City Council Establishes Maximum Possible 2008 Real Property Tax Rates

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Alexandria City Council Establishes Maximum Possible 2008 Real Property Tax Rates

Today the Alexandria City Council authorized advertisement of the maximum possible real (residential and commercial) property tax rates it will consider for the 2008 calendar year. Based on Council’s actions, the base real estate tax rate could be raised by a maximum of three cents, from 83 cents to up to 86 cents per $100 assessed value. City Council will also consider an add-on real estate tax rate on non-residential commercial and industrial property of up to two cents per $100 assessed value. If approved, this add-on tax would be used for transportation projects and services.
On February 12, Alexandria City Manager James K. Hartmann proposed a General Fund Operating Budget totaling $534.8 million for FY 2009 that reflected no increase in the existing real property tax rate. The City Manager also proposed an Alternative Budget that would require an additional $6.8 million, or a two-cent increase to the real estate tax rate. The Alexandria School Board has requested $1.5 million in additional funding above the Alternative Budget. 

After the City’s budget was proposed in February, the Virginia State Supreme Court ruled that the Virginia General Assembly’s delegation of tax and fee authority to the Northern Virginia Transportation Authority (NVTA) to raise taxes was unconstitutional. The NVTA was set up as a regional authority that would have provided additional transportation funding to all Northern Virginia jurisdictions, including $16 million in annual funding to support projects of the City of Alexandria in FY 2009.

This loss of significant NVTA funding, coupled with likely reductions in State aid to the City, creates a gap in the City’s proposed budget that may be only partially reduced by the proposed increase to the real property tax rates. As a result, unless the General Assembly takes action to replace the lost NVTA funding, City Council will look at reprioritizing the current budget, and contemplate additional reductions, particularly in the transportation area, to make up for the lost revenue.

The potential change to the real property tax rate would result in the average residential tax bill increasing by up to $68 or 1.6 percent when compared to 2007 real estate tax rates. This compares to a drop in the average residential tax bill of $47 in 2007. The City’s real estate tax rates would still the lowest in the Northern Virginia region, even if the maximum tax rate increase is approved.

The add-on commercial property tax has been under consideration by City Council since December, when it voted to appoint an Ad Hoc Commercial Real Estate Tax Option Study Committee to study the issue. The Ad Hoc Committee delivered its report to City Council this past Tuesday and recommended establishing a two to four cent commercial property add-on tax rate in 2008.

Alexandria Mayor William D. Euille stated: “Transportation is a major long-term issue facing the region and the City, and crucial to the City’s future economic development and sustainability, and our residents’ quality of life. Without new revenue sources, the City will face considerable challenges in funding necessary transportation improvements.”

Mayor Euille also said that “the City Council’s decision to consider establishing an add-on commercial tax for transportation projects and services is similar to actions taken by Fairfax County (12 cent increase) and Arlington County (12.5 cent increase), which were also affected by the loss of NVTA revenues. In addition, all major Northern Virginia jurisdictions are considering real estate tax rate increases ranging from three cents to 25.6 cents.”

“This is a challenging time for in setting a budget that will provide essential services to our residents and investments in our infrastructure at existing real estate tax rates,” said Mayor Euille. “Given the economic uncertainties, advertising higher tax rates than we may need gives us flexibility in balancing the budget. I look forward to hearing from the community about our budget, how we better meet our transportation needs, and how we address tax options in the weeks ahead.”

The public hearing on the budget will be held Monday, April 14 at 4 p.m. in City Council Chambers, City Hall, 301 King St.  The effective real estate tax public hearing will be held on Tuesday, April 22 at 7 p.m., also in City Council Chambers. The Operating Budget and Capital Improvement Program are scheduled for adoption on Monday, May 5 at a special legislative meeting at 7 p.m. in City Council Chambers. For more information, visit and click on the “FY 2009 Budget” tab on the home page.