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Council reviews fiscal impact of lifting nonprofit tax-exemption moratorium; staff recommends further study
Summary
Officials reviewed the 2013 moratorium on nonprofit property tax-exemption applications and heard that exemptions now account for roughly $30.5 million in foregone revenue citywide for FY2025-26; council asked staff to research how many nonprofits own taxable property and consider ordinance updates before any change.
City staff provided the City Council with a fiscal briefing on the 2013 moratorium that halted new applications for local tax exemptions for qualifying charitable organizations and explained how recent state code changes affect local taxability.
Billy Butt, Suffolk’s assessor, and Stephanie Wells, director of finance, explained that Virginia Code §58.1-3651 authorizes localities to grant local tax exemptions to qualifying charitable organizations and that a later change in §58.1-3603 affects how rental or other income from portions of property used for charitable purposes is treated for taxation. Wells said some properties previously taxed for leased portions may now require full exemption under the changed statute and estimated a small number of Suffolk properties could be affected.
Wells presented revenue figures showing the cumulative effect of various exemptions: $12.3 million in estimated lost revenue in FY2013 and $30.5 million in lost revenue in FY2025-26, representing about 17 cents on the real estate tax rate. She said discretionary exemptions for nonprofits currently cover 53 properties and total roughly $2.2 million in lost revenue; discretionary exemptions overall represented $5.5 million in forgone revenue for FY26. Wells cautioned that as many as an estimated 280 nonprofit organizations might own property in Suffolk and that further research is needed to determine how many would qualify under Section 82-487 and what the true fiscal effect of lifting the moratorium would be.
Council members expressed interest in studying the ordinance and impacts before any action. Council member Rector, who requested the staff work, said more information is needed on how many nonprofits own land and the potential dollar values tied to those parcels. Council member Abney asked for confirmation that some exemptions are mandated by state law and not within council control; staff confirmed mandated categories cannot be reduced locally. Several council members suggested a phased approach: keep the moratorium in place while staff compiles property-level data and then return with a more-detailed fiscal impact analysis and suggested ordinance updates.
No formal vote was taken to lift the moratorium; council consensus was to continue study and possibly revisit the issue before next year’s budget cycle. The meeting then moved to a closed-session motion and subsequent approval of appointments.
