Portsmouth budget talks get complicated
$182M reduction in real estate assessments creates conundrum
PORTSMOUTH — The City Assessor’s Office has shaved off more than $182 million in the city’s overall residential real estate assessment value since a review began last month of inaccuracies in assessment rates.
Interim City Assessor Janey Culpepper said as of April 7, her office has adjusted 1,000 parcels of land across 55 neighborhoods, reducing the city’s original proposed assessment value by 1.8%. And she’s working to reduce more.
The adjustments could result in lower assessment values for homeowners and could potentially lower tax bills. But it also means less revenue, especially if City Council members opt to provide some form of tax relief in the 2024 fiscal budget.
Culpepper’s review has also raised a number of concerns for how the assessment process was conducted under her predecessor, Patrick Dorris, whom the City Council fired last month.
Culpepper told the council Tuesday that among the issues discovered was the removal of depreciation values in certain areas, particularly older neighborhoods with older houses, but also Carrington Crescent, which includes many homes that abut a railroad crossing, in Cavalier Manor. As a result, some homeowners saw not just an annual rise in the assessed value of their home but also an increase associated with the removal of the depreciation status.
Culpepper also said the code used to assess condos and townhouses had been removed and that more than 3,000 errors were discovered in the last submitted land book, which provides to the state final figures for citywide real property information.
She also said staff informed her it had been instructed to calculate increased land values for properties across the city.
“We have land that’s gone up over 200%, and we can’t have that,” she said, adding that it’s “not fair and equitable for our citizens.”
Culpepper didn’t state who had given that directive, adding that she wasn’t there to place blame.
“It’s up to whomever is in charge to make sure that the personnel are following rules and regulations to make certain that things are done properly,” she said.
Dorris told The Virginian-Pilot on Wednesday he stands by his presentation to City Council in February, which showed many increases were seen after raising home sales ratios to 95% or 100% of fair market value, a requirement in the state code. That process involves assessing home sales in various neighborhoods to determine whether they were sold at 100% fair market value. If not, values can be adjusted to get neighborhoods as close to 95% or 100% as possible.
Dorris added that the city did not have a working CAMA system in place during his time as assessor and said having a functional system could have helped with the data errors spotted. CAMA, or computer-assisted mass appraisal, is an automated system that keeps property data and uses uniform valuations.
Culpepper told council members Tuesday the CAMA system would help her office as it allows her staff to input data themselves rather than relying on the IT department, but that it’s still on her office to provide accurate data.
Dorris said he couldn’t comment on the other issues cited by Culpepper without having access to the data and information depicting them.
It’s unclear exactly how much the city will collect in tax revenue this year as a result of the ongoing reassessments.
Dorris said real estate assessments grew by 12% in 2022, and budget documents estimate the city will collect $124 million real estate tax revenue this year. Culpepper’s office is still calculating the reassessments and did not have an updated real estate tax revenue estimate based on the lowered assessment amount.
The fluctuations create a conundrum for City Council members, who have expressed interest in lowering the real estate tax rate by at least 5 cents to offset assessment increases. The city’s real estate tax rate is $1.30 per $100 of assessed value.
But instead of a tax cut, Interim City Manager Mimi Terry suggested a one-time 5-cent tax credit because it’s not yet known how revenue will be affected. She explained that option would grant residents some tax relief without permanently changing the tax rate.
City staff explained that a resident with a home valued at $221,500 — Portsmouth’s median home value in 2021 — would expect to pay a $2,880 annual tax bill at the rate of $1.30, for example. But at $1.25, that tax bill would decrease by about $110.
While Portsmouth charges the area’s highest real estate tax rate, its median home values are lower than Norfolk, Virginia Beach, Chesapeake and Suffolk, which results in a lower overall tax bill for homeowners. City staff plan to bring back additional information about Portsmouth’s overall tax burden compared to neighboring cities.
Not all council members are eager to change the tax rate, however. Councilman Mark Whitaker said his concern is decreased revenue for a city with high poverty.
The 2024 proposed budget does seek to increase revenue through other fee increases. The budget includes usage rate increases for water, sewer and stormwater. Water rates would increase by 32 cents to total $5.19 per 100 cubic feet; sewer rates would increase by 25 cents to total $4.08; and monthly stormwater rates would increase by 75 cents to $14.25.
Water and sewer rates in Portsmouth are set to increase by 5% each year, according to city code.
The fee increases help the respective departments plan better for the long-term capital needs, stay ahead of regulatory requirements and align with state criteria for the city’s stormwater management program permit, said Budget Director Trey Burke at Tuesday’s meeting.
Additionally, the budget doubles nearly all parking fines, with most fees proposed at $50. It also slightly raises museum fees to align with others in the city.