Homestead exemption, eminent domain amendments to be heard Wednesday

Several proposed constitutional amendments of interest to local governments will be heard in a House Privileges & Elections subcommittee on Wednesday (Jan. 17) at 5 p.m.

HJR 624 (Brink) is Gov. Tim Kaine's constitutional amendment that directs the General Assembly to enact legislation that will permit localities to exempt from property taxes up to 20 percent of the value of residential or farm property that is designed for continuous habitation as a home and is owner-occupied.

HJR 579 (Peace) restricts the definition of public use and the use of eminent domain.

HJR 588 (Marshall, R.G.) and HJR 589 (Marshall, R.G.) provide that localities may assess impact fees. HJR 588 also allows proffers and applies to all development; HJR 589 applies only to residential development.

HJR 610 (Cole) requires all state and local elections to coincide with federal el

Local governments should make their views known to subcommittee members as soon as possible. The sucommittee members are R. Marshall (chair), Ingram, Cole, Hugo, Frederick, Fralin, O'Bannon, Phillips, Alexander, Joannou and Sickles. The amendments likely will be heard in the full committee on Friday at 8:30 a.m.

An overview of other constitutional amendments is included later in this Legislative Bulletin.

Chichester, Callahan carrying wastewater plant bond bills

Two senior Republican legislators have introduced legislation on behalf of the governor that would fund $250 million in improvements to sewage treatment plants through the Virginia Public Building Authority.

Sen. John Chichester (Fredericksburg) is carrying SB 771. It has been assigned to the Senate Finance Committee, which he chairs. Del. Vince Callahan (Fairfax) is carrying HB 1710. It is assigned to the House Appropriations Committee, which he chairs. Local governments should contact their legislators and push support of this important legislation.

Sunset on tax bills proposed again

HB 2634 (Reid) requires that any bill proposing to add new state or local taxes, or to increase any state or local tax rates include a sunset date, not to exceed four years. The bill is in the House Rules Committee; please contact committee members in opposition to this bill. Councils and boards are elected by the people and are accountable to them for any taxes that are levied.

The House Rules Committee meets Wednesdays at 9 a.m.; the bill is not on the docket for the Jan. 17 meeting, but may be heard next week, at the Jan. 24 meeting. Del. Jack Reid (R-Henrico) introduced similar legislation last year, but it did not get out of committee.

Optical scan balloting proposed

SB 840 (Devolites Davis) requires voting equipment to use optical scan tabulators, and prohibits the use of direct recording electronic (DRE) voting machines except as a means to mark a paper ballot for use with an optical scan tabulator, effective Jan. 1, 2009. The bill also requires local electoral boards to conduct audits of optical scan tabulators within 48 hours of the end of elections. Currently, the state provides no funding for the purchase of voting equipment. A subcommittee of the Senate Privileges & Elections Committee heard the bill on Jan. 15, and postponed action until the subcommittee's next meeting on Jan. 22; it would likely then go before full committee on Jan. 24. Because of the fiscal impact to localities, the subcommittee chair, Sen. Jay O'Brien (Fairfax), asked that cities and counties report back on the cost of switching to optical scan equipment.

Local governments have already been required to purchase new voting equipment, certified by the state, to meet the requirements of the federal Help America Vote Act. According to the state Board of Elections, there are approximately 9000 DRE machines currently in use across the state. The board estimated that the cost of replacement would be $30 million.

Sen. Jeannemarie Devolites Davis (Fairfax) suggested that an approach to relieve the financial impact would be to require that DREs be replaced with optical scan machines as the DREs wear out or malfunction.

HB 2077 (Armstrong), among other requirements, specifies that equipment purchased on and after Jan. 1, 2009, be able to produce a voter-verified paper record, and that any DRE equipment be capable of generating a voter-verified paper record by the same date. The bill is in House Privileges & Elections.

HB 2696 (Hugo) also requires DRE voting machines to produce a paper record, and is effective Jan. 1, 2009. The bill is in the House Privileges & Elections Committee.

Automated toll collections in Northern Virginia

SB 782 (Cuccinelli) allows the Northern Virginia Transportation Authority to impose and collect tolls for use of newly constructed facilities and facilities that are reconstructed so as to increase their traffic capacity. The bill also allows the issuance of bonds supported by revenues generated by toll collections. The bill further requires that, on or before July 1, 2008, every agency of the Commonwealth having control of any toll facility in Northern Virginia must take all necessary actions to ensure that every toll facility under its control is capable of fully automated electronic operation.

Bills would fix BPOL tax error

Three bills have been introduced to fix an error involving the Business Professional and Occupational License tax that has gone largely unnoticed until recently. In 2001, the point of collection of the motor vehicle fuels tax (gas tax) was changed from the pump (at the gas station) to the rack (the gas wholesaler). That means that the actual tax is not paid at the pump, but it is embedded in the price. The BPOL problem is that this means that the gross receipts tax is based on the price (which now includes the gas tax). Clearly, local officials do not want to charge a gross receipts tax on another tax. Local tax officials have not been collecting the gross receipts tax on the embedded gas tax until recently, following a technical decision by the State Tax Commissioner.

