Projects the Virginia Tech Foundation plans to build in Blacksburg with a recently requested bond issue are expected to earn Montgomery County an estimated $141,461 in real estate tax revenue.
However, that projected tax figure is a fraction of what those properties — valued at an estimated $72.2 million — would earn for the county if they were taxed at 100%.
The tax revenue and value are found in a document that the Montgomery County Economic Development Authority provided for the county board of supervisors to review the projects’ expected economic impact.
Virginia Tech Foundation is awaiting approval from the county board on $104.1 million in requested bonds, which would be among the county Economic Development Authority’s largest bond issuances since 2000.
Officials have said the EDA is only being used as a financial conduit because the Virginia Tech Foundation is seeking bonds for a variety of tax-exempt projects.
Supervisors were slated to vote on the bond issuance last month, but unanimously agreed to table the matter until Aug. 12 due to concerns about the taxability of Tech -affiliated properties.
Montgomery County’s governing body is also using the bond issuance request to highlight a long-standing privilege that supervisors say has complicated how the locality manages growth driven by the university.
The Virginia Tech Foundation is a nonprofit and tax exempt entity, a status that allows its properties’ tenants to pay a reduced amount in local real estate taxes. How much tenants pay depends on the duration of their leases.
Using just Montgomery County’s 89 cent tax rate, the properties to be built in Blacksburg from the recently proposed bonds would raise $642,790 a year in real estate tax revenue if they were taxed at 100%. Add the town of Blacksburg’s tax rate and that figure exceeds $800,000.
“In order to estimate the real estate taxes that could be generated by the non-university tenants, Foundation staff had to make assumptions as to the assessed values and lease terms; both of which are unknown at this time,” Foundation President John Dooley wrote in an email explaining the $141,461 tax figure provided to the county.
Additionally, Foundation staff used a conservative approach so as to not overstate the projected tax benefits to the county and town, Dooley said.
Several supervisors requested the Foundation provide documented reassurance that one of the projects covered by the bond issuance — a 236,000-square-foot and five-story mixed use building slated for downtown Blacksburg — include leases that would guarantee at least some tax revenue.
While some supervisors pushed for minimum five-year leases, Supervisor Chris Tuck said this week that the leases may need to be even longer to create substantial tax revenue.
“Really, I want to see longer than five-year leases,” Tuck said. “If you get into 20 [years], you’re getting a little bit better.”
Foundation tenants are taxed at 100% if they have a lease of 50 or more years, according to county staff. If the lease is for less than 50 years, the assessment is reduced by 2% for every year less than 50 years.
Assessments, however, can’t be reduced by more than 85%. That means tenants on one- to seven-year leases are taxed at 15%.
On the same night that supervisors tabled the bond request, they voiced a desire to hold talks with top university and Foundation officials about helping the county find other ways to pay for the services prompted by Virginia Tech’s growth.
“We’re a growing county, and we’re going to need to provide services, especially public education,” supervisor Mary Biggs said. “I think it’s a conversation well worth having.”
Biggs said the county is fortunate to be home to a major university that is spearheading rapid growth.
“But at the same time, with that comes concerns with how are we going to be able to manage, maintain it and plan for it,” she added.
Tuck said he’d like to see the Foundation’s properties taxed at 100% one day.
“I would love to see them do that because in my mind that would put them on the same page as everyone else,” he said. “But if not, I want to listen to what they’re going to offer.”
Tuck said it concerns him that the Foundation buys commercial real estate and then competes against other property owners who pay non-discounted taxes.
“Hopefully we’re going to be able to work with the Foundation to try to address the issue. That’s my goal,” he said.
In addition to Blacksburg, the Foundation’s bonds are slated to finance projects and property acquisitions in Roanoke, Northern Virginia, Henrico County and Hampton.