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Last Updated: 03/04/2005
The Rockbridge Report is produced
under the supervision of the Dept. of Journalism and Mass Communications
at Washington and Lee University.
Reporting supervisors: Prof. Doug Cumming
Technical supervisor: |
Lexington takes second look at
non-profit tax exemptions By Rob Armstrong The City of Lexington is making it more difficult for local non-profit organizations to receive property tax exemptions. Last month, the Rockbridge Historical Society requested tax exemptions for three properties, including a garden and picnic area with parking space--all of which are open to the public. Lexington City Council denied the Society’s request, as well as several others from various non-profits, including The Association for Retarded Citizens of Rockbridge and the Stonewall Jackson House. The city must already exempt 54 percent of its property from taxation,
which is the highest of any locality in the Commonwealth of Virginia. In
the fiscal year of 2005, this meant Lexington had to exempt almost $3
million in property taxes, but only collected $2.5 million in property tax
revenues. Lexington non-profit organizations are aware of the financial strain placed upon the tax-payers. “We understand that Lexington is in a regrettable situation,” said George Warren, executive director of the Rockbridge Historical Society. “But like any other non-profit, we have good use for funds and we would rather use our finances to further advance the work of our organization than see them used for taxes.” With a population of about 7,000 residents, Lexington’s major sources of tax-revenue difficulties come from Virginia Military Institute and Washington and Lee University. The two institutions cannot be taxed by the city under federal law, and they account for more than 80 percent of all the city’s exemptions and 43 percent of all Lexington property. W&L alone owns one-quarter of the city’s property, and in 2005, the institution received a $1.35-million exemption from the City of Lexington. But for other local non-profit organizations, tax exemptions may not come as easily. State legislation that was passed in 2003 allows localities such as Lexington to deny additional property tax exemptions, at the discretion of the local government. “This is absolutely one of our most difficult issues,” said City Manager John Ellestad. “But if we continue to take property out of the tax rolls, it will just shift the burden elsewhere.” The result for Lexington-based non-profit organizations means any additional property acquisitions that would have historically been tax-exempt may no longer enjoy exempt status in the community. The legislation only affects new applications for tax exemptions from
new or existing property after 2003, allowing previously exempted property
to be grand-fathered-in. A request must be made to the Lexington City
Council, which is not likely to accommodate new applications. As a consequence, local non-profit organizations must dip into their own bank accounts to pay taxes for spaces open to the public. “We need to consider all the people of Lexington,” said Karen Roundy, Lexington Commissioner of Revenue. “Right now, the city of Lexington is the highest [exempting locality] in the state. We’re already pushing above anyone else.” Educational institutions, however, were not affected by the 2003 legislation. So while Lexington City Council is weary about granting more exemptions, it is also trying to restrain growth of VMI and W&L and to keep the two colleges from taking more city property. “One of our long-rage goals is to keep [the colleges] within the foot-prints of their respective campuses,” said Ellestad. “[The City of Lexington] can’t grow, so we must try to eliminate further consumption of taxable property.” Ellestad was referring to a historic agreement between Rockbridge County and the City of Lexington to maintain their jurisdiction and for Lexington to refrain from annexing parts of the county. Warren, a VMI alumnus, is concerned about Lexington’s future. “I think the time has really come to re-examine the city’s relation with W&L and VMI, who should pick up their fair share.” Although both VMI and W&L are not obligated, both institutions make financial contributions to the City of Lexington in lieu of property taxes, which would amount to over a million dollars a year for each college. VMI gives “about $30,000 each year to the City of Lexington,” said Lt. Col. Stewart MacInnis, associate director of communications and marketing. “We’ve been doing this to help the city for many years now.” This year, W&L will be handing $194,600 to the City of Lexington in the form of a grant. In addition, the University will pay $45,000 in real-estate taxes for “properties clearly benefiting from city services,” according to Steven McAllister, vice president of W&L’s treasurer’s office. “The [University] Board of Trustees decided to give a grant to the City of Lexington,” he said. “It has dated back to at least 1990.”
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