The three bills that fix the problem are HB 1695 (Purkey), SB 772 (Watkins) and SB 1011 (Saslaw). VML, VACo and the Commissioners of the Revenue supported the legislation. The bill was reported from a House Finance subcommittee, and will be before the full committee on Wednesday, Jan. 17.

And speaking of tax relief: Elimination of BPOL and more ...

HB 2443 would eliminate the BPOL tax. This sweeping change, offered by Del. Jeffrey Frederick (Prince William), would affect the 39 cities, 120 towns and 45 counties that levy the tax, and eliminate more than $560 million per year in local revenue.

Other proposed BPOL tax changes include:

HB 2224 (Wardrup), which would repeal the BPOL tax exemption for newspapers, magazines, newsletters, or other regularly-issued publications.

HB 2388 (May) permits any locality to exempt in whole or in part from local business license taxes businesses that are primarily engaged in providing electronic payments processing services for financial institutions, that first have a definite place of business within a Multicounty Transportation Improvement District on or after July 1, 2008, and upon whose property a special improvements tax is being levied under § 15.2-4607. The bill also authorizes any locality to provide the same businesses with grants or contractual payments or benefits when warranted by the economic or other benefit the locality will receive. The provisions of the bill expire on June 30, 2016.

HB 2559 (Brink) authorizes the local commissioner of the revenue to accept estimated payments of BPOL tax based on the amount paid by the taxpayer in the immediately preceding taxable year.

HB 2675 (O. Ware) provides that any local governing body may require that no beginning business license will be issued until the applicant has produced satisfactory evidence that all properly assessed delinquent taxes owed by the business to the locality have been paid.

HB 2806 (Byron) grants local commissioners of the revenue the power to deny or revoke business licenses of persons who are aliens and cannot provide legal documents proving they are legally eligible to be employed in the United States.

HB 2929 (J. Miller) authorizes any locality to impose a business license fee in an amount not to exceed $1,000 and to vary the amount of the fee according to the amount of the gross receipts of the business. Under current law, the maximum fee is $50 for localities having a population of 25,000 or more and $30 for localities having a population of less than 25,000. The bill does not alter current law that permits localities to impose a license tax on any business on which a license fee is not imposed.

HB 2930 (J. Miller) provides that local business licenses and state licenses shall be denied or suspended if the business employs or uses unlawful workers. The local Commissioner of Revenue or other licensing official would be responsible for enforcing this law.

SB 1118 (Cuccinelli) authorizes local governing bodies by ordinance to provide that no business license be issued, or provide for the revocation of a license that has already been issued, to any person who (i) is an alien and who cannot provide legal documents proving such person is legally eligible to be employed or to work in the United States, or (ii) has as an employee of the business any such alien. The bill would require Commissioners of the Revenue to enforce the ordinance.

SB 1291 (Norment) requires every contractor who is required to have a valid state contractor's license to provide proof of such license when applying for and renewing a local business license.

Real estate assessments -- notice of changes, limitations on rates or levies, etc.

This year, like last year, several bills have been introduced to alter the process by which local governments send out information on real estate assessments, tax rates and tax levies.

In addition, several bill propose limits on increases in real estate tax rates or total levies. Listed here are several bills that have been introduced. VML, VACo and the Commissioners of the Revenue will work with the patrons of the bills, as well as the two finance committees to attempt to improve bills.

Here is an initial listing of the bills:

Real estate tax limitations and valuations

HB 1706 (Lingamfelter) Local real estate tax receipts must not increase over 3 percent from one year to the next, with an exception for population growth (then the limitation may be as much as 6 percent from one year to the next)

HB 1780 (Cosgrove) limits real estate tax receipt increase to 1% from one year to the next after an annual, biennial, or general reassessment; rate cannot be increased until 30 days after the initial rate reduction

HB 1888 (Albo) limits real estate tax receipt increase to 5% from one year to the next, except by two-thirds vote of the governing body

HB 2507 (D. Jones) prohibits assessors and appraisers from considering federal or state income tax credits when determining fair market value of real property for valuation purposes.

SB 765 (Colgan) requires that assessors consider any restrictions as a result of property being located in a designated resource protection area, such as the Chesapeake Bay Preservation Area.

SB 1063 (Rerras) limits real estate tax receipt increase to 5% from one year to the next

Real estate notice or hearing changes

HB 2127 (Hugo) requires the public notice of the effects of the current tax rate, proposed tax rate, and two incremental rates in between the current and proposed, following annual, biennial or general reassessments with increases over 1 percent from one year to the next

SB 848 (Lambert) newly completed buildings would not trigger a notice of change in real estate assessment separate from the general reassessment notices

Real estate classification for tax purposes

HB 1672 (R. Marshall) One separate class for residential real estate; one separate class for agricultural, horticultural, forest or open space uses

HB 1730 (Alexander) A separate class for residential real estate, with restrictions on rate increases for general purpose class

HB 2618 (Fralin) A separate class for property including energy-efficient buildings

HB 2753 (Marsden) allows localities to provide a tax credit equal to five percent of the real estate tax due on residential property located within one mile of a light or heavy rail station or bus station that is a hub. The credit may be taken only by property owners who purchased their homes on or after Jan. 1, 2007, and may be taken for a period of up to five years.

