HB 1204 (Hugo) would require that certain property be assessed based on use value rather than fair market value in certain localities meeting specified population growth criteria (Arlington County and Loudoun County). This legislation was introduced as a result of a dispute between the owners of two country clubs and Arlington County over the valuation of their properties. VACo opposed the bill during the session due to the troubling precedent the bill would set. VACo is appreciative of the Governor’s action to veto this legislation.
ACTION REQUIRED – Please encourage your legislators to sustain the Governor’s veto.
KEY POINTS
- This bill sets a bad precedent by interjecting the state into decisions about local land use and tax policy. Adopting land use value taxation should be a local decision, not a mandate by the General Assembly.
- The bill would override the existing process created in statute for property owners to appeal assessments, which allows for taxpayers to appeal to the local assessor or Commissioner of the Revenue, the local Board of Equalization, and Circuit Court.
- The bill has some potential unintended consequences for school funding, particularly if landowners in other localities were to seek similar intervention by the General Assembly in the future. True value of real estate is a major component in the Local Composite Index (LCI). By declaring that the lower value of the land being assessed as open space in accordance with the bill is the “fair market value,” the affected locality’s true value of real estate would be lower than it would have been had the property been assessed at traditional fair market value (the highest and best use of the property). Affected localities would then appear to have a lower ability to pay school funding costs, which would lower their LCIs, drawing down additional state dollars. Since the LCI measures local ability-to-pay on a relative basis, lower LCIs for some localities mean higher LCIs (and fewer state dollars) for others.
- Similarly, by declaring that the lower value of the land being assessed as open space is “fair market value,” the bill would appear to preclude the collection of “rollback” taxes in the event that affected properties were converted to another use (for example, being sold for development). Ordinarily, property that is part of a program of land use value taxation is subject to five years’ worth of rollback taxes (the difference between the taxes that would have been levied on the fair market value and the taxes collected on the lower assessed value) when the property no longer qualifies for land use assessment.
KEY CONTACTS
VACo Contact: Katie Boyle