3 thoughts on “Letter On Proposed Tax Abatement Ordinance”

1. I don’t think there is any legal requirement that the ordinance go to the Finance committee. These committees are created by council and don’t have any legal status as far as I know.

   This ordinance is going to be adopted unless the media picks up more on the constitutional issue.

2. The tax abatement ordinance will be before the Council Land Use Committee this coming Tuesday, Oct. 22 at 3:00.

   I am puzzled why this is not being considered by the Finance Committee, along with some data on the cost to the city for including tax abatements for additions up to 100% the sq. footage of the existing size of the building vs. including additions up to 30% vs. including no additions.

   I also question why the tax abatement reform is being done piecemeal. This paper only includes residential tax abatements, and the proposed residential tax abatement for up to 100% of the existing size of the building sets a terrible precedent for multi-family and commercial tax abatements where an addition 100% the sq. footage of the existing building could easily be 200,000 sq. feet or more.

   With this piecemeal approach, the size of the residential additions eligible for tax abatement is being considered even before the definitions are updated. For example, the definitions should indicate that a tax abatement should be granted for a “building” rather than a “structure,” and a “building” should be defined as having four walls and a roof. Otherwise, the loophole will continue where a developer can save a few feet of wall structure from a demolished building and obtain a rehab tax credit for attaching a new building to the token structure. There are not definitions or restrictions to ensure that the rehab tax credit is being granted for the rehab of a building in poor condition rather than, for example, adding a pool house to a mansion.

   Because the city’s rehabilitation tax credit includes over 7000+ “rehabs” in a $1.8 billion program, this is a really big issue. This program was designed to encourage the renovation of Richmond’s older buildings, but has morphed into a program where the city tax payers are subsidizing extensive new construction.

3. The proposed ordinance was approved by the committee members yesterday without discussion. With Baliles and Graziano on the committee, it’s not surprising that there was no discussion. Their districts are the wealthiest. Agelasto was there also, although he is not on that committee. Again, I do appreciate the reforms that he has championed, though this 100% additions business is very troubling.

   Again, quoting Mr. Taylor-

   Many localities limit the building expansion to 15%: Bristol, Danville, Franklin, Fredericksburg, Galax, Hampton, Norton, Staunton, Suffolk, Winchester, Cambell, Clark, Isle of Wight, Page, Stafford, Warren, Blacksburg.

   Richmond’s existing ordinance has a LOW expenditure threshold and NO limit on building expansion. Tax abatements are allowed even when a large addition is attached to a building in good condition. The ordinance was abused so often that the city assessor reportedly suspended the program.

   The pending ordinance retains the low threshold and sets a building expansion limit of 100%. While the expansion limit would eliminate the most extreme abuse, it does not force expenditures into buildings not in good condition. A property owner would still qualify for a tax abatement for doubling the size of a building in good condition.

   I was surprised that Mr. Hester said that the measure would have no financial impact.
   “Financial impact” has a special meaning at city hall. It is often limited to the cost of implementing as ordinance–not the impact on the city budget revenue. If you look at any ordinance and the attached “O&R Request” form, there is a space for a description of the financial impact. It is usually filled in with “none” or the cost of the ordinance itself. I’m sure the original intent was to disclose the actual impact on the budget, but that got morphed somewhere in the past.

This site uses Akismet to reduce spam. Learn how your comment data is processed.