Real Estate Tax Ceiling Set At Half-Cent Above Current Rate In Alexandria

ALEXANDRIA, VA — Up to a half-cent increase in the real estate tax rate will be considered in Alexandria's fiscal year 2023 budget.

City Council voted Tuesday to set the real estate tax ceiling at $1.115 per $100 of assessed value, which is the maximum rate that can be approved this budget cycle. A lower rate than $1.115 may be considered by City Council.

The current real estate tax rate is $1.11 per $100 of assessed value, proposed to remain the same in City Manager James Parajon's budget proposal. The tax rates on personal property (vehicles) and business-tangible property are proposed to remain the same. A second reading and public hearing on the tax rate will be held March 23, and final tax rate and budget approval is scheduled for May 4.

The tax ceiling approved by City Council was suggested by Councilmember John Taylor Chapman.

"My thought was to go up half a cent with my focus being on keeping the tax rate at the level proposed by the [city] manager at the level though, proposed by the [city] manager," said Chapman at the meeting. "Of course, that would take work in terms of adding stuff but also deleting things and talking about priorities. And so since we still have a number of work sessions in front of us to do that, I think it would be prudent of us to advertise at a higher rate."

Councilmember Canek Aguirre advocated for a tax ceiling two cents higher to give City Council flexibility in the budget process.

"We never know what through this budget process we might all of a sudden want to fund and don't want to hamstring us from the possibility of doing so because we say zero," said Aguirre. "Then we're gonna have to start deleting a bunch of stuff, which I don't think most of us wants to do."

Vice Mayor Amy Jackson acknowledged Aguirre's position on flexibility but said "two cents is too high and too much temptation to advertise."

Councilmember Kirk McPike called for a compromise between Aguirre's and Chapman's positions, noting priorities on employee compensation and addressing the climate. McPike expressed concern about cutting programs during continued COVID-19 economic recovery.

Even if the tax rate wouldn't change, property owners with a higher 2022 assessment value would see a higher tax bill. The city's overall tax base increased by 6.24 percent from 2021 to 2022, and the residential tax base alone grew by 6.91 percent. For residential properties, about 82 percent increased in value, 3 percent decreased and 15 percent were unchanged.

According to the city, no tax rate change would still increase the average residential tax bill by $445 or 6.5 percent. A tax rate of $1.115 would increase the average residential tax bill by $477, or 7 percent.

Councilmember Sarah Bagley acknowledged the impact of increasing property values on residents. Bagley also noted priorities like addressing climate change in the city manager's alternate budget with a 1-cent tax rate increase aren't in the budget with no tax rate increase.

"I'm certainly inclined to give us flexibility, but I am you know trending towards in light of the real estate assessments, the 1 [cent] area that allows us a little flexibility, but a more conservative approach," said Bagley.

Councilmember Alyia Gaskins agreed about flexibility but is leaning "more conservatively" on the tax rate ceiling. She is open to a compromise of 1 cent but would likely not vote for a 2-cent increase.

"I really do think this is going to be a hard time for our residents," said Gaskins. "I also think that we are in a unique time in the fact that we do have [American Rescue Plan Act] funds still and we have additional revenue coming in."

Mayor Justin Wilson supports keeping the tax rate the same but believes funding priorities could warrant tax increases in future years. Wilson noted the impact of the upcoming collective bargaining process and capital projects. The city just learned that Metro is planning shutdowns for Potomac Yard Metro preparations and Yellow Line bridge and tunnel renovations, and providing alternate options could fall on local government, according to Wilson.

"I would argue very strongly for, for when we adopt the budget not adjusting the rate this year, recognizing that we are going to have some probably unavoidable pressures on the tax rate over the next couple years," said Wilson.

For this year's proposal, Wilson questioned a tax rate change when city revenue growth is the highest in 15 years.

"It's the healthiest rate of revenue growth we've seen in 15 years now in a city and, quite honestly, if we can't get through that budget with seven and a half percent revenue growth and $60 million of [American Rescue Plan Act] money sitting in the bank, we can't get through that without raising the tax rate, then we got to we got bigger issues at play," said Wilson.

The mayor said the city should also consider regional context, as Fairfax County, Loudoun County and Prince William County could potentially lower their real estate tax rates. Fairfax County's current rate is $1.14 per $100 of assessed value, Loudoun County's is $0.98, and Prince William County's is $1.115. Wilson said it is unclear what Arlington County will do with its tax rate, currently $1.013.

City Council will balance the impact of increasing assessment values on residents with priorities such as employee compensation and funding Alexandria City Public Schools. For more information about the budget proposal and process, visit alexandriava.gov/Budget.