Bacon's Rebellion

Democracy Thrives in Sunlight

Whipple Whips up a Controversy

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by

James A. Bacon
in ,

Sen. Mary Margaret Whipple, D-Arlington, has submitted a bill that would allow local governments to give homeowners a rebate as big as 20 percent on their real estate tax bills — potentially shifting municipal tax burdens to owners of commercial real estate. The Washington Post has the story here.

The idea should prove popular to homeowners reeling from a decade of double-digit increases in real estate assessments. During the extended residential real estate boom of the 2000s, residential assessments increased much faster than commercial, which had the effect of sticking homeowners with a bigger share of the tax burden.

Current state law requires municipalities to set the same tax rate for residential and commercial property.

Bacon’s bottom line: I wish I had a bottom line. I’d like to dig a little deeper on this issue. On the one hand, homeowners desperately need relief from soaring property taxes. On the other, the General Assembly probably had good reasons for requiring all forms of property to be taxed at the same rate.

Here’s one thing I fear if the Whipple law gets passed and localities pass the homestead exemption: More dependent than ever upon business tax revenues, municipalities will compete even more fiercely for commercial and industrial investment. That competition will intensify the “beggar thy neighbor” practice in which municipalities seek to maximize their tax prospects at the expense of their neighbors, grabbing the tax revenue and foisting the costs (roads, schools, etc.) onto their neighbors — accentuating the scatteration of development and undermining regional cooperation in land use and transportation.

Meanwhile, we can expect every business lobby in the state to lobby against the homestead exemption. Politicians will be caught between the voters and their financial backers. I will enjoy watching this drama unfold.

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20 responses to “Whipple Whips up a Controversy”

  1. Larry Gross Avatar
    Larry Gross

    well this should be interesting.

    How could one be a “no new taxes” guy and turn this down?

    so.. does that mean all of the R’s in the GA will support this?

    wait… wait…. do I hear the faint cries of “unfunded mandate” emanating from the local jurisdictions in the peanut gallery?

  2. Anonymous Avatar
    Anonymous

    “Son of Car Tax”, with a different set of sponsors. But it will have the same result.

    Voters will expect an actual 20 percent reduction in their tax bills, but of course that won’t happen. For that to happen, the locality would have to make deep cuts in spending. Won’t happen. Instead, the exemption will be paid for in part by raising the tax rate.

    But only in part. To the extent homeowners do see marginally lower taxes, the difference will come from business, from renters (not covered) and from undeveloped property or farm land. Just as the car tax continues to be applied in full to business, rental and farm vehicles, only at higher rates than before Gilmore dreamed it up.

    Another car tax parallel: the fancier your house (just like the fancier your vehicle) the more tax relief you are expecting. At least the car tax stopped at $20K — this will apply to a $2 million McMansion (now on sale for $1.4…)

    Finally, just like the car tax, eventually the state will be asked to step in and make the localities whole to fund this. They will indeed scream “unfunded mandate.” The $1 billion in GF dollars now used to pay your car tax will be followed by $1 billion in GF dollars to pay your home taxes.

    It has been ten years since the car tax debacle. Time to try again, right? The more it changes, the more it stays the same…

    Don’t like what you pay in local taxes? Mob the councilmen or supervisors and demand less spending!

  3. Larry Gross Avatar
    Larry Gross

    fyi: ….”The homestead exemption, sponsored by former Sen. Nick Rerras, R-Norfolk, passed last year 38-1 in the Senate and 97-0 in the House of Delegates.”
    …

    The amendment would allow, but not require, localities to use it. It says nothing about who would be eligible or what percentage of a home’s value would not be taxed, other than that the maximum is 20 percent.

    Supporters say the lack of details provides the flexibility that city councils and county commissions need. “These are tools given to local governments,” Kaine said. “They can use them as they see fit.”

    http://hamptonroads.com/2007/12/homestead-exemption-second-review-general-assembly

    this also sounds like something RoVa might LOVE if they thought it would result in even more SOQ money transferred from NoVa …

    I can just imagine future local elections… where one guy sez “I won’t raise your taxes” and the other guy ups the ante by saying….”heck, I’ll give you 20% of your taxes back to you”.

    guess who wins the election?
    🙂

    now.. I’m waiting for the one that says you can get a 20% rebate on your income tax….

    … that Whipple lady.. you’d think she’s on to something with respect to the “no-taxers” and petards?

