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Governor's Team Makes Case for New Property-Tax Rate Structure

Nov. 20, 2007 — Despite concerns raised by senators about the impact new residential values will have on taxpayers, members of the governor's financial team said Tuesday that a new rate structure proposed by the governor would "spare the community" any major financial hardship.
During a Committee of the Whole hearing, fiscal team members said that if the government were to continue to apply the current 0.0075 tax rate against the new property- tax values, commercial property owners would see a 25-percent increase on their bills, while the average tax on land would more than triple.
"The average tax on residential properties would more than double, while the average tax on timeshare property would increase by 10 percent," said Nathan Simmonds, senior fiscal policy advisor to the governor. "As a result, tax revenues would increase from 46 million to over 95 million."
To avoid any major increases, the governor's tax proposal outlines a multi-rate tax structure with four different classes of property. According to Gov. John deJongh Jr., the structure would give the government the ability to better manage the real property-tax system. On Tuesday, Simmonds added that a team from both the governor's and lieutenant governor's offices "labored over" the proposal to find the "appropriate combination" of rates that would be the "easiest for the community to manage."
According to the experts, the territory's current property-tax rate has been in use since 1936. If the current rate continues to be applied against the new property valuations, the average bill for commercial owners would be about $4,406, while average residential owners would pay $1,900. Government revenues garnered from property-tax payments would amount to about to $95.6 million.
Under the new proposal, new property-tax rates and classes are broken down as follows:
— unimproved non-commercial real property, to be taxed at a mill rate (tax per dollar of the assessed value) of 0.00495;
— residential real property to be taxed at a mill rate of 0.00377;
— commercial real property to be taxed at a mill rate of 0.00711; and
— time shares to be taxed at a mill rate of 0.01407.
If the new rates are approved and applied against new property-tax values, the average commercial owner would pay $3,739, while the average residential owner would pay $1,014. Coupled with payments from land and timeshare owners, government revenues garnered from property-tax payments from one billing cycle would amount to nearly $57 million — the minimum amount needed to sustain the fiscal year 2008 budget.
Currently, government revenues garnered from property-tax payments is approximately $46.3 million.
While the categories of exemptions granted under the real property-tax system remain unchanged within the proposal, homestead exemptions — which are granted in the form of tax credits — have increased across the board, starting with a base increase from $250 to $400. In addition, the veterans' exemption has increased from $312.50 to $450, while the exemption for residents with qualifying disabilities has been increased from $250 to $400. Finally, the current $250 senior exemption and the $375 elderly exemption have both been increased to $500. (See "DeJongh Proposes New Property Tax Structure.")
Senators had a variety of suggestions for fiscal team members during the meeting. However, all agreed that they would oppose any heavy property-tax increases on residents. Others, such as Senate President Usie R. Richards and Sen. Carmen M. Wesselhoft, questioned how new property-tax values were determined, referencing rumors that the government's contract with Bearing Point — a consulting firm hired to carry out the revaluation project — was not put out to bid. Wesselhoft also questioned whether Bearing Point evaluators were trained and taught to assess each property fairly.
"What we have received numerous concerns about is the manner, mechanism or method that was used to get to the new assessed value of property," Richards added.
Simmonds said he was aware that there have been "some concerns" about the new property values, but explained that the revaluation process is part of a "standard market approach."
"It is a point of fact that values have increased on St. John enormously, on St. Thomas, and even on St. Croix to some extent," he said.
Tax Assessor Roy L. Martin added that Bearing Point was responsible for training any workers hired for the revaluation project. He also said that the project was put out to bid, and Bearing Point was selected out of four companies to carry out the process.
Speaking after the meeting, Richards said he is unsure when the proposal — which would first have to be sponsored by a senator and drafted in bill form — would officially appear on the floor for consideration, since the governor's legislation has already been preempted by a proposal submitted by Sen. Shawn-Michael Malone.
During a telephone interview, Malone explained that while he has not come up with a formal document, he "owns the topic" of property-tax reform, having already submitted a bill request into the legislative system.
"I haven't drafted a full policy yet — I have been unable to do so because of the court decree," he said. "Additionally, the proposal had to be based on the projected revenues needed to balance the budget. So I had to get all the information before I could really get something going."
He added that a group of senators have been working on amendments to the governor's proposal, which will be introduced during a Committee of the Whole hearing Dec. 5.
"The Senate and the government are on the same page here," Malone said. "The proposal just has to be tweaked a little."
Present during Tuesday's hearing were Sens. Liston Davis, Juan Figueroa-Serville, Louis P. Hill, Neville James, Terrence "Positive" Nelson, Basil Ottley Jr., Richards, Ronald E. Russell, James Weber III, Wesselhoft, Celestino A. White Sr. and Alvin L. Williams.
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