by Nicholas F. Benton, Falls Church Press [Online Issue]

24 Mar 2005

“Local officials responded with alarm this week to promises from Republican and Democratic candidates launching their campaigns for governor of Virginia in recent days to target the real estate tax for reform. Real estate taxes are the primary source of revenue for local jurisdictions’ operating budgets, and reliance on them by cities and counties in Northern Virginia is particularly acute given that they get back from Richmond only about 25 cents of every dollar of other taxes that are collected.

“Kicking off his campaign last week, Democratic gubernatorial candidate Tim Kaine offered a tax relief plan that would permit local jurisdictions to exempt up to 20% of real estate taxes. That was eclipsed by a more radical proposal by GOP gubernatorial candidate Jerry Kilgore, who launched his campaign with a promise of an across the board five percent cap on annual real estate assessment growth.

“City of Falls Church Vice Mayor Marty Meserve told the News-Press yesterday that the proposals ‘have the potential to cripple us.’ She said that Kilgore’s plan would be especially damaging, while Kaine’s would at least give local jurisdictions the option to offer exemptions.

” ‘This all could be a repeat of the car tax situation, when a drum beat and a tag line caused people to believe they could ultimately save money when they couldn’t,’ she said. ‘There is a danger that people will think they are capping an unfair tax and won’t look deeper.’

“She said that the proposals are new and haven’t been discussed by the entire Council yet, but will be. As far as the spiraling assessments in Northern Virginia in recent years, rising by as much as 130% since 2000, she said, ‘That’s the market, and assessments are market driven.’

“Falls Church Council member David Snyder, a former mayor here who has run unsuccessfully for State Delegate as a Republican in the past, was even stronger in repudiating the attempts of both candidates to target the only significant source of income for local jurisdictions.

” ‘It would be one thing if Richmond returned us even 50 cents on every dollar we send down there. If that were the case, then we could lower the real estate tax down to something like 85 cents and we’d have no problems,’ he said. But, he added, under the current arrangement, the candidates’ plans ‘would deprive us of the means to do what local citizens want.’

” ‘They are playing politics and this could be the last straw to bring down Northern Virginia governments, in particular. The state takes all our money and returns only 25 cents for every dollar. The dogs of war have been unleashed, and this is a dangerous beginning to the campaign season for both sides as far as I can tell,’ Snyder said.

“A leading Virginia economist also assailed both plans. John Knapp, an economist with the University of Virginia’s Weldon Cooper Center for Public Service, was quoted in the Virginian-Pilot yesterday. He said that ‘both plans would make the tax system less fair and could hamper the ability of fast-growing suburban communities to keep up with demands for schools and other services.’

“In addition to a cap on real estate assessment growth, Kilgore called for a voter referendum on any proposed increase in state taxes on gas, sales or income. Kaine’s plan would create political pressure on local officials to exercise their option for exemptions.  Currently, Kilgore’s plan for a cap on assessments is used in 19 states to curb taxes. Kaine’s plan to offer exemptions to homeowners is current law in 31 states.  Meanwhile, real estate assessments for 2005 are going into the mail today in the City of Falls Church. In anticipation of another double-digit average assessment increase, City Manager Dan McKeever has already recommended a modest cut in the tax rate despite significant added burdens to the next fiscal year budget driven by the opening of a new middle school and other factors.

“He’s also projected the average rate of increase will be around 15%, which is low compared to surrounding jurisdictions. Fairfax County, Arlington County and the City of Alexandria have already sent out their annual assessments, each with average increases of over 20%.

“In Fairfax County, assessment numbers announced Feb. 28 showed an average increase of over 23%, raising the value of the average home to about $445,000. While the overall size of the Fairfax budget in the coming year will grow seven percent, county manager Anthony Griffin has already responded with to the assessment hike there with a proposed 10 cent cut in the tax rate down to $1.03 per $100 in assessed valuation. Included in that proposal are plans to dedicate one cent of the tax to affordable housing and one cent to storm water management.

“In Arlington, assessments announced in mid-January increased overall by 24%, resulting in an increase in the value of an average home from $369,600 to $458,200. Over three years, overall assessments have soared by 70% as county board members consider dropping the tax rate to 95.8 cents. One consequence of the boom in values there has been that 47% of the county’s affordable rental units have been lost since 2000.
‘This is without question the longest protracted period of residential value growth we can document,’ said Arlington Assessor Thomas Rice.

“In Alexandria, assessments completed in early February showed an overall leap of 21.2%, due to both new construction and value appreciation. The jump was 21.3% for the average residential home, with the average assessed value of an existing residential home increasing by 131% since 2000. The value of an existing single family detached home or townhouse is now $563,092 there.

“Average Loudoun County increases are also at 20%, causing some to wonder why the estimated increase for Falls Church, where the average value of a single detached home is already at $527,000, would be only 15%.

“McKeever’s 15% estimated average increase combined with a two-cent drop in the tax rate to $1.06 would leave the average homeowner in Falls Church paying 12.8% more in taxes. If the actual percentage is higher, the net owed per taxpayer will be still more. That information should be known by the end of this week.”