St. Johnians will have a special property tax credit, and homeowners throughout the territory will get an income-based property tax credit, if a measure sent from the Rules Committee to the Senate floor this week is enacted into law.
St. John has seen sharper increases in property values, as wealthy individuals have moved to the sparsely populated island that is mostly a national park, driving up prices. Unless or until the territory passes a constitution creating special municipal districts, it cannot legally have different rates on different islands. As a result, less wealthy St. John property owners have been hit hard by the tax increases and efforts to address the differential have been ineffective to date.
The bill, sponsored by Sen. Tregenza Roach (I-STT,) does not actually mention St. John. Instead, it tries to use the fact that most of the island is a national park owned by the federal government. It directs the territorial tax assessor to “determine the percentage of real property the federal government owns on each island at the time the assessment of residential real property” and use that percentage to determine a tax credit.
It does not say what the credit will ultimately be, apparently leaving that up to the tax assessor, by a literal reading of the text of the bill. It does limit the credit to properties worth no more than $750,000.
It also creates an enhanced homestead tax credit “equal to the amount by which the real property taxes calculated for the property for the prior years exceed two percent of gross household income.” The actual amount of the credit is capped at $5,000 and is applied to each homeowner on a sliding scale based on the value of property. It peaks at 90 percent of the income-based credit for property valued at up to $400,000 and gradually drops to 50 percent for property worth up to $750,000 and does not apply above that value.
To qualify, homeowners must have incomes less than $75,000 for an individual or $150,000 for a family.
While sure to be popular, the measure also would cut property tax revenues at a time when the V.I. government is already unable to pay all of its current bills. An increase in the base property tax rate to offset the loss is not a part of the bill.
A third section of the bill makes changes to V.I. Code Title 33, section 2404, which, if the online Lexis/Nexis unannotated text of the V.I. code is accurate, are either garbled or refer to the wrong section of the law.
Roach’s bill was offered as a substitute for a bill sponsored by Sen. Janette Millin Young (D-STT) that also aimed to cut St. John taxes. Her item restricted assessed values depending on the family connections of the homeowners. Young suggested her bill was being replaced due to her being in the minority rather than the majority. Roach, the sponsor of the other bill, is also in the minority caucus.
Written testimony read into the record from attorney David A. Bornn during Wednesday’s hearing emphasized that property assessments for taxes have to be at market values and not any other, non-market value. Borrn cited the 1992 U.S. Supreme Court case of Nordlinger v. Hahn and the V.I. case Berne Corp. v. Government of the Virgin Islands, settled in 2011.
Tax Assessor Ira Mills made the same argument when Young’s bill was first considered in committee in August of 2016. (See Related Links below.)
After a brief discussion, Young moved for a vote on her measure, which died for lack of a second. Voting for Roach’s version were: Roach, Sens. Jean Forde (D-STT,) Positive Nelson (ICM-STX,) Sammuel Sanes (D-STX,) Janelle Sarauw (I-STT) and Novelle Francis (D-STX). Young and Sen. Myron Jackson (D-STT) were absent at the time of the vote.
“Today was a day to remember when members of the majority and minority have come together” to help with this problem, Sanes said after the vote.