1 City of Hampton Real Estate Tax Relief Program Hampton City Council May 8, 2013 Presented by Ross A. Mugler Commissioner of the Revenue

2 REAL ESTATE TAX RELIEF ENABLING AUTHORITY Section of the Code of Virginia Section of the Hampton City Code Real estate tax exemption, deferral, or freeze is provided for property owners who are eligible according to the terms of this division and who have qualified by meeting the requirements of this division. Persons qualifying for such exemption, deferral, or freeze are deemed to be bearing an extraordinary real estate tax burden in relation to their income and financial worth. (Ord. No. 1401, ; Ord. No. 1488, )

3 FY13 REAL ESTATE TAX RELIEF PROGRAM Program Number of Participants FY13 Tax Credit 25% - 100% Exemption1,339$1,653,406 Freeze $ 36,650 Deferral $ 8,665 There are 1,880 participants in the FY13 Real Estate Tax Relief Program

4 EXEMPTION ELIMNATION FROM THE REAL ESTATE TAX RELIEF PROGRAM Hampton City Council recognizes the rising loss of real estate tax revenue resulting from the disabled veteran real estate tax exemption mandated by the Code of Virginia. Rather than eliminate the entire Elderly and Disabled Real Estate Tax Relief program, Council is considering eliminating the exemption program and continue to offer the freeze and deferral programs.

5 HAMPTON’S PROGRAM REQUIREMENTS In order to qualify for Hampton’s Real Estate Tax Relief Program, the real property must be owned and occupied by someone who is either: –Sixty-five (65) years of age or older; or –Permanently and totally disabled. Note: A dwelling jointly held by a husband and wife may qualify if either spouse meets one of the above conditions.

6 HAMPTON’S PROGRAM REQUIREMENTS (contd.) Maximum Income of $50,000. Net Worth (exclusive of home) cannot exceed $200,000. Exclusion of ten (10) acres of land upon which the house sits. Exclusion of $7,000 of income for other individual(s) who live on the premises.

7 CURRENT PROGRAM PARAMETERS Income Level Tax Relief $0 - $25, % tax credit $25,001 - $27,000 75% tax credit $27,001 - $29,000 50% tax credit $29,001 - $31,000 25% tax credit $31,001 - $50,000 FREEZE OR DEFERRAL Net Worth Threshold $0 - $200,000

8 TAX RELIEF AVAILABLE TO HAMPTON HOMEWONERS AFTER THE ELIMINATION OF THE EXEMPTION PROGRAM TAX FREEZE – exempts property tax increases once the taxpayer becomes and remains eligible. DEFERRAL – allows eligible taxpayers to postpone paying all or a portion of their taxes until either the owner’s death or sale of the property. The taxes constitute a lien on the property.

9 CURRENT FREEZE PROGRAM When a citizen enters the program, their tax liability remains frozen at the tax assessed in the year they initially entered the program. So long as the citizen remains eligible in the program, their tax liability remains constant. If the homeowner’s assessment decreases, the homeowner may not receive a credit in that fiscal year.

10 CURRENT DEFERRAL PROGRAM Homeowner is relieved of real estate tax liability in the amount not to exceed 100% of the liability, the amount to be deferred to be elected by the homeowner. The accumulated tax deferred shall be paid plus 8% interest per year without penalty. Tax and interest are repaid upon sale of the property or within one year from the death of last qualifying owner. Deferral of tax constitutes a lien on the property. Many mortgage companies will not allow the homeowner to defer the tax.

11 PARTICIPANTS WITH MORTGAGES BASED ON FY13 EXEMPTION PARTICIPATION Program Number of Participants Participants with Mortgage Companies Paying Tax 25% - 100% Exemption 1,339 1, Of the 1,339 exemption participants, 247 have mortgage companies paying the tax

12 PROGRAM COMPARISON WITH CITY OF NEWPORT NEWS Program Requirement Hampton Newport News Freeze Frozen at tax assessment of initial qualifying year Program not available Combined Household Income Not to exceed $50,000 Others living in DwellingUp to $7,000 ExcludedUp to $10,000 Excluded AssetsNot to exceed $200,000 Amount of DeferralUp to 100% Repayment of Deferred Tax Repaid when sold or 1 year after death 8% interest per year NO penalty Repaid when sold or 1 year after death NO interest NO penalty

CHANGES FOR COUNCIL CONSIDERATION FREEZE: Change “initial” year. Current ordinance states year in which the taxpayer initially applied and qualified. Change to lowest tax assessment from time taxpayer initially applied and continued to qualify in consecutive years. This will freeze the taxpayer’s real estate tax at the lowest assessment of continued participation. It provides equity with applicants entering the program in last few years when tax assessments were lower compared to applicants who entered in earlier years when tax assessments were higher. Initial year for those transferring to freeze from exemption. 13

CHANGES FOR COUNCIL CONSIDERATION DEFERRAL: Remove interest from repayment of tax. FY14 budget decision for ordinance change with implementation in FY14 or implementation in FY15 to avoid impact for citizens December 5, Repayment date if individual does not meet program requirements in subsequent year. 14

15 City of Hampton Real Estate Tax Relief Program Questions