In a press release, the county has announced that real estate values in the county have risen by an average value of 30% since the last biannual assessment, in 2005. Assessments increased by 27% in 2003 and the same percentage in 2005. By my math, that’s a 109% increase in property values in the past six years, which is a fantastic rate of return if you’re investing, but not so hot if you have no intention of selling your home.
Note that this is only a calculation of the market value of properties — the rate reflects the realities of real estate prices in the area, and not any taxation decision on the part of the county. Albemarle is free, of course, to adjust their tax rate downward, rather than increase revenues by over a quarter, in order to ease the burden on property owners.
The Hook and The Daily Progress have more.
fft. that’s all? lake monticello got about a 40% increase across the board.
Wow. As if living in Lake Monticello wasn’t punishment enough.
I kid, I kid!
It is unethical to tax unrealized gains. Taxes should be levied on transactions or perhaps on income. Taxes should should only be levied when there is actual money to collect.
That the laws of the Commonwealth of Virginia force localities to demand money from those who may not even have the money to pay is an abomination and a great injustice.
Unfortunately, being fiscally responsible probably means that Charlottesville might indeed need to reassess some of these properties. Some of these assessments are way out of line with the actual market value. We keep hearing stories about increased infrastructure needs due to development, but the same development doesn’t seem to be generating a whole lot of revenue either.
I’m no economic genious here, but it seems that it may bring the cost of housing down if you increased the assessments. After all, right now people will put a piece of land on the market and just sit on it until they can find someone foolish enough to pay what they are offering. If they had to soak up taxes, then they wouldn’t want to sit on it as long and would put it out for a lower price. Unfortunately, if you raise it too much, then it might also cause people to sell (which should also bring prices down).
Is there anyone out there who could confirm or deny this?
I suspect that there just isn’t enough land owned by speculators, awaiting resale, for that to make sense. But perhaps somebody who is more familiar with area real estate can say for certain.
Yes and there is two reasons for that. Reason number One- “Residential development is a fiscal drain on local government.”
And reason number two- Albemarle County is not asking enough per unit from the developer in terms of “proffers.” Brian Wheeler has a comparison at “Charlottesville Tomorrow” between Albemarle and Loudoun and the proffers each have asked for on two similar projects.
On 365 acres with 1040 units- Loudoun asked and got $29,269 per unit. On 828 acres, with 3100 units- Albemarle County is only getting $9,369 per unit.
And before anyone tries to use the cost of Real Estate differences as an excuse for the proffer disparities in Albemarle vs. Loudoun- closer to home Orange County received $25,000 per unit for only 290 units with the Annadale development. That also includes: “$75,000 for sidewalks, $1.2 million to build swimming pools, 22 acres for a park or recreational site and 20 acres for a school.”
The increase in Real Estate assessments is primarily because in Albemarle County developers get a pass, which amounts to a big giveaway, when it comes to contributions toward the infrastructure costs. In Albemarle County developers aren’t required to pay for the added demands their developments place on Infrastructure. No the taxpayers wind up footing that bill with increased assessments.
Before everyone goes crazy there are a few things to consider.
Property values have leveled off
they could always lower the tax rate
Everyone can be upset but before storming the County office building with pitchforks and torches need to understand that higher assessment does not have to be a 1 to 1 increase in taxes. Go to a budget meeting and say you don’t want to pay higher taxes. Make sure to remember that might mean you favorite program won’t get a big increase.
One of these years, enough people are going to demand that we only reassess at the time of property transfer that it actually happen. If the county or the city feels that they need to raise taxes, they should have to hold a vote on it, rather than letting it happen via property valuation increases. This bivariate approach is not good.
“Residential development is a fiscal drain on local government.”
Doesn’t that really depend on the nature of the residential development? Residents of high real estate tax McMansions with kids that go to private schools and who generate plenty of personal property tax and sales tax may actually produce more revenue than costs for the local government. Retirees who live at Westminster Canterbury or similar places cost very little and generate plenty of tax revenue. On the other hand low and moderate income workers who rent dupelxes or apartments, have kids that attend public school and don’t pay a lot of sales tax probably generate less revenue than they cost the local government.