    🙂

  4. Vivian J. Paige Avatar
    Vivian J. Paige

    Whipple is reclaiming her bill, which she introduced several times prior to last session. This is the second reference, as pointed out above, and with its passage, will be on the ballot in November. (I’ve included this as one of my legislative agenda items on my blog, btw.)

  5. Anonymous Avatar
    Anonymous

    It’s a balloon folks. Press in one side and it pops out somewhere else.

    Putting aside the merits, this type of taxation occurs in a number of states. What occurs is that commercial real estate pays a higher percentage of the local tax burden.

    Local government calculates what it “needs” to spend. It estimates what it can collect from its sources of revenue. A residential real estate tax bill may or may not increase, but commercial tax bills will surely increase. This, in turn, may or may not be beneficial to the local economy.

    I suspect that, in NoVA, this would work quite well since so many businesses are here because of the presence of the federal government. The demand curve for real estate leases is not that elastic for these types of businesses. Ramsey Pricing principles indicate that government should try to recover as much as possible from those with the least elastic demand.

    Also, our friends at the State and Fairfax County chambers of commerce have been in the van for higher government spending and higher taxes. Well, it’s time for them to put their money where their advocacy has been. It will work just fine in NoVA.

    This might not work as well in more depressed areas of Virginia. So don’t use it there.

    TMT

  6. Anonymous Avatar
    Anonymous

    “Voters will expect an actual 20 percent reduction in their tax bills, but of course that won’t happen. For that to happen, the locality would have to make deep cuts in spending. Won’t happen.”

    Anonymous 10:36 is right. This is just rearranging the deck chairs on the Titanic. Tax the guy behind the tree. Shift the tax to businesses, they raise their prices, we pay. It is smoke and mirrors.

    But, if the rebate is optional by county, some counties (the ones with the highest increases in property values) may use it, and others not. That might result in more businesses looking for someplace cheaper to work.

    This is treating the symptoms and not the disease. We pay for roads with a variety of sources, not just the gas tax, because there are a variety of kinds of beneficiaries, besides road users.
    We put the gas tax in the transportation fund, and then raid it for other, general revenue purposes. Then we say road users don;t pay their way, forgetting allthe while that we used the money for other things. We complain that roads are built for economic development, not transportation, and we forget that real estate, sales, and income taxes all help support the roads.

    So, we have a mix of revenue sources and a mix of beneficiaries, and this condition persists throughout government, not just road funding.

    What we need is a serious initiative to set policy on how to determine what is fair in terms of sources and destinations for funds. That policy would be established on ratios of various factors, and when the economy has big shifts (as in huge run ups in some home valuations) then it would shift the ratios, and adjustments would be allowed (and required)only within specified ranges, unless you get a supermajority vote.

    At a gross level, this shouldn’t be too hard. As individuals we know in a gross sense what our budget is. We might skimp onone are to expand another, temporarily, but as a rule, our food budget is what it is, as a percentage of income.

    It just means stting realistic priorities, and accurately measuring who gets what benefits.

    RH

  7. Anonymous Avatar
    Anonymous

    There’s an interesting discussion over at RichmondCitywatch on this thread and others about the relative value of commercial assessements to their sale price.

    I postulate that there might be some room to re-define how commercial properties are assessed if indeed they are valued at 1/5 of what they would fetch in an open market.

    http://www.richmondcitywatch.com/forum/viewtopic.php?t=365

  8. Anonymous Avatar
    Anonymous

    More discussion here on the income approach to commercial property valuation:

    http://www.richmondcitywatch.com/forum/viewtopic.php?t=2261&start=0

  9. Groveton Avatar
    Groveton

    “What we need is a serious initiative to set policy on how to determine what is fair in terms of sources and destinations for funds.”.

    Bingo!

    And that initiative starts with a fair and honest accounting of the sources and uses of government revenues (i.e. taxes).

    Of course, if the people of NoVA ever saw what really happened to the money raised by Mark Warner’s tax hike he might see a serious drop in popularity in NoVA. So, honesty in government does not benefit many of the people involved in Virginia “politics as usual”.

