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Property Taxes Expected to Increase, Tax Assessor Says

July 26, 2006–An increase in property taxes would yield an additional $11 million in revenues for the local government in 2007, representatives from the Office of the Lieutenant Governor said during the second round of budget hearings Wednesday.
During the meeting, Tax Assessor Roy L. Martin explained that the increase is due to the ongoing property revaluation project, which proposes to assess local property at fair market values. "That means that if property values go up in a certain area, then property taxes go up as well," he said, adding that a person's property taxes could be affected, for example, by improvements made to an adjacent piece of property, or the addition of new buildings to a particular neighborhood.
After the meeting, Martin explained the formula used to calculate the new property tax values and said that the skyrocketing cost of land throughout the territory would most likely result in a property tax increase once the revaluation project has been completed.
Currently property tax bills are being collected based on a different formula, one that does not use fair market values in calculating the amount of taxes to be charged for buildings. "Right now, that formula takes the value of improvements made to a particular building and subtracts it from how much that building has depreciated in value," he said. "With the new formula, which would be incorporated in the bills to be sent out for 2007, that formula has been adjusted to include how much that building would be worth on the market. That would result either in an increase or possibly a decrease to an individual's property tax bills."
During the meeting, senators said they were concerned about the impact the increase would have on residents throughout the territory and asked Martin what could be done to "provide some financial relief."
Martin said that the Senate would have the ability to provide for property tax adjustments once the federal government decides to repeal a certain provision within its property tax statute. "That's supposed to happen by the end of the year," he said.
Martin added that an impact study currently being conducted by BearingPoint Inc.–a stateside company contracted by the government to conduct the property revaluation–also has to be completed before the Senate can make an adjustment. "That study would determine how the community is being impacted by the new tax values," he explained after the meeting. "Once the study is complete, BearingPoint would submit a list of findings and recommendations to the Office of the Lieutenant Governor about what we should do in regards to tax adjustments. After that, the Senate can decide how they want to handle the rates."
In the interim, Martin said that preliminary property tax bills, which incorporate estimated property values, would be sent out in 2007. Called data impact notices, these documents would include contact information for the Office of the Tax Assessor. "This way, residents can come in and talk to us if they have questions about their new property tax values," he said. "Then, we can make all the necessary tax adjustments before the final bills go out," he said.
According to Julio Rhymer, director of business and finance under the Office of the Lieutenant Governor, property tax collections for 2006 are projected at $59.7 million. Property taxes for 2007, which include the new market values, are expected to yield approximately $71 million.
The professional services contract with BearingPoint totals $3.9 million. According to Martin, all funds to pay for the contract have been allocated.
After the meeting, he also said that approximately 50 to 60 temporary employees were hired through BearingPoint to conduct the property revaluation project. To date, that number has been reduced to approximately 25 temporary employees, he said.
The division of Real Property Tax is one of the entities located under the Office of the Lieutenant Governor. Other divisions include: Business and Financial Management, Management Information Systems, Recorder of Deeds, Banking and Insurance, Corporations and Trademarks, and V.I. SHIP (responsible for providing elderly residents with access to Medicare assistance).
The overall operating budget of the Office of the Lieutenant Governor totals approximately $11.1 million, with $6.9 million coming from the General Fund. The remaining money comes from nonappropriated funds, or a percentage of the revenues generated by various divisions.
According to Rhymer, revenues generated by the office are projected to top $100 million by the end of FY 2006. Actual revenues collected in FY 2005 were $96.3 million.
Of the $6.9 million appropriated from the General Fund, $4.56 million would go toward personnel services and would maintain 91 filled positions (totaling approximately $3.3 million), 20 vacancies and 11 new positions (totaling $368,176).
According the Rhymer, many of the new positions are slated for the new Financial Management Office located within Banking and Insurance.
Another $70,000 is line-itemed for capital outlays (for the purchase of computer hardware), while $625,000 would cover professional services contracts, rental expenses, communication costs and utilities charges, among other things.
The General Fund budget recommendation for FY 2007 represents an $862,918 increase over last year's appropriation.
Present during Wednesday's meeting were Sens. Craig W. Barshinger, Lorraine L. Berry, Liston Davis, Pedro "Pete" Encarnacion, Juan Figueroa-Serville, Louis P. Hill, Neville James, Norman Jn Baptiste and Richards.
Sen. Roosevelt C. David was absent.
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