Real Estate Tax Rate Increase Proposed
Economic Woes and State Budget Battles Lead Council to Favor Increase

By Kirstin Downey
Washington Post Staff Writer
Sunday, March 16, 2008; C03

Bad economic news and confusion from battles over the state budget led Alexandria yesterday to become the last of the large Northern Virginia jurisdictions to propose potential tax increases on both residential and commercial properties.

The Alexandria City Council voted to propose a real estate rate increase of up to 3 cents, potentially raising the tax rate to 86 cents per $100 of assessed valuation.

It also voted to advertise a commercial tax increase of an additional 2 cents, but expressed qualms over both moves. Officials have been worried about imposing any extra burden on the city's small retailers but said they had been forced to act because they need the money. Each cent translates to $1 million in additional transportation funding for the city.

Alexandria Mayor William D. Euille (D) repeatedly stressed that officials were giving themselves "flexibility" by providing the public with legal notice that the tax increase could be that high but said he hopes the city will adopt a tax increase that is closer to zero than to 3 cents.

"There are a lot of uncertainties and unknowns," Euille said. "We still have a lot of challenges before us. . . . We need to provide flexibility and protect ourselves."

Officials in Alexandria and the rest of the region are being forced to confront a bad economic landscape, with real estate values falling and foreclosures mounting, while revenue they thought they would receive has disappeared.

The General Assembly negotiated a transportation-funding agreement last year to give local governments money for transit projects, and governments built those projections into their budgets.

Instead, the political compromise unraveled. Residents protested the abusive-driver fees, some counties decided to opt out of the new commercial property tax powers, and two weeks ago, the state Supreme Court declared parts of the plan unconstitutional.

In addition, in the wake of political wrangling over the state budget, local governments have been left wondering how much they will get when they must prepare their budgets.

Alexandria officials had hoped to maintain a flat tax rate but said worsening economic conditions and budget confusion had forced them instead to consider raising taxes to cover shortfalls. They joined Fairfax, Prince William, Loudoun and Arlington counties, all of which have proposed potential tax increases.

Alexandria council members struggled yesterday to think through the budget quandary, even as national economic conditions deteriorate.

"Every bit of news seems to be worse," said council member Timothy Lovain (D). "It's important now more than ever to advertise a rate that gives us more cushion."

Council member Rob Krupicka (D) said challenges are mounting: "It seems in the last three weeks that every day has brought bad economic news."

Euille noted one piece of good news: Alexandria will not lose $1 million in federal jail funding the state had seemed prepared to take away.

Council member Justin Wilson (D) said Alexandria is facing a "triple threat": declining school population, which could crimp state revenue; the uncertainty over the implications of the state budget process; and an expected special legislative session on transportation. He said he feared that politicians in Richmond would use that session to make things worse for Alexandria, perhaps by stripping the new power of localities to raise taxes on office buildings and shopping centers.

"There's a possibility that in the course of a compromise, they get rid of it," he said.

Vice Mayor Redella S. "Del" Pepper (D) said city officials would know more in coming weeks.

"We'll have at least a little sense of what they're talking about" by the time the city enacts the budget, she said. Her statement drew cynical laughter from several council members.

"You see what they're like," Wilson said.