regular grade gasoline prices increase by 20 percent or greater in any one-week period and do not fall below the increased rate for at least 28 consecutive days. In the event these conditions are met, the gas retailer s motor fuel sales related BPOL tax liability in the following license year would be limited to 110 percent of its motor fuel sales related BPOL tax liability in the license year of the increase. TAX ADMINISTRATION AND COLLECTION Collection of Unpaid Fines and Costs by Local Treasurers Effective Date: July 1, 2006 Code Section Amended: House Bill 1425 (Chapter 359) authorizes a local treasurer undertaking collection pursuant to an agreement with the attorney for the Commonwealth to collect the administrative fee authorized by Localities Use of Collection Agents Effective Date: July 1, 2006 Code Sections Amended: and Senate Bill 302 (Chapter 372) prohibits a locality from utilizing the local sheriff, an attorney or a private collection agent to assist with collection of a delinquent local tax unless the locality has first attempted to send written notification of the delinquency to the taxpayer at the address contained in the locality s tax records. If the locality has reason to believe the taxpayer s address contained in its tax records is no longer current the locality may obtain the address from other sources available to it, including the Virginia Employment Commission, the Department of Motor Vehicles and the Department of Taxation. MISCELLANEOUS TAXES Establishment of Tourism Zones Effective Date: July 1, 2006 Code Section Added: House Bill 518 (Chapter 642) authorizes any locality to establish, by ordinance, one or more tourism zones. Localities would be authorized to provide tax incentives within tourism zones for up to ten years including, but not be limited to, 1) reduction of permit fees, 2) reduction of user fees and 3) reduction of any type of gross receipts tax. Localities would also be authorized to provide regulatory flexibility within tourism zones for up to ten years including, but not be limited to 1) special zoning, 2) permit process reform, 3) exemption from ordinances, excluding ordinances adopted pursuant to the requirements of the Chesapeake Bay Preservation Act, the Erosion and Sediment Control Law or the Virginia Stormwater Management Act, and 4) any other incentive. Coal and Gas Road Improvement Funds to Include Improvement of Water & Sewer Systems Effective Date: July 1, 2006 Code Sections Amended: and House Bill 1505 (Chapter 78) and Senate Bill 506 (Chapter 497) allow those localities that comprise the Virginia Coalfield Economic Development Authority to use the portion of the revenue from the Local Coal and Gas Road Improvement Tax currently dedicated for the construction of new water and sewer systems to also use that portion of the revenue for the improvement of water and sewer systems. Litter Control and Recycling: Increased Percentage of Grants Awarded to Localities Effective Date: July 1, 2006 Code Sections Amended: , , , , and House Bill 448 (Chapter 6) permits the Department of Taxation to add to the assessment the amount it has expended in collecting delinquent litter taxes. Cap on Penalty Effective Date: July 1, 2006 Code Section Amended: House Bill 1283 (Chapter 459) provides that no local tax penalty for failure to pay a tax may exceed the amount of the tax assessable. Communications Tax Reform Effective Date: January 1, 2007, generally, but certain provisions effective July 1, 2006 Code Sections Amended: , , , , , , , , , and Code Sections Added: :1, , through , and Code Sections Repealed: , , , , , , and through House Bill 568 (Chapter 780) restructures the state and local communications taxes and fees by replacing the current state 4 Tax Rates 2006

15 Section 2 Real Property Tax, 2006 The real property tax is by far the most important source of tax revenue for localities. In fiscal year 2005, it accounted for 50.0 percent of tax revenue for cities, 62.1 percent for counties, and 26.4 percent for large towns. These are averages; the relative importance of taxes in individual cities, counties, and towns varies significantly. For information on individual localities, see Appendix C. The Code of Virginia, through , authorizes localities to levy taxes on real property (land, including the buildings and improvements on it). There is no restriction on the tax rate that may be im posed. Section provides that all general re assessments or annual as sess ments shall be at 100 percent of fair market value. PUBLIC SERVICE CORPORATIONS Property owned by so-called public service corporations is not assessed by localities. Instead, that task is delegated to the State Corporation Commission and the Department of Taxation. In Virginia, public service corporations include electric power and distribution companies, gas and pipeline distribution companies, gas and product pipeline transmission companies, public service water companies, telephone and telegraph companies, and railroads. In fiscal year 2005, the property tax on public service corporations accounted for 2.2 percent of tax revenue for cities, 2.5 percent for counties, and 0.9 percent for large towns. These are averages; the relative importance of taxes in individual cities, counties, and towns varies significantly. For information on individual localities, see Appendix C. The Commissioner of Revenue or another designated official in each county or city is required to provide by