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Still Holding the Line
City Council votes for a tax rate that will decrease the average property tax bill by $7.
By Michael Lee Pope
Wednesday, May 07, 2008
Eating a meal at your favorite restaurant will generate more money for the city, although the average residential property tax bill will be going down. Riding in an ambulance will cost more, although City Council members decided against taxing commercial properties at a higher rate than residential properties. As they put the finishing touches on the budget for Fiscal Year 2009 this week, budget officials and elected leaders created a delicate balance that forged a $542 million General Fund Operating Budget that is a 4.3 percent increase over last year’s budget.
"We were able to hold the line on the tax rate, and we can boast having the second lowest tax rate in the region," said Councilman Ludwig Gaines shortly before the vote was cast Monday night. "That’s no small feat."
Although general scale city employees organized this year and advocated for a 5 percent raise, City Council members decided against any market-rate adjustments this year. Since organizing earlier this year, members of the Alexandria Government Employees Association have argued that general-scale employees have been paid 13 percent below the real cost of living since 2002. Association members of the newly formed association wore their matching white "5 percent" shirts again Monday night hoping for a last-minute change of heart, but council members decided instead to issue all city employees a one-time "supplement" of $500.
"If we didn’t rally, we probably wouldn’t have even gotten that," said association president Brenda D’Sylva. "We’re not happy with the way this ended."
AFTER THE VOTE was cast Monday night, city officials argued that opting against the add-on commercial property tax rate will give Alexandria a distinct business retention and recruitment advantage over other local jurisdictions. Arlington County raised its commercial tax rate 12.5 cents higher than its residential property tax rate, and Fairfax County created an 11-cent add-on. Although City Council members were considering adding 3 cents to the commercial tax rate — a decision that would have generated an additional $1.5 million in revenue for the city — they decided against adopting the add on during Monday night’s session.
"There are things in this budget for people in the community to love and there are things in this budget for people in the community to hate," said Councilman Rob Krupicka. "I hope they are evenly balanced, but it probably depends on who you are talking to."
The budget season began in February, when City Manager Jim Hartmann issued a $534.8 proposal he called a "hold-the-line" budget. Budget Director Bruce Johnson joked that it should have had a purple cover and be known as the "Lenten budget of sacrifice," although he had no way of knowing that a decision of the Virginia Supreme Court would blow a $20.7 million hold in the budget by declaring the taxing powers of the Northern Virginia Regional Tax Authority unconstitutional. In the wake of the court decision, City Council members began contemplating a new round of taxes and fees to account for the loss in a way that would limit the consequences for Alexandria residents.
"When a person decides to eat in a restaurant, the decision is not an economic one but driven by convenience, adjacency, genre of food selection, ambience and other non-economic factors," wrote Hartmann in his proposal to raise the restaurant meals tax. "Arlington instituted a four-percent meals tax in 1991 and saw restaurant revenues increase in the year after its meals tax was implemented."
THE NEW TAXES and fees created about $18 million in new revenue, and Hartmann’s cost-saving measures created about $2.3 million in spending reductions. Yet one potential new source of revenue was delayed Monday night. Councilman Justin Wilson’s proposal to raise taxes on payday lenders and car-title lenders, which he called "predatory lending institutions," was put on hold after several industry representatives publicly threatened a lawsuit if the City Council decides to move forward with the plan. Although council members did not vote on this particular ordinance last night, the budget includes the new revenue from the tax and spending line items include funding for the financial literacy programs that Wilson’s plan suggested.
"We don’t want to get involved in a lengthy legal fight that will swallow up all the potential new revenues," said Wilson. "So rather than saying ‘damn the torpedoes, full speed ahead’ we are going to see if we can have a meeting of the minds with the industry."
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Michael Lee Pope/Gazette Packet
The council chamber was standing-room-only during a public hearing on the budget last month.
New Taxes and Fees
Property Tax Rate Increase: The real-property tax rate will increase from 83 cents for every $100 of assessed value to 84.5 cents for every $100 of assessed value. The average residential assessment decreased 1.9 percent, so the new rate will decrease the average residential tax bill by $7 from $4,221 to $4,214. Because commercial property assessments increased by 12 percent this year, the higher tax rate is expected to generate an additional $5.2 million for the city. City Council members decided against creating an add-on tax that would raise the commercial property tax rate higher than the residential property tax rate.
Meals Tax Increase: The current restaurant meals tax rate will increase from 3 percent to 4 percent, generating an extra $11.1 million for the city. Because a substantial part of the customer base is comprised of tourists and business travelers, budget officials say that increasing the restaurant meals tax will diversity Alexandria’s tax base and have less of a negative influence on city residents than an increase in the real estate tax.
Hotel Tax Increase: The current transient lodging tax rate will increase from 5.5 percent to 6.5 percent, generating an extra $1.2 million for the city. Transient occupancy taxes are almost always paid by those who do not live in a jurisdiction, so city officials say raising the transient lodging tax will export some of the city’s tax burden to those who do not live in Alexandria.
Parking Fee Increase: Parking meters west of Washington Street that now charge 50 cents per hour will increase to $1 per hour, and parking meters east of Washington Street that now charge 75 cents per hour will increase to $1 per hour. Budget officials estimate that the increase in parking meter fees will increase city revenues by about $680,000.
Sewer Fee Increase: The cost of connecting a single-family dwelling to the city’s sanitary sewer will increase 3.6 percent from the current rate of $7,092 to $7,432. Because the city wants to discourage a risk of applications trying to beat a potential rate increase, the new higher fees will be retroactively effective for final site plan submissions received after April 1, 2008. Budget officials estimate the new fees will generate an additional $50,000.
Refuse Fee Increase: The residential refuse fee will increase from $264 to $301, continuing the city’s policy of collecting 100 percent cost recovery for the full cost of residential refuse collection and disposal. Although the city manager recommended raising the fee to $281, City Council members ended up raising it to $301 to cover the cost of leaf collection costs.
Ambulance Fee Increase: Since 1969 the city’s ambulance fees have been increased five times, and City Council members have now approved another increase that is expected to generate about $400,000 in new revenue for the city. Basic life support service will increase from $300 to $400; moderate life support service will increase from $400 to $500; and advanced life support service will increase from $550 to $675. Budget officials say increasing the ambulance user fees will allow the city to offset a higher percentage of emergency medical service costs and maximize revenues under the federal Medicare program.
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