Virginia Local Tax Rates, 2007

Transcription

1 Virginia Local Tax Rates, 2007 Information for All Cities and Counties and Selected Incorporated Towns 26 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 2007 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 1 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, 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, Transportation Authority Taxes and Fees, 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, Virginia Enterprise Zone Program Appendixes A. Facsimile of 2007 Tax Rates Questionnaire B. List of Respondents and Non-Respondents to 2007 Tax Rates Questionnaire C. Websites of Respondents to 2007 Tax Rates Questionnaire D. Percentage Share of Total Local Taxes From Specific Sources, FY iii

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5 Tables 2.1 Real Property Nominal Tax Rate, Tax Levies in Special Districts, Assessment Procedures for Virginia Localities, Percentage change in Assessed Value After Last Reassessment, Real Property Effective True Tax Rate, Administrative and Judicial Real Property Assessment Appeals and Miscellaneous Taxes, Real Property Owner Tax Relief Plans for the Elderly and Disabled, Real Property Renter Tax Relief Plans Grants for the Elderly and Disabled, Real Property Tax Relief Plans for the Elderly and Disabled: Number of Beneficiaries and Foregone Revenue, 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 General Information, Tangible Personal Property Tax General Information, Elderly and Disabled, Tangible Personal Property Tax for Automobiles and Trucks of Less than Two Tons, Personal Property Tax Relief Act for Motor Vehicles Credit for $20,000 Vehicle, 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, Furniture and Fixtures, and Biotechnology Equipment, 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, Tangible Personal Property Taxes Related to Horse Trailers, Machinery and Tools Property Tax, Machinery and Tools Tax: Semiconductor and Forestry Harvest Equipment, Machinery and Tool Tax Accounts, Utility License Tax, Cable Television System Tax, Utility Consumers Monthly Tax on Electricity, Utility Consumers Monthly Tax on Gas, Utility Consumers Monthly Tax on Water, BPOL Due Dates and Other Provisions, Specific BPOL Classification Fees and Tax Rates, Taxes and Fees on Peddlers and Itinerant Merchants, Tables v

6 Tables (continued) 15.1 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, Natural Resource Taxes, Legal Document Taxes, Localities Reporting That They Levy a Bank Franchise Tax, Miscellaneous Taxes, Tranportation Authority Taxes and Fees, Refuse Collection Fees, Refuse Collection Tipping Fees, Recycling Collection Fees, Miscellaneous Refuse Collection Fees, Residential Water and Sewer Connection Fees, User Fees for Residential Water and Sewer, Impact Fees for Road Improvement, Public Rights-of-Way Use Fees, Total Cash Proffer Revenue Collected and Expended by Purpose, by Locality, FY Miscellaneous Fees, Local Tax Incentives in Enterprise Zones, vi Tax Rates 2007

7 Introduction FOREWORD This is the twenty-sixth 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 150 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, 2007 Legislative Summary and The 2005 Assessment/Sales Ratio Study; the Auditor of Public Accounts Comparative Report of Local Government Revenues and Expenditures, Year Ended June 30, 2006; the Commission on Local Governments Report of Proffered Cash Payments and Expenditures by Virginia s Counties, Cities and Towns, ; information on enterprise zones from the Department of Housing and Community Development; and transportation authorities information on taxes and fees. ORGANIZATION OF THE BOOK The study is separated into 27 sections. We have reprinted as Section 1 the Department of Taxation s information on 2007 state legislation affecting local taxation, which also is available on the department s website: virginia.gov/web_pdfs/2007legislativesummary.pdf (10/10/2007). Sections 2 through 27 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 cities reported a web site. Among the counties, 88 (93 percent) reported a web site. Also, 94 (63 percent) of the 150 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 36 populous incorporated towns. New Items This edition contains new information in sections 2 and 9. In section 2, several tables have been modified and two have been added. Special district real estate levies now make up Table 2.2 and the percentage changes in assessed value of real property is now listed in Table 2.4. In Section 9, items such as the number of personal property accounts within a locality have been added to Table 9.1, information on the personal property tax applied to the elderly and disabled has been incorporated into Table 9.2, and the local personal property tax on a $20,000 automobile has been estimated for most localities in Table 9.4. We have added information on the new taxing powers given to two transportation authorities by the General Assembly (Section 20), and listed the local tax modifications in each locality s enterprise zone (Section 27). Certain sections and tables have been deleted. The new state telecommunications tax eliminated the need for local taxes on telecommunications. Consequently, we have eliminated the tables on the consumer utility tax for telephones and the E911 tax. 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 telephone/ list in Appendix B to contact local officials in order to obtain clarification and additional detail. Introduction vii

