Property tax arrangement between UVA and city is unclear, unexamined

Local governments almost always fund their operations by taxing real estate, and that is no different here in Charlottesville, where the city collects $50 million per year in property taxes. Some of the most valuable property, though—from a hospital complex to parking decks to an unused basketball arena—is exempt from the tax under state law because it belongs to the University.

This dynamic has come under scrutiny in other college towns like Providence, Rhode Island, where, according to the Wall Street Journal, Mayor Angel Taveras is pressuring Brown University to increase voluntary payments in lieu of taxes on the $1 billion in property it owns (currently the school makes payments of $4 million per year). Taveras is even threatening to take his case to the state legislature if the city’s Ivy League tenant won’t give in.

City Manager Maurice Jones said in a written response, “there has not been agreement on direct voluntary payments for the exempt property,” but there had been “informal discussions about it in the past.” Jones went on to say that while he certainly would entertain such an arrangement with UVA, he does not think the city’s economic situation warrants it right now.

Conversations with the Charlottesville assessor’s office reveal that UVA does make some tax-like payments (called “service charges”) on four properties deemed to be “non-educational” in use. Those include houses on Sprigg Lane, Stadium Road, Oakhurst Circle, and Barracks Road. In 2005, the University paid service charges on seven properties serving as faculty and staff housing “as required by state law,” according to the study “Economic Impact of the University” published in 2007. A more recent study says the school paid $33,026 in city property taxes in 2010 (in Albemarle, that number was $127,736).

According to city property records, UVA owns 67 separate properties in the city with a total assessed value of over $500 million. So, the value of the parcels for which service charge payments are made represents less than 1 percent of the total, and the value of the exemption (or its cost, depending on who you ask) is over $4.5 million annually. (This analysis does not include property owned by the UVA Foundation, the nonprofit real estate arm of the University, which is not governed by the state exemption law and pays taxes on its many holdings, including the Boar’s Head Inn).

Asked about how the list of four properties evolved and who signs off on it, City Assessor Roosevelt Barbour provided a reporter with a 1983 agreement between the city and the Virginia Health Services Foundation. In that document, VHSF agreed to pay taxes on five properties that it wanted to develop with financing arranged by the city’s Industrial Revenue Authority. Barbour later said the 1983 agreement governing five properties was unrelated to today’s list of four properties and referred all further questions to City Communications Director Ric Barrick. Barrick could not produce the agreement, though he did provide a list of the four properties, which included a note indicating the tax rate is 91 cents per hundred dollars of assessed value (versus 95 cents for private property in town).

Questions to UVA’s communications office about the payments related to school-owned properties were referred to Executive Vice President and Chief Operating Officer Michael Strine, who did not comment.

In nearby Augusta County, the UVA Health System purchased a 55,000 square-foot medical building for $9.5 million last April and asked the county to exempt it from taxation. A spokesperson for the assessor’s office there said that decision was “still being reviewed.”