HB 2812 (Englin) A separate class for residential real estate

HB 2975 (Bell) requires the commissioner of the revenue to rely upon the information at the Department of Motor Vehicles in determining whether a vehicle qualifies for tax relief, unless he has information that the Department's registration information is incorrect or incomplete

SB 1051 (Edwards) A separate class for property including energy-efficient buildings

SB 1058 (Watkins) Partial real estate tax exemption for property that is industrial or commercial, but was originally an historic landmark (involving a substantial change in the property); but not for the person who demolished the historic landmark

Compromise offered on machinery and tools tax issues

As a result of lengthy work between the Virginia Manufacturers Association and local government groups, the governor has proposed a compromise machinery and tools tax bill.

HB 2181 is being introduced in the House by Del. Chris Saxman (R-Staunton) and SB 1151 in the Senate by Sen. Frank Wagner (R-Virginia Beach).

A similar bill by Virginia Beach Del. Harry Purkey will likely be conformed to match the compromise version, but with a new provision dealing with nanotechnology.

The bills provide a uniform method of defining "idle equipment" for purposes of the machinery and tools tax. Idle equipment is judged to be "capital," and cannot be taxed by localities. In order to be deemed "idle," either (1) equipment must be unused for one year prior to tax day, with no reasonable prospect of the equipment being used in the prospective tax year; or (2) the manufacturer notifies the local tax official nine months prior to the beginning of a tax year that the equipment will be taken out of service for the entirety of the next tax year. (Equipment that is not idle for the entire tax year is subject to the tax, interest on the tax, and potentially penalties) The bill has an emergency clause, so that the April 1, 2007, date can serve as notification for the 2008 tax year.

VML, VACo, the Commissioners of Revenue Association and the manufacturers association support this bill.

Not a compromise bill dealing with machinery and tools tax

HB 2666 (Purkey) would eliminate local taxation of manufacturers' machinery and tools for all equipment placed in service after Jan. 1, 2009. The Virginia Manufacturers Association said that this is a topic of discussion they would like to have with local governments after the 2007 session, and that they would support replacement revenue (yet to be identified). Currently, local governments rely on the machinery and tools tax for about $200 million annually. While local officials always are willing to discuss fairer methods of taxation, they cannot support the loss of a large source of revenues without an adequate replacement of the funding source.

Waste hauler tax classification would aid local transportation

HB 1763 (Purkey) creates a separate personal property tax classification for waste haulers. The revenues collected from such motor vehicles would be used for transportation purposes by the locality collecting the tax. Localities are generally supportive of measures supporting separate classification of property (which can give more flexibility to local officials); they generally oppose the mandatory earmarking of general fund revenues. Waste haulers already are subject to the tangible personal property tax, so any dedication of those taxes would be from revenues already spent on general government. VML and VACo staff will be working with the bill patron in an attempt to iron out any difficulties for local officials.

Let the Feds collect our money

HB 2139 (Brink) and SB 1021 (Whipple) would allow local governments to use federal tax refunds as a way of recovering local tax debt. Under the provisions of this bill, which is parallel to existing practice with state tax refunds, a Virginia taxpayer who owes a locality taxes would have the sum deducted from any federal tax refund due him. The provisions of the act would take effect on the effective date of federal legislation enacted by the U.S. Congress allowing such debt to be offset against federal income tax refunds.

Transportation proposals abound ...

Here are a handful of the current proposals to generate new revenue for transportation, or to make other transportation-related changes:

HB 2071 (Brink) increases the motor vehicle sales and use tax to 5 percent from 3 percent and dedicates the revenue generated for various transportation purposes. The authority to impose the additional tax ceases on Dec. 31 of any year in which any of the additional revenue is not used for transportation purposes.

HB 2190 (Hull) increases the tax on gasoline, diesel fuel, and alternative fuel by $0.055 per gallon; increases the motor carrier road tax by an equivalent of $0.055 per gallon of fuel used in the Commonwealth; and increases the alternative use fee for certain motor carriers from $100 to $150 (the fee is an alternative to paying the motor carrier road tax). The revenue generated is dedicated for transportation purposes as required by existing law.

HB 2464 (D. Marshall) increases the motor fuels tax rate by $0.05 per gallon from $0.175 to $0.225 for gasoline and from $0.16 to $0.21 for diesel, effective Jan. 1, 2008, and ending Feb. 1, 2009. Effective Feb. 1, 2009, the rates increase an additional $0.05 to $0.275 and $0.26, respectively, if a constitutional amendment making the Transportation Trust Fund a permanent fund is approved by the voters during the 2008 general election. The road tax is maintained at the current additional 3 cents per gallon. It also provides a $50 refund in 2008 through 2010 to households in which the total income is $25,000 or less annually.

HB 2466 (D. Marshall) reduces the sale price for determining motor vehicle sales and use tax by (i) the credit given by the seller for any motor vehicle taken as a trade-in, and (ii) the amount of cash discount or rebate given by the seller or the manufacturer. The bill also caps the sale price on which the tax is computed at $70,000, and increases the motor vehicle sales and use tax rate from 3 percent to 3.5 percent.

