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June 19, 2003 – Late Wednesday, toward the end of the Legislature's mammoth two-day session, it passed a bill which the senators believe will allow the government to resume collecting the property tax money it so desperately needs.
District Judge Thomas K. Moore ordered the government in May to stop collecting and billing for property taxes from 1999 onward until it revises the territory's property tax system, notably its method of assessing the value of property for tax purposes.
The order was a devastating blow to the territory's fragile finances, administration fiscal officials said, cutting off approximately $60 million the government was banking on for the remainder of Fiscal Year 2003.
Senators approved the new legislation in the hope that it will satisfy Moore's conditions for allowing tax collections and billings to resume. Senate President David Jones said several times during the day that the body's legal counsels were at work drafting the measure.
The bill passed on Wednesday provides for assessing real property for tax purposes on the basis of market value, not replacement value – the keystone of Moore's opinion. It will allow the government to issue property tax bills for 1999 through 2004 based on 1998 property assessments. It also creates a Tax Assessor's Revolving Fund consisting of 1 percent of property tax revenues, up to$500,000, each year, which is to be administered by the Finance commissioner and used for data processing equipment acquisition and maintenance and training and staffing in the Office of the Tax Assessor.
In large part the measure is what Gov. Charles W. Turnbull proposed as part of his six-bill package to address the territory's fiscal crisis. The governor said in presenting his tax collection proposal that, presuming the Senate would approve the legislation, he would not sign it into law until and unless Moore advised him that it was acceptable to the court as a means of getting the tax moratorium lifted.
Sen. Shawn-Michael Malone said in a release issued Thursday that his amendment to the bill "provides more flexibility in terms of the government implementing this costly but fair system in the event it cannot be accomplished by 2004 as the court has ordered." His amendment, he said, "provides a time certain to allow for persons who may have underpaid to have up to 120 days, as opposed to 30 days, to pay the balance of their property taxes without interest and penalties."
Malone's release stated that taxpayers who subsequently are found to have overpaid their taxes will be credited that amount "for subsequent tax years after 60 days of that redetermination."
Attorney General Iver Stridiron vowed soon after Moore's May ruling to challenge it up to the U.S. Supreme Court if necessary on the grounds that taxation is a local government matter outside of federal court jurisdiction. Appealing is a notion many have criticized, saying the effort could take years and cost much money.
Moore said on June 2 that he would be willing to reconsider his moratorium if lawmakers could come up with a property tax plan he found acceptable. At a hearing in his St. Thomas courtroom, Moore said he hadn't intended to comment on the Turnbull administration's proposal to collect 1999-2004 property taxes on a voluntary basis – a bill approved by the Senate in a special session the governor called earlier in the year. But Moore said he did so "because it was done at the time the case was actively being litigated." (See "Judge: Legislation could lift tax moratorium".)
Moore said he has no problem with the government collecting property taxes. His concern is with the system used to assess the value of real property for tax purposes. In his May 12 ruling on the consolidated portion of the current tax case involving 11 plaintiffs, he ordered the V.I. government to stop issuing new tax bills until the assessment system is reformed.
The new legislation requires the Office of the Tax Assessor to base property assessments on market value, not replacement value. The government's policy of using replacement value was challenged in a landmark case that resulted in a court settlement in December 2000 that called for the government to revise the property tax system.
In several subsequent cases challenging commercial property assessments, the court ruled in favor of the plaintiffs. The most recent, the consolidated case of 11 plaintiffs, ultimately resulted in Moore's ruling, which covers personal as well as commercial real property. (See "Court bars property tax billing and collecting".)
In a related move, a resolution was signed by all majority members but Sen. Adlah "Foncie" Donastorg on Wednesday urging Gov. Charles W. Turnbull to negotiate with Hovensa to pay up to $14 million of its next year's property taxes in advance of the date due. Ironically, Donastorg was responsible for the petition, submitted to the governor.
On the Senate floor on Wednesday, Donastorg brandished a letter from Valentino McBean, Banco Popular de Puerto Rico vice president, contesting the pre-payment idea. Donastorg said McBean contends that Hovensa's future real property taxes are pledged to his bank as security for loans for Y2K projects.
Voting for the property tax legislation were Sens. Norman Jn Baptiste, Lorraine Berry, Douglas Canton, Roosevelt David, Emmett Hansen II, David Jones, Shawn-Michael Malone, Luther Renee and Ronald Russell. Sens. Donastorg, Carlton Dowe, Almando "Rocky" Liburd and Celestino A. White voted against. Sen. Louis Hill was absent for the vote, and Sen. Raymond "Usie" Richards was off-island.

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