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    Document Summary
    - Report Published -

    House Document No. 81

    Document Title
    Town - County Fiscal Relations: The Issue of Double Taxation

    Advisory Commission on Intergovernmental Relations

    Enabling Authority
    HJR 137 (Regular Session, 1992)

    Executive Summary
    The Virginia Advisory Commission on Intergovernmental Relations (ACIR), a statutorily created collegial body that studies intergovernmental issues, was asked by the 1992 session of the General Assembly to examine the question of "double taxation" at the local level (HJR 137). The purpose of this study is to determine whether there are certain county services which town residents do not receive but which they partially finance through their payment of county taxes.

    In Virginia there are 190 incorporated towns located within 74 of the State's 95 counties. The population in Virginia's towns constitutes approximately 6.1% of the State's total population. There are two attachments to this report depicting the relationship of the population of Virginia's towns and counties in 1980 and 1990. Since towns are constituent elements of the counties in which they are located, many major local government services such as education, health, welfare, mental health, corrections, and court-related activities are provided to town residents by the county. Towns have historically been established to augment county services, especially for increased police and fire protection, planning and zoning, building code and inspection services, solid waste collection and disposal, water and sewerage facilities, and parks and recreation.

    Since 1989 there has been recognition by at least three study groups that "double taxation" is a source of town-county tension. A 1986 report, "Towns in Virginia," issued by the Joint Legislative Audit Review Commission, identified "double taxation" as the most frequently mentioned source of town-county conflict. In 1989 a General Assembly Joint Subcommittee studying county-town relations also stated in its report that "double taxation" was a point of contention between towns and counties. Subsequently, the Joint Task Force on Annexation formed by the Virginia Municipal League and the Virginia Association of Counties included in its 1991 recommendations a proposal that the Code of Virginia be amended to establish a procedure by which counties would reimburse a town for services which were not provided within the town, but which were funded by countywide tax collections.

    In terms of fiscal relationships, towns and counties both have the authority to tax real estate and personal property. There are, however, a number of county revenue sources subject to constriction or preemption by towns. Two attachments to this report provide information about those revenue sources and, based on information contained in local financial reports to the Auditor of Public Accounts, data regarding actual town constrictions/preemptions of county revenue. In addition, there are two attachments to the report comparing county and town operating expenditures.

    The issue of "double taxation" does not appear susceptible to generalization or disposition by some universally accepted formula. There is no current agreement as to what properly constitutes "double taxation" nor the appropriate means to rectify the problem if its existence is acknowledged. Testimony and information submitted to the ACIR by town and county officials indicated that there are differing perceptions as to the validity of the "double taxation" issue in Virginia.

    In order to define better the parameters of the "double taxation" issue as it affects Virginia's towns and counties, the ACIR requested a continuation of this study for another year and a commensurate delay in the submission of its recommendations. The 1993 General Assembly approved this request by the adoption of House Joint Resolution 646. The ACIR's final report and recommendations will be submitted to the Governor and the 1994 session of the General Assembly.