COUNTY OF ALBEMARLE
Personal Property Tax Relief
Ordinance to amend Chapter 15, Taxation of the County Code to provide for Personal Property Tax Relief
Messrs. Tucker, Davis, Herrick, Wiggans, Walters; Ms. White
LEGAL REVIEW: Yes
January 4, 2006
ACTION: X INFORMATION:
In 2004 and 2005, the General Assembly, as part of a budget compromise, substantially altered the Personal Property Tax Relief Act of 1998 (PPTRA). Under the original PPTRA, individual taxpayers paid a percentage of their local personal property taxes, and the state reimbursed localities the remaining balance. In 2005, taxpayers’ relief funded by the state was seventy (70%) percent of the tax. However, because of the growing cost of the PPTRA, the 2004 General Assembly elected to freeze the state’s future PPTRA obligations at $950 million per year. Localities will now only receive annually from the state a fixed amount of state dollars for personal property tax relief. State law requires the Board to elect how to allocate this relief among personal property tax taxpayers. The implementation must be approved by ordinance or resolution.
At its December 7, 2005 meeting the Board directed staff to advertise for public hearing an ordinance implementing the “specific relief option”.
4.2 Fund County services in a fair, efficient manner and provide needed public facilities and infrastructure.
As noted above, beginning July 1, 2006, PPTRA reimbursements to localities will be capped at $950 million. This change will mark a shift from a vehicle-based entitlement program to a fixed, annual block grant program. Future payments to localities will be based on their percentage share of 2004 tax year personal property tax collections to total 2004 state personal property tax collections. The amount of funds to be remitted to Albemarle County, estimated at $15 million, will be known March 1, 2006. With that amount fixed for the foreseeable future, the percentage relief individual taxpayers will actually receive each year will decline as that fixed amount is spread over an ever-increasing personal property tax base.
There are primarily two options available to the Board to provide personal property tax relief. Virginia Code § 58.1-3524(C), adopted by the 2004 General Assembly, enables localities each year to set two personal property tax rates: one for the value of each qualifying vehicle that is in excess of $20,000, and a second lower value for each qualifying vehicle that is not in excess of $20,000. The lower rate is required to off-set the amount of dollars funded by the state for personal property tax relief.
The 2005 Appropriations Act provides a simpler, more precise alternative. Item 503.E. of that Act permits a locality to provide by ordinance or resolution, or as part of its annual budget, specific criteria for the allocation of the Commonwealth’s payments among the owners of qualifying vehicles. The Act requires that the locality’s tax bills provide a general description of the criteria upon which relief has been allocated and set out the specific dollar amount of relief so allocated.
If the Board elects this “specific relief” alternative, Finance staff would annually calculate the percentage of relief available to each taxpayer spread equally among qualifying tax payers, and it would be reflected on the personal property tax bills without any additional action by the Board.
The draft ordinance proposed by staff implements this “specific relief” alternative, and also adopts two other discretionary provisions:
1. It continues to provide 100% car tax relief for qualified vehicles assessed at $1,000 or less.
2. It authorizes supplemental tax bills to be issued by the County for tax year 2005 and for prior years for 100% of the personal property tax which remains due and owing as of September 1, 2006 or such earlier date as reimbursement is no longer available from the Commonwealth. The state will not reimburse the County for what had been the state’s share for delinquent bills after that date. Delinquent taxpayers would be billed for the unpaid state share for delinquent bills after State reimbursements are no longer funded.
The County will not experience a fiscal impact as a result of the change in state law. The County will continue to receive full personal property tax revenues; only the source of those revenues will change. Under the PPTRA, the state has paid a share (currently 70%) of personal tax revenue that would otherwise come from individual taxpayers. With the state now limiting its personal property tax relief commitment to a fixed amount, individual taxpayers will shoulder a steadily increasing share of their personal property tax bills.
The loss of state revenue is estimated below:
(Expressed in millions)
FY05 FY06 FY07 FY08 FY09 FY10
Estimated PPTR $ $14.4 $15.5 $16.2 $16.9 $17.7 $18.5
Frozen PPTR $ N/A $15.5 $15.0 $15.0 $15.0 $15.0
Loss of state funding N/A $0.0 $1.2 $1.9 $2.7 $3.5
The $950.0 million state cap was derived to approximate the 2006 PPTR payments for current, not delinquent, tax bills at a 70% rate. The 70% rate has been used since 2001. The estimated $15.0 million payment to the County of Albemarle for 2006 current year tax bills approximates the estimated PPTR reimbursement at the 70% rate. The $15.5 million shown above for FY06 includes delinquent taxes, which will no longer be reimbursed by the state in FY06 and thereafter. Future payments are frozen at the estimated $15.0 million and will result in loss of future state revenues. The loss of state revenue would be offset by additional local taxpayer funds. The state’s payment for the tax year 2005 and prior year outstanding bills is eliminated for FY07 and thereafter. The loss is included above.
Staff recommends at the conclusion of the public hearing that the Board adopt the attached proposed ordinance which:
A - Proposed Ordinance
Return to regular agenda