8 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 helpful suggestions for improvement. Student research assistant W. Grace Ng provided valuable assistance with follow-up and editing tasks. The Cooper Center Publications Division assisted in many ways. Jayne E. Weber designed the cover and the flier, consulted on the layout and formatting of the book, and did proofreading. David J. Borszich assisted with layout and 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 content and wording 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. We take full responsibility for any remaining errors. 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 79 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 November 2007 viii Tax Rates 2007

9 Introduction ix

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11 Virginia Local Tax Rates, 2007 Information for All Cities and Counties and Selected Incorporated Towns Introduction xi

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13 Section 1 Summary of Legislative Changes in Local Taxation, 2007 This section summarizes the major changes in the Code of Virginia enacted by the 2007 session of the Virginia General Assembly for those taxes covered in this publication. The summary is based on the Virginia Department of Taxation s 2007 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 2007 Legislative Summary can be found on the web at gov/web_pdfs/2007legislativesummary.pdf (8/10/2007). 1 Additional information can be found in the Virginia Association of Counties 2007 Regular Session Legislative Summary, located on the web at legislative/legsummary07.pdf (8/10/2007), and the Virginia Municipal League s 2007 Legislative Report, downloadable at (8/10/2007). 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 Personal Property Tax Relief Effective Date: July 1, 2007 Code Section Amended: House Bill 1880 (Chapter 314) expands the Personal Property Tax Relief Act definition of qualifying vehicle to include motor vehicles that are held in a private trust for nonbusiness purposes by an individual beneficiary. Prior to this bill, qualifying vehicles were defined to include any passenger car, motorcycle, and pickup or panel truck that is determined to be (i) privately owned or (ii) leased pursuant to a contract requiring the lessee to pay the tangible personal property tax on such vehicle. All-terrain vehicles and off-road motorcycles titled with the Department of Motor Vehicles are not qualifying vehicles. Separate Classification For Certain Aircraft Effective Date: July 1, 2007 Code Sections Amended: and House Bill 2013 (Chapter 88) and Senate Bill 1171 (Chapter 609) create a separate classification for local personal property tax purposes for aircraft that are (i) considered Warbirds, manufactured and intended for military use, 1 Whenever a website is shown in this study, we include in parentheses the last date that we accessed the site. excluding those manufactured after 1954, and (ii) used only for (a) exhibit or display to the general public (including such flights as are necessary for testing, maintaining, or preparing such aircraft for safe operation), or (b) air show and flight demonstrations (including such flights as are necessary for testing, maintaining, or preparing such aircraft for safe operation). Aircraft used for commercial purposes, including transportation and other services for a fee, are not included in this classification. Local Tax and License Fees on Motor Vehicles, Trailers and Semitrailers; Exemption for Certain Law Enforcement Officials Effective Date: July 1, 2007 Code Section Amended: House Bill 2362 (Chapter 865) allows localities to exempt vehicles owned or leased by deputy sheriffs, police officers, officers of the State Police, salaried firefighters, or salaried emergency medical technicians from the local tax and license fee for one vehicle. Separate Classification for Wireless Broadband Effective Date: July 1, 2007 Code Section Amended: House Bill 2385 (Chapter 322) creates a separate classification for local property tax purposes for any tangible personal property owned and operated by a service provider who is not a Commercial Mobile Radio Service (cellular or other mobile telecommunications service) provider and who is not licensed by the FCC that is used to provide wireless broadband Internet service. Wireless broadband Internet service is defined as a service that enables customers to access, through a wireless connection at an upload or download bit rate of more than one megabyte per second, Internet service, as part of a package of services sold to customers. Duties of Treasurers Effective Date: January 1, 2007 Code Section Amended: House Bill 2390 (Chapter 867) extends the lists of uncollected taxes which the treasurer must make to include the uncollected balances of previously billed tangible personal property taxes on vehicles that (i) were owned by taxpayers, now deceased, upon whose estates no qualification has been made, or (ii) were transferred to bona fide purchasers for value without knowledge, on the part of the persons so transferring, of the unpaid taxes. Summary of Legislative Changes in Local Taxation