    That’s why I think the fair and honest accounting has to be done by a private entity. There is an awful lot of data floating around if you dig deep enough. However, the data is disconnected, hard to integrate and separated by the entities that create the data. I have often wondered about the viability of a political web site that had a very large database of public data attached to it. The site would run articles and commentary (like BaconsRebellion). But it would also allow registered, confirmed users to “mine” the data on the site’s database and perform statistical analysis on the data. The only requirement for the right to access the database would be that your analysis must be published on the site if it is published at all. So, for example, I register with the site. My identity is verified. I use the analysis tools and database on the site to look at the effects of immigration on the economy of Virginia. I get some interesting results. I can publish those results anywhere as long as I also publish the results on the site with the database. This is a form of “open source” for information. Like many types of “open source” software – you are free to download and use the software (equivalent of accessing the database and statistical tools). Also like many “open source” agreements you have to offer the value you added back to the “open source” organization. In the case of software this is accomplished by offering the modifications you have made to the base software back to the organization that manages that software. In this case it would be offering your analysis back to the site that manages the database. This requirement is enforced through a license agreement that is created when you download the original software. The same type of agreement would be required when you access the database.

    The technology behind the database oriented site would be affordable. Much of the software needed for this kind of database is available (oddly enough) as open source software. So, the hardware and hosting would cost money but the base software would not. The labor required to massage the many different sources of data that would form the single image accessible database would be expensive. So would the labor required to maintain the technical componentry of the site / database.

    So, if you accept that it’s a good idea, the question move onto funding. Grants and donations would help but ultimately I think the site would have to get money from advertising. And given the context of the site / database – Virginia politics and economics – you’d have to make money advertising to people in Virginia. There are a lot of well traveled web sites that advertise national and global products (e.g. cars). I think this site would have to focus on more local advertising. Like Google, you are allowed to keep the results of various inquiries as proprietary data. You are also allowed to use that data to target advertising to particular users. So, a person who was using the statistical tools to look at data about Henrico County more often than average would be assumed to be a resident of Henrico County. Local advertising for small businesses in Henrico County would be targeted to that person. The funds generated would be used to operate and maintain the site / database.

    Of course, all advertising is based on the possibility of those receiving the advertising to (eventually) buy the product being advertised. That is a function of traffic (total views) and stickiness (how often the person viewing the ad actually buys the product being advertised). Since the idea of a site / database is something of a new idea, the questions of traffic and stuckiness remain essentially open. In addition, there would need to be a method of selling the local ads. I don’t know the details but I’d start with an effort to sell through yellow pages or something like that. They could take a piece of the advertising in return for selling the ads.

    Anybody have any thoughts on this idea?

  10. Anonymous Avatar
    Anonymous

    This is mere gimmicry. If Margaret Whipple and the rest of the pirates in Richmond were concerned about our tax burden, they would get rid of that ridiculous and unconstitutional HB3202 and the Frankenstein monster known as the NVTA, have the state get out of the alcohol beverage business by selling the ABC stores, and do some real budget cuts.

    The ironic thing is that I escaped the Peoples Republic of Maryland and I see this state going in the same direction.

    We have a problem with two types of immigrants – illegals and Northern Democrats moving to Virginia!

  11. Larry Gross Avatar
    Larry Gross

    Grovton said: “Anybody have any thoughts on this idea?”

    what would be the goal of the effort?

    Would it be to essentially restate the budget in a different way.. perhaps in a more simplistic way so that it was more “user friendly”?

    Have you heard of Balanced Scorecard? (GOGGLE IT)…

    I ..”think” I understand what you’re after… they probably pay big bucks for GA Staffers to learn how to do this and then present simple power-points to the GA guys?

    The Balanced Scorecard is performance based/outcome based metrics… but I’m just not sure how to measure some things…in a way that everyone would agree on the meaning of the measurement…

    There are standards for Levels of Service… and with a little digging.. one could probably compare levels-of-service with costs….

    Could you explain more about what you mean (but with less words).

    🙂

    short, concise, compelling explanation.

    🙂

  12. Larry Gross Avatar
    Larry Gross

    re: gimmicry

    I tend to think more like Groveton.

    you get right down to the point about what is the “correct” amount of tax for a locality.

    I get weary of the schools laying down really arbitrary budgets.. put the phrase “needs based” on them and then proceed to engage in political pandering along the lines of “fully fund our schools”.

    I think citizens ARE entitled to a fair accounting of what their taxes on spent on – AND information that assures them that, compared to other jursidcitions, that their taxes are wisely and cost-effectively spent.

    And I agree with Groveton.. that the compiler/discriminator of this information needs to be in the hands of an independent entity – preferably a citizens panel – elected by citizens – not appointed by the BOS.

    We desperately need some way to have some semblance of guarding the hen house cuz we all know that there are already foxes in that hen house sometimes.

  13. Anonymous Avatar
    Anonymous

    One needs to be careful comparing one local government/school district to others — because they all tend to overspend. Fairfax County schools, for example, always point that they overspend less than many other nearby counties.