HB 2467 (D. Marshall) reduces the sale price for determining motor vehicle sales and use tax by (i) the credit given by the seller for any motor vehicle taken as a trade-in, and (ii) the amount of cash discount or rebate given by the seller or the manufacturer. The bill also caps the sale price on which the tax is computed at $70,000, and increases the motor vehicle sales and use tax rate from 3% to 4%.

HB 2499 (Orrock) grants authority to most counties to impose an extra two percent transient occupancy tax to be used solely for local transportation needs.

HB 2997 (J. Scott) modifies the rates of taxation on motor fuels to be the greater of (i) the current specific cents-per-gallon rates or (ii) percentage rates, 7.3 percent for gasoline and gasohol, and 6.5 percent for diesel. The percentage rates would be applied to the average price per gallon of the fuel, less federal and state taxes, as determined by the Commissioner of the Division of Motor Vehicles over rolling six-month periods.

SB 1163 (Bell) dedicates for transportation purposes all insurance license tax revenues relating to automobile insurance policies. The bill also creates a new source of revenue for the transportation. Upon conviction of certain dangerous driving offenses and traffic infractions for which the Department of Motor Vehicles assigns six demerit points, a court shall order the offender to make a payment into the Transportation Trust Fund. The bill also dedicates the unallocated funds in the first year of the current biennium to the Transportation Trust Fund.

SB 1335 (Colgan) authorizes the governing body of each of the counties of Arlington, Fairfax, Loudoun, and Prince William and the cities of Alexandria, Fairfax, Falls Church, Manassas and Manassas Park to impose a retail sales and use tax at the rate of 0.50 percent. No county or city would be able to impose the tax unless at least six of the nine counties and cities adopt a local ordinance to impose the tax on or before Nov. 15, 2007. If at least six of the nine counties and cities adopt the local ordinance by such date, then in any of the remaining nine localities that have not adopted the local ordinance by March 1, 2008, there would be imposed a state retail sales and use tax at the rate of 0.50 percent. All revenues from the state and local 0.50 percent sales tax would be distributed to the Northern Virginia Transportation Authority (the Authority). The Authority would be prohibited from using any revenues received from the state sales tax to pay debt service on or other costs related to any bonds of the Authority.

You say you want a devolution

SB 1026 (O'Brien) would require counties with populations of 50,000 or more to take over from VDOT responsibility for planning, construction, operation, and maintenance of the state secondary highway system within their boundaries prior to July 1, 2012. This would apply to the Albemarle, Augusta, Bedford, Campbell, Chesterfield, Fairfax, Fauquier, Frederick, Hanover, Henry, Loudoun, Montgomery, Pittsylvania, Prince William, Roanoke, Rockingham, Spotsylvania, Stafford, Washington, and York. Additionally, the bill provides, on a local-option basis, for a two percent retail sales tax on motor fuels in counties that take over responsibilities for state secondary highways, the proceeds of which would be used for secondary highway planning, construction, operation, and maintenance.

Far-reaching Northern Virginia transportation bill offered

HB 2496 (Albo) permits any city or county that is within the Northern Virginia Transportation Authority to impose two additional local fees and taxes to go to the authority, along with the revenue from three additional state taxes imposed in the region. The bill ensures that none of the additional revenues shall be used to calculate or reduce transportation funding or be used to calculate or reduce any other funding to the applicable localities, including funding for education. The bill also repeals the authority for any locality imposing the two additional local fees and taxes to impose a local income tax. The two additional local fees or taxes are (i) a rental car fee of 2 percent and (ii) a transportation impact commercial real property tax of 0.3 percent. The three additional state regional taxes are (i) a fee of $100 on the initial issuance of a driver's license on residents of Northern Virginia, (ii) a hotel/motel transportation impact fee of 2 percent for rooms in Northern Virginia, and (iii) a congestion relief fee on the seller for each deed for real estate recorded in Northern Virginia at the rate of $0.40 for each $100 of value. The three state regional taxes are imposed only in those localities that impose the two additional local fees or taxes.

The Northern Virginia Transportation Authority will determine the transportation projects to be funded and shall use the additional revenues for the primary benefit of those counties and cities that are imposing the two new local fees and taxes as follows:

1. Pay any debt service due on bonds issued by the authority from the additional regional state fees imposed by the bill;

2. The next $50 million received in each fiscal year shall be distributed to the Washington Metropolitan Area Transit Authority (WMATA). For each year after 2018 this $50 million shall be used for the expansion of Metro or other rail service into Prince William County;

3. The next $30 million received in each fiscal year shall be distributed to the Virginia Railway Express.

4. At least 25 percent of the remaining revenues each year shall be dedicated for use on urban and secondary road construction and improvement.

5. At least 20 percent of the remaining revenues each year shall be distributed to the localities embraced by the Northern Virginia Transportation Authority on a pro rata basis. The revenues distributed shall be used solely for transportation capital improvements and public transportation purposes. None of this revenue may be used to repay debt issued before January 1, 2008. At the request of any county embraced by the Authority, all state secondary road construction funding due such county shall be transferred to such county, provided that the county assumes full responsibility for planning and constructing its secondary roads.

