Tax breaks for veterans will lead to loss of revenue

Two amendments to the state Constitution will give veterans a break on their property tax bills, but that will translate into reduced revenues for public agencies across the state, including those here in Valencia County.

The amendments increase the property tax exemption for veterans from $4,000 to $10,000 and create a sliding scale for an additional break for vets based on their level of disability. Additionally, a new category of veterans eligible for exemptions has been created.

While these changes will lower property taxes for those who served, it will also reduce revenue for local government agencies and create a void that will need to be filled if services are expected to continue at current levels.

As Valencia County and other local agencies begin planning for the 2025-26 budget year, one aspect is projected revenues and with increased exemptions for vets, county assessor Celia Dittmaier and her staff are projecting a revenue shortfall of $3 to more than $4 million.

That shortage is revenue the county treasurer’s office won’t collect and then distribute to local agencies such as municipalities, school districts and special districts.

“Right now we’re not sure of the exact figure,” Dittmaier said. “Both amendments have to be ratified by the legislature during this years session, then the sliding scale has to be established by taxation and revenue.”

Currently, veterans get a flat exemption of $4,000, which is subtracted from the taxable value of their property thus lowering the amount of property tax owed. Increasing that to $10,000 and basing calculations for revenue loss on the nearly 3,100 veteran-owned properties in the county shows a shortfall of almost $595,000.

The calculations become more complicated is regards to veterans with disabilities, she said. Currently, veterans who are considered 100 percent disabled by the U.S. Veterans Administration are completely exempt from property taxes on their primary residence.

“They pay no property taxes. The newly approved constitutional amendment would allow veterans at less than 100 percent disability to receive an exemption based on their percentage of disability,” Dittmaier said. “But as of right now, the state hasn’t established the sliding scale that exemption would be based on. If a veteran is 20 percent disabled do you get a 20 percent exemption? We’re not sure.”

Both constitutional amendments passed in Valencia County — the exemption increase to $10,000 passed 18,570 in favor and 7,839 against and the amendment for the sliding scale 21,602 to 4,868.

With notices of value due to be mailed in April and projected revenues for the 2024 tax year already budgeted by the county and other agencies, Dittmaier said the hope is the new exemptions will take effect in 2025 and 2026.

“Going from the $4,000 to $10,000 is pretty straightforward. It’s just a matter of how quick are they going to move in the Legislature? Do we need to get an extension for our notice of values? We have to go to the printer by the beginning to mid February, which is mid session,” she said. “If they want us to get an extension, we will, but right now, things are just unknown.”

The assessor is also hoping the new sliding scale exemptions will be held off until the 2026 tax year, so agencies have time “to balance everything out instead of getting hit with both at the same time.” Additionally, the new class of veteran — those who have served in the reserves for six years or more — will also be entering the mix. Dittmaier also speculated the exemption increase to $10,000 might motivate more veterans to claim it.

“They might look at that amount and say, ‘All the paperwork is worth it,’” she said.

The wild card of the exact number of disabled veterans in the county and how the sliding scale will be implemented is making calculations of revenue losses difficult.

“The sliding scale? It’s never been discussed. Are we talking one percent? Are we talking five percent, 10 percent increments?,” the assessor said. “Then the VA is also going to have to figure out how they’re going to implement it. They’re going to have to print out all new certificates for everybody that has any percentage of disability, right? Then they are going to have to get that to us.”

Right now, there are about 830 veterans in the county who are 100 percent disabled, but according to numbers provided by the VA, in 2020 — the most recent year available — there are 1,492 disabled veterans in Valencia County at varying levels of disability.

“We have to assume those numbers have gone up in the last four years,” said chief deputy assessor Tim Bernal. “The VA broke that down to the number of veterans with zero to 20 percent disability, 30 to 40 percent and so on. Using those numbers, we can extrapolate an increase of veterans and come up with an estimate of how much we’ll be short.”

That tax loss is estimated at between $3 and $4 million.

Another aspect is that the exemptions can stack, with veterans able to take advantage of both exemptions depending on their level of disability.

“So if you’re 100 percent disabled, everything is wiped. Now, if you’re 50 percent disabled, you can get the exemption for whatever that will be on the sliding scale and you can use the $10,000 exemption on top of that,” Bernal said.

Dittmaier said she and her department are hoping these early estimates can help the county and other agencies begin planning for shortfalls in property tax revenues.

“If an agency has a revenue loss somewhere, typically the only way to make that up is to raise taxes somewhere else,” she said. “Depending on whether they are maxed out on their mill rates, that might mean an increase in property taxes.”

The whole process is a bit of a moving target, Dittmaier said.

“We’re still waiting on the Legislature to do its thing, then the VA has to go through it’s process. If someone is disabled, that’s not a call we make. That’s up to the VA. I would assume they are tracking veterans’ disability ratings, because you have to know when a person hits 100 percent,” she said. “I’m willing to help veterans in any way I can, but there’s only so much we can do here in this office.”