Manassas Park is moving forward with a budget that would lower the city’s real estate tax rate for the first time since 2015.
City Manager Laszlo Palko’s proposed budget, which will go before City Council June 7, would reduce the rate by at least 2 cents after the advertised rate was set at $1.53 per $100 in assessed value for the fiscal year that begins July 1. The current rate is $1.55.
The city’s previously publicized plan would have started reducing the tax rate – the highest in Northern Virginia – starting in fiscal year 2024 by 1 cent for each of the next 10 years. That plan had been endorsed by Palko and Mayor Jeanette Rishell, but Palko said that because of an increase in real estate assessments of almost 7% this year, the city was able to begin lowering its rate sooner.
“That was a conservative forecast. The forecast got better, and our reserves position got better in [FY]22,” Palko told InsideNoVa. “It’s pretty exciting that we’ve gotten to this point that we can do this and start reducing that tax rate. The goal is to keep on doing that. We’ve heard loud and clear from residents that that’s their top priority so that’s what we’re doing.”
The council could elect to drop the rate even lower, but the advertised rate is the highest it can be set at for the next fiscal year.
The last time the city reduced its tax rate was in 2015, before Rishell and Palko took office. At the time, creditors from a 2012 debt refinancing were startled by the move, according to Palko. The city built up a significant amount of debt prior to the 2008 crash and back then had no credit rating from Standard & Poor’s or Moody’s. At the same time, the state was monitoring the city’s finances because of its heavy debt burden and low reserves.
Palko says that this time, the reduction won’t set off any alarms. Debt service will begin to fall next year, and the hope is that a significant city center development anchored by new residential units will help to bring in revenue on top of the city’s already growing assessments. The city projects that real estate tax revenue will still grow by $1.6 million in the next fiscal year even with the rate reduction.
“We want to be cautious because we’re not out of the woods with the year. We are still under watch here from everyone to make sure that we are completing the plan that we promised a few years ago,” Palko said. “The hope is that each year we’re just able to do more as our position continues to improve, as our economy gets stronger, as our downtown develops, as we stay committed to reducing our debt liability.”
While the proposed $51.4 million budget reduces the real estate rate, it would also grow the city’s outlay to its school division by $30,000 to $13 million. The plan is to continue to increase the transfer by that amount under the 10-year “operating model.”
The budget would also provide a 3% pay increase for city employees. Despite its high tax rate, on average the city has the lowest salaries for city and school division employees in the region. Palko acknowledged the city still has a long way to go to be competitive with surrounding jurisdictions on compensation.
The budget also funds four new staff positions within the city government, one of which will be paid with state funds. The budget, if adopted, would add an in-home specialist to the city’s social services department to help with child protective cases, something Palko said the city has seen an increase in. For the first time, the city would also have a full-time transportation manager.