6. Beginning at the time that phase two of the Dulles Rail project is constructed, at least $20 million shall be dedicated annually for the Dulles Rail project; and

7. To construct transportation projects in the localities that are members of the Authority that are imposing the new local fees authorized by the bill.

The Northern Virginia Transportation Authority is authorized to issue bonds provided that the debt service does not exceed the amount of revenue provided by the three new regional state taxes.

Personal property tax bills surface

Several bills deal with the personal property tax.

They include:

HB 1880 (Caputo) adds to the definition of "qualifying vehicles" those vehicles held in a private trust, but used by an individual for non-business (personal) uses. The Commissioners of Revenue supported this measure in House Finance subcommittee, saying that the impact would be minimal. The bill was recommended to the full House Finance committee.

HB 1894 (Albo) removes the cap on the overall amount of car tax relief beginning Jan. 1, 2008, and gradually increases the amount of car tax relief to 100 percent of the reimbursable amount for qualifying vehicles over a six-year period. The bill is effective Jan. 1, 2008.

HB 2013 (Suit) establishes a separate class of tangible personal property for vintage aircrafts used only for exhibit, display, air shows or flight demonstrations.

HB 2262 (Rust) Repeals the car tax reimbursement program and replaces it by dedicating 17.5 percent of the state individual income tax collections to localities. The bill is effective Jan. 1, 2009, but only if a constitutional amendment is ratified in November 2008, exempting from taxation all motor vehicles used for non-business purposes.

HB 2385 (May) creates a separate classification for tangible personal property owned and used by the providers of wireless broadband Internet service in providing such service.

HB 2390 (Ingram) requires treasurers to make out a list of uncollected balances of previously billed car taxes on vehicles that (i) were owned by taxpayers, now deceased, upon whose estates no qualification has been made, or (ii) were transferred to bona fide purchasers for value without knowledge, on the part of the persons so transferring, of the unpaid taxes.

SB 1172 (Stolle) establishes a separate class of tangible personal property for vintage aircrafts used only for exhibit, display, air shows or flight demonstrations.

Publications tax bill would aid water quality

HB 2225 (Wardrup) creates a tax to be imposed on newspapers, magazines, newsletters or other publications at the rate of $0.01 on every such publication delivered and sold in the Commonwealth. The revenue generated would be deposited into the Virginia Water Quality Improvement Fund.

Communications tax bills offered

SB 1081 (Puckett) provides for the inclusion of unpaid cable franchise fees by the Tax Commissioner when calculating each locality's share of the Communications Tax Trust Fund when the franchisee fails to pay them. The bill also requires the Auditor of Public Accounts to increase the amounts on a pro rata basis if a locality did not collect the tax revenues for the entire 12 months of Fiscal Year 2006.

HB 1854 (Wittman) changes the base year to 2007 (instead of 2006) with regard to the fiscal year that is used as the base year for determining each locality's share of communications sales tax revenues.

Miscellaneous local tax bills

HB 2315 (Welch) restricts the imposition in any city having a population of 100,000 or more of any new meals tax or tax rate increase without approval by referendum. According to the last decennial census, this would impact the cities of Alexandria, Chesapeake, Hampton, Newport News, Norfolk, Prince William, Richmond and Virginia Beach.

HB 2338 (Gilbert) gives each town the authority to preempt a county's transient occupancy tax within the town, whether the county's tax is pursuant to the authority under § 58.1-3819 or to authority under other previous law. Under current law such preemption applies only to a county's transient occupancy tax imposed pursuant to § 58.1-3819.

HB 2382 (May) states that the provider of consumer utility tax billing services remains liable to the appropriate taxing locality if the taxes are remitted to the wrong locality. The bill requires the provider of billing services to state on the consumer's bill the locality to which the taxes are remitted and to advise the consumer of the procedure to use to correct the information if it is not correct.

HB 2719 (Barlow) authorizes any county to impose a local cigarette tax at a rate not to exceed $0.05 per pack or the amount levied under state law, whichever is greater.

HB 2746 (Englin) allows localities to impose a local income tax if they freeze the amount of real estate tax collections as of the date the local income tax is adopted. Prior to adopting the tax, there must be a referendum approving it, and the local governing body must adopt an ordinance. Localities will continue to assess real property as they normally would. The purpose of the local income tax is to make up the revenues that would have been collected from the real property tax if the collections amount had not been frozen.

SB 1206 (Hanger) conforms the Commonwealth's sales and use tax laws to the provisions of the Streamlined Sales and Use Tax Agreement.

SB 1214 (Hanger) authorizes a cigarette tax for those counties that do not currently have the authority. The amount shall not exceed the amount of the state cigarette tax. The revenues shall be earmarked for any combination of the following: (i) purchasing agricultural conservation easements, (ii) funding initiatives as determined in consultation with local farm organizations, that preserve farmlands in the county, (iii) funding a local purchase of development rights program. Fairfax and Arlington Counties, which are currently authorized to levy cigarette taxes are not subject to the earmarking provisions of the bill.

SB 1265 (Herring) authorizes local governments to extend real estate tax relief to dwellings jointly held between individuals not all of whom are at least age 65 or permanently and totally disabled. The tax relief would be prorated based upon the percentage of ownership interest in the dwelling held by all joint owners who are at least age 65 or permanently and totally disabled.

