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January 3, 2008
Remarks by Governor John P. deJongh, Jr. at a press conference regarding real property taxation in the United States Virgin Islands Governor John P. deJongh, Jr., today, held a news conference at Government House to address the critical issue of real property taxation in the United States Virgin Islands. Below is the text of the governor's remarks. Good morning. Thank you all for being here. I would like to open with a statement after which I would be happy to take your questions. In my State of the Territory Address, I spoke of the need for us to accept our responsibility as elected leaders and to replace shouting with talking. Though I do believe that actions speak louder than words, and I would note that the Legislature acted by voting down the Real Property legislation before it, the very next day after my speech, I have spent considerable time since then talking to Senators about this issue. I have reviewed the comments made on the floor of the Senate when it last considered this matter. I certainly agree that nobody likes paying taxes, and no Legislator ever likes to vote on any taxation question where there is any possibility at all of taxes being increased. But what I think we must do now is to all stop and take a collective reality check. We need to look back at what created the Real Property Tax crisis we find ourselves in, what actions the Legislature and I have already taken which are built on our sending out real property bills – and collecting those taxes. And we must look at what our choices are, at what choices we have already made, and why we made them. So this morning, before I announce the actions I am taking that will, I hope, move this matter to a swift resolution, I would like to ask you, and through you the People of the Virgin Islands, to review this with me. Since 2003, the Virgin Islands Tax Assessor – and the Government as a whole – have been restrained by a Federal Court Order from assessing any real property “until the property tax system has been certified as reliably and credibly assessing and taxing all real property at its ACTUAL value.” In order for the Government to operate, the Court did permit the issuance of interim bills at the assessments set in 1998. This has been done for years up through last year. But, neither the Court’s order, nor Virgin Islands law, allows that to be done again because the revaluation of all properties at actual value has now been done. But this means that for almost a decade bills have been sent out at the values set in 1998 regardless of whether those bills stated what was the actual value or not, even at that time. Many were not. Some owners thought their bills were too high and did not reflect actual value, and that is what, in fact, prompted the lawsuit that still goes on. However, many of us knew then, and know now, that these 1998 old values were, in fact, often lower than the actual value of the property, in some cases much lower. Many owners paid their taxes based on those old assessments knowing full well that they never would have agreed to sell their property at anything close to the level shown on those bills. And, moreover, many of these same owners sought and obtained private appraisals at higher values in order to obtain bank financing—whether for residential or commercial purposes. Plus, since then, the real estate market has risen – spectacularly risen on the island of St. John, but risen on all islands in many neighborhoods. And in addition to all of this, there is one more important point to keep in mind, and that is that there has been a steady increase in inflation since 1998. This is reflected, of course, both in the purchasing power of the dollar and in the cost of goods. So for ten years there has been no recalculation of property values, and certainly no systematic determination of actual value as is required by both Virgin Islands law and the Federal Court. Pursuant to the Court Order, the last Administration hired Bearing Point to revaluate all property in the Virgin Islands with the Tax Assessor’s Office, so that a system of valuation and the results could be submitted to the Special Master appointed by the Court for review and certification. That process is now being completed, and the information is being reviewed by the Special Master. The timing of when the Court acts is crucial, as bills must be prepared, mailed, and a period of time for payment permitted. This is why I believe that the Senate must act now. The Tax Assessor needs time to implement the new system and the new rates that only the Legislature can set. The revenues produced will allow us to continue, without interruption, the most basic of services from the paying of salaries to funding the Spelling Bee. We have every reason to believe the Court understands this clearly, and will act promptly. Let me repeat what I believe all now must have heard before: the Legislature passed a budget which I signed which anticipated $56 million dollars to be collected from Real Property tax billings for each tax year. Let us not pretend that we do not know where the Government’s money comes from—it comes from taxes, and that includes Real Property taxes. Now when the Legislature failed to pass the proposal I sent them, they left us – each and every Virgin Islands property owner – in the worst possible position. They left us with the new valuations which reflect the legally required actual value, often much increased over the ten years since 1998, AND with the old tax rate which is .75 per cent. What they did not approve was a proposal I sent them which cut that rate in half for home-owners and the owners of residential property, and which reduced the old rate by about a third for those who own undeveloped land, often folks holding land until they can afford to build a home. Why did I propose this cut? Because I do not believe we can run the risk of putting Virgin Islanders out of their homes, or jeopardize their ability to hold land until they can build a home, because of steep tax increases. That’s why. And, because we all know, or should have known, that if you use the legally required actual value of property, the only way to lessen the burden is by lowering the rate at which these properties are to be taxed. So, working with the Lieutenant Governor, the Tax Assessor, the consultants from Bearing Point, we devised a system that would apply different rates to different classifications of real property in order to protect our residents in their homes. The proposal we developed