I’m sure that our local government decision makers are very aware of these distinctions and that their knowledge of who pays more taxes than costs influences their land use planning decisions.
@ Tigernach:
What? You’re not a “genious?” Everyone here thought you were. Whoa. I gotta lie down.
Waldo Said:
That’s a very good point. Sometimes these rates seem a little arbitrary as they are, and while there is an appeal process, you don’t exactly get to vote on the issue. Of course, If we went with a property tax model that only increases during property transfer, then that would, in effect, decrease our revenue for schools, infrastructure, etc. For it to work, you would indeed need regular (yearly?) meeting to vote on the issue, and it’d have to increase by a flat percentage without factoring in improvements (since you can have a seperate vote for each person who builds a deck, or paved their driveway).
As for Judge Smalls… do you just get off on flaming people or what?
Sorry, that was supposed to be “can’t have a separate vote”. Evidently its still too early for me to type clearly.
Unless, as you point out, the county votes to raise taxes. And since right now taxes go up anyway, only without a vote, now we’re simply requiring that we all agree (by way of representative democracy) that we should raise taxes.
The Census Bureau says that the average American moves once every 7 years. I don’t know what the figures are for Charlottesville and Albemarle, but I expect that we’d continue to see an steady increase in valuation just the same, as people move, only dampened somewhat.
Waldo, Makes sense to me. I’d vote for it. So when are you announcing your candidacy?
Not hardly. :) I am surprised not to see any such bill introduced into the General Assembly this year, though — something giving localities the power to reassess only at time of property transfer. Maybe I should convince a legislator to introduce such a bill for next year’s session.
Got mine last night, less than I expected, based on recent sales in my neighborhood. Guess my lousy front yard maintenance paid off!
I am waiting with baited breath to see what happens in c’ville proper – we have had these kinds of outrageous assessment increases for several years running as well. It has been brutal. I really hope the market levels off a bit this year.
Looking over the past few years’ of cvillenews.com stories, I figure we can expect Charlottesville assessments on February 1.
A point of clarification… local government DOES take an annual vote on the property tax rate. There are lots of ways to spin this [See: http://www.cvilletaxpayers.org/ for one viewpoint in City]. Sometimes people will tout a “property tax cut” that is still an effective rate increase to the tax payer. The advertisements that run in the paper do have to explain this to the public in advance of the public hearing, but it can certainly be confusing. As assessments go up, government has more revenues available if it doesn’t lower the tax rate in response. Our elected officials decide EACH YEAR as part of the budget process whether to invest that new money in local government and community priorities/needs or return it to the taxpayer by lowering the property tax rate. Brian Wheeler, Charlottesville Tomorrow
A source at City Hall tells me to expect 14% assessment increases for Charlottesville properties. That’s 15% for residential and 11% for commercial. As an annual assessment increase (as opposed to the county’s biennial increase), that works out to about the same as the county’s spike.
Waldo, you seemed to say that assessments should only change when the property is sold. Actually if would be far worse over time.
People who have property with high current values and lived in them a long time would pay much less than people in far smaller homes but who had bought them recently.
This is the situation today in California where multi-millionaires can pay less property tax for large homes than more recent purchasers of small homes. It produces a strong us vs them dynamic when its the new purchasers (not neccessarily new arrivals) who pay the bills.
An aside, people complain about taxes, but no one complains when they make money on selling the property.
That is absolutely correct and, in fact, the very concept. This is for five primary reasons:
1. Property taxes are a contract, between a municipality and a resident, established at the time of purchase. This allows a would-be homeowner to determine whether they can afford to live in that locality and plan for their next three decades of mortgage payments and property tax fees. (Like most contracts, this one can be renegotiated periodically, in that the BoS should be able to change the rate and, if the property owner does not assent, he should advocate for having those BoS members voted out of office.) This up-front knowledge allows homeowners to make purchase decisions and financial plans that are based on sound knowledge of future costs.
2. This eliminates the problem of little old ladies being forced to move out of the family house, or farmers selling the family homestead, because a bunch of fools built McMansions around them and now their $1,000/acre land is worth $1,000,000 acre, and their taxes are sky-high.