Enterprise zone legislation proposed

SB 1057 (Watkins) would decrease to 20 percent (from 30 percent) the amount of a real property investment for which real property investment grant may be awarded, in enterprise zones.

Bill would speed-up Virginia Investment Performance Grant payments

SB 1209 (Hanger) allows an eligible manufacturer or research and development service to begin receiving incentive payments under the Virginia Investment Performance Grants sub-fund in the third year instead of the fourth year. In addition, the bill allows such payments to be made in the second year instead of the third year for distressed areas.

School board surplus retention bill passed over

The House Education Committee unanimously passed by indefinitely HB 1752 (R. Marshall). The bill would have provided that school boards retain any surplus at the end of the fiscal year, instead of reverted back to the locality. The league, Virginia Association of Counties, and several local liaisons spoke against the bill.

Post employment benefit bills introduced

Legislation allowing local governments to establish trusts to use for the pre-funding of post employment benefits has been introduced by Sen. Walter Stosch (Henrico) and Del. Donald McEachin (Henrico). SB 789 (Stosch) and HB 2871 (McEachin) also authorize local governments to contract with the Virginia Retirement System or other third-party agency for the administration of the trusts. The bills further authorize VRS to serve as fund manager. New standards issued by the Governmental Accounting Standards Board require that governments recognize the cost of benefits promised to retirees during the time period that the employee is on the payroll, as opposed to when the employee actually retires. Larger local governments must start recognizing the cost of these post employment benefits in their audits for FY07; all local governments will be subject to the standards by FY10. The most common local OPEB program is health insurance for retirees; local governments may wish to establish separate trust funds in order to keep the funding and accounting for these benefits separate from the medical benefits offered current employees. Because of a question as to whether local governments, particularly counties, have the authority to establish these trusts, SB 789 and HB 2871 clearly establish this authority. SB 789 is in Senate Finance; HB 2871 is in House Appropriation.

Line of Duty bills abound

Several legislators have introduced bills to expand eligibility for Line of Duty benefits and to establish a funding source for Line of Duty benefits. Line of Duty benefits are an example of post employment benefits that will have to be recognized on a governmental entity's balance sheet under revised standards adopted by the Governmental Accounting Standards Board.

HB 2186 (P. Miller) and SB 885 (Deeds) expand the definition of deceased person to include individuals who have a heart attack or stroke during nonroutine, stressful or strenuous public safety activities, either while engaged in the activity or within 34 hours. The bill also increases the death benefit from $75,000 to $100,000, and ties increases of the benefit to changes in the Consumer Price Index. HB 2186 is assigned to House General Laws; SB 885 is in Senate Fin

Del. Vince Callahan (R-Fairfax) has introduced a package of legislation (HB 2006, HB 2007 and HB 2008) to establish a Line of Duty Disability Benefits Trust, levy fines on traffic violations to fund the trust, and extend eligibility for Line of Duty benefits retroactively to local employees disabled on or after Jan. 1, 1966. HB 2817 (Sickles), HB 2822 (Sickles) and SB 1220 (Saslaw) are similar pieces of legislation. HB 2006 and HB 2008 are in House General Laws; HAB 2007 is in House Transportation; HB 2817 is in House General Laws and HB 2822 is in House Counties, Cities and Towns. SB 1220 is in Senate Courts. All the bills keep the Line of Duty program as a state program. Under the Line of Duty Act, public safety officers killed or disabled in the line of duty, and their dependents, are eligible for benefits including health insurance.

Enhanced retirement benefits for deputies proposed again

Gov. Tim Kaine included in his budget amendments a proposal that the state pay a portion of the cost of enhanced retirement benefits to sheriffs' deputies and deputies in regional jails. Several bills also have been introduced to either require or entice local governments to extend these enhanced benefits to deputies. More bills are appearing every day, so this list may not be comprehensive.

HB 2420 (Kilgore) and SB 1166 (Stolle) require cities and counties participating in VRS to extend enhanced retirement benefits under the Law Enforcement Officers' Retirement System to deputy sheriffs by July 1, 2007, and requires the state to pay the total reimbursable costs, but only for the positions funded by the state and at state approved salary levels. (Many localities exceed the deputy positions funded by the state, and pay salaries higher than the state approved levels.) The bill also raises the multipler for calculation of retirement benefits for sheriffs to 2 percent (from the current 1.7 percent), and requires the county or city to pay the costs. Further, the bill allows employers, at their expense, to increase the multipler for deputies and other public safety officers to 2.0 percent. HB 2420 is in House Appropriations; SB 1166 is in Senate Finance.

HB 2848 (Moran) also requires that deputies be included in LEOS, but appears to limit includes state reimbursement only for those localities not currently extending those benefits to deputies. As is the case with HB 2420, state reimbursement is only for positions funded by the state and at the state approved salary levels. The bill further raises the multipler (from the current 1.7 percent of average final compensation to 2.2 percent) for calculating retirement benefits for sheriffs, and allows localities the authority to increase the muliplier to 2.2 percent for all other employees under LEOS. The bill has not been assigned to committee.