14 Personal Property Tax Relief: Qualifying Vehicles Effective Date: July 1, 2007 Code Section Amended: House Bill 2975 (Chapter 815) requires commissioners of revenue to rely upon the registration of the vehicle and certificate of title by the Department of Motor Vehicles (DMV) in determining whether privately owned or leased vehicles qualify for tax relief under the Personal Property Tax Relief Act (PPTRA), unless the commissioner has information that DMV s registration information is incorrect or incomplete. Real Estate Tax Classification of Energy Efficient Buildings Effective Date: July 1, 2007 Code Section Added: House Bill 2618 (Chapter 328) and Senate Bill 1051 (Chapter 354) create a separate classification of real property for certain energy efficient buildings. Localities are authorized to assess the Real Property Tax on energy efficient buildings at a lower tax rate than that imposed on the general class of real property. An energy efficient building is defined as any building that exceeds the energy efficiency standards prescribed in the Virginia Uniform Statewide Building Code by 30 percent. Any qualified licensed engineer or contractor, not related to the taxpayer, is authorized to determine whether the building qualifies to be certified as an energy efficient building. The licensed engineer or contractor will also certify to the taxpayer that he or she has the qualifications to provide the certification. The land on which energy efficient buildings are located is not part of this separate classification. Exemptions for Elderly or Disabled Effective Date: July 1, 2007 Code Section Amended: House Bill 1744 (Chapter 60) increase from $72,000 to $75,000 the maximum income limit a locality in Northern Virginia may impose in providing real estate tax exemptions or deferrals to the elderly or disabled. Previously, the maximum income limit was $72,000. The Northern Virginia localities affected by this bill are the counties of: Arlington, Clarke, Fairfax, Fauquier, Loudon, Prince William and Stafford; the cities of Fairfax, Falls Church, Manassas, Manassas Park, and Alexandria, and the towns of Dumfries, Herndon, Leesburg, Purcellville, and Vienna. Real Estate Tax; Elderly and Permanently and Totally Disabled Effective Date: July 1, 2007 Code Section Amended: Senate Bill 788 (Chapter 587) increases from $52,000 to $62,000 the maximum income limit localities in Central and Southeastern Virginia may impose in providing real estate tax exemptions or deferrals to the elderly or disabled. Under prior law certain localities in Central and Southeastern Virginia were permitted to extend either the income limitations from $50,000 to $52,000. The eligible localities include the counties of Chesterfield, Goochland and Henrico; and the cities of Charlottesville, Chesapeake, Norfolk, Portsmouth, Richmond, Suffolk and Virginia Beach. Deferral of Tax for Certain Elderly and Disabled Effective Date: July 1, 2007 Code Sections Amended: , and Code Section Added: Senate Bill 1265 (Chapter 357) authorizes local governments to extend real estate tax relief for the elderly and disabled to dwellings jointly held between individuals, not all of whom are at least age 65 or permanently and totally disabled, provided their combined net financial worth does not exceed certain statutory limits. To qualify, the dwelling must be the sole dwelling of all joint owners. Under the provisions of this bill, the tax relief is prorated based on the percentage of ownership interest in the dwelling held by all joint owners who satisfy the age or disability requirements. This proration does not apply to property held jointly by husband and wife. Under prior law, the only jointly owned dwellings that qualify for real estate tax relief for the elderly and disabled are dwellings jointly owned by a husband and wife. The tax relief is not prorated in such situations. Notice of Change in Assessment Effective Date: July 1, 2007 Code Section Amended: House Bill 3093 (Chapter 344) and Senate Bill 848 (Chapter 353) provide that if the change in the local Real Property Tax assessment of property is due to the construction or addition of new improvements to the property, the notice of change in assessment for the property need not set out the following information otherwise required when the assessment is changed: 1) the tax rate; 2) the total amount of the new tax levy; 3) the percentage change in the new tax levy from the immediately prior one; 4) the time and place of the next meeting of the local governing body at which public testimony will be accepted on any real estate tax rate changes; or 5) information on when the date of the meeting will be set and where it will be publicized. Prior law required that whenever there is a reassessment of real estate or a change in the assessed value of real estate, a locality must provide notice by mail directly to each property owner whose assessment has been changed. Constitutional Amendment; Homestead Exemption Effective Date: To be determined Code Section Amended: Article X 6 of the Virginia Constitution Senate Joint Resolution 398 (Chapter 843) authorizes the General Assembly to enact legislation that will allow localities, by ordinance, to exempt from real property taxes, or defer real property taxes on, up to 20 percent of the value of residential or farm property that is the owner-occupant s primary dwelling and lived in continuously. This is the first Tax Rates 2007

