Sept. 8, 2008 — V.I. District Court Judge Curtis Gomez said Monday he would soon issue a ruling on whether the government recently violated a five-year-old court order barring the issuance of property tax bills at anything other than the 1998 tax levels.
In 2000, a group of commercial property owners took the V.I. government to court, alleging the government was assessing commercial properties based on replacement rather than actual property value — a method, they said, that resulted in inflated assessments. Thomas Moore, then the sitting U.S. District Court judge, agreed, and in 2003 ordered the government to conduct a thorough revaluation of commercial and residential properties.
Meanwhile, property-tax values were frozen at 1998 levels until the project was complete and a new assessment system — which had to be certified by a court-appointed special master — was established. The court case and revaluation process prevented the government from issuing property tax bills for 2006 and 2007, government officials have said.
Though the injunction is still in place, bills for fiscal year 2006, reflecting the reassessed property values and a new rate structure signed into law months ago by Gov. John deJongh Jr., were issued at the end of last month, prompting the attorneys for the commercial property owners to file a motion to find the government in contempt of the court's 2003 order.
If the judge rules in favor of the plaintiffs, the government should be ordered to rescind the bills, refund any payments already made by local property owners and be fined $100,000 a day until they are able to "re-establish the status quo," attorney Jim Derr — representing Berne Corp., one of the original plaintiffs in the case — said during a show cause hearing held Monday in District Court.
Attorneys for the government have continued to press the court to dismiss the case and lift the injunction barring the government from issuing property tax bills. In hearings over the past few months, government attorney Carol Thomas-Jacobs said the government has completed its revaluation and received a favorable report from the special master. Meanwhile, the federal statute upon which the case and subsequent settlement was based has been repealed, making the court's stay on property tax values moot, Thomas-Jacobs has said.
The 1936 statute prevented the V.I. government from taxing real property — regardless of its classification or use — at different rates.
"The court order is also not valid because the Legislature has already repealed the act that originally authorized the government to issue property tax bills at the 1998 levels and replaced it with this new law, which allows the government to issue bills at the 2006 values," Thomas-Jacobs argued during Monday's hearing. "The government clearly cannot issue bills at a rate that the Legislature has repealed."
Derr wasn't convinced by the argument, and later argued that the government was "fully aware" that an injunction was in place when the directive came down to issue the bills.
"The government rolled the dice, hoping there would be a lifting of the injunction before it came time to issue the bills," Derr said. "When that didn't happen, the government unilaterally made the decision to act on the so-called orders of this legislation and send out the bills. But the Legislature doesn't have the power to set itself up and act as judge in this case — just because it passed a bill that was signed into law, doesn't give the government the ability to ignore the injunction."
Thomas-Jacobs later added that the local tax assessor is mandated to send out tax bills every year, and in the absence of the 1936 federal statute, must look to the local law books — and the recently approved property tax system — for guidance.
But there is no language in the new law that actually forces the government to issue the bills, Gomez said in response to Thomas-Jacobs' argument. The law states that the government "may" issue bills for fiscal year 2006 during the 2008 calendar year, but does not include anything stronger, such as the words "shall" or "must."
"Permissive authority is not the same as a mandate," Gomez cautioned. "The language doesn't require the government to do anything — it doesn't say that they 'shall' issue the bills. It just says that they 'may' issue the bills."
The governor has also not issued an executive order directing the government to issue the bills, according to one witness testifying during Monday's hearing. While on the stand, Tax Assessor Roy L. Martin said that in sending out the bills, he relied on advice provided by the local Attorney General's Office during "several discussions" held over the past few months.
But Martin said he made the decision to upgrade the government's property tax software once the property tax system was signed into law in March.
"Based on legal advice, I was directed to send them out — the 2006 bills at the new rates," Martin said. "And once the new legislation became law, the software in our office was upgraded and changed to reflect the government's new system."
While Derr pointed out that the Tax Assessor's Office does keep old records — ones that would reflect residents' 1998 property values — in its database and could re-issue the bills at the old rates, Martin said that switching back to the previous software would be tedious and "cost prohibitive."
"Serious things would have to occur," Martin said, explaining that that the current database factors in recently implemented tax credits, newly constructed buildings and improvements, property sales and new parcels bought during the 2006 tax year. Meanwhile, some of the data has to be manually entered into the system, and reversing that process could take upwards of nine months, he added.
As difficult as the process might be, it's still not impossible, Derr responded, adding that Martin was "fully aware" of the court's injunction when he gave the go-ahead to upgrade the software.
"The government's arguments provide for a flawed reading of this new law, which was passed to allow the defendant to avoid the consequences of the injunction," Derr said. "We're actually surprised by the government's position, which seems to give the Virgin Islands a free pass with respect to constitutional due process violations."
The government has also issued tax bills to other commercial property owners involved in the case — something that is specifically prohibited in the 2003 order, attorney David Bornn, representing commercial property owners Cyril V. Francois Associates and Twenty-One Queens Quarter, added during Monday's hearing.
While Gomez did not specify a date, he said that he would be "soon" be ruling on the contempt motion. Meanwhile, residents have two more weeks to pay their tax bills, Derr said after the hearing.
"I hope a decision comes down soon," he added.
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