Nov. 11, 2007 — While real property tax figures recently churned out by the Lieutenant Governor's Office have generated much concern, a recent proposal submitted to the Senate by Gov. John deJongh Jr. seeks to limit increases on residential owners.
In a letter sent to Senate President Usie R. Richards, deJongh outlines a multi-rate tax structure which sets up four different property classes and gives the government the ability to better manage the real property tax system.
"By taking back local control of real property taxes and modernizing the system, we will be able to raise the funds necessary to run our government more fairly, evenly and predictably," deJongh writes. "All who have worked to craft this proposal seek a day when we can better manage and mitigate the current tumultuous nature of property tax assessment."
The governor explained that the territory has continued to use the same tax rate — .0075 percent — since 1936. In the proposal, a separate tax rate is imposed for each of the four property classes, which are broken down into:
— unimproved non-commercial real property, to be taxed at a mill rate (tax per dollar of the assessed value) of .00495;
— residential real property to be taxed at a mill rate of .00377;
— commercial real property to be taxed at a mill rate of .00711; and
— time shares, to be taxed at a mill rate of .01407.
In his letter to Richards, deJongh writes, "This system of multiple rates, which is used in many jurisdictions throughout the United States, results in smaller residential property tax increases, thereby protecting the interests of Virgin Islands' homeowners."
He added that when appraising the properties, the territory's tax assessor will have to apply standards set forth by the International Association of Assessing Officers. By doing so, properties will be assessed using an "identifiable measuring stick," deJongh said.
While the categories of exemptions granted under the real property tax system remain unchanged, homestead exemptions — which are granted in the form of tax credits — have increased across the board, starting with a base increase from $250 to $400. In addition, the veterans' exemption has increased from $312.50 to $450, while the exemption for residents with qualifying disabilities has been increased from $250 to $400. Finally, the current $250 senior exemption and the $375 elderly exemption have both been increased to $500.
The proposal also amends the authority granted to the Board of Tax Review, allowing it to hire more hearing officers tasked with handling new appeals and reducing the current backlog of pending real property cases. The proposal also provides the funding needed to hire the extra employees, and covers the cost of stenographers needed to transcribe tax appeal hearings.
Under deJongh's proposal, the territory's tax assessor is also authorized to issue real property tax bills for 2006 and 2007 during the current fiscal year.
"As discussed during the budget process, these revenues are absolutely required in order to sustain the FY 2008 budget passed by the Legislature, which was approved," deJongh wrote. To decrease the financial impact on residents, however, the proposal also includes a provision that allows taxpayers who have taken care of all prior property tax obligations to pay their upcoming bills in installments without incurring a penalty.
The FY 2008 executive budget proposal is about $36.1 million more that what was initially proposed by deJongh, who sent a $799.2 million General Fund budget down to the Legislature in May. Since then, members of the governor's fiscal team have announced that revenues are expected to increase, largely due to a spike in projected property-tax collections. Senators factored the increase into appropriations included in the budget proposal, along with a $10 million reimbursement from the U.S. Department of Education (See "Latest Appropriations Raise General Fund Budget Another $10 Million").
Closing out his letter to Richards, deJongh said the proposal was the result of a "lengthy and demanding" appraisal process.
"It is my belief that the proposed measure strikes a fair balance of the interest of all stakeholders in the Virgin Islands real property tax system," he added.
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