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Already faced with a public-health crisis and the residual impact of government-imposed curtailments in economic activity, Arlington homeowners could find themselves hit with a double-whammy on the tax front.
Updated property-assessments notices hit the mail last week, with the average residential-real-estate assessment up 5.6 percent due to rising home-sales prices.
The average residential property (single-family homes, townhouses, rowhouses and condominiums included) stood at $724,400, up from $686,300, with about 90 percent of homeowners across the community seeing increases.
The figures are in line with trends in the Arlington real-estate market, which shook off the pandemic pandemonium to finish 2020 with more sales and higher average sales prices than in 2019.
So what’s the looming problem for homeowners? While residential assessments rose, assessed values in the commercial sector were down 1.4 percent, led by a steep decline in the valuation of hotels – no surprise, perhaps, given the impact of the pandemic and resulting economic calamities on that sector.
The value of office properties was relatively flat from 2020 to 2021, although new construction helped bump up the sector. Commercial property – a category ranging from malls and national retailers to gas stations and mom-and-pop shops – was down slightly, but that decline also was offset by new construction
Counting both residential and commercial sectors, Arlington’s overall property assessment rose 2.2 percent from 2020 to 2021, a total that, unless county-government officials can keep their belts tightened, could result in the imposition of a higher tax rate. It almost assuredly means there will be no likelihood of a cut in the tax rate for 2021.
Real-estate taxes account for nearly 60 percent of all county-government tax revenues, and growth in assessments has helped fuel growth in a budget that now tops $1.3 billion a year.
After the assessment data arrived, new-for-2021 County Board chairman Matt de Ferranti played his cards close to his vest, declining to commit to setting a tax rate without an increase.
“It would be premature for us to weigh in on a property taxes before seeing the options the [county] manager presents us,” said de Ferranti, who rotated in as board chairman earlier in January.
County Manager Mark Schwartz will present his draft budget next month, which will formally kick off a three-month budget process.
“What I can say is that want to avoid an increase in the property-tax rate if at all possible,” de Ferranti said. “We will consider using one-time funds, investments that are essential for recovery, and, where necessary, reductions in programs and services.”
Last spring, as the pandemic hit, county-government leaders reconfigured their budget proposal on the fly in an effort to address what was expected to be a significant economic hit from the pandemic and shutdown. Ultimately, however, County Board members decided not to reduce the tax rate, which meant a 2020 tax increase for more than three-quarters of county homeowners even as government services were being slashed due both to economic concerns and the public-health situation.
In 2020, the average residential assessment rose 4.3 percent from a year before, while the tax rate stayed steady at $1.026 per $100 assessed residential value. A typical single-family home assessed at $900,000 in 2019 whose assessment rose the average amount (to about $938,700) saw its tax bill rise from $9,234 in 2019 to $9,631 in 2020.
That same home, if it rose the average 5.6 percent in 2021, would now be valued at about $991,260 and would, if the tax rate stays put at $1.026, see a tax bill of $10,170.
If the tax rate rises, the bill would rise, too – in this example, by just under $100 for every penny added to the rate.
County leaders predict a “difficult” budget season, but that phrase is used almost every year no matter the conditions. Early in the budget season, County Board members will advertise a maximum tax rate, which will be the highest the county government will be able to impose. The final budget will be adopted, and the tax rate will be set, in late spring.
The county government’s fiscal 2022 budget goes into effect July 1, although the real-estate tax rate set by the government will cover calendar-year 2021. Property owners pay their real-estate taxes in two equal installments in June and October.
Up to about a decade ago, the county government’s annual budget and tax-rate proposals garnered significant attention from a host of groups, from the Arlington County Civic Federation to the government’s Fiscal Affairs Advisory Commission to those of all political stripes running for election. But as Arlington’s metamorphosis into a one-party (Democratic) fortress intensified, independent voices became more muted and, at times, were less taken seriously within the corridors of power.
The death in 2018 of Tim Wise, longtime president of the Arlington County Taxpayers Association, meant the silencing of one of the few independent voices still standing up for restraining the tax burden on county residents. Since his demise, nobody has stepped up to take up the mantle, at least not on a consistent basis.
Over the past half-century, Arlington’s real-estate tax rate has varied widely, from 76.5 cents per $100 assessed value for several years in the early 1990s to $1.532 per $100 for several years in the early 1970s. But that’s only half the equation, as the tax burden is dependent both on the rate and a property’s assessed valuation.