Danville City Council lowers real estate tax

After an hour of strong debate, Danville City Council voted Friday to lower the real estate tax rate to offset an increase in assessment.

By a 6-2 vote, council passed a rate of 73 cents per $100 of assessed property value, 4 cents less than the previous 77-cent rate. Assessments have increased about 5.9 percent.

The city must now amend its $252.9 million budget, which includes the 77-cent rate, to cover a $600,000 difference as a result of the vote held during a special called meeting Friday afternoon.

Councilmen Pete Castiglione and T. Wayne Oakes voted against the reduced rate. Councilwoman Ruby Archie was absent.

Opponents said cutting the rate to 73 cents would mean minuscule annual savings for homeowners, and deprive the city of needed funds to invest in economic development and keep employee salaries competitive. In addition, they said Danville’s rate is lower than those of surrounding municipalities and home sellers usually garner equal or higher prices for their houses than what the city assesses.

Those calling for the lower rate, which was proposed by Councilman Adam Tomer, said residents are already hit with higher utility bills and gas prices and falling property values amidst a housing slump.

Also, the city can find other ways, such as increasing the 3-percent lodging tax, to help fill the $600,000 gap, Tomer said.

Castiglione, who proposed keeping the 77-cent rate, said a resident whose home is assessed at $2,000 more than the previous amount will pay just $15.40 more per year in real estate taxes.

“Fifteen dollars to me is not going to help you very much as a consumer,” Castiglione said.

The savings would add up annually to less than the price of a fully topped Domino’s Pizza, he added.

Extra city money invested in economic development efforts would attract more jobs and relieve the unemployment that hampers one’s ability to pay real-estate taxes, he said. Residents’ income and buying power would increase, yielding greater long-term benefits than an extra $15.40 per year, Castiglione said.

Castiglione said some residents have sold their homes for up to 30 percent higher than the city’s assessed value.

Councilman David Luther disputed Castiglione’s notion that home values are increasing, and said prices are actually declining across Virginia and the nation.

“Houses are not worth today what they were a year ago,” Luther said.

He pointed out that the city used to fund its departments for 100-percent staffing levels, even those with employee vacancies. However, the city eliminated that practice and the money saved from that could go toward the $600,000 discrepancy, Luther added.

He said that real estate taxes make up a smaller part of Danville’s budget, lower than most cities, and aren’t as essential for Danville.

Tomer said raising the lodging tax could help the city capitalize on racing events and other attractions, and would have mostly visitors paying the extra tax instead of Danville residents. Though the 77-cent rate would only mean a small amount of extra tax, it’s still a tax increase, he said.

“We can nickel-and-dime our citizens to death,” Tomer said.

Oakes expressed concern that lowering the rate would hurt the city’s bond rating.

Luther and Mayor Sherman Saunders said they haven’t heard any residents calling for keeping the 77-cent rate.

“I have heard from a number of citizens on this issue and not a single one in favor of it,” Saunders said.

Votes from some councilmen contradicted votes they made on May 20, when council failed to pass a proposal to keep the rate at 77 cents. That idea failed by a 4-3 vote in favor, because six “yes” votes were needed for it to pass and two council members were absent. During that decision, Saunders, Archie and councilmen John Hamlin and Gary Miller voted in favor of the 77 cents.

Castiglione and Oakes were absent May 20.

Miller, Hamlin and Saunders changed course Friday and voted for the 73-cent rate. City Council will hold a public hearing on its 2008-09 budget at 7 p.m. Tuesday at the Municipal Building. The city has until June 30 to finalize its budget.

City Manager Jerry Gwaltney, who retires June 30, said he will do whatever it takes to balance the budget.

“Whatever council does (regarding the real-estate tax rate), I’ll make that budget work,” he said.

• Staff writer Denice Thibodeau

contributed to this report.

• Contact John R. Crane at jcrane@registerbee.com or (434) 791-7987.