Kaine Explains Homeowner Tax Relief Plan

Kaine Explains Homeowner Tax Relief Plan

Local assesment escalations quadruple those in southwestern Virginia

Tax relief for homeowners is not only dominating the consciousness of local politicians it has taken a front row center position in the upcoming governor's race.

More than 100 residents packed the conference room of the South County Government Center, 8350 Richmond Highway, last Wednesday afternoon to hear Lt. Gov. Tim Kaine's proposals to solve the good news/bad news dilemma of escalating property values and their dark side result, escalating taxes. What they got were solutions that could take five years to implement.

Although the session was held in the southeastern quadrant of Fairfax County, attendees hailed from as far west as Sully District and as close as the City of Alexandria. They also came armed with their own suggestions and political advice for the man who hopes to succeed Gov. Mark Warner.

Prior to offering his own plans, Kaine asked the audience for their input. Having specifically seated local political leaders in the front row after the room was filled to capacity, Kaine got his first input from them.

"FOR THE FOURTH YEAR in a row homeowners have had double digit tax increases," said Mount Vernon District Supervisor Gerald Hyland. "The Fairfax County Board of Supervisors has little alternative but to raise funds through the real estate tax. And, even though we hope to decrease that tax rate by 13 cents, they [homeowners] will still have a significant tax increase this year."

Hyland's reference to the limited options faced by county supervisors was in reference to the fact that revenue streams for Virginia counties are limited by state law. "We need to equalize the powers between counties and cities," Kaine said.

That was buttressed by state Sen. Linda T. "Toddy" Puller (D-36). "One thing we've [the General Assembly] tried over the years is to give counties more revenue streams. But, we've failed," she said.

Alexandria Councilwoman Joyce Woodson cited the West Potomac area of Alexandria where assessments increased by 46.7 percent for residential condominiums this year.

Jim Southworth from Sully District said his home's assessed value had risen from $280,000 to over $700,000. "That's great except that my escrow has more than doubled," he said.

Kaine also pointed out that commercial property, generally, had escalated far less in assessed value than residential property across the Commonwealth. However, any cut in local tax rates must apply equally to every category of property due to the Virginia constitution, according to Kaine.

For these reasons the cornerstone of his proposed remedies rests on the need for two constitutional amendments. One would "allow localities to exempt up to 20 percent of the assessed value of each home and farm" from the real estate tax. He has dubbed this "The Homestead Exemption."

The other would enable the separation of residential and commercial property in the assessment/tax process. It would remove the present equalization requirement.

Overall his plan for "Homeowner Tax Relief" is based on "Five Steps to Homeowner Tax Reform." They are:

1. The homestead exemption

2. A tax abatement program that would exempt new residential additions and renovations from taxation for 15 years

3. Have state government maintain its full funding responsibility to public education under the state-local partnership

4. Veto any unfunded mandates passed by the General Assembly

5. Ensure public participation in "the decision-making process when it comes to homeowner tax rates" by requiring local governments, when mailing assessment notices, to state the previous year's assessment and "the time and place" for public hearings on the local budget as well as when a vote is scheduled "on any rate changes."

As noted by Alexandria resident Carolyn Merck, "Your plan [homestead exemption] is going to take a constitutional amendment and won't happen for a long time."

UNDER THE PRESENT procedure, legislation proposing a constitutional amendment has to pass two sessions of the General Assembly and then be approved by the voters in a referendum. However, between the two General Assembly votes "there has to be an intervening House of Delegates election," according to David Bobzien, Fairfax County Attorney's Office.

"Since each session is a two-year cycle, there is little or no reason to introduce any such bill in the first session because it would just languish for another year. It would normally be introduced in the second year of the session," he said.

"If passed initially, it could be reintroduced in the next session after a House of Delegates election. If passed again, it would then go on the ballot at the next election," Bobzien said.

That scenario means that any constitutional amendment introduced after the next General assembly is seated would not become law, if approved by the voters, until 2010 at the earliest. The next governor will leave office at the end of 2009.

When Kaine was asked about the option of tax deferrals for homeowners such as implemented in California and Hawaii, he said, "Deferral is nice when it happens but not good on the day of reckoning. That's why I'm not backing that."

In the case of both California and Hawaii tax rate increases are capped but the assessed value of a home can continue to escalate depending on individual markets. When the home is sold the new owner's tax bill is based on the assessed value at that time.

That new tax rate and amount is spelled out in the real estate sales fact sheet. The cap goes back into effect based on the new assessment for the new owner until the property is sold again. There is nothing to prevent reduction of taxes in the interim period.

KAINE CITED public education as "the single largest local government cost. In some areas it accounts for 60 percent of the budget," Kaine said.

"For the first time we [state government] have fully funded education," he said. As noted in his tax relief brochure distributed at the meeting, "Last year's historic state budget reform meant $1.5 billion in new funding for public schools, the largest increase in education spending ever made by the state."

Localizing that total, Kaine said, "Fairfax and Arlington counties each got an additional $5.5 million and Alexandria got an extra $3 million for education. When the state starts to meet its obligations it eases local government's burden."

Kaine blamed what he considered a drop in California's quality of public education over the past 20 years to that state's passage of Proposition 13. It not only capped real estate tax escalation rates but also rolled those rates back to mid 1970s levels.

When asked by a Mount Vernon District resident if his homestead exemption "is not just another Proposition 13 by another name?"

Kaine said no. "The homestead exemption puts into Virginia law the ability to specifically target tax relief to home owners," he said.

An Arlington resident suggested that "tax relief" is "the wrong terminology." It should be changed to "tax flexibility so that voters do not get the impression services will suffer as a result of tax cuts," she said.

Kaine's rebuttal was, "I'm a Democrat and I'm tired of playing defense. I'm going to play offense. The Republicans always take over the tax issue. This time I'm going to control the dialogue." That brought forth the one round of applause during the hour-plus meeting.