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Council Splits Property Tax Rate

Personal property tax increased.

Residents of the City of Fairfax will be paying a bit more on their personal property tax (the car tax) in order to pay a lower rate on their property tax. Residents will still pay more in property taxes than they did last year.

At the City Council’s April 12 meeting, councilmembers approved the $110 million city budget for next year. In doing so, they set the personal property tax rate at $3.79 per $100 of assessed value, and set a split property tax rate of 87 cents for the first half of the year and 81 cents for the second half. Three cents of each of the two property tax rates will be used to fund open space acquisition.

The personal property tax increase allowed the council to reduce the property tax rate by about 2.5 cents.

As a result, the owner of the average home in the City of Fairfax (average assessed home value is $413,084) will pay $3,469.91 in property taxes this year. In bottom line terms, this equals a 6 cent reduction from last year's rate of 90 cents, since the amount paid by the average resident would be equal to 84 cents if the same rate had been used for both billings.

WHILE THE state currently funds about 70 percent of the city’s personal property tax, the increase will not be subject to that reimbursement. As a result, the personal property tax increase will mean the owner of the average car (approximately $8,500) will pay $238.26. [See sidebar].

Mayor Robert Lederer touted the city’s reductions in the tax rate over the past few years. However, assessments have gone up each year, and residents have still ended up paying more each year.

Lederer also noted the large amount of debt service that the city must fund, virtually all from voter-approved bonds. If not for the bonds, Lederer said, the rate could be in the high 60s.

The first action of the evening was to increase the car tax rate. City residents had been paying $3.29 per $100 of assessed value, and that amount will now increase by 50 cents to $3.79.

While Lederer said this would put the city 80 cents lower than other Northern Virginia jurisdictions, according to the city’s own budget documents, it will be a higher rate than the City of Manassas and Prince William County. While it will be lower than other jurisdictions, it will only be 80 cents or more lower than the City of Alexandria and the City of Falls Church. It will be 78 cents lower than Fairfax County.

The vote to approve the increase came on a motion by Councilmember Gary Rasmussen, who stated that he does not like the car tax. "I would like to see it eliminated, if we could find a way to do it," he said.

The increase passed on a vote of 4-2, with Councilmembers R. Scott Silverthorne and Jeffery Greenfield opposed to the increase.

The council agenda had an item to discuss a possible increase in the meals tax charged by restaurants, but the possibility died without anyone making a motion. A 1 percent increase in the meals tax would have generated enough funds to drop the property tax by about 2 cents.

WITH THE personal property tax hike in place, the council was able to take on the property tax.

At a previous work session, the council had discussed the problems with setting a tax rate for the June billing date, since the rate applies to this calendar, but June falls into the previous fiscal year. By decreasing the rate, said David Hodgkins, director of finance for the city, it created a budget hole in the previous fiscal year.

To close that hole, the council decided to leave the rate during the first part of the year at a higher level, and drop the rate for the second half of the year.

Silverthorne suggested dropping the rate by one more penny, to 80 cents, and paying for it out of the city’s fund balance — an $11 million cushion or "rainy day fund." The extra cent would have required about $461,000 to be taken from the fund balance.

Councilmember Gail Lyon was concerned about the effect a reduced fund balance would have on the city’s AA bond rating. "How will that affect us if our fund balance continues to go lower?" she asked. Better bond ratings save the city money in interest it pays out to bondholders.

Hodgkins said that the bond rating agencies do examine the fund balance when making decisions about bond ratings. "They would like us to maintain the fund balance where it is," he said.

Silverthorne pointed to past years when the fund balance had been as low as $4 million and said that even if the balance is lowered it would be sufficient. "The bottom line is this is an amount I’m saying is a healthy fund balance," Silverthorne said.

The plan failed 5-1, with only Silverthorne supporting it.

At the meeting’s close, Silverthorne and Lyon both blasted the rest of the council for actions taken at their meeting two weeks ago when the council decided to vacate Yorktown Drive. The city-owned road was given to Jaguar Development, which is developing the Higginbotham Property. The council approved the development during its Feb. 22 meeting. "I think the council blew it when we chose not to accept a $500,000 payment for Yorktown Drive," Silverthorne said. That amount, he noted, could have allowed the city to reduce the tax rate by another cent.

"We gave 60,000 square feet without any monetary benefit," Lyon said. "The citizens owned that property."

Any councilmember who voted for the proposal, the two said, could bring it up again for reconsideration, but none chose to do so.

The council also approved the creation of a Business Improvement District along the Route 50/29 corridor. Businesses along this corridor from Pickett to Jermantown roads will pay an extra 6 cents on their property taxes, an amount estimated to generate about $415,000 per year. These funds will only be used to help develop the corridor.

The initial proposal was to allow the tax for 20 years, but Silverthorne proposed a five year sunset date, at which point the council could choose to reauthorize it or let it end.

The five-year sunset passed by a 4-3 vote with support from Silverthorne, Lyon, Greenfield and Lederer.

In other business, the council introduced resolutions to spend $5,763.73 in grant funds for the purchase of voting machines. The council also introduced a resolution for $1.275 million to use for ongoing aspects of the George Mason Boulevard project. Both of these will have public hearings at future council meetings.

The council accepted a two-year extension of a contract with Davenport and Co. for financial advisory services, and approved a request from Chevy Chase Bank to put a new bank at 10100 Main St.