Legislation being sought to tax long-term leaseholders at Fort Monroe

Jan. 03--A new legislative bill would allow Hampton to assess real estate taxes on long-term leases issued by the Fort Monroe Authority to private owners -- in the same way the city taxes other property owners.

The bill, filed last month by state Sen. Mamie Locke, D-Hampton, would allow the city to directly tax and bill potential long-term leaseholders on the former military post with contracts exceeding 20 years.

The Fort Monroe Board of Trustees agreed in December to work with the city on this plan, which would ultimately affect the amount of PILOT (payments in lieu of taxes) fees that the city charges the authority.

Fees that the Fort Monroe Authority pays Hampton for land the state owns are capped at $983,960. The fees are used to cover the cost of general city services -- police, fire, schools -- to residents and businesses on Fort Monroe.

The authority manages the 565-acre property, some of which is owned by Virginia. Other parcels on the site are owned by the National Park Service and the Army, which officially pulled out in 2011.

Fort Monroe has roughly a million square feet of commercial building space and other acreage it seeks to lease to private developers, officials announced last spring.

"As we transfer property into long-term leases ... with developers, they would be responsible for the repairs and upkeep ... and responsible for the PILOT payments," Fort Monroe Authority Executive Director Glenn Oder said.

With the long-term lease structure, the developer would be responsible for all expenses and operations, insurance and real estate taxes, John K. Hutcheson, the authority's deputy executive director, added.

If the bill is approved, the change would allow the city to assess the property at the same rate it does other properties, he said. The authority reserves the right to choose which leases it submits to Hampton to be directly assessed real estate taxes.

Hampton, when it outlined its legislative priorities in October, had proposed increasing the existing cap to roughly $1.1 million with the ultimate goal of having long-term lessees pay the taxes.

City Manager Mary Bunting said during an October City Council work session that state law addresses how PILOT fees should be calculated to provide the equivalent real estate value.

There is also existing law that handles long-term leases in the state, but because Fort Monroe is unique, long-term leaseholders should be dealt with differently than the rest of the state, she said.

Hampton already directly taxes at least one entity with a long-term lease -- The Chamberlin, Oder said. The historic building located on Fenwick Road operates as an independent living facility and is leased by Roanoke-based Hampton IL Investors LLC, according to city tax records.

The grounds where the building sits are still owned by the Army, Oder said.

Directly taxing leaseholders will help to reduce the overall fees the authority would need to give to Hampton, Hutcheson said. Payments are now covered with funds from the state's allocation.

In 2018, the authority received $5.8 million from Virginia for operating expenses.

In Gov. Ralph Northam's proposed budget amendments for 2019, the authority might receive an additional $800,000 in funding over the next two years, according to the authority.

The bill would need approval in the House of Delegates and the state Senate. The General Assembly is due to go into session later this month.

Lisa Vernon Sparks, 757-247-4832, [email protected], on Twitter: @lvernonsparks

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