The Virginia General Assembly voted last week to provide what may amount to a major tax break for homeowners in developments with shared amenities such as swimming pools, tennis courts, golf courses and lakes by agreeing to wipe that land from the local tax rolls.
According to supporters of the bill -- which was passed hastily in the waning hours of the legislative session -- it only shifts the burden of paying the tax from homeowners associations to homeowners. But Fairfax County officials claim it would cost the county at least $280,000 in annual property-tax revenues.
The bill is being reviewed by the state's attorney general and could be signed into law by Gov. Charles S. Robb in the next month if opponents cannot convince him to veto it.
While the amount is small compared to the $438.8 million Fairfax County expects to collect in real property taxes in 1986 -- amounting to only 0.064 percent of the total -- county officials said that they are angry and are trying to decide what to do next to keep the controversial measure from becoming law.
The Virginia Municipal League has questioned the constitutionality of the measure and said it is seeking legal opinions and impact estimates from cities and towns around the state.
"We're not very happy about it," said John F. Herrity, chairman of the Fairfax County Board of Supervisors. "We opposed it when it was introduced, and we still oppose it."
Fairfax officials said that, although it is unclear which properties would be included under the bill, they estimate that as many as 7,000 acres of county land could be affected.
What the bill does is tax homeowners for a pro-rated share of the value of the land as part of their own property taxes, rather than requiring the homeowner association to pay taxes on commonly held property. Opponents of the measure claim that the land has intrinsic value that would be untaxed under the new system.
"This would be a substantial loss, in that it would include almost any town house development or cluster subdivision, not just the big planned communities like Reston and Burke," said Fairfax Supervisor Nancy K. Falck. She said that the bill "gives members of homeowners associations a tax break and puts the additional tax burden on county residents who don't live in a planned unit development."
The Reston Homeowners Association has figured it would reap a windfall of $38,000 this year from the measure, and the Burke Center Conservancy said it would save nearly $24,000.
Kenneth R. Plum, the Reston representative to the Virginia House of Delegates, sponsored the bill at the request of the local chapter of the Community Associations' Institute, an organization that works to promote the interests of condominium, cooperative and homeowners associations. Plum said he introducted the bill in an effort to end what he says has been a policy of "double taxation" on the part of local assessors.
"It's an equity issue," he asserted. "The bill only establishes for homeowners associations the same method of taxation used for commonly owned property of condominium associations."
RHOA first challenged its real estate property tax bill in a case against the county in 1981. Plum said the association argued that the value of commonly owned amenities such as the pools, tennis courts and lakes already was included in the assessed value of individual homes in Reston and that taxing the common land separately amounted to double taxation. Tax officials have denied that they have taxed the same value twice.
"The feeling is that, if your house is next to a lake or a pool, the value reflects that," Plum said. "So people pay for the value of those amenities in the assessed value of their homes. To also tax RHOA for those amenities is to tax the homeowners again."
In RHOA's court case, the Fairfax County Circuit Court ruled that any changes in the method of tax ation were up to the state legislature rather than the courts. The Virginia Supreme Court upheld the decision.
That was when he started working on a bill, Plum said.
The measure that passed the House in the last day it considered House bills -- and the Senate in the last day of the session -- says localities should include in the value of the house a portion of the value of common property rather than taxing both homeowners and their associations.
At issue is whether such commonly owned property has any value separate from the value of the houses in the community. RHOA officials have argued in the past that, because their common elements are encumbered with easements and can not be sold by covenant, they have no intrinsic market value.
In a case pending before the Virginia Supreme Court, however, one Virginia county claimed that the amenities of a community development were actually worth $1 million, a market value established when the developer of the community tried to sell memberships for the use of the amenities to nonresidents.
Members of the Virginia Senate raised the issue of that case -- Monticello Lakes Homeowners Association v. Fluvanna County -- during the debate over Plum's bill, but Senate Majority Leader Hunter B. Andrews of Hampton said he was convinced the court case was not related to the bill.
William Stambaugh, a delegate from Arlington, said that, although the court case may be over a separate issue, he believes the lower court's finding does relate to the bill.
"This bill is unconstitutional, in that it violates the provisions that all property be taxed and be taxed fairly," Stambaugh said. "The circuit court found in the Monticello case that the amenities had their own value. This bill presents the possibility of exempting significant amounts of valuable property from the tax rolls. A few taxpayers in Reston would make out like bandits, but all the other residents in the county are going to end up carrying the freight."
Some local officials have raised questions about the terms in the bill, saying that they can not tell whether it would diminish local coffers.
Plum said the intent of the bill is to include only commonly owned property in subdivisions where membership in the homeowners association is mandatory. He admitted that there are some unresolved issues and that he would ask the governor to submit technical amendments to clear up the confusion.
"I'm going to have to get an opinion from the county attorney before I can figure out what this means," said William Marchand of the Prince William County assessment office. "It's really a can of worms."