The city’s annual property assessments are up 14.3% this year, Charlottesville reports in a press release, with residential properties increasing by 15% and commercial property increasing by 11%. Last year they increased by 18.8%, so at least things have cooled down a bit, but not much. Hopefully somebody smarter than me will provide the internals on this — what the largest increase was, how different neighborhoods faired, etc.
Aren’t residential and commercial properties taxed at the same rate? If so, couldn’t we split those off and tax the two at different rates? That might allow the city to shift some of the burden off of homeowners and onto business owners, since the latter at least enjoys some income as a result of their structure, and since the assessment increases always seem to be less for businesses than for residences. I wonder if this has been done elsewhere and how well it’s worked.
Expect lots of “this will put me out of business!” arguments if the city tried to impose a higher tax rate for businesses. With all the small, locally-owned businesses, I don’t think the city would ever seriously consider it.
You can’t really shift the tax burden to business. The only way that tax isn’t passed along to consumers is if consumers don’t support the local businesses by making purchases from them (at the higher prices they’ll charge to meet their increased tax obligations). There seems to be this conventional wisdom that people who own “businesses” are rolling in dough, but that’s almost never the case, especially for small businesses.
Don’t get me wrong – Virginia’s property tax system is a big stinking truckload of corrupted crap. The values are arbitrarily set by the government, and the appeal (at least in the County a couple of years ago) is to a board composed of the county tax assessor, a builder, a real estate agent, and usually a “private citizen,” most or all of whom have a vested interest in increasing the property values as much and as often as they possibly can.
The system taxes citizens on property value they can’t benefit from until and unless they sell. We’ve lived in our home for six years, and each assessment is higher than the previous one – our assessed value has gone up about 70% since 2001. I can assure you that our income hasn’t gone up 70%, so that means our buying power and immediate actual personal wealth (such that it is) is shrinking rather quickly. Our next-door neighbor is elderly and lives on a fixed income. Her property tax is a significant expense for her, and though the last thing she wants to do is move she may have no other choice.
There are fair ways to do this. They could tax personal real estate only when property is sold, and actually tax it at the contract price. A formula could be created that would arrive at a just tax rate, based on the value appreciation. With this, they could eliminate the assessment office, so there would be a savings as well. Of course, if enough property doesn’t change hands the revenue stream shrinks so that’s a problem.
Therefore, they could tax my property every year based upon my purchase price. Tax me at that rate annually as long as I own the property. When I sell the house, tax the sale based on a formula that takes into account the appreciation in value while I owned it – an expense that I would add to the selling price and pass along to the buyer anyway. Then start taxing the property at the new purchase price until it is sold again.
This would make my ongoing tax burden fair and predictable, and would tax the increased value when I actually realize it, instead of taxing me based on an assessor’s speculative reasoning.
I’m not opposed to paying the tax – I’m just opposed to having to pay it before I’ve realized the increased value they’re taxing me for. But as long as the legislature listens to counties, cities, and tax assessors and continues to ignore homeowners (i.e. citizens and voters), this isn’t likely to change.
I like California’s (or Los Angele’s) system. The assessment does not increase until the property is sold. And then the new owner pays the real estate tax based on how much s/he paid for the property. That way someone can afford to live in the same house their entire life and if they never sell- never realize the value of their home’s appreciation- they aren’t penalized by higher property taxes. Additionally the people who wind up driving up property values are also the people who pay the tax penalties for it.
at least it is less than last year and not as much as the County. Looks like the Council is going to act on it which is something more than what other cities are doing.
Looks like the “don’t shift to business” angle was already covered well.
I really don’t understand the C’ville mentality. Granted I haven’t been here a full year yet, but it seems like the prevailing views are:
Home prices are too high, there’s not enough cheap housing
There’s too many things being built, stop building more houses
All these chain stores are coming, I miss the cozy small businesses
Hey, a new chain store is opening! Opening day, the place is packed.
All businesses are evil.
I don’t get it (shrug).