3. Such an approach would encourage stability in the community, by providing an incentive to stay where you already live. Such stability is enormously valuable in many, many regards: social well-being, crime reduction, economics, healthcare, etc., etc. (See Eric Klinenberg’s Heat Wave: A Social Autopsy of Disaster in Chicago, which describes how hundreds of elderly people died in the 1995 Chicago heatwave because they didn’t know any of their neighbors.) Our current approach provides a strong incentive for community instability, forcing people to move. That’s terrible.
4. It is, as Jack points out, immoral to tax people on unrealized gains. My wife and I will begin building our house this spring. We intend to live there for the rest of our lives. We are very happy to pay our fair share of taxes. But we have no intention of ever selling it. Our home is not an investment. So the gains that we’ll surely make in property value are not, in fact, gains at all. We’ll never get a penny of that money, because it’s pretend money unless we realize those gains by selling the property. Taxing us on that is just bizarre.
5. Municipal governing bodies have too long been able to get away with tax increases by saying “hey, it’s the market, what can we do?” True, they did not vote to raise the rate, but they also failed to vote to lower the rate enough to offset the increase. So they cut the rate by a little bit — still resulting in a tax increase in terms of what the average homeowner’s bill is — call it a tax cut, and that’s that. That’s not fair to citizens, and the surest way to prevent that and require an honest, open discussion when municipalities need more revenue is to require a vote to raise the rate in order to do so.
I hope that explains things.
Yes, but that’s coming on the tail of a similar increase last year, and a much higher increase the year before. I’ve watched my neighborhood increase 125% since 2002. If we see anything like a 15% increase again, I plan to challenge it. The sales in our neighborhood have slowed considerably – I will be stunned if they justify another hike of that percentage.
Yes, the new assessments have been at the end of January for the past few years.
Although this is very un-Libertarian of me, a few thoughts on the morality of real estate taxes.
– You are not being taxed on capital gains. If this were a capital gains tax, then you’d be taxed at the time of sale, and, excepting certain loopholes/exemptions, you are taxed on the capital gains by the state and the feds, at the time of sale.
– you are being taxed for the cost of local government – you receive the benefits of the taxation (school system) when you and your wife have and school children; you receive the benefits of all the things you’d like the county government to do – including police, fire and rescue – that nifty school at Stony Point and the firestation. Those benefits help you in terms of lowered homeowners insurance on that house you have now and are building – think what it would cost in that premium if the trucks were further away. This is not trivial.
– ostensibly, the land values reflect the desireability or value of living in a particular area. Part of what adds to that value here is: low density (unlike say, Fairfax), quality schools, good services. You can find the rural character which is so expensive here in Southside VA, for considerably less. You will have to give up the schools and the cultural opportunities of c’ville/albermarle, but perhaps those things aren’t really worth such high taxes. People will pay thousands a month to live in NYC in a closet. One thing about this area: normally one of the things that drive up values is ability to earn income – that is somewhat broken here, since the growth isn’t ‘organic’ – we have tons of money coming in from outside – money that is not earned here.
– Although it no longer is so, at one time, property taxes were used because land ownership was a very good measure of wealth – ability to pay. It was a fairly ‘progressive’ means of measuring who in a community reaped the majority of the benefits of the community – represented their “share” of ownership in the venture that any community represents. Now that we are no longer an agrarian society/economy, it’s not a very good measure of ownership.
We have tried to game the system for a number of years – providing ‘land use’ exemptions to redress exactly the problem of little old ladies and family farms – we wind up providing a shelter for speculators who can afford to sit on the land for years and years until it “ripens” for development – Charlie Hurt is exhibit #1. Sure, it may have helped some folks sit on land longer, but it’s been very expensive as a means of preserving rural character and greenspace. The city currently offers tax relief for ‘fixed income’ folks. Roll backs are an attempt to address this problem.
Any special incentives intended to distort normal market forces will likely have strange and unintended consequence and will create opportunities to game the system. I think the ‘right’ answer is to tax incomes, not real estate – and by incomes, I don’t mean wages alone – I mean income. Institute a local income tax (that’ll never happen in VA), and then you capture the real sources locally. That will help corrent this situation, at least somewhat.
