Try to buy a car lately?

It’s likely you either couldn’t find what you hoped or paid above the expected price.

That’s what happened to Virginia Beach Commissioner of the Revenue Phil Kellam. His family bought a Toyota last year for $4,000 more than its sticker price.

A few months later, he saw his experience confirmed in the data.

The value of the roughly 400,000 vehicles in Virginia Beach rose by a total of more than 40% between this January and last. The average annual growth is around 5%.

“Extraordinary is an understatement,” Kellam told WHRO. “It’s just astounding.”

His job is to use those values to calculate what city residents owe in personal property taxes.

But because of the spike in car values linked to supply chain issues, those taxes were set to soar as well. That would burden taxpayers already reeling from rising inflation and gas costs.

Leaders in Hampton Roads cities have taken notice. Most recently approved one-time tax relief or plan to vote on it soon.

The issue stems from the state of the car market, which is temporarily distorted because of compounding problems with the supply chain.

The manufacturing of cars has slowed down, in part because of a global shortage of microchips  needed for modern vehicles.

Pent-up demand coming out of the pandemic combined with fewer cars on market has reduced options for buyers.

Values for both new and used cars have soared. But that doesn’t necessarily reflect a car’s real long-term value, Kellam said.

“When people say fair market value is what an able seller and a willing buyer are willing to do, I’m not so sure,” he said. “I just needed a car. And I think the market was a bit distorted and I know that I’m not alone.”

Revenue commissioners including Kellam use a car’s value as assessed on the first of the year using a pricing guide from consumer data company J.D. Power.

The tax billed to the owner is based on the rate set by elected officials. In Chesapeake, for example, the tax for vehicles is $4.08 per $100 of its assessed value.

The owner of a car worth $25,000 would have paid about $677 last year, Chesapeake revenue commissioner Victoria Proffitt told council members recently. The same person would have had to pay more than $1,000 this year.

Chesapeake could have taken in about $26 million more than officials had budgeted, said City Manager Chris Price.

Many cities chose instead to offset the impact to taxpayers by changing the methodology behind the taxes.

Instead of basing the calculations on 100% of a car’s market value, Virginia Beach and Hampton city councils unanimously elected to drop that to 75%. Chesapeake settled on 77.5%. 

Newport News and Norfolk councils are set to vote on similar measures next week. 

The relief measures apply only for 2022 and do not change the actual tax rate.

Not all residents will see their bill go down, however. Many will still see increases – just not as high as if there’d been no action.

Changing the ratio is allowed in state tax code for extreme circumstances, Kellam said. But he hasn’t seen it done in the quarter-century he’s held the position.

“I’ve never seen a spike like this,” he said.

Anyone can appeal their personal property tax assessment by contacting thelir local revenue commissioner’s office.

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