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Real Estate Tax Increase? Maybe Not

City Council to consider stagnant real estate tax in exchange for higher meals and property taxes.

City Council is entertaining the possibility of keeping the real estate tax below its advertised rate of $0.74, by offsetting the increase with a higher meals and personal property tax.

Council voted to advertise the real estate tax at $0.74 per $100 of total assessed value at its Tuesday, March 27, meeting. The advertised rate means the council cannot vote to exceed that rate, which would be an increase of $0.03 from last fiscal year. But at its Tuesday, April 3, work session, council members instructed staff to draft the numbers for where the budget would be if they raised the meals tax by 2 percent and the personal property tax by $0.71 to $4.50. Based on those estimates, council could consider to leave the real estate tax alone or increase it by 1 or 2 cents less than the advertised rate, recommended Councilman Gary Rasmussen.

Mayor Robert Lederer looked for a consensus early on, since he said "it’s a totally different budget without the meals tax." That tax increase accounts for $2.4 million of the proposed budget.

"This is too big of a line item this year to wait to the 11th hour," said Lederer.

Four council members outwardly supported the meals increase, which would be enough members to approve it at the Tuesday, April 10, meeting where City Council is scheduled to adopt the budget. Council member Scott Silverthorne said he hoped other members would keep an open mind on the amount of the meals increase, since it may turn out that a 1 percent increase would also work. Silverthorne said the higher the revenue, the higher the spending — not the direction he wants to head. City staff is expected to come up with estimates on that before the April 10 meeting.

"I think this is the year, if any year, to increase the meals tax to help this budget year," said Council member Gail Lyon, who said she supported an increase that failed last year. "We have things we have to manage."

Consensus for a personal property tax increase was not as firm. Council member Jeff Greenfield pointed out that the personal property tax is a lump sum payment, so increasing it might be harder on some residents’ pocket books, he said. "It’s not something wrapped into a mortgage [payment]."

"I don’t think it’s the panacea we all think it is," said Greenfield.

But other members showed some interest in the increase, especially those who want to avoid a real estate tax increase. Council member Gail Lyon said she favors balancing the increases between meals and property if it means keeping the real estate tax lower. Silverthorne said he would only support a meals or a personal property increase, but not both.

Other Northern Virginia jurisdictions the city compares itself to have no plans to increase personal property tax, said David Hodgkins, the city’s finance director. Alexandria is the only jurisdiction voting to advertise an increase, he said, and Arlington raised its personal property tax to $5 the previous year.

DURING THE BUDGET MARKUP, council members trimmed a few things down, but added others. Council members asked staff to report back on the increase in cost-of-living adjustment, or COLA. COLAs prevent inflation from eroding social security and supplemental security income benefits. An increase is proposed based on the City Council’s policy on reaching compensation adjustments each year, said City Manager Bob Sisson.

And while council members said they don’t want city employees to feel like the council is balancing the budget at their expense, they did ask for more details about the COLA flexibility. It was unclear what the consensus will be when council members vote on April 10.

"Getting rid of the cost-of-living increase concerns me," said Greenfield.

The city added $41,000 back to the budget for tourism and marketing, and subtracted $45,000 from parks and recreation. The cut was for the concept plans at Van Dyck Park — one of the city’s most heavily used parks, said Michael McCarty, the city’s parks and recreation director. The concept plans would have provided information about the feasibility of building a community center on the property, he said. The city kept $30,000 in McCarty’s budget for a master plan for all city parks.

Another cut came from acorn lights along Pickett Road, near the Home Depot by Fairfax Circle. Council members determined the decorative lights, a $30,000 expense, were not pertinent to the upcoming fiscal year’s budget.

The City Council is scheduled to receive detailed budget memos in the days leading up to the April 10 adoption meeting. Based on those memos, council members will vote on some of the uncertainties from the April 3 work session. There will be a public hearing before council members vote on the budget, meaning community members can come out and voice their opinions on various budget items.