Cville Libertarian,
I agree with you that we should all be taxed on our real income and I think the father of free market capitalism, Adam Smith would too. Did you know that he was a strong believer in progressive taxation? He wrote, “The rich should contribute to the public expense not only in proportion to their revenue, but something more than in that proportion.” I also agree that a real income tax that replaces real estate taxes will never happen in Virginia.
As for land use tax breaks, it’s not just local speculators like Charles Hurt but also many others, including wealthy celebrities and many elected officials who benefit from very low taxes on land that they will eventually either sell for development or develop themselves. The taxes they don’t pay are shifted to all the other taxpayers who aren’t eligible for tax relief.
I don’t believe that Land use tax relief PRESERVES land because preservation is permanent. Land use tax relief does defer development by shifting it to other parcels but this is often at the expense of orderly development close to urban services.
Kevin, et all,
You know one way to get rid of the Land Use tax credit without everyone freaking out and selling could simply be to phase it out. Set up a time table where you gradually reduce it the benefit (and increase the back taxes), while increasing ACE funding. Also set up a provision that those who’d previously recieved land use credits get priority for ACE easements. Some people would still choose to subdivide and/or sell but those would only be the people who had plans to do that eventually anyway.
Maybe some sort of additional incentive could even be set up for people to switch programs before the program runs out?
Also, one thing that concerns me about both programs is that they only apply to large landowners. If I own nine acres of Green Space with four division rights then neither program really provides an incentive for me to keep that open space. It could be argued that both programs are unfair tax benefits generally only available to the wealthy.
Likewise, it seems that once a piece of land is subdivided that it is a permanant loss. Is their anyway to provide for voluntary merging of subdivided land (when it is all under the same ownership)?
(Tat, if you’re out there, I wonder if we could inspire someone to lead a forum on this Land Use vs. Ace debate for EW?)
Tigernach,
I believe that the phasing program you envision would require enabling legislation from the State Legislature. That is very unlikely. The Farm Bureau and the building and real estate interests are very satisfied with program just like it is right now. All of them would fight any changes that might make it more difficult to sell or develop their land or increase their taxes and they would certainly win. Oh, and you can forget about trying to legislate a distinction between a developer/speculator and a farmer. Many farmers are speculatin’ that their land is going to become valuable enough to finance their retirement. Taking away or even limiting development options is going to reduce the future value of the land.
State law does allow changes in Albemarle’s land use tax (use value taxation) that would make it a more effective conservation tool. That’s conservation, not preservation. The county could change its use value program and require that landowners who want the tax break would also have to agree to keep their land undeveloped for ten years. This would discourage speculators and developers who plan on developing the land in the next ten years and generate considerable tax revenue that could be turned into a significant real estate tax rate reduction or, more likely, added to the county budget and spent. When New Kent County changed their program many people either agreed to refrain from developing their land for ten years of they started paying the full market value tax. I don’t know if the tax rate was reduced or how much additional revenue was collected. In many cases the land was not developed any sooner than it would have been when the use value tax was being collected.
A few years ago I looked at a 392 acre parcel that was in the use value program. It is on the north side of Pantops Mountain across from Rivanna Ridge shopping center. The actual taxes being paid on that land resulted in an effective tax rate of $0.02/$100 of assessed value. That particular piece of land that was being “preserved” was actually worth millions and now has houses all over it. The thousands of and thousands of dollars that were not collected didn’t do a damn thing to keep that land from getting developed.
It was my impression that that land use tax credit was a local program, so what say would Richmond have whether we kill the entire program, or gradually phase it out? No doubt the Farm Bureau would fiercely oppose removing this subsidy regardless of how it’s done; they have a talent for arguing for no government interference in their “property rights” while simultaniously asking for money to enable them to develop.
