Council Ponders Eliminating Car Tax

Council Ponders Eliminating Car Tax

Mayor, Council prepare legislative packet for the 2006 General Assembly session.

As the members of the Virginia Senate and House of Delegates gear up for the General Assembly in February, the City of Fairfax is preparing its own wish list. Every year, local jurisdictions adopt legislative packets and discuss concerns for their representatives to take to Richmond.

Car taxes feature prominently on the city's list for the 2006 General Assembly session. Following a report by city treasurer Stephen Moloney at the council’s work session Tuesday, Nov. 29, Mayor Rob Lederer and councilmembers resolved to examine methods of distributing the car tax.

When Virginia first enacted the Personal Property Tax Relief Act in 1998, said Moloney, the plan was to reimburse jurisdictions such as the City of Fairfax 100 percent for the tax on personal vehicles, phasing in the reimbursement by 2002. But since then, the value of cars and amount of people in Virginia has risen steadily along with the state’s reimbursement, he said. The state froze the percentage of reimbursement at 70 percent starting in 2002, and in 2004 moved to cap the reimbursements. In 2006 and thereafter, said Moloney, the reimbursements will be capped at $950 million, of which the city will receive about $3 million.

"That kind of changes how you distribute it," said Moloney. The current formula fully reimburses the tax for cars valued at under $1,000, and for vehicles from $1,000-$20,000, the formula reimburses based on the percentage in effect for that particular year. But the city can eliminate the full reimbursement for vehicles under $1,000 and apply the percentage in effect to them, or it could increase the $1,000 limit to a higher amount, said Moloney. At the work session, the Council leaned toward keeping the current $1,000 limit.

Councilmember Scott Silverthorne brought up a third option at the work session: eliminating the car tax from the personal property tax altogether.

"We don’t want to jeopardize the $3 million we are getting back, but why not eliminate in the City of Fairfax the personal property tax, period?" he asked. The problem with former Gov. Jim Gilmore’s (R) plan to eliminate the car tax was that it never actually happened, said Silverthorne.

"It’s a dirty little secret that what the state did is to pass the buck to the localities," said Lederer at the work session. "Now we get to do that [eliminate the car tax]."

The amount of the state’s reimbursement is linked to the personal property tax, however.

"There is a chance that the state can come back and say, ‘Wait a minute, we’re reimbursing you for the personal property tax, and you don’t have the personal property tax,’" said Moloney. Currently, city residents pay 38 percent of their car tax, which comes out to about $2 million in revenue, and this figure is too large for the city to lose altogether, he said.

Councilmembers agreed the city would have to look into other ways to offset the loss in revenue. "It would be nice to do away with that tax, if we could replace it with something else," said Councilmember Gary Rasmussen.

"It’s an innovative question," said Moloney. "I don’t know that anyone has addressed it yet."

ALONG WITH a car tax, the council is also considering scrapping dated license plate decals, which automobile owners purchase each year from the city. Several jurisdictions in southern Virginia are eliminating the decals, said Lederer.

Eliminating decals would cause a few problems, said Moloney. They provide valuable information and help track car ownership, he said, as well as facilitate tax collection. The city has a couple of options, however, such as developing a license plate bearing the city’s name on it, like regional license plates in Florida and Ohio. Fairfax could also develop a permanent decal for car owners that would only change with the car, he said. But if the city did eliminate the decal, it would not eliminate the $500,000 in yearly revenue that comes with it, said Moloney.

Lederer requested that the option to eliminate decals be added to the legislative packet.

City staff will research the new options surrounding the car tax. "From the staff point of view, we are still juggling some figures, seeing what’s reasonable," said Moloney. "No decisions have been made yet."

Other items on the city’s wish list included a regional petition for the return of red-light cameras. The cameras were turned off July 1, 2005 after the General Assembly voted not to extend the bill allowing them.

"We were the first ones in the state to do it, and felt that it was unfortunate that the General Assembly could not see the merits of the program," said city manager Bob Sisson. "We’re hoping, in the year that’s passed, that their vision has improved."

The city is also looking to the General Assembly for ways to limit residential construction time. Currently, the city has no power to do this, said Sisson.

"There is no limitation on the time frame for which a home builder must observe in doing home renovations," said Sisson. This lack of limits often results in overextended building projects and concerned neighbors, he said.

The legislative packet also includes a joint resolution with the City of Fairfax School Board requesting adequate funding from the state. The resolution will highlight the City of Fairfax’s special position in relation to Fairfax County Public Schools. The city owns the school buildings but the county supplies staff and curricula, so the city pays tuition to the county. The county does, however, pay some tuition to the city for the percentage of county students that go to city schools.