CHRISTIANSBURG — Montgomery County officials are working on a plan to provide taxpayers some relief on personal property taxes.
The county’s turn to tackle some of the recent inflation crisis’ local impact came this past week when its Board of Supervisors mulled over a number of relief options on the vehicle tax bills that go out every fall.
While a variety of items fall under the personal property designation, the tax is mostly known as the one car owners pay each year on their vehicles.
Montgomery County levies a personal property tax rate of $2.55 per $100 of assessed value.
County supervisors’ discussion of the issue reflects a broader effort among other governing bodies in the region to try to provide relief on motor vehicle tax bills, which were slated to see significant jumps this year due to rising costs — particularly prices for used cars.
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Montgomery County staff noted the recent rise in vehicle costs when they presented supervisors with the various relief options. They said used car values are currently inflated, which they added will likely cause localities’ motor vehicle tax collections to exceed normal growth patterns.
Values provided by the Commissioner of the Revenue Helen Royal’s office indicate assessed values exceed the current fiscal year estimates by 27%, which equates to $4.8 million in additional revenue, county staff said this past week.
In what can perhaps be viewed as a silver lining, county staff did say the inflated values are not expected to continue indefinitely.
“Used vehicles normally decrease, rather than increase in value,” the county’s director of management and budget, Marc Magruder, said, adding that he expects that otherwise typical pattern to return at some point. “We do not expect inflated values to continue for an extended period of time.”
Prices for used cars climbed nearly 50% during the pandemic and went up faster than those for new vehicles, according to a story a few months ago by the Wall Street Journal, which cited data from Edmunds. The spike in used car costs was significantly driven by new vehicle shortages, which prompted many to seek pre-owned cars, the newspaper reported.
Following the discussion this past week, Montgomery County supervisors voiced consensus for a relief option that would request Royal’s office to “certify that the JD Power Pricing Guide values are inflated and that an 80% assessment ratio is more in line with the fair market value of vehicles.”
The JD Power Pricing Guide — previously the National Automobile Dealers’ Association’s Official Used Car Guide — is what the county generally relies on for the value of cars and to ultimately determine motor vehicle tax collections.
The option supervisors voiced favor for would effectively provide relief for taxpayers as their bill would not be based on the full inflated value of their cars, county staff said.
While there were some concerns over how the consensus option could impact the workload of Royal’s office, several supervisors found what they deemed to be more serious drawbacks with the other choices.
One option several supervisors initially favored would involve the establishment of a revenue-neutral rate that would be 54 cents lower than the current personal property tax rate. Some supervisors, however, voiced concerns over that option calling for a tax rate increase or spending cuts whenever the values of vehicles went back down.
“There’s no way under the sun I would vote [for] a tax increase on that one,” said Supervisor Todd King.
The other relief option supervisors dismissed would involve the provision of rebate checks to taxpayers based on the difference between normal revenue growth and inflated vehicle valuations. This choice was unlocked by new legislation that allows localities to return a portion of personal property tax revenues to taxpayers in any year during which the locality reports a surplus.
The rebate option would require taxpayers to pay their full amounts upfront and then wait to receive the rebates. Supervisors raised concerns over the timing of the process, the personnel resources it would require and its overall inefficiency. County staff said the rebate process would take a month or longer.
The 80% option supervisors favored also appeared to be the quickest to implement as it would not require preliminary measures such as an advertising period and a public hearing.
County staff plans to return with a resolution on the favored personal property tax relief measure at the board’s Sept. 12 meeting.
Several localities over the past few months have either proposed or approved measures to appease concerns over upcoming personal property tax bills.
Roanoke, for example, decided earlier this year to rebate more than $5 million in unexpected funds stemming from the inflation-adjusted values of vehicles. The rebate under that plan is equal to 17.5% of the tax paid per vehicle.
While they aren’t slated to vote on their plan until next the first half of September, Montgomery County supervisors had been bracing for the impact of increased car values on personal property taxes for some months now.
Board of Supervisors Chairwoman Sherri Blevins previously said she was absolutely in favor of pursuing tax relief measures at some point later this year.
“With our economy, there are a lot of uncertainties,” Blevins said during an interview earlier this year. “Inflation has been the highest … I think in the last 40 years. It is extremely high.”
In fact, Blevins during the spring made an unsuccessful push to lower the county’s real estate tax rate out of concerns over housing prices, which had themselves gone up significantly due to a boom that started during the pandemic. The supervisor also pointed to the upcoming countywide reassessment, which is expected to lead to overall increases in property values — and effectively real estate tax bills.
“I just don’t want citizens to be blindsided,” Blevins said.