15 of two resolutions required for this amendment. If a second resolution is passed, the amendment will be submitted to a referendum. Transportation Funding The 2007 transportation funding bill included provisions that permitted Northern Virginia and Hampton Roads localities to tax real estate from commercial real property at a different rate than residential property. Details are included in the section, Transportation Funding, on page four. Business, Professional and Occupational License Tax Motor Fuels Tax Exemption Effective Date: January 1, 2007 Code Section Amended: House Bill 1695 (Chapter 85) and Senate Bill 772 (Chapter 834) amend the business, professional, and occupational license (BPOL) tax to clarify that taxpayers may continue to exclude amounts received for any federal or state excise taxes on motor fuels from the amount to be taxed. For many years retail service stations collected fuel taxes at the pump and paid them to the appropriate government. In 2001 the point of imposition was moved to the distributor, but the change was not intended to affect the overall tax burden of retail service stations. The retailers continued to deduct fuel taxes from their gross receipts for BPOL tax purposes even though they no longer paid fuel taxes directly to the appropriate government. Machinery and Tools Tax Uniform Statewide Statutory Classification for Idle Machinery Effective Date: January 1, 2007 Code Section Amended: House Bill 2181 (Chapter 191) and Senate Bill 1151 (Chapter 159) provide that when valuing machinery and tools for purposes of the local machinery and tools tax, the locality must, upon written request of the taxpayer, consider any bona fide, independent appraisal submitted by the taxpayer. These bills also codify the Department of Taxation s (TAX) administrative rulings holding that idle machinery and tools are to be classified as intangible personal property not subject to local taxation. The bills codify the definition of idle machinery and tools established by the Tax Commissioner in 1950 that provides that machinery and tools are idled if they have been discontinued in use continuously for at least one year prior to any tax day and there is no reasonable prospect that such machinery and tools will be returned to use during the tax year. These bills also provide that machinery and tools will be deemed idle on and after January 1, 2007, if they have been specifically identified in writing by the taxpayer on or before the preceding April 1 as machinery and tools that the taxpayer intends to withdraw from service not later than the next tax day and as to which there is no reasonable prospect that such machinery and tools will be returned to use during the tax year. The alternate definition is intended to provide a clear-cut procedure for machinery and tools to be classified as idle. The nine months notice is intended to give localities sufficient time to adjust their budgets to compensate for revenue loss. The bills require taxpayers to notify the locality in writing on or before the next return due date without extension in the event that any machinery and tools defined as idle under this definition are returned to use. Such machinery and tools are subject to tax in the same manner as if they had been in use on tax day of the year in which such return to use occurs. Interest applies, but if the taxpayer provides timely written notice of return to use, no penalty is levied. The bills require TAX to issue guidelines for the use of local governments in applying the provisions related to idle machinery and tools on or before January 1, In preparing such guidelines, TAX is not subject to the provisions of the Administrative Process Act for guidelines promulgated on or before January 1, 2008, but is required to cooperate with and seek the counsel of local officials and interested groups. After January 1, 2008, the guidelines will be accorded the weight of a regulation under and any amendments to the guidelines would be subject to the Administrative Process Act. MISCELLANEOUS TAXES Tax Local Coal and Gas Road Improvement Tax; Extension of Sunset Provision Effective Date: July 1, 2007 Code Section Amended: House Bill 1628 (Chapter 57) and Senate Bill 734 (Chapter 586) extend the sunset date from December 31, 2007, to December 31, 2012, for the local coal and gas road improvement tax. This tax is levied on businesses engaged in severing coal and gas from the earth at a rate not to exceed one percent of the gross receipts from the sale of such coal or gas. The revenues from this tax are used to improve public roadways and other local infrastructure in the locality. Transient Occupancy Tax Maximum Amount Northampton County May Charge Effective Date: July 1, 2007 Code Section Amended: House Bill 1714 (Chapter 86) and Senate Bill 904 (Chapter 596) allow the transient occupancy tax in Northampton County to be increased to five percent. The three percent additional revenue collected from Northampton County must be designated and spent for promoting tourism, marketing of tourism or initiatives that attract travelers to the county and generate tourism revenues in Northampton County. Maximum Amount Amherst County May Charge Effective Date: July 1, 2007 Code Section Added: Senate Bill 811 (Chapter 767) allows the transient occupancy tax in Amherst County to be increased to five percent. The three percent additional revenue collected from Amherst County must be designated and spent for promoting tourism, marketing of tourism or initiatives that attract travelers to the Summary of Legislative Changes in Local Taxation