    But that’s like GM, Ford and Chrysler in the 70s comparing one to the other. All of their cars were third-rate. The proper comparison was to foreign manufacturers. How did Chevrolet compare to Nissan or Honda, for example?

    Several years ago, I sent an email message to the superintendent of schools for the Archdiocese of New York, which served approximately 110,000 students at the time. It had higher percentage of minority and poverty students than did Fairfax County Public Schools. The New York schools included special education programs — I don’t recall the specifics.

    I asked the size of the central office staff — it was less than 30. FCPS, on the other hand, had somewhere around 1800 non-school-based employees for its 160,000 students. Keep in mind that the 1800 figure does not include the many staff jobs on site in the schools.

    TMT

  14. Anonymous Avatar
    Anonymous

    “That’s why I think the fair and honest accounting has to be done by a private entity.”

    I’m thinking more like a supreme court. They probably need to be from outside the jurisdiction, too. Each county appoints a board, then we swap boards, or something like that.

    I think there is a tremendous amount of data, but people tend to pick and choose what they wish to believe. I think you need a kind of cone shaped discussion room. At the outer rim anyone can throw in a bank shot.

    When you have dissenting opinions you have some means of resolving them into one statement that all can agree on. You don’t get to contribute to the next lower level until the top level is resolved and you accept the resolution as a given.

    eg. Larry thinks transit can carry 40,000 people per hour and one rail line can carry a lot more peole than one highway lane. I say Metro only averages 5000 per hour per track. Both statements could be correct on their own, but they cannot meaningfully exist in the same thought space. Through discussion we can probably find a resolution.

    So the discussion group would go find additional arguments, and add them to the database, until a meaningful concensus or level of agreed truth is reached.

    Each time you do this you drop to a lower level in the cone, where gravity has eliminated the frivolous spinning truths at the rim. They are no longer allowed in the discussions at this level.

    Eventually agreed truth drops out the bottom.

    That’s the hard way. The easy way is to just put the budget on the back of your tax form and require people to put their dollars where they want them spent. Larry thinks this won’t work, but I think when yoou average 7 million opinions you get pretty close to the truth: how people really want their money spent.

    I think Larry doesn’t like it because he knows his ideas are so far on the fringe they wouldn’t get much support. But, it doesn;t have to be binding, just published. Politicians could propose other solutions at their own risk.

    The advantage is that it is easier to measure the difference between actual spending and desired spending than it is see where your money really goes. Spending highway money on ship restoration projects, for example. There is nothing wrong with ship restoration projects, but there might not be that many people who support them compared to neighborhood restoration projects.

    Even if the people are wrong, and spend too little on police or jails, they will wise up pretty quick.

    RH

  15. Groveton Avatar
    Groveton

    Larry:

    My idea would deal with a lot more than the budget (although the budget is a part). There are a lot of corproations that have the following problem:

    1. They have a lot of data – current and historical.
    2. The data has been built up over the years in the data bases of separate applications. So, HR has employee data, Finance has revenue and profit data, production has quality data, etc.
    3. The data in the different systems is hard to merge. Each system records things in different ways. And, the way to get to the data is different from one system to the next.
    4. The software tools built to analyze data have been developed system-by-system.
    5. The format and definition of the data has changed over time – even within each system. Maybe customer ID was expanded from 6 digits to 9 digits in 2003. Overhead allocation policies changed. The result of this is to make historical comparisons difficult even within a system.
    6. External data is available but only in an inconsistent way.

    A fairly common response to these problems is to build a special database with copies of the data from the various systems and external data. This database is sometimes called a data warehouse. The data base normally comes with analysis tools that allow people within the company to run relatively sophisticated analyses of the data.

    My proposal is to build a data warehouse for data (maintained by many different agencies) relating to the Commonwealth of Virginia. While I haven’t even begun to think of all the various sources of data – here is a list of possible sources:

    1. Virginia state budget.
    2. US Department of Energy trends and statistics of electricity and natural gas prices by type of use by area.
    3. Fairfax County real estate tax records.
    4. Dominion Resources annual reports and quarterly filings.

    Obviously, there are some issues with this:

    1. There is more data available than anybody could get into a single data base. So, priorities have to be set.
    2. Keeping the data current is an issue. There are some technical techniques for doing this but they require work to develop. Changes in the data can be manually entered as well but this is very expensive.
    3. The analysis tools have to be easy enough to use that people will use them. A public service data warehouse can’t depend on users with programming skills or advanced degrees in statistics. The biggest challenge is to make accessing the data a straight-forward proposition.