reduced the old rate for residences by about half from .75 to .37 per cent. It reduced from .75 to .49 per cent for undeveloped land, about a one third reduction for undeveloped land, and it even included a reduction of rate, albeit a very small one, from .75 to .71 per cent for commercial properties. And because those rates were to be applied to the new actual values, the result would be to raise the amount of money set forth in the budget as coming from real property taxes. It was a formula of fairness and fiscal responsibility. The Administration’s proposal will reduce the average tax in three categories: land … residential … commercial. The only increase in rates, by the way, was on time-share owners where often the values of the amenities that they use, such as pools, recreational facilities, restaurants and the like, are owned by hotels that are themselves tax-exempt. Yes, they too complained, both the sellers of time-shares and through them the owners, and perhaps an adjustment may prove to be necessary in the future if this increase can be shown by real numbers to directly affect the growth of this important segment of our economy, an industry that is important to our resort development and one that this Administration will continue to work with. But that segment of our economy is being taxed comparably to what its owners pay on their primary residences on the mainland and, truth be told, these concerns because of the number of dollars involved are not the central focus of our real property tax concerns at this time. No, what is central now is how to be fair to our people while collecting the monies needed to manage our school system, provide resources for law enforcement and ensure that basic public services are provided. And so, to be sure that there would be a further lessening of impacts on those less able to pay, my proposal also called for an increase in exemptions for homesteads, the elderly and disabled, and for veterans. And beyond this, it also contained a “circuit breaker” provision that limited the impact of increased taxes in those cases where the revaluation from 1998 numbers to current actual value increased by more than 125 percent. This provision limits the increase in taxes from one year to the next in these cases by granting a tax credit equal to 40 percent of the increase. None of this may prove to be perfect in an imperfect world, but I assure you that it was all better than letting taxes double or doing nothing. Also imperfect may have been the special case of St. John where, quite unlike the broad experience on the other islands, the real estate market has sky-rocketed over the past decade, but now, within the past year, it has hit a wall and fallen back. Many from St. John have complained bitterly of their new valuations, and we have heard and acted. The Tax Assessor’s Office continues to re-visit promptly all properties where an owner has disputed the new valuations. These re-visits are happening without delay and will continue until all have been re-examined who wish to be. In the end, not all may like the fact that their properties are now so much more valuable than they were listed at in the 1998 tax records, but as to process and procedure, all must and will be heard, their comments and information considered. But let us understand that for many home-owners in particular, the lowering by about half the rate at which they would be taxed under my proposal, as well as the increases in exemptions, actually results in no increase in taxes at all or an increase of well less than the inflation rate alone over the past ten years. During the debate in the Legislature, there were some voices of reason who did, in fact, appreciate that the only way to lessen the burden of real property taxation was through varying the tax rate. Yet some of these Senators still question whether the adjustment for some might still be too abrupt, too great a change from one year to the next. I have heard this concern and share it. I agree that an adjustment of the level of qualifying income for those to whom the “circuit breaker” provision applies should be incorporated as we move forward. And so today I am announcing that I will be re-submitting a revised Real Property Tax Bill to the Legislature, and I am today calling the Legislature into Special Session on Thursday to consider this legislation immediately. We must acknowledge that as a practical matter, and given the concerns we have clearly heard, we can only collect one year’s taxes in this fiscal year. My proposal reflects this reality. Additionally, I ask the Legislature to authorize, as part of this revised bill, a time-limited real property tax amnesty on penalties and interest for years 2005 and prior. This, I trust, will encourage the prompt payment of presently unpaid taxes by those who owe delinquent taxes during this fiscal year, and to raise the monies so desperately needed to fund our budget. Our budget must be funded; our teachers and others must know that we are serious in working to negotiate their salaries, our vendors must be paid. And we cannot risk having the Court lift the injunction, thus leaving us with the new valuations and the old rates. My lawyers and the Tax Assessor tell me that if this were to happen we will have no other choice but to send out real property tax bills at the old rate, and with the old level of exemptions, in the absence of action by the Legislature. We cannot just -- yet again – send out the old – now ten year old – bills now that the revaluation has been done and presented to the Special Master for approval. It is not fair, and it is not legal. Inaction in this case is, in fact, an action. It will prove an intolerable burden on our people. But the Legislature and I can certainly work together to get this bill passed now. We know that it is very likely that experience will show us how to improve it in the future. I call on the Legislature to pass the Real Property legislation without delay, so that we can press the Court to lift its injunction, and so we can get on with the necessary tasks of collecting our Real Property taxes fairly and on time from here on out. Before I take your questions, allow me to inform you and the wider listening and viewing audiences that by the conclusion of this news conference today, the charts that on display here today will be available for the public’s consumption on my Administration’s website at www.governordejongh.com. Joining me today are Lt. Governor Gregory Francis and Tax Assessor Roy Martin. We are now prepared to take your questions. |
