The City Council is considering three alternatives to changing the tax-relief program for senior citizens and the elderly. Which alternative do you prefer, and why?

A tax-relief program that reduces or eliminates real estate taxes for some Virginia Beach senior citizens is not financially sustainable. That’s the conclusion of a city task force that reported recently to the City Council.

Now, the City Council is exploring ways to change the program – to continue keeping low-income seniors in their homes while managing the program’s skyrocketing costs.

The City Council has come up with three options, which are summarized here. The council wants to hear from you. A public hearing was scheduled for Tuesday, Feb. 17, at 6 p.m. However, the hearing was cancelled due to inclement weather and has been rescheduled for Tuesday, Feb. 24  in the City Council chamber in City Hall, second floor, 2401 Courthouse Drive​. City Council is still scheduled to vote on program changes March 3. For more information, contact the city's Budget Office at (757) 385-8234 or [email protected].

Virginia Beach has the most generous tax-relief program for seniors in Hampton Roads.
 

Residents must meet certain income thresholds to qualify for tax relief. For example, to qualify for a 100 percent exemption – paying no real estate taxes – a Virginia Beach resident can earn up to $48,009 a year. The comparable thresholds in other cities are: Portsmouth $21,000, Chesapeake $22,000, Norfolk $28,611 and Suffolk $44,359. In addition, both Norfolk and Suffolk cap the maximum home value in the program at $203,386 and $201,700 respectively. Virginia Beach does not have a cap on home values for participants. Hampton and Newport News do not offer 100 percent tax relief.

The Virginia Beach program also offers other levels of tax relief: exemptions of 20, 40, 60 and 80 percent, tax freeze or tax deferral.

The tax freeze option allows applicants to freeze their real estate tax bill at the amount assessed in the fiscal year in which the taxpayer initially applies and qualifies for the freeze option. The applicants’ bill is then protected from future rate changes or increases in assessments. With a tax deferral, the applicant may opt to have 100% of the real estate tax bill deferred until a change in ownership of the residence occurs at which point the total accrued tax bill is due. There is no interest charged on the deferred amounts.

The program is growing rapidly. Currently, 5,722 Virginia Beach residents receive 100 percent exemptions from real estate taxes. Another 1,527 get reduced tax bills, deferrals or tax freezes. Since 2006, participation has grown 79 percent and costs have jumped 144 percent.

The program for seniors and non-veteran disabled citizens now costs $13 million a year. City leaders did not expect the program to grow so quickly when it was created by the state four decades ago.

Last year, the City Council appointed a task force to study the program and recommend changes. The group reported its findings on Jan. 27. You can read the full 100-page report here, or read the shorter City Council presentation here.

Costs have skyrocketed for two major reasons:

• Many Baby Boomers are hitting retirement age and living longer.
• The program automatically raised income thresholds by more than 20 percent a year in 2006, 2007 and 2008, based on big increases in property assessments. But the thresholds did not drop when property values dropped from 2010 to 2014.

There are four ways to reduce the program’s costs:

• Lower qualifying income thresholds, perhaps by the same amount that assessments dropped from 2010 to 2014.
• Exempt home values over a certain amount. The median home value in Virginia Beach is $247,200. Some homes in the program are worth more than $900,000.
• Eliminate the tax deferral part of the program.
• Eliminate the tax freeze part of the program.

The City Council chose three alternatives for consideration:

• Option 1: Adjust the maximum income threshold for 100 percent exemptions by the amount that home values dropped from 2010 to 2014. This would save $3.3 million and affect 1,639 people, who could move to other levels in the program.

• Option 2: Adjust the income threshold for 100 percent exemption to 60 percent of the city’s median household income ($62,855). This would save $3.6 million and 1,782 people would no longer qualify for 100 percent exemptions. They could move to lower levels of the program.

• Option 3: Set the income threshold for 100 percent exemptions at half of the median household income. The threshold for the lowest level of participation – a 20 percent tax exemption – would be set at the median household income ($62,855). This would save $2.9 million, and 2,809 people would no longer qualify for 100 percent exemptions. They could move to lower levels of the program.