May 16, 2003 – Lt. Gov. Vargrave Richards has taken several steps in response to District Judge Thomas K. Moore's ruling Monday on V.I. property tax billings and collections — a ruling that has virtually brought property sales in the territory to a halt.
Moore imposed a moratorium on the sending out of commercial and residential property tax bills and the collecting of such taxes on bills outstanding since 1999 until the V.I. government reforms its tax assessment process and procedures to comply with a settlement agreed upon in 2000.
A push-back of proof of tax payment
Richards has directed the Recorder of Deeds Office not to require proof that property taxes have been paid beyond 1998. "This directive was made so that real estate transactions can move forward," he said. "The public is advised that property taxes are owed for all years, even though they will not be collected at this time."
Recorder of Deeds Wilma Hart Smith said a tax clearance letter is necessary to obtain a deed. However, under Richards' directive, the recorder will accept a letter stating that taxes have been paid through 1998 or later.
Formerly, a title insurance officer said, a letter was required showing payment through 2001. Lack of such a letter now will not stop the real estate transactions, the officer said, adding that having title insurance on any property transaction is beneficial
A drafting of legislation
Richards also has drafted legislation and sent it to Gov. Charles W. Turnbull asking him to submit it to the Legislature. Richards said, "The court indicated that the 2002 tax bills can be sent out under certain circumstances which require legislation," Richards said.
He has "directed the tax assessor to hold all 2002 property tax bills until further notice," which complies with the court order, Richards said. He also said his "immediate priority" is to get the 2002 bills sent, and his legislation is to that effect.
Sen. Emmett Hansen II announced on Thursday that he had introduced legislation aimed at relieving the situation. (See "Hansen submits bill to reform tax assessments".) Hansen said on Friday that he has not seen Richards' bill and does not know if they overlap.
Moore's ruling came in a consolidated lawsuit brought by 11 plaintiffs making an argument advanced successfully in several earlier cases: that the territory's practice of assessing commercial property values on the basis of replacement value rather than market value results in inflated taxes and violates federal law.
The settlement in 2000 of the landmark case challenging the practice called for the government to reform its tax assessment process and procedures. Moore noted in his ruling on Monday that the two and a half-year-old order remains in force.
However, the moratorium on tax billings and collections apparently can be lifted before that reform is accomplished. According to Moore's decree, what is needed is for the V.I. Code to be amended to provide for retroactive adjustment of property tax bills for 1999, 2000, 2001, 2003, and 2004 "and for a reasonable time thereafter until a fair and equitable system capable of reliably and credibly assessing all real property at actual value is in place."
St. Thomas real estate executive April Newland, speaking from Washington, D.C., where she is attending a conference of the National Association of Realtors, said real estate professionals in the territory are "very upset" at the impact of the moratorium and have taken their concerns to Delegate Donna M. Christensen.
"You have to get a tax letter, or you can't record a deed," Newland said, and sales on St. John have "shut down" because of Moore's ruling.
Newland said she had not been aware of Richards' directive to the Recorder of Deeds Office. She said real estate people are meeting with title companies to see what will be acceptable if they can't validate the tax information. Newland is past president of the V.I. Territorial Association of Realtors as well as the regional association which includes Georgia, Alabama, Florida and Puerto Rico.
Dwain Ford, president of the St. Croix Board of Realtors, said he is encouraged by Richards' actions. "I'm impressed by what the lieutenant governor is doing; I'm glad he stepped in," he said Friday. As for paying taxes to facilitate a property transaction, he suggested that the real estate agent "would probably have to average past and future taxes, and put the amount in escrow."
Because the government's appeal to the U.S. Supreme Court seeking to overturn an appellate court ruling upholding Moore's jurisdiction in the tax case could take a long time, "what the lieutenant governor is doing is very important," Ford said. "We need to solve this problem inside," he said.
A contract for expert assistance
Richards also negotiated and signed a contract with Kenneth Voss to assist Tax Assessor Roy Martin. The move met with enthusiastic approval from Joseph Hunt, the "special master" appointed by the court in 2000 to oversee reform of the tax assessment system.
Speaking from his office in Raleigh, North Carolina, on Friday, Hunt said Richards made an "excellent choice" in Voss, whom he said would be "an on-site consultant to the government for re-evaluation."
Hunt said, and Richards had noted, that Voss has been a consultant to the V.I. government before. He is "a most respected Certified Assessment Evaluators designee, sanctioned by the International Association of Assessing Officers," Hunt said.
Richards said Hunt told him that with Voss's contract, the government "is well on the way to compliance with the court order."
The contract with Voss has been reviewed by the Property and Procurement Department and is now before the attorney general and the governor, Richards said.
A call for "immediate" nominations to tax board
Richards also has asked Turnbull to submit nominations to fill seats on the Board of Tax Review and "immediately send the names to the Senate." Richards said that the court had noted this board must function as part of the property tax system.
It could not be determined Friday afternoon how many members the board currently has. The Tax Assessor's Office referred a query to the Finance Department. There, an aide said she would have to speak "to Walter Challenger," who was "probably out to lunch" and she would call back with the information. The call was not returned.
Richards concluded that "while the court order may or may not ultimately be up held, it is critical to the solvency of our government that we adhere to the decision and order" from the District Court. Meantime, he said, he will "make every effort to … improve the tax assessment system and ensure the government receives the revenue that is due."
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