16 county and generate tourism revenues in Amherst County. Transportation Funding Effective Date: July 1, 2007 Code Sections Amended: , , , , , , , , , :8, :12, , , , , , , , , , , , , , , , and Code Section Added: , , , , , , , :01, , , , , , , , , , , , , , , and House Bill 3202 (Chapter 896) provides additional funding for transportation projects through the imposition of taxes, fees and other revenue sources. This bill authorizes any locality to impose additional impact fees if it has established an urban transportation service district and adopted an impact fee ordinance pursuant to this bill by December 31, The revenues generated by this bill would not be used to reduce the share of local, federal, or state revenues otherwise available to the localities. This bill also i) increases fees for motor vehicle registration, ii) increases fees for violations of vehicle weight limits, and iii) imposes civil remedial fees on drivers convicted of certain driving and vehicle related infractions and on drivers with eight or more driver demerit points. This bill also raises the motor fuels tax rate on diesel fuel from 16 to 17.5 cents per gallon, and increases the road tax on motor carriers from 19.5 to 21 cents per gallon. The revenues collected from these increases will be dedicated to the Highway Maintenance and Operation Fund. This bill also dedicates one-third of all revenues collected from the license tax on insurance companies to the Priority Transportation Fund. The bill authorizes the Northern Virginia Transportation Authority to impose additional local fees and taxes to be used for transportation purposes. The additional local fees and taxes that the Northern Virginia Transportation Authority may impose include: i) an additional fee of $100 in Northern Virginia on initial issuances of driver s licenses; ii) an additional annual vehicle license fee of $10; iii) an additional initial vehicle registration fee of 1percent of the value of the vehicle; iv) an additional vehicle inspection fee of $10; v) an additional local grantor s tax at the rate of $0.40 per $100; vi) a rental car tax at the rate of two percent; and vii) a transient occupancy tax at the rate of two percent. In addition, the locality may impose a commercial real property tax at a rate not to exceed $0.25 per $100. This bill also authorizes the authority to impose a five percent sales and use tax on motor vehicle repair services provided within the authority. The motor vehicle repair taxes and use tax would be administered by Department of Taxation. This bill also repeals the authority in localities imposing the additional fees to impose a local income tax. This bill also creates the Hampton Roads Transportation Authority consisting initially of the counties of Isle of Wright, James City, and York, and the cities of Chesapeake, Hampton, Newport News, Norfolk, Poquoson, Portsmouth, Suffolk, Virginia Beach, and Williamsburg. Subject to approval of seven of the twelve localities embraced by the authority that include 51 percent of the population of the localities embraced by the authority, the Hampton Roads Transportation Authority is authorized to impose additional local fees and taxes to be used for transportation purposes if it imposes all of the fees authorized by this bill. The additional local fees and taxes that the localities may impose include: i) an additional fee of $100 on initial issuances of driver s licenses; ii) an additional annual vehicle license fee of $10; iii) an additional initial vehicle registration fee of 1 percent of the value of the vehicle; iv) an additional vehicle inspection fee of $10; v) an additional local grantor s tax at the rate of $0.40 per $100; vi) a rental car tax at the rate of two percent; vii) an additional local grantor s tax at the rate of $0.40 per $100; viii) a rental car tax at the rate of percent; and ix) a motor fuel sales tax at the rate of two percent. In addition, the locality may impose a commercial real property tax at a rate not to exceed $0.10 per $100. This bill also authorizes the authority to impose a five percent sales and use tax on motor vehicle repair services provided within the authority. The motor vehicle repair taxes and use tax would be administered by the Department of Taxation. This bill also repeals the authority in localities imposing the additional fees to impose a local income tax. Tax Rates 2007

