THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, January 27, 1995 TAG: 9501250119
SECTION: PORTSMOUTH CURRENTS PAGE: 02 EDITION: FINAL
TYPE: Column
SOURCE: Joseph Banks
LENGTH: Medium: 86 lines
City Council's rejection of a real estate tax increase earlier this month doesn't mean we won't see a similar proposal this year.
Three reasons why:
City Council is expected to offer its final approval of an economic development plan at the Feb. 28 meeting. To pay for aspects of such a plan, City Manager V. Wayne Orton earlier suggested a 4-cent increase to help finance such projects. Council rejected the suggestion at the Jan. 10 meeting, but there's no guarantee that Orton won't revise or revive the suggestion.
Gov. George F. Allen is suggesting elimination of the Business, Professional and Occupational License tax. Residents likely will be asked to pay more or expect less to offset the up to $4.4 million annual loss in city revenue.
The 1994-95 fiscal year ends June 30, which means consideration of the 1995-96 fiscal year isn't that far off.
All those who believe that your real estate, personal property, or utilities tax will rise in fiscal year '95-96 with no improvement in service, raise your hand!
Before council reconsiders an increase in the real estate property tax rate, it might want to revisit the issue of personal-property tax on boats.
Not only consider raising the personal property tax rate from 1-cent per $100 of assessed value to $1.50 per $100 but expanding the circle to include all boats, even those assessed at less than $10,000.
Such might limit the severity of a real estate tax increase.
In 1991, City Council set the personal property tax on boats at 1 cent per $100 of assessed value.
The logic exercised was that Portsmouth, by having a lower tax, would attract boats from other cities and turn the city into the boating capital of Hampton Roads, if not the Annapolis of the South.
The increase in the number of boats, the logic continues, would have a direct economic impact on Portsmouth marinas and local businesses, whereby the city would realize an increase in tax revenues that more than offset the loss of income by the decrease in the boat tax.
The Commissioner of Revenue office estimates that Portsmouth witnessed an increase of 400 to 500 boats in Portsmouth since 1991.
The state Department of Game and Inland Fisheries says there were 299 more boats in the city in 1994.
At present, Portsmouth's Commissioner of Revenue bills only those whose boats are assessed at $10,000 or more. An owner of a boat assessed at $10,000 owes the city $1. (I wonder what the net revenue is after subtracting for cost of preparing the bill, postage and processing that $1 check!) The owner of a $20,000 boat pays $2; a $30,000 boat, $3; $40,000 boat, $4, etc.
The Commissioner of Revenue's office estimates that at least half of the boats registered in the city are assessed at less than $10,000. Therefore, they only pay a $20 city sticker fee.
Revenue generated in Portsmouth from boat tax and decals in '94? An estimated $50,000.
Revenue generated in Chesapeake from its boat tax in '94 was $176,644.62; in Norfolk, $430,358; in Virginia Beach, $737,546.40
Based on the total appraised value of boats of $30,992,526, Portsmouth could have generated $464,886.34 last year with a $1.50 per $100 boat tax. Or $414,886.34 more than generated from the penny tax and sticker fee.
Has Portsmouth really seen a disproportionate increase in spinoff tax revenue as a result of the lower boat tax? Are neighboring cities not witnessing the same proportionate spinoff tax revenue?
Has Portsmouth really seen a disproportionate increase in the number of boats registered here?
Has Portsmouth really gained a competitive edge with its 1-cent boat tax? Or have we have just flushed potential revenue down the Elizabeth?
Each penny increase in Portsmouth's real estate tax generates an estimated $250,000.
Based on 1994 numbers, a $1.50 boat tax would nearly equal the amount of money raised from a 2-cent increase in the real estate tax rate. Before raising the $1.32 real estate tax rate, might we consider charging boat owners the same $1.50 rate that boat owners elsewhere in South Hampton Roads pay?
Obviously my suggestion won't garner me any invites to the Cock Island Race. How about this? It was suggested that money raised through the proposed 4-cent increase be dedicated to economic development projects. Let's raise the boat tax with the understanding that all revenue from such be dedicated to an economic development program, such as a waterfront project, such as the dredging of Scotts Creek.
KEYWORDS: PORTSMOUTH REAL ESTATE TAX PORTSMOUTH PERSONAL PROPERTY TAX by CNB