January 1 of each year, to any public service company with property in its area, a copy of the property boundaries of the corporation ( ). The State Corporation Commission or the Department of Taxation send out their assessments for the property ( ). Localities examine the assessments to determine their correctness. If correct, the locality determines the equalized assessed valuation of the corporate property by applying the local assessment ratio prevailing in the locality for other real estate ( ). Local taxes are then assigned to real and tangible personal property at the tax rate current in the locality ( ). TAX RELIEF PROGRAMS There are several types of locally financed tax relief available. Section 3 contains information on so-called circuit breaker plans for the elderly and disabled. Section 4 covers land use assessments for agricultural, horticultural, forestal, and open space real estate. Section 5 contains information on preferential taxes for agricultural and forestal districts. In addition, Section 6 covers property tax exemptions for certain rehabilitated real estate and other exemptions. Two Virginia localities, the cities of Alexandria and Charlottesville provide tax relief for low-income owners who are not elderly. In the City of Alexandria, the Affordable Homeownership Preservation Grant program provides grants ranging from $1,200 with a $40,000 income ceiling to $200 with a $100,000 income ceiling. 1 The City of Charlottesville grants $250 annually to homeowners who own homes assessed at less than $238,200 and have an annual income less than $50, Localities are permitted to institute deferral for a portion of the real estate tax by of the Code of Virginia. Recent legislative changes have eliminated the requirement that the amount of real estate taxes that may be deferred be calculated by subtracting from the real estate tax for the current tax year the base amount of nondeferrable tax. Localities are now permitted to grant deferrals from the full amount by which each taxpayer s real estate tax levy exceeds 105 percent, or such higher percentage adopted by the locality. 3 Deferred taxes are subject to interest in an amount established by the governing body, not to exceed the rate published by the IRS code. 4 The de fer ral potentially ap plies to every property owner, not just the eld er ly and disabled. (For deferrals limited to the elderly and disabled see Section 3 of this study.) No localities reported having a deferral program in Loudoun Coun ty had a de ferral program in place in the 1990s but terminated it be cause the pro gram was administrative ly complex, cum ber some and re quired staff time in dis pro por tion to the ben e fit received by the taxpayer. 5 The cities of Alexandria, Falls Church, and Fairfax 1 (8/25/2006). 2 Section 50.7 of the Charter of the City of Charlottesville. 3 A 2005 change allows the use of the Internal Revenue Service rate. Section 6621 of the Internal Revenue Code establishes a rate of 3 percent plus the federal short-term rate. In September 2005 the short-term rate was 3.90 percent. 4 Department of Taxation, 2006 Fiscal Impact Statement for HB 1231, 3/22/ City of Alexandria, Budget Memo #46: Review of Other Jurisdictions Experience with a Real Estate Tax Deferral Program for the General Population (Councilman Speck s Request), 4/25/

16 and the coun ties of Fairfax and Henrico have con sid ered deferral but have not adopted it. Administrative problems appear to be the major reason for the unpopularity of deferral programs. According to Henrico staff, The administrative procedures for trac ing the prop er ties and re cov er ing the relevant taxes upon either the death of the owner or transfer of the prop er ty itself would be both cumbersome and time consuming and could not be ac com plished with existing staffing levels or existing com put er systems. 6 Another reason for the unpopularity of the programs is that taxpayers receive a postponement, not a removal, of the tax burden. ASSESSORS, DUES DATES, & PRORATION Table 2.1 shows that in 2006, a total of 28 cities reported employing a full-time property tax assessor, while 11 did not. In contrast, a minority of counties had a full-time assessor (39), while 56 did not. This re flects the fact that many counties reassess property in fre quent ly. No towns had assessors, since towns rely on as sessed val ues es tab lished by their host counties. Tax due dates vary among localities. Generally, if taxes are paid annually, they are due by De cem ber 5. If paid semiannually, they are due by June 5 and December 5. How ev er, some localities have different due dates, as pro vid ed in Most cities have semiannual tax due dates with payments required in June and December. Of the 39 cities, 5 require taxes due annually, 27 semiannually, and 7 quar ter ly. Among the counties, 40 have annual tax due dates, while 55 have semiannual requirements. Of the towns re spond ing to this question, 107 report annual due dates, and 27 re quire semiannual payments. A locality is permitted to prorate the taxable amount. Any coun ty, city, or town electing to prorate new buildings which are substantially complete prior to No vem ber 1 must do so at the time the building becomes sub stan tial ly com plete or fit to live in. Localities vary about prorating taxes. Of the cities, 26 report prorating taxes while 13 do not. Among coun ties, 61 prorate their taxes while 34 do not. Reports from the towns that answered