Ailing Budget May Lead Fairfax Back to Car Tax

Fairfax County officials said yesterday that the county might have to reinstate a local car tax and cut some cherished programs to make ends meet next year as the county's budget continues to be battered by the recession.

In a grim assessment likely to be repeated in boardrooms across the region this summer and fall, the county's financial analysts reported that revenue will probably shrink by 7 percent next fiscal year, creating a $315 million hole in a budget that was only balanced this year by increasing the real-estate tax rate, gutting an affordable housing program and cutting about 300 positions.

Home values, which declined by more than 12 percent last year, will probably continue to drop but at a slightly slower rate. More dramatic will be the impact of declining values in nonresidential real estate such as hotels and high-rise office buildings. Nonresidential real estate makes up less than a quarter of tax receipts but is projected to sink in value by about 18 percent in the next fiscal year -- the largest drop since at least 1991, according to the analysis.

The analysts recommended freezing pay and leaving unchanged the county's allocation to the school system, which received $1.6 billion from the county this year. They proposed increasing the residential real-estate tax rate, which went up by 13 cents to $1.05 per $100 of value this year, by an additional 11 cents. But because of the continuing decline in home values, the average homeowner would probably see a $23 drop in his or her bill.

The county, which derives most of its revenue from real-estate taxes, took a scalpel to the budget this year, doing away with an affordable housing program that was adopted about the time when home values peaked in 2005, and small perks such as the "I Voted" stickers handed out to voters at polling places. Most of the positions cut were in departments such as tax administration, and many of the job cuts were achieved through attrition; 35 employees were laid off.

Bridging next year's gap will be more difficult and could require taking a hatchet to some treasured programs in parks and recreation, human services and public safety, which have been viewed as critical to Fairfax's high quality of life, County Executive Anthony H. Griffin said.

"We can slim down a little more, but there isn't much money in it," Griffin said. "The big money is in the programs. . . . I need some guidance as to what we're not going to do anymore."

Also on the table is reinstating a car registration fee of $33 a vehicle, a move that would generate an estimated $27 million.

The board abolished the so-called decal fee in 2006, and its elimination is one of the enduring legacies of former chairman Gerald E. Connolly (D). But some supervisors have recently proposed bringing the fee back, which they said would diversify a revenue stream that relies too heavily on fickle real-estate values.

Connolly, now a member of the U.S. House of Representatives, has warned that reviving the unpopular fee could be politically toxic, especially during difficult economic times.

Some supervisors also endorsed the introduction of a meals tax, which would require voter approval.

"Revenue diversification," said Supervisor Gerald W. Hyland (D-Mount Vernon). "We keep saying we want it but we never do anything about it."

Yesterday's report, delivered during a board retreat at Frying Pan Farm Park, offered a dismal economic snapshot of Fairfax and Northern Virginia. The number of Northern Virginia jobs in April had declined about 19,600 from a year ago, and Fairfax County's unemployment rate that month was 4.5 percent, higher than the last two economic downturns.

On a brighter note, home sales in the county rose more than 23 percent during the first quarter of 2009, and the number of days required to sell a home has fallen after rising for 41 consecutive months.

There are about 1,300 foreclosed homes in the county owned by mortgage lenders, down from a high of 2,257 in September 2008. But officials warned that the housing market might yet take a turn for the worse if the foreclosure rate increases.