17 Section 2 Real Property Tax, 2007 The real property tax is by far the most important source of tax revenue for localities. In fiscal year 2006, it accounted for 50.6 percent of tax revenue for cities, 62.4 percent for counties, and 27.5 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 D. 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 imposed. Section provides that all general reassessments or annual assessments 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 2006, the property tax on public service corporations accounted for 1.7 percent of tax revenue for cities, 2.2 percent for counties, and 0.8 percent for large towns. These are averages; the relative importance of taxes in individual cities, counties, and towns varies significantly. In two counties with large power-generating facilities, the property tax on public service corporations accounts for more than 60 percent of local tax revenue. For information on individual localities, see Appendix D. 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 real property 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 up to $500 annually to homeowners who own homes assessed at less than $350,000 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 must 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 deferral potentially applies to every property owner, not just the elderly 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 County had a deferral program in place in the 1990s but terminated it because the program was administratively complex, cumbersome and required staff time in disproportion to the benefit received by the 1 (9/13/2007). 2 Charlottesville Affordability Housing Program: charlottesville.org/index.aspx?page=1995 (9/13/2007). 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 2007 the short-term rate was 4.82 percent. 4 Department of Taxation, 2006 Fiscal Impact Statement for HB 1231, 3/22/2006.

18 taxpayer. 5 The cities of Alexandria, Falls Church, and Fairfax and the counties of Fairfax and Henrico have considered 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 tracing the properties and recovering the relevant taxes upon either the death of the owner or transfer of the property itself would be both cumbersome and time consuming and could not be accomplished with existing staffing levels or existing computer systems. 6 Another reason for the unpopularity of the programs is that taxpayers receive a postponement, not a removal, of the tax burden. Changes By General Assembly in 2007 The General Assembly passed several new laws pertaining to real property. It passed the first of two required resolutions for the homestead exemption referendum. Homestead exemption, if it becomes law, will allow localities to exempt from real property taxes, or defer real property taxes on, up to 20 percent of the value of residential or farm property that is the owner-ocupant s primary dwelling and is lived in continuously. Before this can happen, one more resolution must be passed and then the amendment is subject to public referendum. The General Assembly also passed a transportation funding agreement. It gave two transportation organizations, the Northern Virginia Transportation Authority and the Hampton Roads Transportation Authority the ability to impose certain taxes in their areas of activity. See Section 1 for a complete summary of the new powers of these authorities. It also gave localities in these authorities the ability to tax commercial real property at a rate different than residential real property. Localities associated with the Northern Virginia Transportation Authority may tax commercial properties at a rate not to exceed $0.25 per $100 over the residential rate. Localities in the Hampton Roads Transportation Authority may tax commercial properties at a rate not to exceed $0.10 per $100 over the residential rate. It appears that Fairfax and Arlington counties will take advantage of this new law for tax year Assessment Frequency, DUES DATES, PRORATION, and Billing Practices Table 2.1 provides general information associated with real property taxes in Virginia s localities. The table provides an estimate by localities of the number of real estate parcels in a locality. Thirty-five cities, 85 counties, and 87 towns returned estimates. The number of parcels in cities ranges from 149,739 (Virginia Beach) down to 2,387 (Lexington). 5 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/ Budget Memo #46. 7 Arlington Endorses Business Tax Hike: Transportation Projects Would be Funded by Revenue. Kirstin Downey, Washington Post, 10/23/2007, Among counties, the number of parcels ranges from a high of 349,351 (Fairfax County) down to 3,792 (Highland). Table 2.1 also lists the nominal tax rates. The nominal rate is the rate used by localities and is applied to the assessed value of a property. It will be discussed in more detail later, when comparing it to effective tax rates. The frequency of a locality s general assessment is listed along with the date of the last assessment. Section of the Code requires cities to have a general reassessment of real estate every two years. However, any city with a total population of 30,000 or less may elect to conduct its general reassessments at four-year intervals. 8 Counties are required to have a general 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 either five-year or six-year intervals ( ). However, nothing in these sections affects the power of cities and counties to use the annual or biennial assessment method in lieu of general assessments. The table below summarizes the reassessment 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 intervals. In contrast, just over one-fourth of the counties reassess 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 increase in value due to repairs or additions must be assessed as if it were new ( ). Similarly, the Code permits the abatement of local real estate taxes on damaged buildings if they are rendered unusable for at least 30 days of the calendar year ( ). Tax due dates vary among localities. Generally, if taxes are paid annually, they are due by December 5. If paid semiannually, they are due by June 5 and 8 The Code does not specify which census is to be used. Tax Rates 2007