    I have worked on corporate data warehouses a number fo times. I am quite sure that this can be done with public information. The question is, as always, cost. The more data you get into the data warehouse the more useful the data warehouse. However, the more data you get in the data warehouse, the more it costs to build, operate and maintain.

    The open question to people on BaconsRebellion is whether such a public data warehouse would be useful. If you could get relatively access to data (current and historical) about the demographics and economics of Virginia would you use it to better research your posts? I know this is a hard question to answer without seeing the details so I am asking the question generally and expect generalized answers.

    There is probably a tie between this idea and various universities and “think tanks” involved in Virginia policy. Groups like the Fiarfax Taxpayers’ Alliance and researchers at George Mason University (for example) must want (or already have) something like this. Another step would be for me to look at how they do their research.

  16. Larry Gross Avatar
    Larry Gross

    who is your audience?

    what information is being prepared for them?

    what would be expected to result from getting the “right” info to the right “target” audience?

    oh yes.. the old Requirements Analysis cloud is reforming..

    the absolute hardest thing to do with websites is to keep the content fresh and compelling..

    One that has achieved at least in part your goal is the VPAP website.

    They have done a marvelous job tapping into electronic government databases for campaign information.

    Then they’ve taken the data and sliced/diced it into meaningful comparative info… allowing users to do their own data “mining”…

    For instance, most all of the financial info with respect to Gerald Connolly’s campaign finances is easily available fairly quickly.

    and VPAP is totally dependent on access to government records – not only the records, but timely records.

    VPAP would be fairly “after-the-fact” if they did not quickly access the latest data – which they do.. and then notify via email that the data is available.

    so VPAP might be a reasonable model…

  17. Groveton Avatar
    Groveton

    Who is your audience?

    Two classes of people:

    1. Those who register to inquire against the database. Hard core political bloggers (some of the more frequent posters on this web site), college and graduate level students engaged in economic / demographic research regarding Virginia, “think tank” researchers such as the people at the Fairfax County Taxpayers’ Association, journalists, small business owners with substantial revenue from consumers in Virginia, staffers for politicians and political candidates.

    2. Those who read the posts, look at the analysis of others, post their own comments. Interested citizens willing to spend some of their time understanding the politics and economics of Virginia. Also, blogmasters would be free to use the database to produce background for their own sites as long as they published their analyses on this site too.

    What would be expected to result from getting the “right” information to the “right” target audience. A better informed citizenry willing and able to engage the business as ususal politicians in debate. Or willing to vote for politicians only to the extent that they have policies that make sense to the voter based on the available facts.

    VPAP is a great site – very much in line with what I have in mind. Only with better analysis tools and an historical perspective. I’d love to see where Jerry Connolly has gotten his money over the years and link the donor companies to a database of contracts awarded by Fairfax County to those companies.

    I guess I believe in a few core ideas:

    1. The technology of large databases is cheap enough to use without depending on a substantial revenue stream.

    2. User generated content will continue to add value to the places that allow it. Whether it is your posts on BaconsRebellion or published statistical analyses on my concept site, ordinary people create content that others want to see. See also: YouTube.

    3. Give people unfettered and convienient access to public data and they will use that access to change the political system for the better. Kind of the VPAP argument.

    4. Online advertising can be used to generate some / most / all of the funds required to operate and maintain the site.

  18. Jim Bacon Avatar
    Jim Bacon

    Groveton, I’m totally on board with your idea. I think it could revolutionize citizen participation in state/local government — indeed, it would revolutionize the practice of state/local government itself.

    Only one quibble: I doubt you could support the effort through online advertising. You’d have to support the initiative through some combination of foundation grants, subscriber fees or VPAP-like sponsorships.

  19. Larry Gross Avatar
    Larry Gross

    I agree with Jim.

    Awesome idea but you’ll need some financial support.

    To give an example… VPAP wants to expand it’s local election campaign finance data … and for Spotsylvania.. it would cost about 3K to do it…

    so.. at the least .. put a Paypal capability on the site…

    Also.. don’t forget the Richmond Sunlight site.

    and do you know about this site:

    http://www.roanoke.com/datasphere/wb/xp-index

    go for it Groveton!!!!

  20. Larry Gross Avatar
    Larry Gross

    Groveton – I’d certainly be willing to help at giving feedback and possibly some minimal tasks… depending on the skill required.

    The idea of having a place that pulls together all the various information resources for Virginia from which to have policy discussions is exciting.

    It certainly could elevate the quality and impact of citizen involvement with our elected.

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