Supervisors expected to approve historic real estate tax credit

(Editor's note: This article was updated Jan. 26 to reflect new information.)

Henrico supervisors Tuesday night approved the introduction an ordinance that would provide a real estate tax credit of 2 cents per $100 of assessed value to property owners in the county. County officials believe it will be the first time a Virginia locality has provided such a credit since the General Assembly granted them with permission to do so in 2005. The board will host a public hearing on the topic Feb. 22.

The action is the first part of a “2+2” plan proposed by County Manager John Vithoulkas as a way to ease the real estate tax burden on property owners during a time when property values are skyrocketing. The second part – a 2-cent per $100 of assessed value decrease in the county’s real estate tax rate, to 85 cents – will be part of his proposed budget for the coming fiscal year, which begins July 1.

Combined, the two moves will cost the county about $20 million in revenue that it would have collected or kept otherwise, but officials wanted to provide some relief for property owners as a way to counter the rapid increases in property values and associated assessments.

“Rather than think of ways to spend it, we have decided to give it back to our residents, because we manage our money that well,” Board Chair Pat O’Bannon (Tuckahoe District) said Jan. 25.

“The point is [we are] first in the commonwealth to return dollars to taxpayers because of good fiscal stewardship,” Brookland District Supervisor Dan Schmitt said, summing up the value of the rebate for his colleagues during a board retreat Jan. 22.

Even with those changes, most property owners will see the amount of real estate taxes they owe increase this year when compared with what they paid last year – but those increases will be lower than they would have been otherwise. The owner of a home valued at $322,000 – the median value in Henrico, according to Finance Director Sheila Minor – will pay about $146 more in real estate taxes this year than last year but would have paid about $275 more without the changes, for example.

That’s because although Henrico’s median-to-sales assessment ratio is just below 90% – meaning that properties typically are assessed at about 90% of their actual purchase prices – assessments this year in the county are up nearly 11% from last year and just about 20% in the past three years. Average sales prices in the county were up more than 15% in July when compared with the same month a year earlier.

The tax credit will be calculated based upon the 2022 assessed value, Minor said during the retreat. The original proposal called for property owners who were due $50 or more to receive checks, while those slated to receive less than $50 would have had their first-half bill this year credited in that amount. About half of the 115,000 property owners would have received checks as part of that option. But Tuesday, supervisors opted to lower that threshold to $30, which means about 100,000 property owners will receive checks. Delinquent taxpayers will receive credits to their accounts.

Three Chopt Supervisor Tommy Branin credited Varina Supervisor Tyrone Nelson with suggesting the change, noting that $30 might amount to a tank of gas – not an insignificant expense.

“It makes a difference in somebody’s life," Branin said. "Thank you for bringing it into perspective.”

The hottest housing market locally has been the $300,000-and-below market, Minor said, and three regions of Henrico with homes largely in that range are evidence of it. Homes in Highland Springs have experienced the second-largest increase in sales prices this year – 50.7% – in Virginia, while those in East Highland Park (41.3%) and Laurel (40%) also are among the top eight.

For homeowners in those houses – a range that comprises nearly 58% of all residential properties in Henrico – rapidly rising assessments can present challenges.

“If you want to sell your house, then, jackpot,” Nelson said during Saturday’s retreat. “[But] some people have been in their houses forever and they’re not trying to sell their house.”

Branin agreed.

“Unlike most other locales in the commonwealth, we have been bringing our tax rate down, trying to equalize the increase in value,” Branin told fellow board members. “We all, as residents, felt the increase and know that that increase is there. And the question that we’ve all had to each other and the manager is, Can we do the [tax] credits? Can we do this? Because we can’t stop that [property value] increase. But with this big of an increase, goodness gracious. We need to help the people we represent.”

Even forgoing roughly $20 million in revenue through the tax rebate and tax reduction, Henrico is still well-positioned financially, Vithoulkas told supervisors. The county has a general fund balance (excess money) of about $413 million – or about 40% of its annual expenses. Typically, it budgets for a fund balance of at least 15%, he said.

“You’ve got more in reserve than we’ve ever [had],” Vithoulkas said. “It’s going the right way.”