this question indicate that 32 pro rate their taxes while 104 do not. Table 2.2 details assessment practices among localities that answered. The table includes cities and counties, but not towns, because only a low percentage of towns provided substantive answers. For those interested in the towns that responded, data are available from the Cooper Center upon request. The second column of Table 2.2 lists the number of taxable real estate parcels within each locality. In cities, the number of such parcels range from 3,203 in Buena Vista to 147,802 in Virginia Beach. Counties range from 3,792 in Highland County to 344,601 in Fairfax County. The third and fourth columns indicate how general reassessments and maintenance assessments are implemented. General reassessments involve reassessing all parcels to reflect changes in market value. Maintenance assessments involve adjusting assessed values between reassessments because of new construction, improvements, damages, demolitions, subdivisions, and consolidations. Twenty-four cities responded that they perform general reassessments on an in-house basis, while 12 answered they contract out the work. Three cities did not answer the question. Among counties, only 28 indicated they conduct in-house reassessments, while 65 contract them out. Two counties did not respond to the question. Regarding maintenance assessments, 31 cities reported performing reassessments using in-house staff, 5 reported contracting the work, and 3 did not respond. Among counties that responded to the question, 75 reported performing maintenance reassessments using staff, while 16 reported contracting the work to independent appraisers. The question on physical inspection refers to the actual inspection of the property, as opposed to computerized mass-appraisal of parcels. Column five lists the answer of whether localities ever perform physical inspections and, if so, column six lists the inspection cycle time for physically reassessing parcels. Among cities that responded, 27 answered that they perform physical inspections, while 9 responded that they do not. The inspection cycle ranged anywhere from 1 to 5 years. Among counties that responded, 57 indicated they perform physical inspections, while 32 answered that they do not. The inspection cycle ranged anywhere from 1 to 8 years. The final two columns refer to the total percentage change in assessed value of parcels between two reassessments, including all parcels and just single-family owner occupied parcels. It should be kept in mind that a major factor affecting the magnitude of the increase is the time between general reassessments. A rise of 50 percent is not as impressive in a locality where reassessments occur every 6 years as it is in a locality that reassesses every 2 years. The reported changes in single-family parcels in cities ranged from 4 percent (Norton) to 42 percent (Fredericksburg), while counties ranged from 5 percent (Buchanan) to 127 percent (Northumberland). TAX RATES Tax rates are generally discussed in terms of either nominal (statutory) or effective rates. The nominal rate is the rate used by localities and is applied to the assessed value of a property. The effective rate is published by the Virginia Department of Taxation in their assessment/sales ratio study. The department derives the effective rate by multiplying the median assessment ratio by the nominal tax rate. The median assessment ratio is usually less than 100 percent because reassessments lag market increases and tend to be conservative. Consequently, the nominal rate is generally higher than the effective rate. 6 Budget Memo #46. 8 Tax Rates 2006

17 A problem with the effective rates published by the Virginia Department of Taxation is that there is a significant time lag in publication and the most recent year available is Despite the lag, the effective rate is important because it gives a more accurate reflection of the difference in real property tax rates across localities. NOMINAL TAX RATE Table 2.1 includes information on nominal real es tate tax rates, assessment frequency, whether the lo cal i ty em ploys an as ses sor, effective dates, tax due dates, and wheth er proration is used. The nominal tax rates were reported to the Cooper Cen ter by all cities and counties and the 137 respondent towns that levy a real property tax. Nominal Real Estate Tax Rates, 2006 Mean* Median 1 st Quartile 3 rd Quartile Cities $1.01 $1.00 $0.82 $1.21 Counties $0.71 $0.68 $0.60 $0.80 Towns $0.21 $0.17 $0.11 $0.24 Cities & counties $0.80 $0.73 $0.62 $0.94 *Unweighted. Nominal rates are generally higher in the cities than counties. The rates are lowest in towns because they are subordinate to counties and have limited responsibilities. EFFECTIVE TAX RATE Table 2.3 shows city and coun ty average ef fec tive tax rates in the year 2004, the most recent year for which the Virginia Department of Taxation has conducted an assessment/sales ra tio study. The de part ment makes its com pu ta tion in a way that is de signed to con trol for the vari ance in as sess ment pro ce dures. There fore, when com par ing tax rates among lo cal i ties, the read er may wish to consult both Tables 2.1 and 2.3. Table 2.1 shows nominal rates in Table 2.3 shows nominal and effective rates in The following table summarizes the effective tax rates for the localities shown in Table 2.3. Effective Real Estate Tax Rates, 2004 Mean Quartile Unweighted Weighted Median First Third Cities $ $0.85 $0.69 $1.02 Counties $ $0.51 $0.43 $0.59 Cities & counties $0.62 $0.73 $0.56 $0.46 $0.76 The Virginia Department of Taxation s as sess ment/sales ratio study compares the locally assessed value of prop er ty to its actual sales price for a sample of parcels sold in the study year. The resulting ratio, the me di an ratio, is then multiplied by the average nominal tax rate per $100 of assessed value to determine the ef fec tive tax rate per $100 of true (market) value. 