HB 2984 (Ingram) is a multi-faceted bill that increases the multiplier for all VRS retirees to 1.75 percent (from 1.7 percent), increases the early retirement age from 50 to 55 years (with 30 years of service), allows localities to offer enhanced law enforcement benefits to new public safety hires under the Virginia Law Officers Retirement System (VALORS) rather than the Law Enforcement Officers' Retirement System, and provides state funding for localities that offer enhanced law enforcement benefits based on the fiscal stress index. Committee referral is pending. New VALORS retirees receive a 2 percent multiplier, but no supplemental payment, whereas LEOS retirees are eligible for a 1.7 percent multiplier, as well as a supplemental payment based upon years of service that extends to normal Social Security retirement age.

Retirement for council members/supervisors proposed

SB 851 (Lambert) includes council members and members of the boards of supervisors as employees included in political subdivisions' coverage group and requires the political subdivision to pay the costs of the retirement benefits. The bill is in Senate Finance.

Bill would restrict optional retirement benefits

SB 850 (Lambert) prohibits school boards and political subdivisions that receive funding from a county, city or town from offering any retirement unless the council or board of supervisors authorizes the political subdivision or school board to offer the benefit. The bill is in Senate Finance.

Defined contribution retirement plans proposed

HB1941 (Purkey) and HB 2956 (Bell) establish a defined contribution plan in lieu of the defined benefit plan currently offered under VRS. The bills require employees eligible for participation in VRS on or after July 1, 2008 to participate in the defined contribution plan, and allows employees under the current system to switch to the plan. A defined contribution plan provides for an individual account for each member, and the benefits are based on the contributions to the account and investment income. Under a defined benefit plan, the retirement benefit is based on a formula and provides a guaranteed level of benefits.

Changes to SOQ funding formula introduced

HB 1702 (Lingamfelter) requires the state to include the land use assessment value in the formula determining the local composite index of ability to pay. The bill was heard by a House Education subcommittee on Jan. 16, and the subcommittee agreed to recommend that the bill be referred to House Appropriations.

HB 1891 (Albo) states that a locality whose composite index exceeds 0.5000 must be considered as having an index of 0.5000 for purposes of distributing all payments based on the composite index. The bill is in House Appropriations.

HB 2278 (Watts) revises the composite index and funding formula for state aid to education by among other things, including a population density component, using median rather than average adjusted income and using more up-to-date tax and population information. The bill is in House Education.

SB 1243 (Herring) authorizes localities whose K through 12 student membership has exceeded 5 percent of any two of the last three years to have its composite index reduced by 10 percent for the current year. The bill provides that the state share of basic aid would be based on the revised composite index, with the increased state aid to be paid from general funds not otherwise designated for public education. The bill is in Senate Education & Health Committee.

Additional retirement information to localities proposed

HB 2095 (Tata) and HB 2904 (Spruill) requires VRS to give localities specific information that will enable the localities to determine the assumptions that are driving the actuarial costs of retirement, and to understand the retirement costs of different classes of employees. HB 2095 is in House Appropriations; HB 2904 has not yet been assigned to committee.

End of population classifications proposed

HB 2928 (Landes) replaces population classifications with the specific names of localities throughout the Code of Virginia. The bill has not yet been assigned to committee, but similar legislation introduced last year was in House Rules. Localities will want to review the bill to ensure that they have not been left out or included in the code sections.

Constitutional amendments abound

This is the session in which the General Assembly adopts the "first reference" constitutional amendments. Amendments adopted this session would have to be adopted in the same exact form in the 2008 session prior to submission to the voters in a November 2008 referendum. Constitutional amendments generally are heard in the House or Senate Committee on Privileges & Elections. For the House committee, generally the amendments first go to the subcommittee on constitutional amendments, which meets Wednesdays at 5 p.m. in 4 west of the General Assembly Building. Subcommittee members are Marshall, R.G. (chair)-Prince William, Ingram-Hopewell, Cole-Spotsylvania, Hugo-Fairfax, Frederick-Prince William, Fralin-Roanoke city, O'Bannon-Henrico, Phillips-Dickenson, Alexander-Norfolk, Joannou-Portsmouth, and Sickles-Fairfax.

Here is an overview of the amendments to date:

Local taxes

HJR 559 (Frederick) limits increases in real estate taxes to one percent per year. The amendment also limits increases in the assessed valuation of property to one percent plus the inflation rate per year. Assessment would be at fair market value if the property was sold, transferred, improved or rezoned at the owner's. The resolution is in House Privileges & Elections Committee, and will be heard in the subcommittee on constitutional amendments. The league opposes limitations on local government taxing authority.

HJR 581 (Lingamfelter) requires the General Assembly to exempt from property taxation the property that is the principal residence of a veteran (or widow or widower) who has been determined to have a 100 percent permanent and total service-connected disability.

HJR 586 (Cole) exempts from taxation privately owned motor vehicles used for nonbusiness purposes. HJR 655 (Rust-Fairfax) is a similar amendment.

HJR 624 (Brink) and SJR 398 (Whipple) direct the General Assembly to enact legislation to allow localities to exempt from real estate property taxes up to 20 percent of the value of the residential or farm property that is occupied by the owner and designed for continuous habitation. This is Gov. Tim Kaine's homestead exemption legislation.

