One effect of the COVID-19 pandemic has been how it has changed the economy, particularly how it has affected the new and used car industries. The valuation of personal vehicles have skyrocketed, which turned personal property tax assessments into a guessing game.
The personal property tax rates for 2022 were initially adopted on April 26 and included a 0.25% reduction, meaning $0.25 per $100, in the personal property tax rate for automobiles and trucks, anticipating the valuation increase. What had previously been a rate of 3.75% was then reduced to 3.5%.
“Every year we prepare revenue estimates for the budget based on our estimated assessed values of property and our current tax rates. In the case of vehicle values, we knew they were expected to increase substantially this year, so during the budget process, the board decided to lower the rate,” said Glenda Bradley, Orange County deputy administrator.
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The value increases in automobiles have been unprecedented and nationwide. A study from Kelly Blue Book in March found that after peaking in 2021 at 41%, the average value of used cars in the United States had begun to slowly decline as inventory issues began to resolve. It decreased by 5% in the spring of this year before leveling out and slightly increasing again.
“As the Commissioner’s Office continued to refine their values using information from NADA, we realized that values had increased much more than anticipated,” Bradley said.
When the initial reduction of 0.25% was adopted, the county had estimated that the increase in car valuation would rise 26.5%. The Commissioner of the Revenue has now determined that the actual value increase of vehicles registered in Orange County had increased by more than 40%, which is in line with the national average.
Proposed at the Sept. 13 Board of Supervisor’s regular meeting, Bradley produced her findings and requested the tax rate reduction in the form of an emergency ordinance. After hearing her summary of the math involved, the board passed it unanimously.
The change also meant amending a report done yearly in cooperation with the Commissioner of the Revenue that estimates the extent to which the Virginia Personal Property Tax Relief Act (PPTRA) will save Orange County taxpayers. The PPTRA is a static figure, roughly $2.7 million in state funds, which every year is added to the county budget in order to ease the financial burden of county residents. Almost two decades ago, when the act was passed, it amounted to 56% of the county’s yearly tax revenue. Declining almost every year since, especially with the fluctuation in personal property valuations, it now sits at 26%.
Both measures have a similar ultimate goal, Bradley said: Saving the taxpayers of Orange County money wherever the option presents itself.
“The Board [does] not want to place more of a tax burden on citizens when the budget had already been balanced at the lower values,” she said. “The rapidly increasing vehicle values is a highly unusual situation [and] one that has been happening statewide. They decided to reduce the tax rate to help offset the increase in values.”
The Board of Supervisors will next be in session for its regular meeting at 5 p.m. Sept. 27.