'Dualing' Car Tax

Published 4:33 pm Thursday, October 14, 2010

FARMVILLE – Cue the banjos.

Town of Farmville residents will begin paying two different motor vehicle license tax rates on their motor vehicles, depending upon on which side of the Appomattox River they live.

Dual tax rates.

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Those living on the Cumberland side of the river will see their car tax bill decrease.

Everyone else across the flowing Appomattox in Prince Edward-most of Farmville, in fact-will see their vehicle tax bill go up, by approximately 25 percent.


The Town of Farmville has rescinded its own vehicle tax and will no longer sell those Town decals that residents are supposed to purchase-most didn't-and stick on their windshields every year.

The Town didn't rescind the tax to get rid of that revenue stream, however, but to increase revenue by entering into separate agreements with Prince Edward and Cumberland Counties to collect the car tax revenue for the Town of Farmville.

So everyone with a vehicle will get a bill, including those many people who stopped coming to the Town office to pay the Town's tax buy purchasing an annual vehicle decal.

Town residents will begin paying the motor vehicle license tax rates set by Prince Edward and Cumberland Counties, depending on their county of residence within Farmville's corporate limits.

Prince Edward County's motor vehicle license tax rates on vehicles is higher than was the Town of Farmville's and Cumberland County currently has a lower rate.

With the Town set to get vehicle tax revenue from everyone now, even Cumberland's lower rate will contribute to the Town's revenue increase.

Simple, really, or simply complicated.

Town Council members expressed surprise during their October monthly meeting Wednesday night when they learned that the effect of their decision for Town residents in Prince Edward was effectively a tax increase.

The lengthy discussion sometimes resembled a jam of snarled traffic as council members wrapped their understanding around the fact that most town residents would be see their car tax bill go up by approximately 25 percent.

The Town of Farmville has not raised its own car tax rate by 25 percent but its decision to rescind its own car tax in order for Prince Edward's rate to apply for those living in that county has created the 25 percent tax increase for those residents.

Which seemed to surprise Town Council.

The fact came to light as Town Council went over the new motor vehicle license tax agreement between Farmville and Prince Edward, which will see Prince Edward keep the additional 25 percent of the revenue, in addition to a 10 percent collection fee taken from the amount of money the County collects for the Town of Farmville.

“Let me just point out one thing,” Town Manager Gerald Spates told council members as he began to review the agreement, which council eventually approved without dissent. “If you look in there it says the Town rate is, our rate is 75 percent below the County's, so we're going to get 75 percent of what the County collects on the vehicles in town because their rate's higher and they're going to charge us a 10 percent administration fee. So that's basically what the agreement is. I think the agreement's fair.”

“Could you just clarify that?” council member Dr. Edward I. Gordon asked.

And so began a long and winding discussion.

“When they start charging our residents,” Spates explained, “they're going to charge them the same rate they charge county residents, which is higher than ours is…The County's going to get that difference.”

David Whitus responded to what council was reading and hearing and said, “This side of the table over here is a little slow…We're still absorbing this but the way we absorb it that's a 25 percent tax increase for our citizens. We're going up to the County rate, which is 25 percent more than our rate so our citizens are going to get a 25 percent tax raise, we're only going to get 75 percent of that for the Town and then we're going to pay the County another 10 percent for administration. Are we understanding it correctly?”

“Yes, sir,” Spates replied.

“What about the fact that we're doing a tax increase without advertising it?” asked Dr. Gordon.

“No, we abolished ours,” Spates said of the Town's car tax. “We did away with our vehicle tax.”

“Okay, we did away with our vehicle tax,” Dr. Gordon said. “Now we're putting on a basically a higher tax.”

“We're not,” Spates answered. “The County is.”

“But our citizens are going to pay it,” Whitus said.

“That's right,” Spates replied, then noting that when council had previously discussed it “nobody said anything.”

At last week's work session, Spates told council members, “Now the only drawback you're going to hear, you're going to hear (some) people complain about it. Cumberland County's tax rate is a little bit cheaper than Prince Edward's. People in Cumberland won't pay as much as people in Prince Edward.”

Apparently council members did not understand the full impact of the plan to abolish the Town's own car tax and have the tax, instead, collected by the Counties of Cumberland and Prince Edward.

“The citizens are paying more, though,” Dr. Gordon said Wednesday night. “Isn't that right? The citizens are paying more?”

“Yeah,” Spates said.

“So isn't that a tax increase?” Dr. Gordon continued.

“Not for us,” Spates said. “We're not charging the tax. We've abolished our tax.”

The discussion continued for some time.

Ironically, Town Council had agreed to the plan in order to simplify car tax collections for the Town, by getting the Counties to collect it, and make sure all Town residents with vehicles paid the vehicle tax because they would now receive a tax bill from the Counties which includes a tax on vehicles in Farmville. And because it would abolish the vehicle decals, viewed as a pain to scrape off and put on and regarded as the reason so many people simply didn't buy them, the Town losing out on that revenue.

“I think we're lost, at least I am…Where's the money coming from?” Dr. Gordon asked again. “…I need it explained in another way.”

At one point, council member Sally Thompson made a motion that “we throw this back into committee.”

The problem, Spates said, is the County tax tickets are going out Thursday and the deal needs to be approved prior to that to collect the tax revenue for the Town. Without the agreement, the Town wouldn't get a dime of vehicle tax revenue this year.

“Can this not be broken down simple, to understand, because I don't understand,” Dr. Gordon said.

“If you'd wait a second and let me explain to you,” Spates told him.

“Okay, explain it,” Dr. Gordon said.

“I'll explain it,” the town manager said, and went on to do so, again. “Right now we sell Town decals for $25. Nobody's buying them because they can get by with it because Prince Edward, Cumberland, Charlotte…”

“Excuse me, that's not the issue we're asking,” council member Donald L. Hunter said. “We understand all that.”

At that point it wasn't clear to, at least some council members, whether the 10 percent collection or administration fee was coming from the 75 percent of the tax Prince Edward will send to the Town or from the 25 percent that the County gets to keep.

The fee comes from the 75 percent sent to the Town.

The agreement in council's packet, and eventually approved by council, explains that, “The county will remit to the Town 65 percent of the actual amount of the tax collected from town residents. This amount represents the amount the Town would normally collect after deducting the 10 percent administration fee.”

After more discussion, Dr. Gordon again said, “Is that not an increase?”

“It is not an increase from us,” Spates repeated.

“Is that not an increase for the Farmville citizen?” Dr. Gordon said.

“It is not a tax increase,” Spates said, again, “because we are part of Prince Edward County. We repealed ours.”

But then Spates said, “You're going to pay more. All of us are going to pay more.”

After more discussion, Dr. Gordon said, “Let me make it real simple-is this a tax increase for our citizens, Yes or No? Yes or No?”

“Yes, it is a tax increase,” Spates told him.

“Okay,” Dr. Gordon said. “If we're going to put a tax increase in…”

“We're not,” Spates said.

“You just said 'Yes,'” Dr. Gordon said.

“We're not putting it in,” Spates told him.

And so there is no need for a public hearing, which is something Dr. Gordon was wondering about.

Council then voted for the deal without a single No.

The agreement with Prince Edward and Cumberland can be rescinded if the Town reinstitutes its own vehicle tax.