Tax revolt!

By Published by The Editorial Board

Published: June 2, 2008

Everyone who owns a house knows they can sell it for more than their city or county assesses it for. Property assessments always lag behind sale prices.

But the trend has to be heading in the right direction for the assessments to make sense. If home prices are rising, it’s only logical that assessments would also go up. When prices fall, why should assessments rise?

That’s a political argument that’s not based on any analysis of real estate sales data in the Dan River Region. But property tax rates are set by elected political leaders, not the folks who study home sales numbers.

On Friday, the political leaders of Danville voted to lower the city’s property tax rate from 77 cents per $100 of assessed value to 73 cents, which will keep real estate tax bills the same. The change will force the city staff to come up with $600,000 in budget cuts to get the 2008-09 spending plan finished by the June 30 deadline.

Friday’s vote was surprising because we can’t remember the last time a Danville budget didn’t pass pretty much as it had been proposed. The vote was obviously motivated by reports that housing prices around the nation were in a free-fall. We haven’t seen that here in the Dan River Region, but that’s because this area already has some of the state’s lowest average home sale prices.

“Houses are not worth today what they were a year ago,” Councilman David Luther said.

Luther, along with councilmen Adam Tomer and Stokes Daniels, led the charge on this issue. They were joined Friday by Mayor Sherman Saunders, Dr. Gary Miller and John Hamlin.

“I have heard from a number of citizens on this issue and not a single one in favor of it,” Saunders said of the 77-cent tax rate.

So what’s next for Danville’s budget?

The city could gut the city’s tourism budget. Tourism is a relatively new city government function, and with record-high gas prices and the national economic climate, we may not see many tourists here over the next few years. Tomer revisited his idea to raise the city’s lodging tax, which wouldn’t affect most local residents. Or the city could find other areas to nip and tuck throughout the budget.

Over the past few years, Danvillians had endured higher utility rates and other rising fees for service. There had been some grumbles, but the issue never took hold because a case could be made for those previous increases — the 2000 school bond, rising wholesale electric rates, higher costs for city services, etc. But taxpayers couldn’t look at their property assessments this year, in light of what’s happening across the nation, and be satisfied with what they saw.

Danville City Council’s decision to cut the tax rate was the direct result of widespread disbelief about rising local property assessments.