Commissioner warns veterans tax exemptions are driving millions in local costs; staff proposes COLA to keep beneficiaries eligible

Commissioner of Revenue Mugler told the Hampton City Council the city’s suite of tax‑relief programs — freeze, deferral and exemption — are affecting the city budget more than expected. He reported that the grandfathered exemption parcel count fell from 446 to 321 and that veteran-related exemptions for FY24 approached $6.5 million, with total local exemptions (including personal property relief) near $8 million for FY24.

Mugler said the exemption program’s income and net‑worth thresholds mean many longtime beneficiaries face bracket changes after Social Security cost-of-living adjustments. “If we don't use a COLA adjustment on these folks…67% of the applicants would be affected and change their bracket, and 20% would be completely eliminated from qualifying in the program,” he said, urging council to consider aligning the exemption brackets with Social Security COLA. The commissioner recommended staff work with regional partners — VML/VACO and area commissioners of revenue — to pursue state reimbursement for the unfunded mandate.

City Manager Mary and council members discussed the regional impact and political sensitivity of asking the state to reimburse what the commissioner called an “unfunded mandate.” Mary noted that the exemption program effectively adds about five cents to Hampton’s real estate tax rate because of the foregone revenue. Council directed staff to gather comparative regional data and said they would pursue legislative coordination if the data show broad regional impact.