St. Thomas Real Estate Trends

Fans of Herman Wouk chuckle at the latest uproar on the property tax issue!

As reported in the Virgin Islands Daily News:

"The U.S. 3rd Circuit Court of Appeals ruled in an opinion published Tuesday that the V.I. government is prohibited from sending out property tax bills - causing thousands of property tax bills sent out last month to be immediately rescinded and making the territory's already strained budget situation more tenuous.

In the opinion written by Chief Judge Anthony Scirica and agreed to by judges Thomas Ambro and D. Brooks Smith, the high court upheld the September 2008 order from Chief V.I. District Court Judge Curtis Gomez that said the government has no authority to send out property tax bills right now and the government is in contempt of court.

"We find no clear error in the District Court's underlying findings of fact, and we agree with the District Court's application of fact to law," the opinion states.

The opinion invalidates all of the 2006 property tax bills sent out last month. In a statement sent out by Government House on Tuesday night, Government House spokesman Jean Greaux Jr. said that tax bills that have been sent out will all be rescinded, and the executive order setting July 1 as the due date for the tax bills will be vacated.

According to the statement, the lack of taxes will represent about a $28 million loss in revenues.

Several months ago, Gov. John deJongh Jr.'s financial team had pegged the territory's projected financial shortfall at $188 million for the current fiscal year. It is not clear where property tax revenues fit into those projections.

Government officials who were hoping to use their interpretation of the laws and previous court rulings to justify sending out property tax bills had little to say about the 3rd Circuit's opinion on Tuesday. Government House did not wish to comment beyond a short statement released Tuesday evening, and Greaux did not return telephone calls seeking more information.

Attorney General Vincent Frazer declined to comment on Tuesday. Justice Department spokeswoman Sara Lezama said that Frazer and other top-level officials needed Tuesday to fully understand the ruling and decide what comes next.

Tax Assessor Bernadette Williams could not be reached for comment.

This is the newest twist in the territory's long and convoluted journey to arrive at a fair and equitable property tax system. Litigation about the fairness of the territory's property tax valuations and assessments has stretched back almost a decade, after a group of commercial property tax owners sued the government in District Court because they believed the system of assessing property taxes was unfair and unconstitutional.

Three years of property taxes have gone uncollected because of the legal quagmire.

Last August, the government sent out tax bills for 2006 using newly assessed property valuations and a new formula for calculating the taxes based on use of the property. Because the court had not yet given the government permission to send out the property taxes, Gomez held the government in contempt of court.

Gomez ordered all new tax bills to be rescinded and imposed a $5,000 daily fine against the government until it complies with the order directing the government to pay plaintiffs' attorneys' fees and other costs and ordering the creation of a new government account - the Property Tax Contempt Expense Fund - to satisfy payments the government must make.

The V.I. government immediately appealed the contempt ruling to the 3rd U.S. Circuit Court of Appeals. The government also requested that the hearing be expedited and that the high court postpone enforcement of the contempt order. In October, the 3rd Circuit granted the government's motion.

At that time, government officials saw the stay as a green light to reissue tax bills. Government officials reasoned that since the contempt ruling invalidated the new tax bills, it followed that a stay of that order allowed the government to issue valid tax bills.

In January, the government and attorneys for the property owners who initially brought the property tax litigation in 2000 argued the legitimacy of Gomez's contempt ruling before the 3rd Circuit in Philadelphia.

While waiting for the ruling from the 3rd Circuit, the V.I. government last month again sent out 2006 property tax bills and the governor issued an executive order mandating that they be paid by July 1.

At the time, Frazer said that the government's fiscal situation was "quite dire," and that the government must be able to get the money it needs to operate.

No information was available on Tuesday about how many people had paid those bills to date.

In the 20-page opinion, the 3rd Circuit judges reaffirmed several decisions they had made during the lifespan of the litigation. The appellate court agreed with Gomez's ruling. The court order prohibiting new tax bills is still valid, the 3rd Circuit's opinion states, and Gomez correctly ruled that there are still benchmarks the territory must reach to have a fair and equitable tax system.

"We see no abuse of discretion," the opinion states.

James Derr, the lead attorney for the property owners who brought the initial lawsuit, said that the opinion was what the plaintiffs expected. No new legal ground was broken in the opinion, and the 3rd Circuit basically reiterated legal points it had made before.

"Unfortunately, the government put itself in something of a quandary," Derr said. "The government needs money, and the government sent out tax bills. People paid their taxes, and now the government has to recall them. It will be a real problem for the government."

Derr said he hopes all of the attorneys involved in the case can come together before Gomez soon for a status conference to reaffirm where things stand and what should be done next. "

Stay tuned for more island insanity...