19 December 5. However, some localities have different due dates, as provided in Most cities have semiannual tax due dates with payments required in June and December. Of the 39 cities, four equire taxes due annually, 28 semiannually, and 7 quarterly. Among the counties, 39 have annual tax due dates, while 56 have semiannual requirements. Of the towns responding to this question, 115 report annual due dates, and 27 require semiannual payments. A locality is permitted to prorate the taxable amount. Any county, city, or town electing to prorate new buildings which are substantially complete prior to November 1 must do so at the time the building becomes substantially complete or fit to live in. Localities vary about prorating taxes. Of the cities, 26 report prorating taxes while 13 do not. Among counties, 61 prorate their taxes while 34 do not. Reports from the towns that answered this question indicate that 35 prorate their taxes while 107 do not. The final column of Table 2.1 pertains to town billing practices. Three possibilities exist: a town sends out its own bills and collect its taxes (TT in the table), a town collects its taxes but the county sends the bills (CT in the table), or a town has the county bill and collect the taxes (CC in the table). Of the 114 towns that answered the question, the overwhelming majority (89) reported billing and collecting their own taxes. Twenty-three said they collect taxes, while two had the county both bill and collect town taxes. Table 2.2 provides additional information concerning tax rates. Several localities provide district levies to fund special activities such as capital improvements, emergency services, sewer and water services, or pest control within those districts. Table 2.2 lists the 14 cities, 13 counties, and five towns that report levying such taxes. The table includes the base (nominal) rate for the locality, the district in which the activity takes place, the purpose of the activity, and the special rate imposed for that activity. Most special activity taxes are in addition to the base rate, though some are simply flat fee and others a percentage rate of improvements. Table 2.3 details assessment practices among localities. The table includes cities and counties, but not towns, because only a small percentage of towns provided substantive answers. For those interested in the towns that responded, data are available from the Cooper Center upon request. The first column lists whether a locality has a full-time assessor. Twenty-eight cities reported employing a full-time property tax assessor. In contrast, a minority of counties had a full-time assessor (40), while 55 did not. This reflects the fact that many counties reassess property infrequently. No towns had assessors, since towns rely on assessed values established by their host counties. Columns two through five indicates general reassessments and maintenance assessments practices. 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-six cities responded that they perform general reassessments on an in-house basis, while 12 contracted out the work. Among counties, only 28 indicated they conduct in-house reassessments, while 67 contract them out. Regarding maintenance assessments, 33 cities reported performing reassessments using in-house staff, while six reported contracting the work. Among counties, 83 reported performing maintenance reassessments using staff, while 12 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 during the general reassessment. If a locality responded that it did not perform physical inspections during the general reassessment, two further questions were asked: did the locality perform a physical inspection at all? If so, what was the inspection cycle? Among cities that responded, 26 answered that the assessment cycle did not correspond to the physical inspection cycle. Twenty-four reported having a physical inspection cycle, the periods ranging anywhere from two to five years. Among counties that responded, 73 indicated they perform physical inspections during general assessment, while 21 answered that they do not. Of the latter, 19 reported having physical inspection cycles ranging anywhere from two to eight years. Table 2.4 pertains to the percent change in assessed value between the last two reassessments. These are total, not annual, percentages, so localities reporting longer assessesment periods tend to have larger percentage changes. The first two columns refer to the total percentage change, with the first column referring to all parcels in a locality and the second to just single-family owner-occupied parcels. The reported changes in single-family parcels in cities ranged from minus 5.3 percent (Manassas) to 54 percent (Poquoson), while counties ranged from minus 0.01 percent (Arlington) to 140 percent (Clarke). The third column lists the lower rate offset. The Code of Virginia requires, as part of the truth in taxation state law, that localities report the lower rate offset after each general reassessment in which assessments increase. The purpose is to let taxpayers know the equivalent tax rate needed by a locality to bring in an amount of revenue equal to the revenue before the assessment increase. For example, assuming a locality of one house, if the nominal tax rate was $1.00/$100, and the house was assessed at $100,000, the property tax would be $1,000. Given a new assessment at $150,000, taxes would go up to $1,500. The lower rate offset is the tax rate that would bring in the amount of the original tax, $1,000. In this case, the lower rate offset would amount to about $0.67/$100 [($1,000/$150,000) x $100]. A total of 13 cities and 23 counties provided their offset rates for comparison with their nominal rates. Real Property Tax 7