The Virginian-Pilot editorial today weighs in on the 5% cap in real estate taxes being touted by Republicans Nick Rerras and Hank Giffin. A great line:
GOP leaders have responded with an outpouring of enthusiasm generally reserved for Brussels sprout casserole day at the Capitol cafeteria.
The editorial then makes the point that I’ve said before:
Cities and counties are overly reliant on real estate taxes to pay for government services. That’s a problem forced upon them by the state legislature, which offers local governments few other revenue sources.
The argument in favor of a cap says that even so, local governments should be able to live with a 5% increase each year. And, other states have done it without adverse consequences. Two things that require mention.
First, such a cap right now is unconstitutional. The Virginia Constitution requires all assessments to be at fair market value. To cap assessments, a constitutional amendment would be required. Realistically, due to the nature of constitutional amendments in Virginia, we’re looking at 2011 as being the earliest that such a cap would be able to be in place. At the very least, Rerras and Giffin should be telling folks about this delay.
Second, there is evidence that a cap on assessments has the unanticipated result of actually causing taxes to go up. There was an article in the July 2007 edition of Land Lines, a publication of the Lincoln Institute of Land Policy, that makes this claim. From the article (emphasis mine):
Researchers from Colorado, Idaho, Illinois, and Minnesota presented the results of their studies showing the effects of proposed or existing limitation measures in their states in a workshop sponsored by the Lincoln Institute in November 2006. They experienced initial surprise that the assessment limitations produced higher taxes for many property owners whom they would have expected to receive tax relief.
I plan to write a more extensive post on this article later. But for now, suffice it to say that the 5% cap, proposed by Jerry Kilgore in his 2005 campaign for governor, is just as bad an idea today as it was then. The fact that Kaine’s 2005 plan has been embraced by the legislature – on both sides – is telling.
Technorati Tags: Nick Rerras, Hank Giffin
VIVIAN J. PAIGE | All Politics is Local 
vjp – Just to clarify, since it has been repeated here and elsewhere on a number of occasions recently, is it not true that when then candidate-Kaine proposed Homestead Exemption legislation, his version of the law would make this relief available only to those who resided in the same house for 15 years or longer? That was a bad idea; if enacted it would have created no tax relief for thousands for citizens who needed it, and instead imposed an artificial line of discrimination between homeowners new and old. If you call his office today, of course, they would say he tweaked this provision I am sure. But that was in fact his original idea of “homestead” legislation; if Kaine is touted for homestead legislation, disclosure of what he preached, it seems to me, is appropriate.
The current version is a modified one. The appealing thing about the bill in many people’s view, particularly those who want to preserve local discretion (which is totally understandable) – is that it does just that – 1) local government’s “may” not “must” exempt up to 20%. The public needs to be informed more about this; I am hearing more and more people who are expecting this bill to mean automatic relief. Not true; don’t expect it. And 2) this bill achieves another aim local officials have wanted for years – namely, a back door means to, in-effect, assess commercial and primary-residence residential properties at different rates. The concept of a split rate, though it is not permitted by law, is achieved. And, to Democrats credit, it is one a Dem. has trumpted locally; Del. Kenneth Alexander. This bill is a means to accomplish this.
Brian – honestly, I don’t remember that part of the proposal (I was a little busy during that time myself) but in looking back thru the various articles written at the time (here, another) , I can’t find an exact copy of the plan (Kaine’s 2005 website is gone, of course) and the only reference I can find to 15 years is in this article, which talks about a separate proposal to exempt renovations from taxes for 15 years.
And, of course, the homestead exemption will be discretionary on the part of the localities and get us to where we need to be: separate rates for commercial and residential properties. (Why the legislature is so against separate rates makes little sense to me.)
Once it gets passed, we have to lobby our council to implement it – and make it a campaign issue in 2010 if they don’t.
Brian – I kept looking and was able to get to Kaine’s 2005 website via the Wayback Machine. Here is the page on his position on the homestead exemption. Note that the 15 year issue is related, as I suspected, to renovations.
vjp – Got it. Thanks. I was looking as well. In particular I was trying to find transcripts of Kaine-Kilgore debate that aired on WHRO. This taxes my memory; but I was remembering it stated then. I did find this : “The following is the proposed wording for the governor’s constitutional amendment: “The General Assembly shall by general law authorize the governing body of any county, city, or town to have the option to provide by local ordinance for the exemption from local property taxation, within such restrictions and upon such conditions as may be determined by local ordinance, of up to 20 percent of the value of residential or farm property that is designed for continuous habitation and is occupied as the primary dwelling of the individual owners.” from here http://app.bronto.com/public/?q=message_preview&fn=Key&type=tracking&id=bmscugyzyqsmsimknojlnktmlnmhbid&link=brmdotbrcrlrtqqnxkvlkrbtjcgbbgh