I mentioned in an earlier post that I was going to roll out my legislative agenda. This is the third in the series.
No one doubts that the rapid increases in real estate assessments that we have experienced over the last few years has come to an end. Nevertheless, the need for real estate tax relief still exists. A number of bills have already been introduced (HB6, HB11, HB74, HB102, HJ3, HJ4, HJ19, SB9, SB10, SJ6) to address the problem.
The constitutional amendment to exempt up to 20% of the assessed value of your home passed the legislature last year. In order for it to become law, it must pass the legislature again this session (HJ3, SJ6), after which it will be placed on the ballot in November 2008 for voter consideration (HB6, SB9). If it makes it to the ballot, I expect that it will pass overwhelmingly. The challenge then will be to get the localities to implement it.
Legislative approval of the so-called “homestead exemption” amendment is by no means assured, however.
I’m already hearing that the business community is gearing up to defeat these bill. Their reason for doing so is that they are afraid that the amendment will create a de facto bifurcated rate, i.e., two separate rates, one for homeowners and another for business owners. Business owners have always opposed a bifurcated rate.
Those who have followed the real estate assessments and rates over the years are well aware that the rapid assessment increases affected homeowners the most, while business owners experienced modest increases. (See my prior writings on the topic here.) When the tax rates were cut, a lot of business owners actually saw their real estate tax bills reduced, while homeowners continued to see increases, albeit at a smaller rate. During discussions on the amendment last year, Del. John Cosgrove (R-Chesapeake) raised this very point when SJ354 came before a subcommittee of the House Privileges and Elections Committee.
With residential real estate values flat (or, in some areas, declining), this amendment would permit localities to raise the rate, provide an exemption for homeowners, and essentially shift the tax burden to businesses, all the while maintaining or even increasing, revenues. As I mentioned in an earlier post, Norfolk’s real estate rate got pretty high ($1.40 per $100 of assessed value) during a relatively long period of modest assessment increases. So I understand why the businesses would be against the proposal.
That doesn’t change the facts, though, that they got significant windfalls over the past few years – windfalls that came from the pockets of homeowners. If the homestead exemption had been in effect, those windfalls wouldn’t have been nearly as large. And the localities wouldn’t have been so reluctant to implement rate reductions.
As long as residential real estate and commercial real estate appreciate at different rates, it seems to me that a bifurcated rate is appropriate. Since the legislature is unwilling to give us that, the homestead exemption is the best chance we have.
Because constitutional amendments require passage by the legislature in two separate sessions separated by an election, and then voter approval, business will essentially have two more opportunities to kill this. We shouldn’t let them. Localities have so few tools in their toolbox, thanks to the Dillon Rule, that they need this one.
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