Higher Real Estate Tax Rate Not Ruled Out By Alexandria City Council

ALEXANDRIA, VA — On Tuesday, Alexandria City Council set the advertised real estate tax rate one cent higher than the current rate while discussing the impact of assessments to homeowners and revenues needed for capital investments. That advertised tax rate is not final but is the highest City Council can adopt in the fiscal year 2024 city budget.

The current real estate tax rate is $1.11 per $100 of assessed value, which the city manager's proposed budget would keep the same. One alternative budget proposal calls for a one-cent real estate tax increase, which would produce an additional $4.7 million in fiscal year 2024 revenue and $2.4 million from the second half payment in fiscal year 2023.

One consideration for City Council in setting the real estate tax rate is the impact of increasing assessment values on homeowners.

Even if the current tax rate stays the same, tax bills would still go up for property owners whose assessment values increased. Assessment data presented to City Council showed the average single-family home assessed value increased 4.58 percent, while the average value for a residential condominium increased 3.48 percent. The commercial tax base overall increased by 1.97 percent, but changes varied by property types. Multifamily rental properties had an 6.19 percent increase in value.

Motions to advertise a one and a half cent increase and one cent increase were proposed, but only the latter was approved.

Some City Council members were reluctant to support an advertised tax rate one and a half cent higher than the current rate.

"What is going on right now, everyone has just received their assessments," said Vice Mayor Amy Jackson. "When we have homeowners that have it's gone up almost 22 percent, for a lot of people 20 to 22 percent in three years, people can't afford their assessments."

Councilmember Alyia Gaskins agreed with advertising a higher rate to give flexibility during budget discussions. However, she raised a concern about one and a half cent increase due to housing costs for middle-income families.

"I'm thinking about the fact that all of the middle income households that we have in our community right now — I think there's somewhere near 9,000 that make too much to qualify for any benefits but obviously make too little to be stably housed and really stable in our community," said Gaskins. "And I worry at a time when everybody's feeling a lot of pressure from utilities to food to gas."

Councilmember John Taylor Chapman explained why he suggested advertising a one and a half cent increased tax rate.

"I do feel that if we don't give ourselves wiggle room and are a harsh hit with something that we might not be aware of in this budget process, we will be boxed in to having to make, frankly, cuts in that might not before the best interest of the organization," said Chapman.

Another key factor mentioned by Chapman was the future of the capital budget. As reported by ALX Now, city government and Alexandria Ciy Public Schools had a disagreement on whether some projects should be prioritized in the next ten-year Capital Improvement Program.

Mayor Justin Wilson said he doesn't believe the tax rate should be raised this year but highlighted the need to have conversations about the Capital Improvement Program's future. He noted the city made a two-cent increase in the tax rate before the COVID-19 pandemic with revenues dedicated to largely school capital improvements. But after the COVID-19 pandemic hit, the capital program was slowed down and a two-cent tax rate reduction was approved.

"Sooner or later, we're going to have to deal with it either by modifying the [Capital Improvement Program] or by raising a lot of additional revenue," said Wilson. "For me personally, the only way that I would support this year, increasing the rate would be if 100 percent of that was going that additional revenue was going to cash capital or reductions of debt in order to fund the capital improvement program."

Councilmember Canek Aguirre highlighted the concern of not making proper capital investments for the future.

"I'm gonna say forget about boxing ourselves. I'm gonna say digging ourselves a hole," said Aguirre. "When we think about what the last council had to do for stormwater because of the infrastructure investments that we didn't make, there's a long list of things that we didn't invest in appropriately."

Councilmember Sarah Bagley acknowledged Chapman's discussion on long-term investment needs while giving a short-term funding perspective.

"I do appreciate the space that an advertisement of a potential increase would allow for in terms of programmatic ideas, or redirection, new positions, new pilots," said Bagley. "So I would be inclined to support an advertisement of an increase bearing in mind that while we may not adopt it this year, it might result in budget questions and pricing impact considerations that might be available next year."

Virginia law requires a public hearing on the real estate tax rate if assessments would result in a 1 percent increase or more. Alexandria's tax rate public hearing is scheduled for April 25. Budget adoption is scheduled for May 3.

Full budget proposal information is available on the city's website.