Growth is inevitable, sorry. If you want cheap housing, you need to have more housing units. If you want local businesses to stay afloat, you need to draw more people into the city to patronize them in the first place.
Coming from Fairfax and leaving because it got too overdeveloped, I kind of understand why people are so bitter. Well managed growth is possible .. though given Waldo’s postings of the ineptness of the City Council and others, maybe people are despondent for a good reason.
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As I recall from my research back when we were working on Rich Collins’ effort to stop the growth tax, state law prohibits localities from taxing commercial property at a different rate than residential property. It’s not just a matter of the Dillon Rule even.
I think you would run into way too much organized opposition from business interests if you were to try to get that state law changed. One would be much more likely to succeed in passing a bill that would allow localities to assess property values based on the actual sale price of the home. Property would not be reassessed until it is sold again. This would be a good way to moderate the immoral practice of taxing unrealized gains.
Additionally, this would force fiscal discipline on localities through their new political responsibility. Currently, a county government can accomplish what amounts to a tax hike simply by reassessing property. This way they get more of the people’s money to spend without having to actually vote on it and risk the wrath of the voters for hiking taxes. Take away the constant reassessments and they will have to vote to increase the rate in order to get more money. All of a sudden, I think you’d find a whole new interest in reining in unnecessary spending.
[…] City of Charlottesville (Press Release) (cvillenews) […]
Opened the new assessment and my head snapped back in surprise. Ouch! Now I need to schedule an appt with the chiropractor…
The tax rates better be coming down.
Ducktroller,
How much would you say that the “tax rates better come down”? A token increase of a few cents that doesn’t offset the increase from the higher assessments? I hope that’s what you want because I think that’s what you’ll get. Or do you want a rate reduction that is so big that your bill is the same dollar amount as last year? Do you want a rate reduction that will keep your tax the same as last year’s plus inflation? Do you have plans if the tax rates don’t come down enough? I’m just curious because your post suggests that something is going to happen if the tax rates don’t come down. I don’t think anything significant is going to happen. I know what I’m going to do. I’m going to pay the higher tax bill. I can’t move…yet. So I’m content to wait and watch my house get more and more valuable. It’s tough for people who are in my income bracket and trying to buy now but the situation is great for those of us who managed to squeeze in about ten years ago.
If they lower the rate at all it will only be a paltry, token sum that won’t come remotely close to offsetting the increases in taxes from the higher assessments. After the unanimous vote to reduce the rate The Daily Progress will loudly proclaim that the city council has reduced taxes.
With a 10 million dollar budget surplus at the end of 2006 they have a LOT of room to lower real estate taxes. Should they do it? Yes. Now will they do it? Probably not.
I really can’t believe this – yet another year with yet another increase. I’m going to carefully research sales in my neighborhood. I can’t believe that in a faltering/slowing market, we have yet another year of increases. Although the numbers in this year’s county assessments are larger, they represent a two-year time period, unlike the city, where we keep getting increased each year. Coming on a near 25% for me last year, this is just out of control.
The second thing I read when I got my statement was that the public meeting will be April 2 in city hall […then the rate will be set]. The first thing of course was the 10% increase – the lowest increase in 6 or more years but another big increase nonetheless.
I thought about going to that meeting and (armed with data about tax revenues 5 years ago vs. now) request that the rate be set such that the revenues are the same as 5 years ago, perhaps adjusted for population growth (what, 5% in the city proper?)
Crazy I know, but that’s what I thought….
-M
Our assessment jumped 22% this year. Near as I can tell, the only notable sales in our vicinity have been the Habitat project out back . . . the one that involved bulldozing our pretty little ravine, not replanting, and leaving us staring at a mountain of red clay. Now, it’s supposed to look nice when it’s finished, but they did that bulldozing over a year ago and have only completed phase one, with no indication that they’re going to do anything else. Incidentally, they haven’t built on the land where they bulldozed trees . . . they built on what was a vacant field/lot.
It’s nice to know that uglifying a neighborhood can do wonders for property values.