HB 1204 (Hugo) is a problematic bill that 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). As introduced, the bill would require that real property of at least five acres that is devoted to open space be assessed based on the property’s land use value. The bill was amended in the Senate Finance Committee to apply to properties of at least 20 acres, in an attempt to mitigate its effect on Loudoun County, which already has a land use valuation program. The bill was reported by the Senate Finance Committee on February 27 and will be considered on the Senate floor later this week.
VACo opposes this legislation. Although the legislation applies to a limited number of localities now, it sets a worrisome future precedent by requiring a locality to assess property as if it were part of a local program of use value taxation, regardless of whether the locality has adopted use value taxation. Adopting use value taxation is a local option under current Code. This bill would supersede that local authority and direct that certain property be afforded preferential tax treatment.
HB 1204 was prompted by a dispute between two golf courses and Arlington County over the assessments of their properties. The General Assembly has enacted a process for property owners to appeal assessments. This bill would interpose the General Assembly in this existing process for resolution of disputes about the valuation of property.
ACTION REQUIRED – Please contact Senators to express opposition to this legislation.
- Adopting land use value taxation should be a local decision, not a mandate by the General Assembly. This bill sets a bad precedent by interjecting the state into decisions about local land use and tax policy.
- A process for appealing assessments is already in place. Taxpayers may 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. 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.
VACo Contact: Katie Boyle