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new property tax proposal

Travel discussion for St. John

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new property tax proposal

Postby loria » Wed Jun 28, 2017 2:33 pm

apparently the legislature is thinking of a huge increase on property tax for people who rent their villas I cut and pasted this from another site : -- this was an invitation sent to VITAR for Realtors to put in their two cents. I do not know if they are also inviting the public at this time. Seems that between Hotel Tax and Income Tax, they are already getting a decent amount from the short term rentals. The current tax rate for residential is .00377 or $377 per $100,000 of assessment, the new tax would be $1,417 per $100,000 of assessment. Ouch!
"This bill creates a new real property tax classification known as the villa real property 12 tax to be taxed at a rate on .014170. The classification includes residential real property that is 13 rented, leased or otherwise hired out for a period of time that does not exceed 180 days."
In part the invitation read “[The Virgin Islands Legislature] Committee on Finance will meet on Friday, July 7, 2017 in the Frits E. Lawaetz Legislative Conference Room on St. Croix at 10:00 AM to consider… bill: Bill No. 32-0073, “An Act amending title 33 Virgin Islands Code, chapter 81, subchapter I, section 2301 by adding a new real property tax classification” (Proposed by Senator Marvin A. Blyden)… The purpose of the meeting is to receive viable testimony as we discuss legislation that will impact the current state and the direction of the United States Virgin Islands’ economy. Your testimony should include all pertinent data, and expert opinion as it pertains to the subject matter. Please provide written testimony by Thursday, July 6, 2017.
In addition, please include applicable information regarding the following: • Support or opposition of the proposed legislation • Advantages and/or disadvantages to passing the bill • Economic impact (economic analysis) of the proposed legislation • Recommendations to the bill”.

I do think that if this passes owners will be forced to increase rental rates -- putting the VI out of range for many (we already pay some pretty large taxes, management fees, etc) -- the trickle down impact from loss of tourist dollars will most certainly negatively impact the USVI economy -- if you own a property i suggest writing to the senators, if you are a renter -- your voice is important too...
< leaving on the 22nd of march...but too lame to figure out the ticker thing again!>
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Re: new property tax proposal

Postby longingstjohn » Wed Jun 28, 2017 3:43 pm

From what I take, the Villa owners would be paying double the rate that Caneel and the Westin do. I can imagine property prices dropping if it gets passed.

imho,
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Re: new property tax proposal

Postby jimg20 » Thu Jun 29, 2017 9:02 am

WOW! UNBELIEVABLE!

They are proposing to essentially quadruple the property tax on villas. This is why I will be planning my next trip to VG. The VI Government has declared war on the tourists. I complained when they went from 8 to 12% on the room tax with a brief stop at 10%. All of you thought I was over reacting. This recent sales tax came up and I said that we as visitors should complain with one voice. All of you brushed it aside, and many of you told me that I should go somewhere else if I don't like it. We visitors along with our STJ friends covered the Army Corps of Engineers with letters etc. when that marina was proposed, and we successfully forced it back. (Yes, it is technically alive, but effectively dead.) We could do the same thing with this tax issue, but too many of you are not interested in doing anything about it. There will be a new tax. That I can promise you. You could, however, do something and moderate the increase.

Now the VI Government has decided that the way to increase production of golden eggs is to strangle the goose. Why not? The goose doesn't fight back. I won't do it any more. I will miss some aspects of STJ and I will certainly miss the friends we've made there. I will not participate in this abuse of visitors any longer.

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Re: new property tax proposal

Postby 54b » Thu Jun 29, 2017 10:21 am

For those of us who thought there would be no math...can someone help explain how this affects the average STJ villa renter on a more granular level?

I know that last time we rented, there was a 10% room tax added, so $350 on top of a villa priced at $3,500 for the week. (Sounds like that room tax is now 12%.)

If the aforementioned villa cost $3,850 total ($3,500 base plus the tax) for the week then, what would it cost or likely cost with the newly proposed tax?

Thank you.
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Re: new property tax proposal

Postby jimg20 » Thu Jun 29, 2017 10:57 am

54b, I don't think you can use a mathematical formula to say how much the property tax will raise the villa rent. I think it will be based on what the owner determines that they have to charge to get a positive cash flow - or at least get near a positive number.

The sad part is not that they will charge twice the rate they charge the Westin, but that they will quadruple the current rate.

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Re: new property tax proposal

Postby Coconuts » Thu Jun 29, 2017 11:45 am

54b: The recent VI Hotel Tax increase took it from 10% to 12.5%. Visitors see that directly. The new proposal is for an enormous increase in the property tax of villas that are in the short-term rental market. This is a tax that property owners pay to the VI. It is not directly visible to visitors, but it's also hard to see how it couldn't end up passed along in the form of increased weekly rental rates. The VI government is in a financial squeeze, with out of control spending and borrowing, along with lax collections enforcement. They recently raised taxes on alcohol, but this proposed increase dwarfs that increase. The proposal is to increase the property tax from $377 per $100K of assessed value, to $1417, an increase of 276%. On a $1M villa, that is an additional annual tax obligation of $10,400 (that's over and above what we currently pay). That's a lot, and fundamentally changes the economics of villa ownership. It also could price villas out of the reach of their current patrons, and significantly curtail the tourist business which is the mainstay of the VI economy.

This is serious. Now is the time to push back on this proposal, and maybe hire some lobbyists...

