Virgin Islands Real Estate Trends

For those of us who have spent time on the island - chuckles continue as we think about Herman Wouk's classic about daily island life. Yes, in reality things have not changed much since he wrote his humorous novel back in the 60's.

Case in Point: Property Taxes

Understandably buyers would like to know what their property tax bill will be. Yes we address this on our site and clearly would like to convey accurate information - but - much time, property re-assessments and many senate meetings - and where are we really?

The Daily News recently reported:

On the strength of a glowing review of property tax reform and territorywide property revaluation, the V.I. government asked a federal judge to lift the injunction barring collection of property taxes at new rates and with new values before the scheduled May 16 court hearing on the issue.

Joseph Hunt, the court-appointed special master for the Virgin Islands property tax reform case, filed a report with District Judge Curtis Gomez on March 31 stating that the Virgin Islands government seems to have done all that is necessary under a 2003 court order calling for comprehensive reform in property tax collections.

"It is my opinion that the government of the U.S. Virgin Islands is in compliance with the court's directive to put in place an assessment system and procedures that are proper and capable of producing credible and reliable assessments as required by law," Hunt wrote in his three-page report.

For several years, the territory's property tax system has been under the magnifying glass and tax revenues have remained stagnant, if they were collected at all. In 2000, a group of commercial property owners sued the government, claiming that its system of basing property taxes on properties' replacement values was unconstitutional.

District Judge Thomas Moore agreed with the property owners. He issued an order in May 2003 that froze tax rates and property values at their 1998 levels. For the last five years, the territory has worked to try to arrive at a fair tax system of its own. The court appointed Hunt to monitor the government's progress in making improvements.

The court also ordered the territorial government to do a comprehensive property revaluation. In April 2004, the government entered into a $6.5 million contract with Virginia-based BearingPoint Inc. to do the work.

The revaluation was completed in recent months. Last month, Gov. John deJongh Jr. signed legislation establishing new property tax rates. A hearing, where the government is expected to ask Gomez to allow use of the new property values and tax rates, is scheduled for May 16.

Seizing the positive message in Hunt's report and arguing that revenues from property tax collection are desperately needed to keep the territory out of more debt, Assistant Attorney General Carol Thomas-Jacobs filed a memorandum Thursday asking Gomez to lift the injunction before the hearing date.

"In light of the special master's report, there is absolutely no basis for keeping the permanent injunction in place and it should be immediately lifted," Thomas-Jacobs' memorandum states. "Moreover, the court in the May 12, 2003, order clearly provided for modification of vacation of its order once the special master has certified that the property tax system in the Virgin Islands is credible and reliable."

The memorandum says that failing to lift the injunction would be "tantamount to an override" of the legislation passed by the V.I. Senate that reformed the property tax system and of the action taken by Congress - which last June repealed a 1936 federal law that required all property in the Virgin Islands to be taxed at the same rate.

Hunt's report looks at the credibility of BearingPoint's property revaluation. Commercial and hotel property valuations, as well as valuations for condominiums, timeshares, and tracts of land larger than 2 acres are complete and consistent, the report states.

As for residential valuations, the report states that BearingPoint's valuations compare well with sale prices and are within acceptable levels of accuracy. A low or average percentage of homeowners requested that assessors take a second look at their property, Hunt wrote, and the formal property valuation appeal process through the Board of Tax Review should be capable of handling any future complaints.

The one anomaly was St. John, where many residents have called the skyrocketing property values they received in the revaluation unrealistic. Last week, a group of St. John property owners calling themselves the Virgin Islands Unity Day Group filed their own lawsuit against the government in federal court, asking the judge to throw out the property values from the revaluation.

"St. John's property increases ran sharply higher than other locations, and can account for the higher number of appeals from that location," Hunt wrote. "BearingPoint carefully tracked the reason for the appeals for vertical and horizontal analysis of assessment patterns. This review often resulted in adjustments to entire neighborhoods as well as to individual properties."

Hunt wrote that he believes that the revaluation is complete and meets or exceeds industry standards recommended by the International Association of Assessing Officers. He cautioned the government to make sure that it keeps values up-to-date, implement new tax management software, and keep a functioning Board of Tax Review for appeals.

Attorney James Derr, lead attorney in the 2000 property tax case and who represents the St. John residents challenging the revaluation, said he does not think the territory has met its burden to have the injunction lifted.

"My biggest problem with the report is it is largely based on conclusions," Derr said. "It has little factual support."

Derr said he plans to file an opposition to the report with the court.

Derr said he sympathizes with the government's need to collect property tax revenue and would support allowing it to collect taxes at the 1998 level for one more year while all of the issues are worked out.

"We just want taxes to be paid on a fair and consistent basis for everyone," Derr said. "Meeting at a middle ground for another year or so is the responsible way to go."

Your guess is as good as mine. I'll keep you posted - maybe I'll get a property tax bill sometime soon.