Personally, I think developers have taken over the Farm Bureau, and are using it as a cover. My family are farmers going way back, and I strongly resent the idea that farmers need to become developers to plan for their retirement. That certainly wasn’t true for my father, or my Grandfather or my Great Grandfather. I plan to leave our farmland to my own children, not turn it into a subdivision. Using easements, CREP, and other programs makes that possible. Part of being a farmer is learing how to wisely invest and manage your money. My grandfather watched the stockmarket constantly so he’d know what was worth growing and what wasn’t. Dumping all your money onto your land and expecting to cash out all at once is just really foolish and fiscally irresponsible. They shouldn’t blame the county because they didn’t have the foresight to consult a financial planner. One of the Farm Bureau reps told me personally that his plan was to sell to developers and buy land in West Virginia. How does that serve to promote farmers and farming in Virginia?
Make no doubt… this has nothing to do with Retirement. When they bought that land were they under some kind of mistaken assumption that it was zoned as a residential suburban area? They knew it was rural land when they bought it, and it was their decision to take a gamble that they could thwart the public’s will and make it into something suburban. If they obviously bought it in good faith as farmland then they should have had every expectation that they’d sell it as farmland to another farmer. If they intended all along to create a subdivision out of it then they don’t deserve a farm use or conservation tax credit. They’ve just saw prices going up and wanted to cash in. Fine, but don’t ask for a tax break to do it. Besides, with the acres we are generally talking about, and the current rate for land, no one’s going to be in poverty even if they can’t subdivide but a few times per year.
Kevin, Tigernach,
Thank you for the interesting discussion on the Land Use Tax. I have been asking the County for any data they have to support the return on investment to the tax payer for over three years and have yet to get an answer. I’m in total agreement with Tigernach and his view of the Farm Bureau, which I feel would best be renamed Real Estate IV. That said, even as a growth area resident who has seen his community get the short end of the stick for some time, I believe that rural protection is worth both the effort and money. I just want to make sure we’re no longer renting rights but buying them. It seems to me that you can make the case for NOT reducing the overall tax rate by eliminating land use, but rather moving the funds that would come in to the ACE program. If you look at the ACE data the program has been very successful and this year even got some matching grant money, giving them an even bigger bang for the buck. Rural preservation, with its elimination of the associated development rights is an investment in the future against the high cost of providing services further and further from the core employment of cville. I just hope this issue is one that comes up in the next election cycle and there are enough rural residents who will vote to preserve the rural area rather then cash in on it.
What a nice article… Our assessments went up 106% here in Albemarle County after having gone up 76% last time around.
I am a young school teacher, married to a young nurse. Obviously my point here is that we are just starting out. I am an 11th generation Virginian, we’ve been here in Albemarle, Ivy – even more unfortunate – for the past 120 years. My wife’s family is from Greenwood since they can recall, we’ll say at least four generations, so we’re no transplants, or as you say, people with “intention of selling [our] home… Our assessments went up 106%, we provide our own water, our own seprtic system, plow and maintain our own roads and the state road for our neighbors half the time as it is not heavily travelled and appears to be last on the list come winter weather. Anyway, what do we do? My grandparent’s raised me, they are here and paying the same price to stay in the home they built, harvest the fruit trees and garden they planted way back when, before so many people arrived here. My wife and I are not quite sure what to do at this point, the county won’t let us divide the land into lot’s and sell of nor do we want to do that. It is pretty frustrating knowing that I will likely not be able to remain in the profession I love if I inteend to own and maintain the land I grew up on. It’s as if the people new to the area have just arrived at the fact that pulling the rug out from underneath old locals is the logical way to go about doing their business. We never complained or raised hell about all these new people, we welcomed every new faimily to our area the way it used to be done with practical country hospitality and damn if it isn’t coming back to really hurt us. Oh well, we’re nothing more than good ol’ working people, no stuffed shirts here, no two-cent millionares wanting to call shots either, that seems to be the trend. Maybe we’ll figure this out…
Sorry, I should have clarified that the “new people” I had in mind were our local BoS and other people calling the shots, it wasn’t animosity directed towards our neighbors.
George,
It doesn’t matter if you meant the “new people” were the local BOS and others, you post smacks of a superior attitude that is all too prevalent in this county. I would remind you that you do not obtain any additional rights or priviledges based on how long your family has lived here. Granted, it might give you a different prespective in the situation as it deals with growth, but that’s all. This is, at leat the last time I looked, the United States, where we have a constitution that gives people to right to move about freely and conveys with them those rights where ever they go. I would also suggest that if you’re having a problem with the “new people” you blame it on the “old locals” who have been selling off their land and not to the people who are buying it. My only hope is you don’t teach government.