All the best,

Kevin
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Re: new property tax proposal

Postby tupelodent » Thu Jun 29, 2017 11:54 am

As a new villa owner(closed 2 weeks ago), I can say I will do everything I can to make sure this new tax doesn't happen. I'm sure it will but we need to try.
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Re: new property tax proposal

Postby longingstjohn » Thu Jun 29, 2017 12:04 pm

As someone asked, I worked the math for our home (Villa Tesori).
based on 30 weeks rented, the per day increase would be roughly 150.
just to go back to where we are today.

very few villas break even, the math will likely make many homes drop from the rental market.

in the end it will be fiscal suicide if they follow through. but politicians don't care about logic, only about self interest, and what they can sell to their constituents.

jmo,
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Re: new property tax proposal

Postby 54b » Thu Jun 29, 2017 12:48 pm

Thanks all for the added context and Brian, that was what I was getting at with my question with regard to the potential increase...

And agree with you all that it will most likely price some people out...I know that when we look at villas with our friends, we're looking for a daily rate of about $450. That's not Peter Bay, but it puts us in a pretty good pool of villas with lots of nice options. But if you told me a lot of the villas we're considering now would be $600 per day, that would not only limit our number of villa options, it would probably force us to consider other lodging options beyond villas. And it certainly doesn't help that airfare to STT seems like it has doubled in the last 5 years.

Maybe everyone else gets this better than I do, but I think if it were explained more like..."this increase likely means your daily villa rate goes up $100+," you'd see more action from the tourists who don't typically have as much empathy for villa owners as they probably should.

Thanks again.
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Re: new property tax proposal

Postby jimg20 » Thu Jun 29, 2017 1:36 pm

Kevin, I have to disagree with your math. This is not a 276% increase. It is a 376% increase. As I said earlier, it nearly quadruples the tax bill.

They are going to get a tax increase. The only question is how big will it be?

You will need to organize. You will need a formal resistance to this. If not, prepare to sell what you have.

We're not coming back for more of this kind of abuse by the VI Government.

JIM
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Re: new property tax proposal

Postby RicksFormula » Thu Jun 29, 2017 1:42 pm

if you are looking for more usable numbers, assuming the owners pass the exact cost of the proposed increase along to the renters, here is a good example.

For a 1.0 million dollar property, the old tax would be $3,770 per year or $72.50 per week (broken down by the most common rental term).
The new tax on the same 1.0 million dollar property would be $14,170 per year or $272.50 per week per million evaluation.

I'm sure the average owner gets a lot fewer than 52 weeks of rent per year on average so if you estimated 36 weeks a year occupied, the weekly cost to cover the new tax would be closer to $105 (old tax) compared to $394 (new tax) per million evaluation.

For Peter Bay homes that's $2,000+ per "rented" week for the owner to break even assuming 36 weeks a year.

No way the owners won't want to raise rents to cover it and I'm sure the more letters of protest that go in, the better chance the tax increase will be moderated.

Someone correct me if I'm calculating this wrong as I'm doing it rather quickly and may be missing a digit
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Re: new property tax proposal

Postby Coconuts » Thu Jun 29, 2017 2:54 pm

Jim: FWIW, I think that we are both saying the same thing. If we used to pay $3,770, and we will pay $14,170, the difference (the amount by which our taxes would go up) is $10,400. This difference is 276% of what we used to pay. On the other hand, the total paid of $14,170 is 3.76X (376%) of what we used to pay. It's horrible either way.

By the way, property values are bound to be directly impacted by any such change, which would reduce the basis on which the property tax percentage would be applied. Between that and the resulting drop in tourism that the entire territory economy depends upon, this is a counterproductive strategy to improve the its finances. It is also expressly unfair to folks such as tupelodent, who just got in at prevailing market prices.

All the best,

Kevin
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Re: new property tax proposal

Postby loria » Thu Jun 29, 2017 4:05 pm

I just had a lengthy conversation with Shereen Spivey chief of staff in Senator Blyden's office -
this isn't going to go away -- they need to do something -- she heard me out on the single property owner -- want to retire there etc ---- i would suggest calling their office -- she was VERY nice -- and i DO understand that there are locals whose property values have been influenced by the improvements in their area -- and that many of them have a hard time paying their taxes -- so there needs to be some give somewhere .... but 400% is just going to put a lot of people out of the business (and the people that rely on those villa jobs out of business as well -- if you are a villa owner -- please join us on FB in the USVI vacation rental owners and managers group
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Re: new property tax proposal

Postby tupelodent » Thu Jun 29, 2017 4:12 pm

Why don't they just try to collect all the back taxes owed? The person I bought our villa from hadn't paid his property taxes in 8 years!!!! I'm still waiting on the thank you letter from the VI government because if I hadn't bought the place they would have never gotten paid.
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Re: new property tax proposal

Postby equineannie » Thu Jun 29, 2017 4:39 pm

USVIs are nearly bankrupt and doubts are rising the US Congress will allow them BK protection like Puerto Rico. Chronic mismanagement, graft, corruption and general malaise is all to blame. I experienced this firsthand when living there and after I moved, I never returned to visit either. There are so many more wonderful islands, in the Caribbean,to visit and to buy property. The BVIs are nice as are Dominica, the Grenadines, Curacao, Bonaire to name a few. Tourism will be dropping on all the USVIs as vacationers are not going to want to pay the exorbitant prices fr a villa if this tax goes into effect.
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