More Tax Relief for Elderly Will Pay Dividends, F.C. Treasurer Says

Falls Church City Treasurer Jody Acosta, seated at table, presented the “Option 3” plan for extending tax relief to the elderly, disabled and veterans in the City to the F.C. City Council work session on Monday night. (Photo: News-Press)

The Falls Church City Council got a lesson on how less can be more, or on counter-intuitivity, from City Treasurer Jody Acosta Monday night, when she explained that her plan to offer greater levels of tax relief for eligible elderly, disabled and veteran citizens will pay big dividends for the City. And not just by a little bit, either.

As the Council prepares to mark up its proposed $99 million annual coming fiscal year budget this Monday night, there was a consensus, although not unanimous, to put an extra $63,000 into a tax relief fund of $390,000, to make tax abatement and deferral options available to more residents.
The “Option 3” plan, recommended by a special task force on the matter, is designed to enable more elderly, disabled and veteran citizens to remain in their homes, and not move away because of prohibitive annual tax obligations.

In summary, Acosta’s argument, on behalf of the task force, is this: With the average value of impacted elderly homes at $525,000, the current rate annual tax is $7,100, which may not be much to the City, but a lot to the impacted homeowner and could readily serve as a significant burden, and an incentive to move away to an affordable rental somewhere else.

If such a person moves away and sells her home, then it is highly likely given the current trends that the home will become occupied by a family with children. Since it is now calculated that the cost of educating a child in the Falls Church School System is approaching $20,000 per year, a family with two children moving into a home in Falls Church will impose a $40,000 per year financial burden on the City, which over the course of a decade is $400,000, not including any other costs.

So the math is simple. A senior or disabled person staying in their home with the benefit of tax relief will do so at a cost of $71,000 over 10 years, compared to the cost of over $400,000 to the City if that person leaves and the home is sold to a family with two children.

Some on the Council, like Phil Duncan, did the math and that caused his support “in a big way,” he said. “It is simply a matter of fact that we all benefit if we can encourage older people to stay here,” he said. “The money issue alone causes me to support this.”

Duncan noted that, because the City’s relief program would still be less generous than those offered by other jurisdictions in the region, that is still a “conservative proposal.”

But other Council members, like David Snyder and Ross Litkenhous, were less enthused, arguing that, while deferring taxes is OK (until a home is sold), offering outright tax relief seems to give an unfair advantage over everyone else who is paying their taxes.

“This is a slippery slope,” argued Litkenhous. “There could be unintended consequences. It won’t be easy to walk this back if it doesn’t work.”

Snyder said he’s worried that savings in the school costs won’t materialize as suggested.

But Councilman Dan Sze said it “will be good to keep senior citizens in their homes” and Letty Hardi concurred.

The Option 3 would reduce the interest charged on deferred taxes to zero, encouraging qualified households to go that route. Currently, senior homeowners are reluctant to leave their heirs with a financial burden of deferred taxes, especially if there is interest that has accrued.

They simply won’t do it, and will prefer a tax relief option if at all possible, Acosta noted. Like it or not, she suggested, that’s how seniors will behave.
The changes would actually lower the limit of assets of a qualified person from $540,000 to $400,000, and increase the range of those qualified for relief.

The estimated cost could grow from $140,000 to $265,000 for regular tax relief, drop from $40,000 to $15,000 for deferred taxes, and grow slightly for veteran tax relief from $100,000 to $105,000.

The Council also heard from representatives of the Mary Riley Styles Library over its plans for a renovation with the $8.7 million approved by voters, but facing a $900,000 estimated cost overrun.

While plans are in place for moving the library to a temporary location, the vacant classroom trailers at the Thomas Jefferson Elementary School, the contractors for the renovation and expansion of the library will not be ready with a final “guaranteed maximum price” until September, which is when the Council will be subsequently vote to commence or modify the work.

Snyder said he’d like to consider a “third option” beyond those of a lesser project at the same cost, or the same project at a higher cost, and Sze said he is concerned about the impact of a looming recession and the effect of that on the price.

Duncan said he is concerned about the precedent of the City Hall renovation, that the City be treated fairly by the construction team with respect to cost overruns, change orders and the like.

The longer the delay, the more cost estimates will rise, Litkenhous opined. “It will get worse, not better.”

The Council also touched on the issue of affordable housing, led by Hardi who brought it up in the context of the budget discussion for the City’s Housing and Human Services component.

The City faces the fact that the only significant affordable housing dwellings in the City, the 96 apartments at The Fields, will lose by 2026 the tax relief subsidy that has kept them affordable.

While there is no money in the current budget for affordable housing, City Manager Wyatt Shields suggested that setting aside $150,000 to $200,000 a year may be sufficient to enable the City to negotiate for an extension of the terms with The Fields in an effort to maintain them as affordable.

He said that this could come for discussion when revisions to the City’s comprehensive plan comes up in May.

“We need to develop a strategy for affordable housing this year,” Duncan said.