Tax Type
BPOL Tax
Local Taxes
Description
Taxing Special Districts Established by City or Town
Topic
Local Power to Tax
Local Taxes Discussion
Date Issued
02-28-1987
[Opinion - Virginia Attorney General: 1987 at 111]
REQUEST BY: Honorable Wiley F. Mitchell, Jr. Member, Senate of Virginia
OPINION BY: Mary Sue Terry, Attorney General
OPINION:
You ask several questions relating to the establishment of a downtown service district by the City of Alexandria pursuant to § 15.1-18.3 of the Code of Virginia. The city is interested in establishing the downtown service district to provide off-street parking facilities to service parking needs primarily generated by office and retail businesses located within the service district. The specific questions presented are: (1) whether a city is limited only to increases in real property taxes to fund services in a downtown service district established pursuant to § 15.1-18.3 or whether it may fund such services by increasing any other taxes it is authorized to levy under its charter or by general law, including gross receipts business license taxes;1 (2) regardless of the type of tax adopted, whether the additional tax must apply uniformly to all property or businesses in the district or whether the city may exempt some property or businesses in whole or in part;2 and (3) whether a § 15.1-18.3 downtown service district may be designated as either primary or secondary, and, if such a designation is required, what the legal significance of those terms is.
I. Applicable Statutes
Section 15.1-18.3 authorizes "[t]he governing body of any city, or any town with a population of more than 30,000 [to] designate primary and secondary3 downtown service districts" and to exercise the powers set forth in § 15.1-18.2( b) in such a district.
Section 15.1-18.2(b) provides, in pertinent part, that the city council shall have the following powers and duties with respect to the service districts:
(5) To levy and collect an annual tax upon any property in such service district subject to local taxation to pay, either in whole or in part, the expenses and charges for providing such additional governmental services in such district. . . . [Emphasis added.]
The purpose for creating a downtown service district is "to provide additional or more complete services of government than are desired in the city as a whole." § 15.1-18.2(a).
II. City May Impose Additional Real and Tangible Personal Property Taxes and Merchant's Capital Taxes to Fund Services in Downtown Service District
The object of a permissible tax levy for downtown service districts under § 15.1-18.2(b)(5) is any property in the service district subject to local taxation. § 58.1-3000 details the property subject to local taxation, which includes all taxable real and tangible personal property, including the tangible property of public service corporations, except the rolling stock of corporations operating railroads, and the capital of merchants.
It is my opinion, therefore, that the governing body of a city is limited to the imposition of additional real property taxes, tangible personal property taxes and merchant's capital taxes to fund services in a downtown service district.4
Local gross receipts business license taxes authorized under § 58.1-3700 et seq. constitute excise taxes imposed on the privilege of engaging in certain businesses and occupations. See 1974-1975 Report of the Attorney General at 459. They are not local taxes on property. It therefore is my opinion that no levy of an additional gross receipts business license tax is permissible for purposes of funding services in a downtown service district established pursuant to § 15.1-18.3.
III. Express Statutory Authority Required to Exempt Certain Property or Businesses from Special District Taxes
You next ask whether a city imposing an additional ad valorem tax in a downtown service district may exempt, in whole or in part, certain property or businesses from the additional tax. Virginia follows the Dillon Rule of strict construction applicable to powers of local governing bodies, limiting such powers to those conferred expressly by law or by necessary implication. See, e.g., Commonwealth v. Arlington County Bd., 217 Va. 558, 573-74, 232 S.E.2d 30, 40 (1977); 1984-1985 Report of the Attorney General at 99, 100.
There is no authority in Art. X, § 6 of the Constitution of Virginia (1971) for exempting property on any of the bases you present. Neither § 15.1-18.2 nor § 15.1-18.3 authorizes a city to exempt property from the special district taxes.5 I am of the opinion, therefore, that a city is without authority to exempt, in whole or in part, certain property or businesses from additional district taxes.6 Such taxes are subject to the uniformity requirement of Art. X, § 1 and must, therefore, be applied uniformly upon the same class of subjects within the boundaries of the service district.7
IV. Section 15.1-18.3 Requires Designation of Downtown Service Districts as "Primary" or "Secondary"
Your third question concerns the designation of downtown service districts as "primary" or "secondary." Downtown service districts are created solely by statute. § 15.1-18.3 permits cities and towns with a population in excess of 30,000 to "designate primary and secondary downtown service districts." Following the plain language of § 15.1-18.3, it is my opinion that, in establishing a downtown service district, a city must designate this district as either "primary" or "secondary."
This designation as a primary or secondary downtown service district does not limit the purposes for which these districts may be established, however.8 Similarly, the powers and duties of the governing body with respect to the districts are not affected by their designation.9
1 Gross receipts business license taxes are authorized by § 58.1-3700 et seq.
2 You mention as examples of possible exemptions (1) all residential property in the district, or (2) property in the district belonging to owners or lessees who already provide adequate parking at their own expense.
3 Three bills were passed by the 1987 Session of the General Assembly which would delete the words "primary and secondary" from the provisions of § 15.1-18.3. See S.B. Nos. 453, 520; H.B. No. 1231 (1987 Sess.).
4 Cf. Reports of the Attorney General: 1975-1976 at 293; 1958-1959 at 243; 1955-1956 at 173, construing § 21-118(4) (now § 21-118(6)), which gives sanitary districts the power to levy and collect annual taxes upon all property in the district subject to local taxation to pay expenses for the purposes listed therein. These Opinions concluded that the additional tax could be levied on real and personal property, merchant's capital and the tangible personal property of public service corporations, but if levied, the statute required that the tax be imposed on all such property (e.g., a tax could not be applied solely to real estate). § 15.1-18.2(b)(5) permits a tax to be levied on any property in the district subject to local taxation. Thus, additional taxes could be imposed on real estate alone, or any of the other categories of property subject to local taxation alone or any combination thereof, subject to the uniformity requirement of Art. X, § 1 of the Constitution of Virginia (1971).
5 See 14 McQuillin, Municipal Corporations § 38.80 (3rd ed. 1970) (in the absence of express authorization, a municipal corporation has no power to exempt lands from special taxation.) Of course, property already exempt from taxation under the Constitution or applicable law would not be subject to such a special district tax. See Art. X, § 6.
6 The authority of the General Assembly to authorize property tax exemptions is constrained by the Virginia Constitution. See Art. X, §§ 1, 6. I am aware of no authority for establishing the exemptions for residential real estate or the realty of certain businesses addressed in your letter. Different rates of taxation may be imposed upon separate classes of property. See Art. X, § 1; Washington Bank v. Washington Co., 176 Va. 216, 218, 10 S.E.2d 515, 516 (1940). The General Assembly is authorized to classify taxable subjects. See Art. X, § 1. No different classification has been made, however, with respect to residential and commercial real estate. See § 58.1-3008; § 58.1-3500 et seq.; 1966-1967 Report of the Attorney General at 295.
7 See 1981-1982 Report of the Attorney General at 385.
8 As noted above, the authorized purpose is "to provide additional or more complete services of government than are desired in the city as a whole." § 15.1-18.2(a).
9 Section 15.1-18.2(b) contains these powers and duties.
Attorney General's Opinion