Fairfax County expects the financial impact of a recent Virginia Supreme Court ruling on deductions for business taxes to increase to at least $45 million, adding more worry to what has already been a difficult budget year, officials said Tuesday.
County budget officials plan to move an additional $15 million into an emergency budget reserve that already has $30 million set aside for refunds that the county expects to have to issue in response to appeals on business, professional and occupational licenses taxes. The appeals are based on the January ruling on how out-of-state receipts can be deducted.
The deepest impact of the Arlington County case will be felt “through this year and part of next year,” Susan Datta, the county’s budget director, told the Board of Supervisors during a budget committee meeting. The effects of the court decision will also be felt in other counties.
Fairfax officials say they are struggling to maintain services for 1.1 million residents with stagnant tax revenue brought on by an anemic regional economy and a struggling commercial real estate market. As the County Board of Supervisors weighs adoption of a $3.81 billion budget in April, there are concerns about whether there will be enough money for the nation’s 10th-largest school system, along with several other pressing demands.
On Tuesday, County Executive Edward L. Long Jr. told supervisors that the county will have to ask voters to approve a $151 million bond referendum in November to pay for improvements in county police and fire stations — some more than 40 years old — and a new South County police station. Next year, more money will be required for the county’s aging homeless shelters, which “are in dire need of repair,” Long said.
Long emphasized the need to find new revenue sources. He suggested a “meals tax” on food and beverages inside restaurants and hotels as a possible solution, a controversial proposal that the board has been reluctant to put before voters.
“If you don’t put it on the table, then this is where our expenses level is going to be and we’re just going to have to build our budgets around that level of revenue,” Long said.
The county board has already said it doesn’t plan to raise real estate taxes higher than the current rate of $1.09 per $100 of assessed value.
Several supervisors expressed frustration over their budget choices, particularly in light of planned cuts that several members said they want to avoid — such as scaled-back cost-of-living increases for the county’s 12,000 employees.
“We have to find a way to meet the full MRA,” said Supervisor Penelope A. Gross (D-Mason), using the abbreviation for the cost-of-living increase, officially known as a “market rate adjustment.”
Long announced the creation of a committee that will look at county services that could be cut over the next several years. “I don’t recall ever being in this situation, where our basic needs are outstripping our anemic revenue growth that’s coming in,” he said.