030408 Historic HousesTax Incentives for Rehabilitation of
Historically Significant Structures
City Council Presentation
March 4, 2008
BACKGROUND:
In 1999, the City Council adopted an
ordinance to provide partial real estate
tax exemptions for rehabilitation of
“historically significant”residential or
commercial or industrial structures
Under the current ordinance, a partial real estate tax
exemption is available under the following
circumstances:
•Structure is “historically significant”(i.e., listed on the
Virginia Beach Historical Register)
•Structure is at least 50 years old
•Historical Review Board determines in writing that the
proposed project will not diminish the historical
significance of the structure
•Rehabilitation increases building assessment by at least
20% (residential)
•Costs of rehab must be at least 25% of assessed value
of structure prior to work (commercial/industrial)
If all conditions are met, the owner is entitled
to a partial real estate tax exemption equal
to:
Residential: an amount equal to the initial increase
in the assessed value of the structure as a result of
the rehabilitation
•E.g., if assessed value of structure before rehab is $100,000 and
$150,000 after rehab, tax exemption = $50,000
•Tax savings would be $445/yr. under current tax rate ($0.89 per
$100 of assessed value)
Exemption is for 15 years and stays the same irrespective of
any increase in assessed value after the first year
Commercial/Industrial:an amount equal to 50%
of the qualified costs of rehabilitation, not to exceed
the assessed value of the structure
•E.g., if cost of rehab is $150,000, exemption is for
$75,000, so long as the assessed value of the
structure is at least $75,000
Exemption is for 5 years and remains the same
irrespective of any increase in assessed value
The procedure under the current ordinance requires, among
other things, that the property owner must file an application
with the Real Estate Assessor and Historical Review Board.
The Board has 60 days to determine whether the proposed
rehab project will restore or maintain the historical significance
of the structure.
After a rehab project is complete, the Board must inspect
the project and the Assessor must reassess it; both must be
done within 60 days after the owner notifies the Assessor
that the work is complete.
Exemption takes effect July 1 of the year following the
completion of rehab project
According to the City Assessor’s Office,
since the ordinance was adopted, there
have been no applications for a tax
exemption.
ProposedOrdinance
At the request of Councilmember Henley, a
At the request of Councilmember Henley, a
draft ordinance has been prepared and
draft ordinance has been prepared and
circulated to City Councilmembers. The
circulated to City Councilmembers. The
remainder of thispresentation concerns the
remainder of presentation concerns the
provisions of the proposed ordinance and how
provisions of the proposed ordinance and how
they differ from the current ordinance
they differ from the current ordinance
The proposed ordinance does two main
things:
1.Streamlines the application process;
and
2.Expands the tax incentives to the
extent allowed by State law
It also makes a number of amendments
of a more or less technical nature
Proposed Changes -Residential
Exemption is for the Exemption is for the initial
??
amount of the initial increase in A.V. or50% of
increase in assessed qualifying costs, whichever
valueis greater
Rehab must increase Deletes requirement (no
Rehab must increase
??
?
assessed value of minimum increase in A.V.
assessed value of
structureat least 20%required)
at least 20%
Proposed Changes –
Proposed Changes –
Commercial/Industrial
Exemption is for an Exemption is for 50% of
Exemption is for an Exemption is for 50% of
??
??
amount= 50% of qualifyingcosts orthe
= 50% of costs orthe
qualified costs of rehabinitial increase in A.V.,
qualified costs of rehabinitial increase in A.V.,
whichever is greater
whichever is greater
Exemption is for 15 years
Exemption is for 15 years
Exemption is for 5 years
Exemption is for 5 years
?
?
?
?
Deletes requirement (no
Deletes requirement (no
Rehab costs must be at
Rehab costs must be at
?
?
?
?
minimum)
minimum)
least 25% of assessed
least 25% of assessed
value
value
Proposed Changes -Other
CURRENTPROPOSED
??
Historic Rev. Bd. reviews appsPlanning Director reviews apps (but
??
HRB still decides whether a building
is eligible for City Register)
Term contemplates contemporary
?
“Rehabilitate”means “restore to
?
use while preserving historic values
former state”
Allows application if structure is
?
Must be on City Historical Register
?
eligible for listing on Register
Applies to all structures (owner
?
“Qualified costs”limitation only
must document qualifying costs)
?
applies to commercial/industrial
structures
Reduced to 30 days
?
Review time = 60 days
?
Proposed Changes -Other
•Adds exemption for historically significant
•
hotels or motels
•Exemption is for 90% of assessed value of
structure after rehab, not to exceed the
increase in assessed value resulting from
rehab
•Exemption is for 25 years
Proposed Changes -Other
Adds tax credit for historically significant residential
•
structures. If owner rehabs structure, he can also get tax
credit (in limited circumstances)
•structure must have a tax lien at the time of purchase
that is > 50% of the assessed value of the property
•tax credit is for the total amount of the tax liens, not to
exceed the amount by which the liens exceed 50% of
assessed value at the time of purchase
•Example –owner buys property for $100,000, and assessed value is $80,000.
There are $43,000 in tax liens on it. Tax credit = $3,000 and may be taken
over a period of up to 10 years.