New property valuations to appear on forthcoming bills
Published: August 18, 2014
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ST. THOMAS - After 14 years of legal battles, legislative fights and delays, V.I. property owners will soon be getting their 2013 property tax bills - the first bills issued using the new property valuations and the new tax structure.
Of course, new is a relative term.
The court-ordered mass revaluation of all property in the territory was done in 2006, although it was updated this year. The law establishing the new tax structure to go along with the new property values was passed in 2008.
At first, the government was waiting for the court to let them issue the new bills at the new rates. That green light came in 2011, but after not issuing bills at all for almost six years, the government had some catching up to do.
Now the government is ready to send out the bills, and property owners are curious to see what impact the new structure will have on their bank accounts.
The legal battle
A group of commercial property owners filed a lawsuit more than 15 years ago, claiming that the government's tax system was unfair and unconstitutional. A settlement agreement was reached in 2000, but after three years of inaction by the government, the plaintiffs returned to court. In 2003, the court ruled in the property owners' favor, issuing an injunction freezing property tax valuations at 1998 levels - the last set of values the court deemed fair. The court also ordered the government to revaluate all property in the territory using fair market value and demonstrate that it has a functioning Tax Review Board.
In April 2004, the territory entered into a $6.5 million contract with Virginia-based BearingPoint Inc. to work on the revaluation. The contractor developed a formula that considered many factors, including property sales, to determine market value.
Impact statements, telling property owners how much their property was worth as of January 2006, were mailed out in 2007. The impact statements showed an increase in property values across-the-board - but especially on St. John where in some cases, values tripled.
Many residents cried foul, and said the data collected on the properties to use in the valuation was full of errors. A group of St. John residents sued the government over the new values, but the case was dismissed.
Tax Assessor Ira Mills said in the years since, property owners that felt there were errors in the way their property was valued have had the opportunity to go through the appeals process and get values corrected.
"Since our original attempt at revaluation, it has sensitized people to reviewing what we had assessed for them, so we've had informal appeals and in some cases, formal appeals to the Board of Land Use Appeals," Mills said. "Those have been adjusted already at this point."
By law, the territory's revaluation must be reviewed and updated every five years.
Mills said the Lt. Governor's Office just completed the reassessment.
"Some went up a little, there's some that went down a little," he said. "In St. Croix, because of the economic situation in St. Croix, the market value has gone down, so that trending would be covered in the market value and assessed value."
For the recent update, not every property was visited like they did in 2005. Mills said a percentage of homes in a neighborhood would have been looked at and used as a general reflection of any changes to that neighborhood's property values.
When the court battle was being waged, the tax rate issue was hung up on a 1936 federal law mandating that all property in the Virgin Islands be taxed at the same rate. For seven decades, all properties in the territory were taxed at a flat rate of 0.75 percent of their value.
For years, territorial officials lobbied for Congress to repeal the law. Without a repeal, people could have seen their tax bills jump exponentially. The federal law also prohibited exemptions.
In June 2007, President George W. Bush signed a bill officially repealing the law.
After the repeal, Gov. John deJongh Jr.'s administration crafted a new tax structure that would work with the new market value-based property valuations.
After a battle in the V.I. Senate, a new tax plan passed, and was made law.
The new tax structure has different base tax rates for different types of property. Unimproved non-commercial property is taxed at 0.49 percent of its value. Residential property is taxed at 0.38 percent of its value. Commercial property is taxed at a rate of 0.71 percent of its value, and timeshares are taxed at 1.4 percent of their values.
To help ease the burden of the new, higher property values, the new tax structure includes a number of tax credits and exemptions.
A "circuit-breaker" clause is included in the new statutes that caps the tax obligation for people whose property values under the new system are more than 125 percent higher than under the old 1998 values. It is only available to owners with household incomes of less than $135,000.
People who live in their property can receive a homesteaders tax credit of $400. Homesteaders can get one additional exemption, if they qualify.
Veterans or widowed spouses of a veteran can get a $650 credit.
Seniors at least 60 years old can get a credit of $500, however the owner must earn less than $30,000 or have a household income less than $50,000.
Property owners with a disability, as determined by Social Security, will be eligible for a $500 tax credit as well.
Any tax credits a property owner was already enrolled in will automatically switch over to the new, higher rate, Mills said. There is no need to reapply, however, if a taxpayer is now eligible for a credit they were not previously, they should come to the office and apply, Mills said.
Mills said it took some time for the government to be ready to issue the new bills at the new rates. Under the new law, the 2012 bills were supposed to be sent out with the new structure.
"It wasn't until 2011 that the court indicated that from now on you can bill at something other than 1998 rates, but because we were in mode of trying to catch up, it still left us calculating at the 1998 rates," Mills said. "So 2012 was the first opportunity, but we were not ready in terms of our total review and total analysis that would bring us to the new values."
Mills asked the Senate to amend the law to keep the 2012 bills at the 1998 rates, which it did.
The 2013 bills will be mailed out by the end of the month. As they have done in the past, the Lt. Governor's Office will be offering early payment discounts.
Mills said taxpayers should look very closely at their new bills to make sure there are no errors.
Once the bills are sent out, the information will be available on the Lt. Governor's website, www.ltg.gov.vi.
For those with mortgages, tax bills are typically sent straight to the bank, but owners can look up the bill online to check it.
"They should see what is in the system for them and make sure their credit is there," Mills said.
If there is a problem with the bill, the taxpayer should bring whatever documentation is required to justify the revision to the Lt. Governor's Office.
"We intend not to bill anyone for anything other than the just amount," Mills said. "We want to be fair and equitable in our billing."
Starting with the 2013 bills, the owner of record as of Jan. 1 of that year will be responsible for that year's tax bill.
For example, if a property is sold in the middle of the year, the seller will be billed for that year and the new owner will not be responsible for the property tax obligation until the next year.
For more information contact the Tax Collector's office at 776-8505 on St. Thomas, 776-6737 on St. John, 773-1105 in Christiansted or 772-0120 at the Frederiksted office.
- Contact reporter Aldeth Lewin at 714-9111 or email email@example.com.