Oct 6, 2015 3 min read

A tax-abatement program with the potential to save city property owners thousands of dollars is severely underused.

“In my years here, I can only recall one (user),” said Dennis Adams, city treasurer since 2008, who added most people don’t seem to know about the program.

Washington City Council will hold a public hearing at 5:30 p.m. Thursday to consider renewing the commercial and residential Local Economic Revitalization Tax Assistance Act, or LERTA, which expired Aug. 8. The act provides tax breaks to city home and business owners who construct a new building or add value to an existing structure through improvements.

Washington Mayor Brenda Davis said the program is a good incentive for owners to improve their property, “But unfortunately, it’s underutilized.”

Even though zoning officials provide the application to home and business owners who are seeking a building permit, city technology coordinator Lynn Galluze said nearly all those eligible to participate do not.

The program provides approved residential applicants with a three-year abatement of any additional city and school district property taxes due to any increase in assessed value from the resulting improvements at a rate of 100 percent.

For example, if a homeowner makes improvements to a house valued at $100,000, increasing the value of the home to $150,000, $50,000 of the value will be exempted from city and school district taxes for three years.

Adams explained that the improvements must add value to the home and do not include routine home maintenance, like painting or window upgrades.

Commercial applicants receive a tax deduction of 100 percent in the first year; 85 percent in the second; 66 percent in the third; 50 percent in the fourth; and 34 percent in the fifth.

Applicants must be current on all taxes, including real estate, earned income, occupational privilege, business privilege, mercantile license and per capita, as well as on public water, sewage and solid waste charges. If an owner were to become delinquent in taxes or charges, the relief would automatically terminate.

A home or business owner has 60 days to apply from the time a building permit is issued or, if no permit is required, within 60 days of commencement of construction.

Within 60 days of construction completion, the applicant must contact Washington County – the assessment agency – to determine the amount eligible for tax exemption.

Under the ordinance, any new business locating to the city would be eligible, unless it receives tax relief through Tax Incremental Financing (TIF). In addition, city residents must account for five percent of a business’s workforce.

According to Ken Baker, Washington School District solicitor, it is beneficial for the city and school district to have coinciding expiration dates, which usually occur five years after implementation. Baker said city officials can choose to extend the expiration date and can redefine eligible boundaries, if they choose.

The previous act included all city properties.

If City Council enacts the LERTAs, the school district would then take action to adopt them.