SJR 340 (Devolites Davis) requires the General Assembly to enact legislation to permit localities to exempt from personal property taxation the vehicles owned or leased by members of the armed forces serving in an area of active military combat.

SJR 354 (Rerras) allows the General Assembly to adopt legislation to permit localities to exempt from real estate taxes a portion of the value of owner-occupied property that is the principal dwelling and has been occupied for five years or more.

SJR 362 (Quayle) allows the General Assembly to authorize increases in the exemptions for property tax relief programs for the elderly based on increases in the age of the persons.

SJR 371 (Norment) allows localities the authority to reduce tax assessments for an amount up to $100,000 of assessed valuation for owner-occupied, primary, single-family residences,

SJR 386 (Wagner) allows localities to offer real estate and personal property tax relief programs for the elderly and disabled, with no income restrictions. Tax relief is defined as provisions that limit or prohibit increases in property taxes or that provide for an exemption or deferral from all or a portion of local property taxation.

HJR 716 (Watts) allows the General Assembly to authorize cities, counties and towns to exempt up to twenty percent of the median sale price of homes on lots not exceeding one acre sold during the preceding year for each homestead that is occupied as the primary permanent resident.

HJR 684 (Frederick) limits each local "districts" property tax revenue to inflation and revenue increases by the voters. The amendment also limits the increase in state revenues, requires refunds of tax revenues in some cases, and requires referenda for increasing taxes at both the state and local government levels. Districts are defined as state and local governments, excluding enterprises.

Transportation Trust Fund

Two constitutional amendments carried over from the 2006 session are on the House floor awaiting final votes. HJR 18 (R. Marshall) and SJR 180 (Howell) place transportation revenues in a trust fund that can be spent only for transportation purposes. SJR 180 passed the full Senate during the 2006 session, but in a different form. As it came to the House, the resolution limited the use and amount of state general funds that could be used for transportation purposes. This limitation has been a major sticking point between the House and Senate. If SJR 180 is enacted in its current form, it will have to return to the Senate for another vote. HJR 18 has not been before the Senate.

There are plenty of other constitutional amendments, none exactly like SJR 180 and HJR 18, on a transportation trust fund to choose from, as shown below.

HJR 558 (Frederick) and SJR 317 (Cuccinelli) require the General Assembly to maintain its appropriations to the Highway Maintenance and Operating Fund and the Transportation Trust Fund by appropriating at least as much as was appropriated in the preceding fiscal year. The funds cannot be used for purposes other than constructing, improving and maintaining roads and furthering the interests of the state in the areas of highways, public transportation, railways, seaports, and airports.

SJR 373 (Norment) establishes a separate Transportation Fund, to be used only for transportation purposes and all purposes incidental including highways, public transportation, rail, seaports, and airports, and for the operations of state agencies related to transportation. The fund will include all revenues dedicated to transportation funds as of Jan. 1, 2007 by general law, other than a general appropriation law. The amendment allows the General Assembly to borrow from the fund, but the fund must be paid back.

HJR 656 (Welch) is similar. HJR 675 (D. Marshall) is similar but specifies differently the taxes and fees to be deposited into the Fund. HJR 677 (Albo) also has a different way of specifying the taxes and fees to be dedicated to the fund. HJR 676 (Cline) and SJR 376 (O'Brien) are similar, but do not allow borrowing from the fund.

HJR 679 (Iaquinto) sets up a separate Transportation Fund and limits the use of the fund to transportation purposes, but also places the same requirements restricting the use of funds on political subdivisions. The resolution also allows the General Assembly to require that revenues collected or received by political subdivisions be placed in a transportation trust fund to be established.

Eminent domain

Five amendments that substantially narrow the use of eminent domain have been introduced. HJR 579 (Peace), HJR 723 (Bell) HJR 722 (Joannou) HJR 714 (Rapp) substantially narrow the scope of eminent domain.

Impact fees

HJR 588 (R. Marshall) allows localities to assess impact fees or accept proffers to help pay for costs associate with the development.

HJR 590 (R. Marshall) allows localities assess impact fees to help pay for costs associated with new residential development.

Restrictions on state taxing/spending

HJR 626 (Ware) limits the increase in the state general fund.

State and local elections

HJR 610 (Cole) requires all general state and local elections to coincide with federal elections in even numbered years.

HJR 614 (Hargrove) establishes a recall procedure for state office holders and requires the General Assembly to establish a procedure for the recall of local officers, with an exemption for localities whose charters already include a recall procedure.

Requirements for school nurses introduced

HB 1719 (Lewis) and HB 2479 (Crockett-Stark) require one licensed nurse for each school. Currently the Standards of Quality requires the availability of nursing services, but not the staffing standard of a licensed nurse for each school. The bills are in the House Education Committee.

Duplicate textbook proposal offered

HB 2556 (Frederick) requires school boards to ensure that there are enough textbooks available so that students can keep a text at school and have a copy to be used at home. The bill is in the House Education Committee. Similar legislation was introduced last year, but failed to get out of committee, primarily because of the cost of the measure.