Oct. 25, 2005 – Lt. Gov. Vargrave Richards told several U.S. Senate committee members that a 1936 bill, which dictates how the V.I. government calculates property taxes, was an anachronism and contrary to the principles of local control.
However, at least one Virgin Islander believes that the V.I. government should not be completely unleashed from federal restrictions. Gary Berne, a member of the group that originally brought the suit that forced the V.I. government to abide by the 1936 law, wrote a letter to the same committee – the U.S Senate Committee on Energy and Natural Resources.
According to Sen. Lisa Murkowski, of Alaska, who conducted the hearing on Tuesday in Washington, D.C., Berne's letter asked that the law be amended not repealed. She said Berne advocated allowing the Virgin Islands government to put 10 percent caps on increases in property taxes and also to be allowed to give special benefits to veterans or the elderly.
Richards and Delegate Donna M. Christensen agreed with the principal of a cap and special benefits. Richards said the V.I. government needed the cap to protect residents from "outrageous tax increases."
However, neither of them were pleased by the suggestion that the law be amended instead of repealed. Richards said, "It ties the hand of the government of the Virgin Islands with respect to property taxes." He said determining property taxes should be a strictly local matter.
Christensen, who has introduced a bill into both houses of Congress that seeks to repeal the 1936 law, said, "This is not a role for the federal government."
Richards said, "To my knowledge, there is no other state, county or city government that the federal government tells how to collect local property taxes."
Richards argued that since the taxes are collected locally and spent locally, the federal government should not interfere in how they are determined.
Christensen said, "Passage of this legislation is necessary to allow the Virgin Islands to fashion a local property tax law that takes into account the circumstances and realities of our community."
She explained that most people in the Virgin Islands had believed that the 1936 law had become irrelevant after the passage of the 1954 Organic Act. The V.I. government has been making property tax regulations as it saw fit since that time.
However, U.S. District Judge Thomas K. Moore ruled last year in Berne Corp. vs. Government of the Virgin Islands that the 1936 law was still valid and needed to be adhered to.
Richards, who was testifying in his capacity as administrator of the Office of the Tax Assessor, said he is optimistic that the law can be repealed before the beginning of next year and no dramatic inconveniences will befall residents. He said his staff members are already working on what will be needed for a smooth tax policy transition if the law is repealed.
Christensen told the Senate committee that reverting back to the 1936 law caused provisions to be struck down that were similar to those used in other jurisdictions throughout the United States.
She said, "The local property tax laws which were struck down provided a 10 percent cap on the increase in assessments for real estate residential in any assessment period, as well as certain exemptions from taxation, for homesteads, veterans, and farmland and exemptions offered as part of our economic incentive program."
Both Richards and Christensen emphasized the serious effect new evaluations and adherence to the 1936 law would have on certain residents. Christensen said, "This situation presents a very serious one for many of my constituents, most acutely on the island of St. John, because their property tax bills are already moving way beyond their reach," she said. "Many of the areas on St. John have seen wealthy individuals purchasing properties and making improvements which have the effect of immediately and drastically increasing the value of their properties as well as the value of the properties surrounding them."
She added, however, that all residents in the Virgin Islands would be affected.
Nikolao I. Pula, director of the Office of Insular Affairs, testified that the Bush Administration supported the bill.
"The Department of the Interior has sponsored or backed measures that increase self-government for the territories," Pula said. "Repeal of the 1936 provisions enhances self-government by returning property tax policy to the Government of the Virgin Islands."

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