Amazon bump? What Amazon bump?
Arlington government officials say they believe the community’s expectations (or fears) may be outpacing reality, at least when it comes to the arrival of Amazon’s “HQ2” in Crystal City on the price of local real estate.
In a briefing focused on the upcoming fiscal 2021 budget process, County Manager Mark Schwartz said that while there has been “consistent strength” in home values as well as good news on the commercial side, overall property values are expected to grow about 4.6 percent when assessments are tabulated and mailed out early next year.
That’s far less than the civic grapevine and social-media commentariat have been predicting.
Schwartz said those contending that the HQ2 arrival would push housing prices countywide further into the stratosphere are dealing with assumptions, not facts. But he also could be signaling that local residents should not anticipate on a significant cut in the real-estate tax rate offsetting higher assessments.
Real-estate taxes (residential and commercial) account for about 57 percent of total Arlington government revenues in a given year, and knowing where they are headed is vital in helping county staff piece together a budget proposal that is likely to run $1.4 billion or more.
For homeowners, the home-assessment notice they will receive in late January will be only half the equation – they will not know how much their overall tax bill will be until County Board members set tax rates in the spring.
On Nov. 19, board members directed Schwartz to include no increase to the existing real-estate tax rate of $1.026 per $100 assessed value in his budget proposal, and attempt to find ways to cut the rate.
Suzanne Sundburg, a budget watchdog with a generally conservative outlook on spending, concurs with that guidance, and says county leaders should be able to get by without a tax-rate increase.
“In my view, the projected revenue increase of 3 percent to 4 percent from assessment increases alone should be sufficient to meet the county’s needs,” she said. “An increase in the tax rate on top of revenue seems like overkill – and it would represent a definite hardship for many lower- and fixed-income residents.”
Former independent County Board member John Vihstadt went further: He pressed for a reduction in the tax rate.
“While the [County] Board is already congratulating itself for their expected action of holding the line on the property tax rate for next year, I fear they’ll overlook the fact that many residents will face significant three- and even four-figure hikes in out-of-pocket costs, thanks to jumping assessments,” Vihstadt said.
“The Board concedes that Arlington is increasingly unaffordable to the middle class and those just starting out, yet – if they’re serious about it – they need to sharpen their pencils to provide at least a modest tax-rate reduction to offset relentless assessment escalation,” he told the Sun Gazette.
(Democrats might retort that, while on the board in 2017, Vihstadt joined all four Democrats in supporting a tax-rate increase of 1.5 cents on top of an average assessment increase of 2.9 percent. At the time, Vihstadt told supporters that he worked to get the best deal for taxpayers. “I could throw bombs or hand grenades from the outside . . . or I could have at least somewhat of an impact from the inside,” he said that year.)
Homeowners in 2020 could benefit from higher assessments anticipated in the commercial (office, hotel, apartment) sector, which represents about half of all assessed property value in Arlington. After years of high office-vacancy rates depressing the value of commercial property, “we are on the road back,” Schwartz said, with the overall vacancy rate down to 16 percent after peaking at more than 20 percent.
“We hope it will continue to go down,” he said.
Because commercial property requires less in the way of government services than residential, a big boost in commercial assessments could allow room for a lower overall tax rate, which could help homeowners.
But County Board members already may have uses for the additional revenue that higher assessments will bring, pointing to the need to fund affordable housing, transportation, schools and stormwater infrastructure. And in except the most extreme circumstances, there rarely are significant cuts made to existing programs.
Assessments are expected to be out in mid- to late January, with Schwartz’s budget proposal following in February.
That will kick off a three-month period that often combines showmanship with brinksmanship, as county leaders and special-interest advocates jockey to divide up the budget pie.
In this past spring’s budget process, Schwartz’s proposal called for no more than a 1.75-cent increase in the real-estate tax rate. County Board members countered by advertising a rate increase of 2.75 cents before settling on 2 cents – which, the cynics might suggest, gave them the best of both worlds: providing more funding to satiate advocacy groups while being able to proclaim fiscal responsibility by not raising taxes as much as they could have been raised.
In the budget adopted last spring, owners of a typical Arlington single-family home saw their real-estate tax bill rise 4.95 percent to more than $8,400, counting both the assessment increase and a 2-cent bump in the tax rate.