"A proposal to offer homeowners a sizable break on their property taxes is sailing through the General Assembly over the objections of business advocates, local government officials and a University of Virginia economist.

The “homestead exemption” would allow local governments to grant homeowners up to a 20 percent real estate tax break off the value of an owner-occupied single-family home or farm.

If passed by lawmakers, it would require an amendment to the state constitution, which needs the approval of voters.

The measure, which has bipartisan support, seeks to give relief to Virginia homeowners who are struggling to afford the skyrocketing property taxes of recent years.

Homeowners in Charlottes-ville, for example, saw the city’s average residential property tax bill last year jump by $240 over the previous year, bringing the average tax bill up to a total of $2,522 per home. Much more modest increases are expected in 2008.

“All of us are aware of the problem brought on by rising assessments - particularly for homeowners on a fixed income,” said Del. Rob Bell, R-Albemarle County. “It’s another tool for local governments to give tax relief.”

Albemarle County Board of Supervisors Chairman Kenneth C. Boyd said that he generally supports lower taxes, but fears a homestead exemption would starve local government of the revenue it needs to provide critical services. “I’m fiscally conservative and I’m in favor of lower taxes,” Boyd said. “But I’m also reasonable enough to realize that it takes money to run our county.”

Local governments would not be required to adopt a homestead exemption, Bell said. “They don’t have to do it,” he said. “The can work it into their budgets as they see fit.”

Boyd said there would be “tremendous pressure” on local governments from constituents to adopt a homestead exemption.

“I’m concerned that it’d be a great blow to the tax revenue of this county,” he said.

John L. Knapp, a senior economist at UVa’s Weldon Cooper Center of Public Service, said that if localities implemented the full 20 percent homestead exemption and did not simultaneously increase the tax rate, it would curtail property tax revenue by 12.9 percent across Virginia. Charlottesville would see its property tax revenue fall by 11.3 percent, Albemarle would forgo 12.4 percent, Greene would lose 14.4 percent, Fluvanna would drop 15.7 percent and Nelson County would let go of 13.2 percent.

In a more likely scenario, Knapp said, local governments would implement a limited version of the homestead exemption and raise the tax rate to make up for some of the losses. As a result, homeowners would not see as much tax relief and properties not included in the homestead exemption - namely, rental and business properties - would pay a greater share of taxes.

Timothy Hulbert, president of the Charlottesville Regional Chamber of Commerce, said in an e-mail that the homestead exemption would be “dangerously divisive” and would unfairly shift the local tax burden to businesses and renters.

“Virginia has long prided itself of having one of the more equitable tax structures in the nation,” Hulbert wrote. “By creating this inequitable tax structure, the General Assembly and local governments would put in place a local tax structure that no doubt would foment civic discord and polarization among classes of taxpayers within a community and result in increased economic burdens to some taxpayers.”

A new report by the nonpartisan Commonwealth Institute for Fiscal Analysis also found that the homestead exemption could lead to a reduction of critical local government services like public safety, human services and education.

“Implementation of the homestead exemption option would result in decreased tax revenue collected by localities, thus threatening the quantity and quality of services that residents have come to expect and continue to demand,” the report found.

Nearly every local government in Virginia already offers some amount of property tax relief, but state law currently limits such tax breaks to senior citizens and people with disabilities. It is not yet known what sort of qualifications local governments might require of homeowners to be eligible for the homestead exemption.

If the homestead exemption is approved, Knapp suspects that many local governments would adopt it, but would not offer the entire 20 percent tax break. If every local government in Virginia enacted the full 20 percent tax relief, Knapp estimated that it would result in a $1 billion loss of revenue.

The House passed the homestead exemption bill Tuesday in a unanimous vote. A Senate committee approved the bill in a 9-3 vote on the same day.

Gov. Timothy M. Kaine also supports the idea of giving homeowners a break from skyrocketing property tax bills. A homestead exemption was part of his platform during the 2005 gubernatorial campaign. “The governor has said he favors the concept of a homestead exemption, but we’ll see exactly what sort of bill eventually lands on his desk,” said Kaine’s spokesman, Gordon Hickey.

If the homestead exemption clears the legislature, it could go before voters as earlier as November 2009. It would take effect Jan. 1, 2010." (Brian McNeill, The Daily Progress, January 31, 2008)