A Penny For Your Thoughts

Fairfax County received another blow from the General Assembly on Monday. Despite the persuasive testimony of State Senator Dick Saslaw (D-35) and County Executive Tony Griffin, the House Finance Committee voted down a proposal to allow Fairfax County to impose a two percent meals tax. Several people who attended the Monday morning meeting noted that the question and answer dialogue was excellent and delegates’ body language conveyed interest, but the proposal ultimately failed 12 to 6. Thus, another effort to seek legislation to diversify local revenue streams, and reduce the burden on residential real estate taxpayers, crashed and burned.

For months, local governments across the Commonwealth of Virginia have worked on proposals that would remedy Virginia’s antiquated tax structure and allow counties the same authorities as cities and towns to diversify revenue. The tiny City of Falls Church has more authority and flexibility in its revenue streams than does Fairfax County, more than 100 times larger. Fairfax cannot raise its cigarette tax, or impose a meals tax, or a hotel tax without getting approval first from the General Assembly. Without diversification, the County’s General Fund depends on the real estate tax for 60 percent of its revenue. Clearly, this overdependence needs to be fixed, but the House of Delegates in the General Assembly is making it exceedingly clear that they don’t care. Local governments support a myriad of public services, many of which are mandated but not funded by General Assembly legislation. In Fairfax County, the state provides only 17.8 percent of school funding; county taxpayers provide 71.4 percent of the total (the other 10 percent comes from a variety of other sources).

To be fair, it’s not all grim. The County’s initiative for a 2 percent transient occupancy tax (hotel room tax) passed both the House and the Senate, and is expected to have Governor Warner’s signature. That 2 percent tax is forecasted to raise $6.9 million a year, a little less than half a cent on the tax rate. However, that legislation was very carefully crafted in collaboration with the Fairfax County Chamber of Commerce and the hospitality industry, and is earmarked for specific uses to recruit the business and vacation dollar.

At a reception Monday night in Richmond’s historic Old City Hall, I spoke with several members of the Northern Virginia General Assembly delegation. All expressed frustration with the budget impasse, and offered little hope that the state would have a budget before localities need to adopt their own FY 2005 budgets. Not knowing what state funds will be available for localities makes our budget deliberations extremely difficult. State funding already falls short of local needs, and we face the very real danger of not having any state funding if the Senate and the House cannot break their impasse. Stay tuned….