CrozetResident,
I have only lived here since 1990 but I believe that when you move to an area you have a moral obligation to do your best not to harm the local people. I may be a “newcomer” here but I have a hometown and aging parents who are experiencing financial distress over very similar growth issues. ACE needs to grow, localities need to give as much property tax relief as possible to elderly residents, and government at all levels needs to get creative to find ways to keep good people from being taxed out of their homes.
Gail,
I completely agree with you when it comes to supporting elderly residents. The question is should we continue to give a tax break to someone’s elderly parent who’s sitting on land worth hundreds of thousands of dollars, by asking someone else’s elderly parent to pay for that tax break when their making just enough to keep their home off the auction block. Yes, continuing the tax break will allow the land rich elderly parent to keep their land or more accurately preserve their wealth for their children, while the other elderly parent who doesn’t have any options i.e. sell off some of their land has no option but to sell their home or let the bank take it in foreclosure.
I don’t agree with you that because I moved here I assumed any moral obligation to anyone. The bottom line is this; the land use tax subsidy will cost the tax payers about 12 million dollars this year alone. It was a program sold to the public as a way to preserve the rural character of the county. To that end no one is able to prove land use has done anything other then to allow developers to keep their land i.e. North Pointe, Hollymead, Biscuit Run off the market till they were ready to cash in. If I have any moral obligation to my fellow citizens it’s to make sure government is accountable and when it comes to tax dollars insure they’re spend in a prudent manner, which benefits ALL those who pay the tax bill.
Please remember this is an average of 30% – my little home and land in the older section of Crozet went up a whopping 67%! I ought to see if the county is interested in buying it! I’ll be really surprised if tax rates are reduced much, if at all. The supervisors never met a tax they didn’t love.
If tax rates aren’t reduced, this will force many people to seek places where both the rates and the assessments are more sane. Just think, next year, they’ll be able to increase assessments every year! Why wait two years when you can collect more each year!
Thanks Gail, that’s all I meant to say and I am sorry it might have come across as arrogant, I didn’t mean for it to obviously but I can see how someone might read it that way. Crozet Res., trust me, I am nothing more than a humble school teacher that’s frustrated and fearing that I won’t be able to hold on to something that is dear to me. Land use is not something we do nor do we plan to sub-divide and sell because we can’t, we don’t own that much property. We are just regular people with regular land holdings and I was just trying to say that it’s becoming awfully difficult for us to stay where we are. On top of that, it is a bit disheartening to see developers and others use our tax dollar to put in sewage, water, roads, etc. nearby – increasing our land value – but the county still refuses to accommodate us with the same investment so please, by all means, look out for those of us not smart enough to know what to do in this situation and “make sure government is accountable” to us too. If I were a government teacher maybe I would know more about how this all works and be better prepared for the assessment…
George –
I’m a ‘been here’ myself – native c’villian (MJH) – but my parents families roots are egalitarian level playing field, where the freedoms of all, not just the economic elite 800lb gorillas, are preserved. As with all other government, we give up some personal freedom in order to gain some protection.
NOTE, – this is an edit – Waldo, I’m not sure what happened, but a huge chunk of this comment was deleted when I hit ‘submit’ – this the original comment, and the one above is the truncated one.
George –
I’m a ‘been here’ myself – native c’villian (MJH) – but my parents families roots are
I believe that permanent conservation easements,such as ACE, are the way to control growth, not the current land use tax subsidy which has clearly been abused in Albemarle County.
Crozet Resident,
This place, beautiful as it is, is also a place where some families have lived for many generations. You may not know this, but if your ancestors are buried in a particular place and you have always lived where you were born, your ties to that place are different than the ties of those of us who have moved here. I have raised my children here and I feel great affection for the place but I know the difference. I also know that in mobile America, lots of folks have no idea what I am trying to say here. This is a divide that is at the heart of this community and which needs more attention.
