Despite Fiscal Pinch, Tax Bill Will Go Down
The Falls Church City Council will vote Monday to finalize its budget for the coming fiscal year beginning July 1, and last minute revisions will reduce the tax rate from an earlier-projected three-cent rise to two cents.
The rate voted Monday will be $1.03 per $100 of assessed valuation, instead of $1.04 as previously advertised, up from the current rate of $1.01. But with a sharp drop in residential assessments this January, the tax impact on the average Falls Church homeowner will actually be a smaller bill, down $174.
For the second straight year, the City’s budget is being cushioned by a hefty tax contribution from the new, large-scale mixed use projects either completed or under construction in its commercial corridors.
That has more than offset the decline in residential property values, easing what would otherwise be far stiffer tax pressures on homeowners. Vice Mayor Lindy Hockenberry noted last night that without the new mixed use projects, the residential real estate tax rate would have to be $1.14 this year, instead of $1.03.
The new budget includes the full request for funding by the Falls Church School Board, which despite enrollment growth, held that request to a narrow three percent increase over the previous year. The increase is almost entirely accounted for by higher teacher salaries required to keep the City’s school system competitive with surrounding jurisdictions.
Data provided by City Manager Wyatt Shields to the City Council at its work session this Monday showed that Falls Church’s overall tax rate is competitive with other jurisdictions in the region, and that its growth this year will be far less than many.
In fact, in a comparison of the proposed rates for the coming fiscal year, Falls Church’s rate is less than Leesburg, Manassas Park, Loudoun County, Herndon, Vienna, Manassas and Prince William County. Leesburg is projected to raise its rate from $1.09 to $1.32, Manassas Park from $1.14 to $1.27 and Loudoun County from 91 cents to $1.14.
Fairfax County, taking all real estate rates into account, will grow from 90 cents to $1.02, identical with what Falls Church’s will be next year.
Arlington’s rate will remain the lowest in the region, though jumping three and a half cents from 81.8 cents to 85.3 cents. That’s attributed to the fact that Arlington has followed the same aggressive commercial and mixed use development strategy that Falls Church is seeking to emulate.
But in addition, both Arlington and Fairfax will be increasing the tax rate for commercially-zoned property above the rate for residential, an option permitted by the state legislature for the first time this year. Both will raise the commercial real estate rate an additional 10 cents, while Falls Church will not raise its commercial rate over the residential rate at all.
At its work session Monday, the City Council found it could reduce the increase in the tax rate from $1.03 to $1.02 by finding $366,000 (equivalent to a penny on the tax rate) in savings without reducing any programs.
It was determined that there was a sufficient surplus in the current fiscal year budget to make the final payment of $217,000 to the F.C. Volunteer Firefighters for the West End Park property, thus taking that cost out of the next budget.
The other factors involved discovering the City will receive $59,000 more from the Washington Metropolitan Transportation Authority than expected, due to increased tax yields from higher gas costs, and that the schools will get $30,000 more from the state than expected. Finally, the actual cost of real estate tax subsidies for needy families was calculated, and comes in $59,500 less than originally estimated.
The Council was presented with scenarios for reducing the tax rate still further, but quickly found doing so would involve cuts they all considered unacceptable.
Shields showed data on reducing the Business and Professional Operating License (BPOL) tax for professional services in the City from 52 cents per $100 of gross receipts to Arlington’s rate of 36 cents and Fairfax County’s rate of 31 cents. The City would lose $268,000 in the first case and $284,000 in the second.
Council members commented they needed more time to consider reducing the BPOL rate, but that it was something they wanted to do in the future.
On the real estate tax rate, Shields said, “It is hard not to support dropping a penny off our original recommendation,” but he cautioned against “putting us into a hole for the out years.”
Councilman David Snyder added he was “pleased we could drop the rate down a penny,” but expressed a similar concern for “long term issues.”
A public hearing will precede the Council’s final votes on the FY09 budget and tax rates this coming Monday.