Much of N.Va. to Raise Tax Rates
Housing Slump Causing Election-Year Dilemma

By Kirstin Downey
Washington Post Staff Writer
Monday, April 16, 2007

After seven fat years, elected officials in Northern Virginia are grappling with their first lean one, and tax increases are looming almost everywhere.

Swollen by surging real estate assessments, area budgets have ballooned, rising sharply from a cumulative total of more than $3.7 billion in 2000 to more than $6.3 billion for the coming fiscal year. Loudoun County's budget tripled in that period, Alexandria's rose 76 percent, and Fairfax County surpassed the $3 billion mark.

Now, however, with the housing market in a slump, politicians are caught between raising taxes or reducing high-quality services that residents have come to expect. Even though many officials are up for reelection this fall, they are choosing tax increases.

"The good times are over," said R. Scott Silverthorne, a nine-term veteran of the Fairfax City Council, which voted Tuesday to raise real estate and personal property tax rates. "This is the first time in recent memory that we have had a slowdown in the real estate market. This is a challenging era. It's the most difficult budget we have had in 16 or 17 years."

Municipal revenue is more volatile in Northern Virginia than elsewhere in the region because Maryland and the District get more of their budgets from income taxes and because they reassess properties only every three years, which has the effect of moderating market peaks and valleys. In addition, the District and Maryland have laws that place caps on property assessments, which means a booming real estate market gives them more money but not as much as in Virginia.

Almost all Northern Virginia counties and cities -- except Fairfax County -- are raising taxes. The cities of Alexandria and Falls Church are signaling property tax rate increases. Loudoun's rate is climbing 7 cents. Arlington County will not raise its property tax rate, partially because of increases in commercial assessments, but officials are proposing a new utility tax on residences.

Even officials in tax-averse Prince William County are swallowing hard and raising taxes after hearing from scores of residents urging them to keep the level of services high. After a bruising battle that included a debate over whether to shut community pools one day a week, county officials voted to give themselves the option of raising taxes when they adopt a final budget this spring.

"There is no way we can operate this budget without a tax increase," said Supervisor John D. Jenkins (D-Neabsco), who said he thought taxes should rise even more than the 78.7 cent rate the board approved, up from 75.8 cents for each $100 of assessed value. Even most of the Republicans on the board favored raising the rate to cover police, fire and education services, although they looked for other places to make cuts.

The one noticeable exception is the area's largest county, Fairfax. The county, in which all supervisor seats are up this fall, probably will avoid tax increases because its budget was bolstered by $27 million in unspent funds that it carried over from the previous year. This year's budget also got a boost from the continued growth in the value of apartment buildings and commercial and office property.

Elected officials in Fairfax and elsewhere say increases won't hurt taxpayers much because actual bills have fallen as home assessments have declined. Some have trumpeted the rate increases as triumphs of careful fiscal management.

"To cut taxes in a bad year is an absolute accomplishment," said Prince William Board of County Supervisors Chairman Corey A. Stewart (R), who is serving a one-year special term and faces voters Nov. 6.

Area officials say that the infusion of cash in the first half of the decade was hardly a gravy train but represented a badly needed fiscal recovery from the 1990s, when the real estate market sagged and governments found themselves without the money for critical infrastructure improvements, leaving governments and schools operating in decaying and overcrowded buildings.

In those years, Fairfax lived with what it called "doomsday budgets," in which officials had to raise tax rates substantially, close a network of mini-libraries, shutter county offices, freeze salaries for two years and lay off workers.

Remembering that era and recognizing that real estate values are likely to be depressed for a while, the county has been careful not to "bake anything new," into the base budget this year, said Fairfax Supervisor Sharon S. Bulova (D-Braddock), chairman of the board's budget committee. "We know our revenue is going to be constrained next year."

Virginia officials are blanching at citizen fury over the prospect of cutbacks. Alexandria tried to hold the line on the budget, originally proposing to keep taxes flat and eliminate employees' cost-of-living raises. But instead, city officials voted unanimously last week to raise taxes.

They took the action in the face of strident resident demand for a continued high level of services. At a hearing, Mimi Carter, a PTA president in Alexandria, said she didn't care to "respect the [budget] process." She said that she just wants to make sure officials give Alexandria children the things they need and that to fail to fully fund the school budget would "threaten academic achievement."

"That's why we voted for you," she told City Council members, adding that residents want the strong public education, soccer fields and child-care programs they say they were promised.

Arlington residents similarly called for a rich menu of services, including a year-round homeless shelter, an arts center and more money for arts programs and parks, in addition to raises for county employees.

Budget concerns are pitting constituencies against one another. In Prince William, the Board of County Supervisors reversed its decision to close the community pools one day a week after critics charged that poor kids would be blocked from entry while kids on swim teams would still be permitted to use the pools. Then a supervisor complained that his district has no pools.

Alexandria and Arlington have created special parks for dogs, and in Alexandria, where teachers had been told there was no money for a pay raise, one school booster at a recent hearing held aloft a sign that said: "It is a shame that DOGS are more important than teachers and kids in Alexandria."

The conflict also varies depending on the jurisdiction. In the inner suburbs, where schools and basic road infrastructure were built and paid for years ago, residents want better parks and services. In the outer suburbs, people who have moved into large tract houses built on former farmland are demanding that top-quality schools be constructed nearby to serve their children.

In Loudoun, a 7 percent decline in residential assessments jolted officials and residents. In an election year, supervisors angrily jostled over priorities and taxes before a majority voted to increase the tax rate. The population has increased from 169,000 in 2000 to more than 270,000. Many came for the excellent schools, which account for the bulk of all spending.

Loudoun Supervisor Mick Staton Jr. (R-Sugarland Run) was among the supervisors who argued that the county should severely reel in proposed spending increases given the drop-off in assessments. Keeping the tax rate constant at 89 cents, as Staton and others advocated, probably would have meant cutting tens of millions from the School Board's budget request, county officials said.

"This budget increases taxes on the citizens of Loudoun County when their assessments have gone down," Staton said of the 7-cent tax rate increase. "I will not vote to increase taxes."

But Supervisor Sarah R. Kurtz (D-Catoctin), who supported the rate increase, noted that county schools were set to receive $19 million less than they had requested. "We're doing the best we can under the circumstances," Kurtz said.

In the end, Loudoun supervisors increased the schools' operating budget by 14 percent over the current fiscal year's.

Staff writers Bill Turque, Michael Laris and Timothy Dwyer contributed to this report.