Loudoun Approves Car Tax Bill Increase

Northern Virginia taxpayers already riled about rising home assessments could have something else to fret about this year: their car tax bills, which are likely to increase in the state's fastest-growing communities.

Counties such as Loudoun and Prince William and cities are starting to feel the pinch of the General Assembly's decision to freeze the amount Virginia pays local governments to make up for car tax revenue lost to the state's phase-out of the unpopular levy on personal vehicles.

The cap on car tax relief hits growing, wealthy jurisdictions the hardest because thousands of new, often expensive cars and their owners are moving in by the thousands. Yet those areas receive a fixed car tax reimbursement from the state to help pay for schools, fire protection and other services. If local officials want to keep their tax receipts from falling, they must increase the proportion of the bill that car owners pay.

Yesterday, supervisors in Loudoun became among the first to make it official, voting to bill car owners this year for 41 percent of their bill, up from 30 percent now. For the owner of a car valued at $20,000, that means a bill of $344.40 -- compared to $252 last year for a car of that value.

None of the supervisors was happy about the decision -- and three of them voted against it. Loudoun stood to lose $10 million.

"We all agree that the state is screwing us," said Supervisor Steven J. Snow (R-Dulles), who endorsed the higher percentage. "We're all for tax reduction. We're all for getting it down. We all want to do our best. But we're going to take care of people. We're going to take care of the county's needs and requirements. And that's going to cost money."

The squeeze on the personal property tax began in 2001, when legislators halted the phased repeal of the tax on the first $20,000 of value of personal vehicles, a plan that carried James S. Gilmore III (R) into the governor's office. They stopped that year at 70 percent, meaning car owners were paying just 30 percent of the taxes owed on the value of their vehicles. The state paid local governments 70 percent of the levy to make up for the lost revenue used to pay for local obligations such as schools, libraries and law enforcement.

Last year, lawmakers went a step further, fixing the dollar amount paid to local governments at $950 million -- 70 percent of car owners' bills at the time, but not any more.

As cities and counties grow, the amount of relief available to each taxpayer will diminish over time, becoming a smaller proportion of their overall bill.

A majority of Loudoun supervisors disagreed that voting to increase the percentage paid by taxpayers amounts to a tax increase. And officials in other localities, preparing to take the same step, say much the same.

"We don't have the state money to reimburse at 70 percent anymore," said Kevin C. Greenlief, director of the Fairfax County Department of Tax Administration. "So really, your only option is to show what your actual true reimbursement is going to be."

Fairfax is likely to take up the reimbursement matter at its meeting Monday, Greenlief said. Vehicle owners can expect to pay 30 to 40 percent of their bills, he said, if the Board of Supervisors agrees.

In Prince William, the figure is likely to be the same, said Steve Ferlotti, the county's assistant finance director. Clarke County officials have already approved a higher percentage.

Still, the Loudoun supervisors who voted against the measure yesterday said their colleagues did have another choice: give up the revenue and reduce county spending accordingly.

"There is room in this budget to cut back," said Supervisor Lori L. Waters (R-Broad Run), "and it comes down to making choices and priorities. It comes down to choices, and I'm choosing not to increase the car tax."