Supervisors seek changes in composite index
by Larry S. Chowning
On November 17 the Middlesex County Board of Supervisors voted to support a recommendation of Lancaster County Administrator William H. Pennell Jr. that the Virginia General Assembly change certain real estate values used in formulating the state composite index.
A county’s composite index determines that county’s ability to fund its own school expenses and other aspects of local government, and is a big factor in determining the amount of state funds a county receives. The composite index is based, in part, on county real estate values. The higher the real estate values, the higher the composite index.
This year Middlesex’s composite index increased from .6786 to .7431, which means the county school system will get $300,000 less in state funds.
Middlesex, Lancaster and Northumberland counties are rural counties that have high composite indexes because of the high value of the waterfront property along their shores.
Land use taxation and conservation easements are methods used by counties and the State of Virginia to discourage development and preserve farm and forest land. Most farm and forest land in Middlesex County is in a land use taxation program. Under land use, farm and forest land is appraised at 100% fair market value, but then assigned a land use value for taxation purposes. The land use value is considerably less than the fair market value.
However, when the state figures a county’s composite index it does not use the land use values, it uses the assessed values, which are much higher and increase a county’s composite index.
Land that is placed in conservation easements also is assessed at fair market value but taxed at a reduced value because these easements cannot be developed.
Pennell and Middlesex officials want the land use/reduced value figures to be used in computing a county’s composite index—instead of using the fair market values. Doing this would lower the composite index of waterfront counties such as Lancaster, Middlesex and Northumberland.
Pennell wrote a letter to 99th District Delegate Albert C. Pollard Jr. that stated, “I recently had a discussion with Jim Goforth, a member of the Middlesex County School Board, regarding the composite index formula. Jim is a former superintendent of schools in Virginia and is keenly aware of the impact of the formula.”
Pennell went on to write that Goforth found two numbers that need to be changed. “Land that has received reduced taxable value because of its inclusion in conservation easement and land use zoning continues to be computed [in the composite index] at its fair market value instead of its reduced taxable value,” Pennell wrote.
Also, homes under construction should not be included in the annual ratio study performed by the Virginia Department of Taxation, wrote Pennell.
“While these changes may not make a significant difference in the composite index computations, it is the right thing to do with respect to computing the final values for each community,” wrote Pennell.
Pennell recommended that Pollard and 98th District Delegate Harvey Morgan become “co-patron” of a bill to change the current way the composite index is determined.
Middlesex recently had two large waterfront tracts be designated as conservation easements. One is a 400-acre tract on Urbanna Creek and the other is Locust Grove Farm at Topping, which has several miles of waterfront on Whiting Creek and the Rappahannock River. Both of these tracts now get taxed based on a reduced value because the property owners have givien up their rights to develop the property.
