News-Press Editorial: Preemptive Tax Cut

It was a smart move by the Falls Church City Council to move swiftly last Monday night to codify a sharp reduction in the City's real estate tax rate for the coming fiscal year. By a unanimous vote, the Council voted to lower the ceiling above which the tax rate cannot go for the FY2005 budget from its current $1.13 per $100 assessed valuation to $1.09.

When the final vote on the budget comes on April 26, it is possible the rate could come down even further. But for now, it is important that City real estate taxpayers know the Council is working to ameliorate the impact of the 25% (on average) jump in real estate assessments that were reported last month.

The City of Falls Church's Chief Financial Officer Shirley Hughes made it clear in an interview with the News-Press yesterday that, with the Council's intent to cut the tax rate, the total amount in actual dollars that the City will collect in real estate taxes in the coming year is the same as it intended to collect before the surprisingly-big jump in assessments came in.

Last year about this time, Hughes projected that assessments would rise only 5% and, based on that and the passage of the $25 million bond referendum to construct a new middle school, the City rate rate would have to jump from $1.13 to $1.26 to cover costs (assuming a virtual no-growth budget except for the school bond debt).

The only difference from that projection to today's reality is that instead of covering the City's $56 million operating budget with a 13 cent tax rate increase, it is being covered by a higher-than-expected assessment increase combined with a tax rate cut.

The only growth in the budget aside from the school construction debt is that driven by an unexpected, major increase in the City's obligation to the Virginia Retirement Fund and continued enrollment growth in the City schools. Otherwise, there are no new programs or significant cost increases in the budget.

"It is important for residents to know that the leap in assessed values in the City is not a `windfall' enabling the City Council to spend more money. The amount the City intends to spend has not changed from the projections of a year ago. We knew then that to pay for a new school, the rest of the City's programs would have to be put on a diet," Hughes said. "They are on a diet. There is no excess spending."

Given the choice between stagnant property values and an increased tax rate, or rising property values and a lower tax rate, City property owners fare far better for a variety of reasons with the latter option. It also strengthens the City's fiscal health and credit rating.