Crozet Resident,
You and I both know that use value taxation has been used for many years by developers and speculators. It has helped dramatically reduce their costs and so enabled them to buy even more speculative real eastate and also wait for values to go up while at the same time use value has shifted a huge tax burden onto non-eligible landowners. It ought to be changed because it frequently doesn’t work doing what it’s intended to to do and it is unfair. That said, I do know that it has helped some non-developers who could not own their tree farms, riding stables, orchards etc. if they had to pay the full fair market taxes. Some of them may be willing to put their land into the ACE program but others may not. Any solution to the problems of use value should take this into account. If the solution doesn’t include the legitimate users concerns they will become the main focus of the debate, the poster childern for use value, and the effort to reform the problem will die. Maybe shifting the revenue into the ACE program will do it, I don’t know. I wonder just how far 12 million would go when buying development rights.
Kevin Cox wrote:
No. Residential development really is a drain on local government.
I couldn’t explain it better than it has been explained on this site (smalltownproject.org), so I’ve excerpted a portion of his explanation.
Myth #1 — “Residential growth brings in needed tax dollars.”
[…]
Beginning in the late ’80s, the American Farmland Trust (AFT) began developing “cost of community services” (COCS) studies to compare residential development to farmland, open land, and commercial/industrial property with regard to how much they generate in tax revenue versus the costs of public services they require. The latter involve things like road maintenance, police and fire service, educational expenses, traffic control, and various forms of infrastructure maintenance.
Other organizations, from community groups to local governments, followed AFT’s lead, conducting their own COCS studies of the revenues versus costs of residential development versus undeveloped land, farmland, and commercial/industrial land. The results could hardly be clearer. In nearly every case studied, for every dollar in tax revenue generated by undeveloped land or farmland or commercial/industrial property, considerably less than a dollar is required to provide necessary community services to the property. That is, these forms of property pay for themselves. They are a net plus to a city.
On the other hand, precisely the opposite is true of residential development! In nearly every case, for every dollar in tax revenue generated by residential development, something more than a dollar is spent on community services. Residential development fails to pay for itself and is a net loss to a city.
The Ratio’s the Thing
The methodology of a COCS study is procedurally burdensome, involving sifting through and organizing a great deal of financial and budgetary data from a particular town or county. The idea, though, is conceptually simple. In the end, a simple ratio of revenue to cost of services tells the tale. As a typical example, a 2002 COCS study of Saguache County Colorado was sponsored by Saguache County, the Sonoran Institute, the National Association of Counties, and AFT. It found that for residential development in Saguache County the ratio was 1 : 1.17. That means that for every dollar of revenue generated by residential development in Saguache County, $1.17 was spent on community services.
Looking across studies, the median ratio of revenue dollars to cost of community services is about 1 : 1.15. (See AFT’s summary report, Cost of Community Services Studies: Making the Case for Conservation) That means that half the communities studied have ratios worse than that. Frequently it’s around 1 : 1.40 and even worse. Virtually all the communities with ratios better than 1 : 1.15 bunch between there and break-even. It’s extremely difficult, in other words, to find a town where residential development actually brings in more revenue than it costs.
While not perfect, COCS studies provide clear evidence that residential development is rarely the economic boon to a community that developers and the government officials they’ve lobbied so successfully would have you believe. Indeed, it is typically a financial drain, creating a deficit which has to be made up somehow. How is it made up? To the extent possible, it has to be made up by the revenues from commercial and farm/open land.
The type of residential development determines the cost of community services. You lump all residential development together. Even one of the articles you link to says this: “If many homes in a community are in an extremely high price range and occupied by “empty nesters,” for example, the COCS ratio should be expected to be relatively low. On the other hand, low- or middle-income property occupied by families with numerous children would produce a higher ratio.” A couple with no children and a million dollar home generate far more revenue than they cost the local government. A single mom on welfare with three kids costs the local government more than she pays in taxes. Local governments know this and act accordingly.
The worlds population is growing, UVa’s enrollment is growing and the population of Virginia is growing. People have to have homes. Arguing that growth costs too much is a waste of time. Growth is going to happen no matter what ASAP says. Accepting this is the first step towards realistic and effective planning that can help reduce the negative impacts of growth.
