Localities Prepare For End to Windfalls

Maryland homeowners, who receive valuations every three years, will get similar bumps. State officials said that in portions of Montgomery that have been assessed for 2006, including parts of Rockville, Gaithersburg and Olney -- about 114,000 households -- residents can expect increases similar to this year's, which ran at about 70 percent. That would make a Montgomery home worth $400,000 three years ago worth $680,000 next year. Values in the District, driven especially by appreciation in condos and co-ops, are expected to grow at roughly the same rate as last year, about 21 percent, officials said.

Maryland and District residents have some indemnity from runaway property tax bills. Under state and D.C. laws, yearly increases on owner-occupied residential properties are capped at 10 percent.

Virginians, however, have no such cap. The dawn of each budget season brings a litany of complaints from local lawmakers about the structure of the tax system imposed by the state legislature, which bars counties such as Fairfax from taxing personal income. That has meant an increasing reliance on real estate taxes to underwrite local governments. Since 2000, for example, property tax revenue has grown from 50.2 percent to an estimated 59.5 percent of Fairfax's general fund. About half of Arlington County's general fund comes from property tax receipts.

Some localities are beginning to look to the day when the largess of property taxes begins to thin. The Arlington County Board has instructed County Manager Ron Carlee to submit a proposed budget with no new programs and spending growth capped at the average for the past three years -- about 6.5 percent. Pay increases for public safety employees are exempt from this cap.

In Fairfax, Griffin, the county executive, has usually submitted proposed budgets with increases in spending tied more directly to revenue growth, which has averaged slightly less than 7 percent in recent years.

For next year's proposed spending plan limits, he has instructed department heads to "essentially give us the same budget you gave us last year," meaning no growth, except for pay raises and increases to cover such items as rising health care costs for employees and retirees.

As for the limits county officials have requested of the schools, Connolly said, "Even the schools can go on a diet for the sake of the taxpayers."

Staff researcher Bobbye Pratt and staff writer Peter Whoriskey contributed to this report.