Property Tax Bill Moves Forward

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After several hours of testimony at the April 11 Senate Finance Committee meeting in Cruz Bay, residents chat during a break.
All photos by Amy Roberts.

St. John residents hoping to see an overhaul of the property tax system in the Virgin Islands filled the seats at the Legislative Conference Room in Cruz Bay on Tuesday afternoon.

They came to hear testimony given at a Senate Finance Committee meeting concerning Bill No. 32-0030 proposed by Senator Janette Millin Young in February 2017.

At the conclusion of Tuesday’s session–which ended after 8:30 pm–Finance Committee members voted to send the proposed bill on to the Rules Committee for further refinement.

Some St. John property owners have been battling the Virgin Islands Government for the last ten years, claiming that the entire system for assessing property values is flawed, that the burden of paying property taxes is falling unfairly on St. John property owners, and that local people will be forced to sell their land because they cannot pay their property tax bills.

The committee’s vote to move the bill forward was greeted as good news, “But we still have a long haul,” said Myrtle Barry, a member of the Unity Day Group, a community organization that has been leading the charge for tax reform. “Senator Kurt Vialet said, ‘Expect it to look different based on the input from testimony given.’  We heard a lot of good information,’” Barry said.

Bill No. 32-0030 is almost identical to a previous version discussed extensively at a hearing on St John last August.  At that time, Finance Committee members voted to hold the bill in committee, and the proposed legislation expired at the end of the 31st Legislature’s term.

“This is essentially the same bill, and I feel an extra sense of responsibility that something must be done,” said Millin Young. “Our task is not to point fingers; it’s time to break the cycle of stress and prevent the dispossession of people.”

Senator Janette Millin Young, the bill’s sponsor.

There’s no question that St. John residents have paid a disproportionate amount of the property tax revenues.

Over the course of the hearing, senators and officials from the Office of the Tax Assessor determined that each square mile on St. John generates $3 million in property tax revenue for the government, in comparison to $1 million for each square mile generated on St. Thomas, and $250,000 on St. Croix.

The Bill 32-0030 seeks to rectify the problems in several ways, including:

  • Setting a cap on tax increases for people who live on their land and have not sold or developed it.
  • Basing the property tax rate on the actual sales price of properties sold since 2013.
  • Establishing penalties for the Office of the Tax Assessor if appeals to property tax bills are not resolved in a timely manner.
  • Requiring that a mass appraisal be certified as accurate (in accordance with the standards set by the International Association of Assessing Officers) and be verified by independent experts.

The problem with property taxes is not unique to St. John, but it has become a flashpoint partly because of the presence of the Virgin Islands National Park which is federal property.

In the Virgin Islands, property owned by governments—federal and local—are generally exempted from paying property taxes, as is property owned by religious organizations and property owned by corporations that receive Economic Development Authority benefits.

Attorney Dolace McLean and Tax Assessor Ira Mills get ready to testify.

On St. John, the total amount of property exempted amounts to 72% of the island, according to Tax Assessor Ira Mills. Under further questioning, Mills said only five of the island’s 19 square miles contained taxable property.

The presence of the VI National Park has had a significant impact on the total amount of property tax revenue collected by the territory. On one hand, it has decreased the total amount of taxable property.  On the other hand, it has caused the value of the land available for development to soar, increasing the revenues collected through property taxes.

The park has proved to be an attractive lure for vacationers and for investors. In the past 30 years, real estate experts estimate that nearly 750 homes—more than half the homes on the island– are on the short-term rental market.

The construction of luxury villas on St. John for vacation rentals has driven up the property values for neighboring homeowners who are unable to afford steep increases in their tax bills.

St. John resident Julia Powell-Gregoire, a member of the Unity Day Group, said her property tax bill increased from $723 a year to $6,000 because of her home’s proximity to luxury villas.

Tax Assessor Mills said that many St. John residents experienced a steep increase in rates partly because property taxes rates were kept artificially low for 15 years.  (A court order stemming from legal challenges to the property tax rates forced the Office of the Tax Assessor to roll back rates to the 1998 levels.  New higher rates went into effect in 2013.)

Mills said the new rates included “circuit breakers” – restrictions on how much taxes can be increased at any one time – but residents said they still weren’t getting relief.

Unity Day members said the mass appraisal and re-valuation of properties conducted by Deloitte in 2013 led to numerous inconsistencies and errors in property tax bills.

In her testimony, Unity Day member Myrtle Barry gave examples of two types of errors she personally has tried to get rectified.

Property tax reform expert Steve Jamron and Unity Day member Myrtle Barry.

As an example of inconsistencies, she stated, “In my family subdivision there are identical quarter acre lots of land.  The residential land assessments vary from $79,000 per quarter acre to $550,000 per quarter acre.  The lower priced properties are two identical adjoining quarter acre lots assessed at $79,000 and $280,000.”

Barry also gave an example of an error in the GIS government mapping system. “Although I provided the Tax Assessor’s Office with a current copy of our survey, the Estate road and a quarter acre lot that were deeded to separate owners is reflected in the GIS system as one parcel.”

Barry stated that she felt fortunate to inherit land on St. John.  “I am not trying to avoid paying property tax.  I want to pay property taxes based on fair property assessments – not the flawed assessments now listed.”

Although Bill 32-0030 is not perfect, it does address most of the major concerns, according to Pam Gaffin, another member of the Unity Day Group.

“It solves the problem of inherited land for families that have been here forever by preventing them from having an increase in value until they sell [the land] or develop it, and they don’t have to sell it,” said Gaffin.

“The second thing is in order to pay for the loss in revenue from those native lands, we are going to insist that anyone that buys a McMansion is assessed by what they paid for it instead of being under-assessed as many are now,” said Gaffin.  She cited several examples of properties that were sold for significantly more than their assessed value and said that the sales of this upscale properties will mitigate the effect of revenues lost from the rate caps on properties owned by local families.

Gaffin also said St. John property owners have had to go to court in order to force the Office of the Tax Assessor to process appeals to their tax bills.  The proposed bill sets time limits and consequences if the office does not process appeals in a timely manner.  “We’ve been in court since 1998, and it’s very expensive,” she said.

The Unity Day Group said they spent $120,000 and recently dropped a case against the government because they ran out of funds.

Senators said they intended to scrutinize the proposed law in as it passed through other committees to prevent any more legal challenges.

Abigail Schnell-O’Connell, representing the St. John Board of Realtors, questioned whether the law as written would stand because it grants rights to property owners who live on their property, but not to non-resident owners.  She also wondered whether the real estate market would become less appealing to off-island investors who would not be able to take advantage of all the benefits in the bill.

Barry agreed that the law needed to be carefully crafted but said Virgin Island families need protection.

“Anyone with resources can purchase property,” she testified. “If investors with exorbitant disposable income purchase properties on St. John, at exorbitant prices, does that mean that I can no longer afford to own property here?  Will the investor trend that displaced the locals of Aspen Colorado, Martha’s Vineyard, etc. displace the residents of St. John and these beloved Virgin Islands of the United States?”

Now that it has cleared the Senate Finance Committee with a unanimous vote, Bill 32-0030 will be sent to the Rules Committee and then the Committee of the Whole before it is approved and forwarded to the governor for his signature.