7 It should also be pointed out that the Virginia Department of Taxation does not use the lo cal ly re port ed nominal tax rate in its com pu ta tions. In stead, it cal cu lates the nominal rate by dividing the real es tate levies by the local real estate taxable assessed value, as re port ed in the local land book. This meth od of com put ing the nominal tax rate takes additional district levies into account. 8 The real property tax rates reported in Table 2.3 are a more accurate reflection of the differences among lo cal i ties in tax rates on real property than those in Table 2.1 because they control for variations in assessment frequency and tech nique among lo cal i ties. Table 2.3 also shows the latest re as sess ment in effect when the median ratio study was con duct ed, the num ber of sales used in the study, the median ratio, and the co ef fi cient of dispersion. The coefficient of dispersion mea sures how closely the individual ratios of each lo cal i ty are ar rayed around the median ratio. The formula for the coefficient of dispersion (CD) is: CD ( X i + X m ) / n = 100 X m where X i represents the assessment/sales ratio for the ith sale in a sample of size n, and X m represents the median ratio of the sample. 9 If there were no dispersion, the CD would equal zero. Coefficient of Dispersion, 2004 CoefÞ cient of Dispersion (%) Cities Counties Total The assessment/sales ratio data are from To compare the local nominal tax rates for that year, consult either Section 3, Tax Rates 2004, published by the Cooper Center, or the Virginia Department of Taxation s Virginia Local Tax Rates: Tax Year The studies may be viewed at (8/30/06) and LocalRatesSurvey2004.pdf (8/30/06), respectively. 8 Virginia Department of Taxation, The 2004 Assessment/Sales Ratio Study (Richmond, April 2006) p. 37. The study can be found at tax.virginia.gov/web_pdfs/2004ratiostudy.pdf (8/30/06). 9 Virginia Department of Taxation, 2004 Assessment/Sales Ratio Study, p. 38. Real Property Tax 9

18 There is no universal standard for how much dispersion is tolerable, but an upper limit of under 20 percent is subscribed to by many practitioners. 10 By that standard, all but three of the cities had an acceptable CD. However, a number of counties did not meet that standard. As one might expect, more frequent reassessment is associated with higher quality assessments. All but six of the 54 localities that assessed annually or biennially had an acceptable CD. ASSESSMENTS AND APPEALS Section requires cities to have a gen er al re assess ment of real estate every two years. How ev er, any city with a total population of 30,000 or less may elect to conduct its general re as sess ments at four-year intervals. 11 Counties are required to have a gen er al reassessment every four years ( ). There is an exception for counties with a total population of 50,000 or less. These counties may elect to reassess at ei ther five-year or six-year intervals ( ). However, nothing in these sections affects the power of cities and coun ties to use the annual or biennial assessment method in lieu of gen er al as sess ments. The table below summarizes the re as sess ment periods chosen by the cities and counties. Reassessment Periods for Real Estate Period Cities Counties 1 year years years years years years years years years years As the previous table indicates, a large majority of the cities reassess at one or two year in ter vals. In con trast, only one-fifth of the counties re assess that frequently. Virtually all of the populous cities and counties reassess annually or biennially. Generally, a town relies on the surrounding county to provide its assessments, in which case the town s reassessment will occur with the same frequency as the county s. Similarly, most towns utilize their county to handle the billing and collection of taxes, though some of the larger localities may do it themselves. Any building which has incurred a $500 or more in crease in value due to repairs or additions must be as sessed as if it were new ( ). Similarly, the Code permits the abate ment of local real estate taxes on damaged build ings if they are rendered unusable for at least 30 days of the cal en dar year ( ). An assessment may be appealed through either a for mal or judicial appeal. In 2005, formal (ad min is tra tive) appeals were begun in 68 localities and ju di cial ap peals in 24. The number of appeals in a locality ranged from one administrative appeal in a few cities and counties to over 2,000 reported in the City of Rich mond and in Fairfax County. Judicial appeals were far less numerous, with most localities having one or two, though the City of Alexandria reported 227 and the City of Richmond, 400. Table 2.4 presents data on appeals for all localities which provided a response. 10 John L. Knapp, Virginia Issues: The Real Property Tax (Charlottesville: Tayloe Murphy Institute, 1974), pp The Code does not specify which census is to be used. 10 Tax Rates 2006