"Sticker Shock" in the June 17 Fairfax Extra reported that over the last five years, the average house price in Fairfax County has skyrocketed 83 percent from $195,713 to $357,506. That represents a rise of nearly seven times the rate of inflation, an unprecedented increase.
Housing prices have soared to unsustainable heights. Fairfax is an extreme example of a national phenomenon where the East and West coasts represent the hottest markets. In 2003, housing inflation nationwide was eight times the inflation rate.
As an attorney and economist, I'm in agreement with The Economist and other analysts who warn that the steeper the climb, the faster the fall. Like the expectations of perpetual increase attendant to the recent stock market bubble, exorbitantly high U.S. home valuations are gleefully celebrated without regard to underlying value. This stratospheric climb is nearing its peak. With the bursting of the bubble, the recovery will stall, and American families will lose considerable wealth.
Perry L. Weed
Concern Over Smaller
Commercial Tax Base
During the past five years, the real estate burden on the homeowners of Fairfax County has been increasing steadily. It is likely to get worse -- much worse. Homeowners in Fairfax now pay the highest real estate taxes (on a per-residential-home basis) of any jurisdiction in Northern Virginia. Until last year that honor was held by Prince William County.
One obvious reason why Fairfax County now has the highest residential real estate tax levy in the region is the rather generous rate at which the county board has been spending those tax dollars. But there is also another, ominous reason, which cannot simply be dealt with by reduced spending. The commercial tax base in Fairfax County has been declining precipitously. From fiscal 2001 to fiscal 2005, the commercial tax base in the county has declined from 25 percent to 18 percent. This decline has shifted to homeowners a much larger share of the real estate tax base.
In the mid-1970s, the county board became concerned when the commercial tax base in the county had dropped to 14 percent, and it established a commission to review the issue. That commission, known as the Cole Commission, released a report in 1976 in which it expressed considerable concern at the trend toward a residential-dominated tax base for the county. The cost of education, police, fire and other services that must be provided for the citizens of the county simply could not be met on the backs of residential homeowners.
A significant commercial tax base was essential. As a result of the Cole Commission recommendations, the county government embarked on an aggressive policy to broaden Fairfax's commercial tax base. By fiscal 1987, the county had achieved a commercial tax base of 25 percent.
This increase, over a 12-year period, was a result of a combination of factors, including a robust economy as well as aggressive policies launched by the county government to seek and attract business to Fairfax.
The decline in the county's commercial tax base does not appear to be an issue on the radar screen today. For example, the newly elected board chairman never mentioned the issue in his March 2004 State of the County address. With the decline of the commercial tax base apparently spinning out of control compared with other jurisdictions, this should be a high-priority issue for our county leaders.
The order of magnitude of the commercial tax base decline is readily apparent. Sixty percent of the county's multibillion-dollar budget comes from real estate taxes. Therefore, it stands to reason that a decline of 7 percentage points, from 25 percent to 18 percent, in the commercial tax revenue is highly significant and shifts the heavy burden to residential property owners.
The issue of spending and the commercial tax base should be in the forefront of almost every meeting of the Board of Supervisors.
[Herrity, a former Republican board member and chairman, lost a bid last summer to be nominated as the GOP candidate for county board chairman in the Nov. 4 general election.]