Richmond tightens tax exemption rules

The Boaz & Ruth building on Meadowbridge Road. Boaz & Ruth saves about $16,000 in taxes a year because of the nonprofit property tax exemption. (Photo by Lena Price)

A tax break on real estate for local nonprofits will soon be harder to come by.

The Richmond City Council on Monday night voted unanimously to impose a moratorium on “by designation” property tax exemptions for nonprofits that aren’t automatically excused by state law.

The change to the ordinance means that nonprofits in the city, with the exception of state-approved hospitals, government organizations, religious organizations, libraries and schools, won’t be able to apply for tax-exempt status on their real estate for 2014 or beyond.

Councilwoman Kathy Graziano said the designation process, which allowed the council to vote on which nonprofit groups would get tax breaks on their real estate, was too subjective.

“It’s very difficult for the council to review applications and to determine whether or not a specific nonprofit should be exempt,” Graziano said. “And from a fiscal standpoint, it’s a loss of revenue for the city.”

Richmond has about 75,000 taxable properties valued at $25.7 billion, according to data from the city assessor’s office. About 3,800 of those, including government buildings and hospitals, are tax-exempt under state law. That amounts to $72.5 million a year in real estate taxes not paid to the city under the exemptions.

A five-year moratorium on designation exemptions had already been in place but was lifted last year to grant exemption to the Byrd Theatre in Carytown.

In September, the council granted tax-exempt status to 23 properties owned by several local nonprofits, including the Byrd Theatre Foundation and Boaz & Ruth. Nineteen more properties have applied for tax-exempt status this year.

City Assessor James Hester said if the council exempts the 19 outstanding applications in addition to the 23 approved in September, it would cost the city about $200,000 in annual tax revenue.

Councilman Chris Hilbert said the city should look for other ways to support nonprofits, including direct funding.

“I’m not against these organizations. I think they do great work,” Hilbert said at Monday’s meeting. “We should support them, but I think it’s problematic public policy to be doing it via tax exemptions.”

Nonprofits that have been granted the exemption will continue to receive it.

Boaz & Ruth, a Highland Park-based nonprofit that connects ex-offenders with jobs and housing, received exemptions on nine of its properties. Martha Rollins, founder and former chief executive of Boaz & Ruth, said that translates to a $16,000 tax break for the organization every year.

“It’s huge for us,” Rollins said. “Every little bit of that has helped our business, and it’s allowed us to maintain a presence in an area with one of the highest crime rates in the city.”

Rollins said the nonprofit tax exemption was similar to granting a corporation a tax break for developing operations to bring more jobs to the city.

“We still pay taxes on at least four of our properties, and we’re delighted to pay that tax,” Rollins said. “We wouldn’t request these exemptions if they didn’t make an incredible difference to us, but they do.”

Vice president Ellen Robertson was absent for Monday night’s vote.

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