Slutzky eyes land use tax restriction

The chairman of the Albemarle County Board of Supervisors may propose major reforms to a county program that gives tax breaks to owners of rural undeveloped land.

Under David L. Slutzky’s idea, rural landowners would be given a choice: They could pay real-estate taxes based on the land’s fair market value just like the vast majority of county landowners, or they could get massive land use tax breaks by agreeing to keep their land permanently undeveloped through conservation easements.

That change would mean some rural landowners would no longer receive land use tax breaks and would pay thousands or even tens of thousands of dollars more in taxes each year, money that could be used by the county for education, transportation and other services, or to reduce the tax burden on the vast majority of county taxpayers.

“I came to the conclusion that it may make sense for the county to say: ‘We’re going to reserve land use tax for people who truly preserve the land,’” Slutzky said in a recent interview.

Albemarle operates under a system in which many rural residents get tax breaks for keeping agricultural, horticultural, forestry or open space land undeveloped for a limited period of time, as opposed to being taxed on fair market value.

The land use program is designed in part to encourage landowners to preserve the scenic beauty of their property, a key strategic goal for county leaders. It also lowers taxes for farmers.

Benefits only a few

Though about 60 percent of the county’s land is in the land use tax program, those parcels — fewer than 5,000 — are owned by a small percentage of the county’s residents.

Under the county’s existing program, residents only have to commit to keeping their land undeveloped for a few years at a time, and they can get out of the program anytime and pay rollback taxes, plus interest. But Slutzky’s idea would force rural landowners to choose between permanently extinguishing their development rights, through conservation easements, or paying taxes based on fair market value for their land. Under Slutzky’s idea, rural landowners would still have the right to create family subdivisions even if they put their land in conservation easements.

Placing land in a conservation easement gives the landowner a tax break, but it also permanently protects the property from development.

Slutzky said many rural property owners have no intentions of developing their land but others, whom he calls “speculators,” are receiving tax breaks while waiting for opportunities to sell their land to developers “for a big bag of money.”

“Guess who’s paying the bill: the 95 percent of the county property owners who own the other 40 percent of the county’s land,” Slutzky said.

Slutzky, a Democrat who is vying for a second term as Rio District supervisor, is being challenged by Republican Rodney S. Thomas, a former member of the county’s Planning Commission who has made protection of property rights one of his key campaign issues.

Thomas opposes Slutzky’s idea.

“I think it’s just taking the rights away from the individuals that own the land,” Thomas said. “I don’t think they [should] have to put their land into conservation easement just to prove that they aren’t going to develop some property. It’s their property. It belongs to them.”

But Slutzky said what he calls “land use tax reform” might generate more than $10 million in revenue per year and possibly closer to $20 million — revenue that might look good for a county that is currently grappling with a budget shortfall and foresees difficult years ahead.

Officials say the county gives about $18 million in tax breaks annually to rural landowners who keep their land at least temporarily undeveloped, and the county began a revalidation program this year requiring rural landowners in the land use tax program to prove they actually qualify for the tax benefits.

However, some property owners eventually sell their land to a developer or subdivide their land and sell the pieces.

“They pay off the last five-year tax break [in rollback taxes] out of the proceeds of the sale, and they’re laughing all the way to the bank,” Slutzky said earlier this year. “What we are in fact doing with land use taxation in Albemarle County is subsidizing speculative investors. Now the one person who in my view deserves to be in land use tax is the person who says, ‘I’m going to extinguish all of my development rights. I’ll put my land in conservation easement.’”

Slutzky said land use tax reform is only “an idea in development,” adding that much more research would be needed.

“I’m not even sure that I would vote for it,” Slutzky said. “I don’t even know what ‘it’ is exactly.”

But the idea is something Slutzky has long considered. Slutzky is an adjunct professor at the University of Virginia in the Urban and Environmental Planning Department.

In late 2008, Slutzky floated the idea to other supervisors, but he says there didn’t appear to be majority support for the idea, so supervisors didn’t ask county staff to examine it.

Slutzky says many technical issues remain unresolved and it’s unclear whether there would be enough support from other supervisors to make it worth the county spending the time and money researching the idea.

Supervisor Dennis S. Rooker says that when the idea was raised last year he wanted the county to examine it, but now isn’t the time.

“We’ll see where the board is in January and who’s on the board [after the November elections] and whether or not there’s any thought among board members that there might be some support for that kind of proposal,” Rooker said.

Though Rooker said it’s premature to say whether he’d support land use tax reform, he does see some benefits.

“If you eliminated the land use program entirely … technically your revenue from the land that is in land use would increase by $18 million, which would reduce the tax burden on other taxpayers,” Rooker said.

Tax revenue to be had

If land use tax reform were implemented, Slutzky said he suspects many residents would decide to put their land in conservation easements — in which case the land would be taxed at the same rate as under the land use tax program — and others would decide to pay taxes based on fair market value, to leave their development options open.

If half of the property in the land use tax program was taxed at fair market value, that could generate about $9 million in new revenue annually, Slutzky estimated. In that scenario, the county would also pay millions of dollars less to Charlottesville under a revenue sharing agreement, he said, because the amount the county pays the city each year is based on fair market values, which are much lower if the land is under a conservation easement.

The additional revenue could pay for services such as transportation projects, better pay for teachers and more police protection, without increasing — and possibly even lowering — the county’s real-estate tax rate, Slutzky said.

The county loses tax dollars on the approximately 60 percent of the county currently under land use, Slutzky said, because the amount paid to the city under the revenue sharing agreement is greater than what the county collects under land use.

Slutzky said he suspects land use tax reform would also increase the value of many homes in Albemarle, because rural homeowners value the scenic view and privacy of rural land. Permanent conservation would give neighbors a guarantee that the nearby land would remain undeveloped.

Support questioned

Neil Williamson, executive director of the Free Enterprise Forum, a business advocacy and government watchdog organization, said he doesn’t think there’s enough support from members of the Board of Supervisors for land use tax reform to pass. He added that Slutzky is a powerful force on the board but would face strong public opposition to the idea.

“I know better than to underestimate David Slutzky and his ability to persuade board members,” Williamson said. “However, if David Slutzky chooses to bring this forward, I would anticipate a significant outcry from the landowners in Albemarle.”

Whether such an idea has any chance of catching the interest of the Board of Supervisors depends partially on the outcome of the November elections.

In addition to there being a competitive race for the Rio District seat held by Slutzky, three candidates are running for the Samuel Miller District seat being vacated by retiring Supervisor Sally H. Thomas. Rooker is unopposed for his re-election bid in the Jack Jouett District. The other three board seats aren’t up for election this year.

“I’m going to wait until after the election,” Slutzky said, adding that if he wins, “this will be one of the topics that I’m going to try to learn more about.”