Anyway, people are more than just numbers in a financial impact statement.
Kevin,
With regard to what the elimination of land use in favor of ACE and what that would do the data is available. For the past three years ACE has been averaging about 1,000 acres preserved per 1 million spent. In the past 4 years land use has cost the tax payer about 40 million, therefore if the same amount would have been spent in ACE there would now be about 40,000 acres in preservation versus ZERO acres preserved under land use.
With regard to your statement about taking into consideration those who would have to sell their land were it not for land use, I can only respond by saying what does the person who lives in the growth area and by the way is paying for land use do when their taxes go up? They have no avenue to obtain funds by selling land. No, they must sell their house or go to foreclosure.
What it boils down to is this. Land use will cost about 12 million this year. This is tax payer money and because of this the land use program must be judged as to its effectiveness by how well it serves ALL the resident of the county, not just those who get the tax break. To date, I have seen no evidence of such effectiveness. What I have seen is one rural resident after another tell the board of supervisors that they don’t care about rural preservation and in fact demanded the county not impose phasing and clustering to preserve rural land because they are planning to sell their land. I have no problem with property rights, but you can’t have it both ways. In fact, I willing to pay for those rights with tax money via ACE. I do not however want to continue to rent those rights to people who already told me they intend to sell.
Finally, I don’t think ASAP has stated growth will not occur. What they have said and I agree, is there is a point of diminishing returns from growth and their request for a comp plan amendment is an attempt to put some semblance of intelligence to stop us from going past that point. At the very least, a comp If you need any proof that this can occur then you have only to take a trip to most any place in the tri state area to see what a disaster will occur. Preserving rural land is an investment in the future and will pay dividend well over and above the cost of buying those rights.
Again, thank you for your comments
Crozet Resident,
ASAP and their chief spokesman, Jack Marshall, regularly state that “growth is not inevitable”. It is. I think that accepting reality should be part of planning.
I don’t see any reason that the family orchard, tree farm, riding stable etc. should be given any more favorable tax treatment than any other business. Many people do see a reason and that is going to influence any effort to reform use value taxation. Also, those who do have their farms in land use pay fair market taxes on the house, some of the buildings and at least one acre. These facts should be included in the discussion. Omit them and then they’ll come up later and help sink justified reform.
I moved out of the county almost ten years ago and so my taxes are not effected by use value. It’s an interesting topic though, and I wish you luck if you plan to try and get the BOS to take away the use value subsidy from developers and speculators.
BTW, how many of the supervisors and their more generous campaign contributors own land in the program?
Kevin,
You raise some important points. The usual reaon given by those who receive the tax break is they deserve it because they use less services. To that I say “wrong”, they get the same services per household that everyone in the County gets. Indeed, because of the distances involved and the cost of fues for school buses, police cars etc, it actually costs more per household to provide services. I would also submit that as long as their land retains its development rights, then what you have is a development yet to be developed and is no different from land in the growth area that hasn’t been developed. Now should those rights be vacated, either by puting the land in ACE or some other form of preservation they should get a tax break, but only then.
As the the supervisors, I’m afraid your correct in as much as the land use program has become a way for them to buy rural votes albeit with money from mostly growth area residents. I am hopeful that this year being an election year and with the fact that the board turned down phasing and clustering due to the protests from rural residents the board will have a much harder time in their justification for land use. It will be an election issue.
With taxes and reassessments, you are guilty until proven innocent!
I have had my house for seven years, and the rate of reassessment is beyond belief. There is no way on Gods green planet I could sell my house for as much as they have assessed it for. Even if I could, it would cost me a FORTUNE in home improvements!!!!
The house beside us has been on the market for at least 5 months. Obviously, they must be going by these insane prices.
After this last reassessment, I can’t WAIT to sell my house! If only improvements after seven years wasn’t obvious.
It’s ironic they list “improvements” on this, because they have not done a damned thing for us. Greed is in effect. I would love to sell at this price! It’s the opposite of the blue book value of most cars.
In our neighborhood there have been MANY break-ins and robberies over the past year. Frankly, I’m not impressed by the services for the cost.
Where’s the lynch mob when you need them?