Why is my Lunenburg County tax bill so high?

Published 8:00 am Thursday, December 15, 2022

VICTORIA – Just about every county in the Commonwealth has been struggling with the burden of higher personal property taxes for its citizens. Lunenburg County is no different.

However, county officials became aware of the expected increase in rates and took action.

In late 2021, Commissioner of the Revenue Liz Hamlett became aware of the expected increase informing the County Administrator and Board of Supervisors of the prediction.

“Together, we explored possible options to lower the tax burden for Lunenburg citizens for the unprecedented appreciation in vehicle values,” Hamlett said.

According to Hamlett, she uses the “Clean Loan” value listed in the pricing guides, which is less than the “Clean Trade-in” value, and the recommended action was to reduce the ratio used against the assessed value according to the J.D. Power pricing guide for four classifications of personal property to 85% to calculate the personal property tax levy which is provided for in the Code of Virginia. Hamlett said the county personal property classes for motorcycles, passenger vehicles, travel trailers and recreational vehicles/motor homes are taxed at the same rate as all other classes of personal property at a rate of $3.80/$100.

“Those four classes of vehicles went up in value over 25% of the prior year,” Hamlett said.

However, those four classes were granted a percent of value reduction to 85% of assessed value by the Board of Supervisors.

HOW DOES MY TAX BILL WORK?

A city or county doesn’t set the value of your vehicle. That’s what drives the bill you get. They have to use the values from a recognized pricing guide. Prince Edward County, for example, uses the National Auto Dealers Association (NADA). They take the vehicle’s VIN number, type it in and get the value NADA assigns.

Here’s the first point where cities and counties get a choice. They have to determine which value to go with. They can choose the retail value of a car, the trade-in value, or the loan value. Retail value is the price if you want to go and purchase it off the lot. A trade-in value is a price you’d get if you try to trade the car in at a dealership. The loan value is what the bank would give if you tried to borrow against the car or truck. According to NADA, the loan value is considered the lowest.

Cities and counties have the option to pick any of these three. Prince Edward County uses loan value. Some areas, like Appomattox, use trade-in value. Once they pick one of the three, the city or county applies their tax rate to that value in order to determine how much a person owes. That means even if a city or county’s tax rate goes down, the tax bill also spikes if that value climbs. And the value of all used cars has gone up dramatically over the last year.

WHY DID CAR PRICES CLIMB?

Due to the shortage of new vehicles as a result of the economic impacts of COVID-19, vehicles appreciated in value rather than depreciating from the prior year’s assessed value based on the data received from the J.D. Power pricing guide.

Hamlett said, Among other things, some events that led to the appreciation of vehicle values are:

In March of 2020, the Federal Reserve cut the interest rates to nearly 0%. These unprecedented low-interest rates on both new and pre-owned vehicles allowed consumers to purchase them sooner than they would have. Strong demand means higher prices.

The “COVID-19” related closing of certain auto manufacturing plants for the necessary production of ventilators and other Personal Protective Equipment caused a further reduction in inventory.

Large fleet companies (E.g., rental agencies and car services) chose not to replace inventory, adding to the shortage of pre-owned vehicles in the market.

“Unfortunately, J.D. Power has advised that the values will be slow to return to pre-COVID-19 values and they anticipate a slow decline over several years.” Hamlett said.

According to NADA and Kelly Blue Book, auto manufacturers built 1.7 million fewer vehicles in 2021 compared to 2019. And that deficit hasn’t been fixed yet, thanks to one tiny issue.

It’s a computer chip problem. The pieces needed to produce new cars aren’t getting to the manufacturer. Take General Motors, for example. In order to produce new cars, they’ve suspended heated seats as a feature because the computer chips to make them work aren’t in stock.

Beyond shipping, the computer chips aren’t being built in the quantities needed. Ukraine produces 25% of the world’s supply of neon. That neon gas is used to make semiconductor chips. No gas means no chips. And no chips means fewer new cars.

As a result, the value of used vehicles keeps spiking. Kelly Blue Book’s data shows as of April, prices for used cars had spiked 28% higher than in 2021. As things slowly get back to normal, that’s changing.

As of Monday, Oct. 31, the latest numbers show that price growth was just 11% higher than last year. Just don’t expect a fix coming soon. At the World Economic Forum, Intel CEO Pat Gelsinger cautioned that supply problems with computer chips will likely last into 2024.

For local residents, that means you can expect a bit of sticker shock on the assessed value of your vehicle at least a while longer.