Charlottesville budget staff are scrambling to recalculate revenue projections for the $251 million budget for fiscal year 2025 now that the City Council has directed them to research an increase in the personal property tax.
“What amount of a [personal] property tax increase would replace half a percent increase in the meals tax?” asked City Manager Sam Sanders just before what will likely not be the final public hearing related to the budget this year.
Council will now consider adoption of its budget on April 15 and not at a special meeting on April 9. That will allow time for the legally mandated advertisement of a fourth tax rate increase proposed this year.
Raising the personal property tax idea had not been suggested by Council at any of their budget work sessions to date and was only floated publicly before what had been billed as the final opportunity for the public to weigh in on the $251.25 million financial plan Monday night.
The budget that was taken to public hearing was built on a two cent increase on the real estate tax rate as well as an increase of one percent on the lodging tax and meals tax.
Before the public hearing was opened, City Councilor Michael Payne raised a question.
“I’m not saying we will or won’t do this, but a conversation topic that has come up has been the personal property tax rate,” Payne said. “What if any deadlines exist for that?”
Krisy Hammill, the city’s budget director, said no change had been advertised for that rate, which is $4.20 per $100 of assessed value. Most other communities around Charlottesville lowered the rate when used vehicles soared in value in the wake of the pandemic.
If Council wanted to go higher, they would need to let the public know by taking out a classified ad for a public hearing in the print version of Charlottesville Daily Progress which had a 2023 circulation of 10,326. The Progress is no longer published daily, which makes the timing of that advertisement more complicated as there is no longer a Sunday edition.
Hammill said it would be tight to make that change given the position in the budget cycle.
“That would require a seven-day average advertisement and a public hearing on that as well and the City Charter requires that we have the budget adopted by April 15,” Hammill said.
There was no information on the agenda about this being discussed.
The idea comes from City Councilor Natalie Oschrin.
“I was proposing a flat personal property tax rate increase to replace the meals tax rate increase and potentially some of the real estate revenue and I’ve got some math to show for that,” Oschrin said.
Oschrin said she had not yet had the chance to share that information with Mayor Juandiego Wade or Vice Mayor Brian Pinkston. She said there is room to grow revenue from that tax and the city should tax different kinds of personal property at different rates.
Before the public hearing, Wade said he was not interested for this year.
“I just know this late in the game that I may consider it personally for next year when we have a little bit more time to digest it,” Wade said.
Wade said he was concerned that raising the personal property tax rate would affect more people than the meals tax. He said if two other Councilors agreed, the idea could move forward.
“I would at least like to hear what it is,” said Councilor Lloyd Snook.
Oschrin prepared a statement to read in which she said explained her reason for wanting to raise the personal property tax.
“It’s not too late for me to follow through on my campaign platform goals and ideas that voters supported me for my housing, transit, and urbanism ideas, so there’s a desire to deprioritize cars and reprioritize people and shelter,” Oschrin said. “Those are my priorities.”
After winning a slot as one of three Democratic nominees for City Council in the June primary, Oscrhin took office in January after an uncontested election in November. She originally proposed keeping the real estate tax -rate and meals tax unchanged and making up the difference through the personal property tax and increasing parking fees.
“Lower personal property taxes are a hidden subsidy for cars and we need to stop doing that,” Ochrin said.
She said an increase in the rate from $4.20 per $100 to $6 per $100 would be enough to raise revenue for Council’s spending priorities. However, she acknowledged her math is based on a lot of assumptions and the Commissioner of Revenue would need to provide more data.
Pinkston said he wanted to see more information from staff.
“It seems like a straight-forward enough idea that I feel kind of dumb that I didn’t think about it two years ago,” Pinkston said.
Council will have further discussion of the idea at their budget work session on Thursday.
For some background:
- Every additional penny on the real estate tax rate brings in $1.1 million in revenue
- Every one percent increase in the meals tax would bring in $3 million
- Calculating the difference for the personal property tax is more complicated due to ongoing shifts in the car market. Commissioner of Revenue Todd Divers will try to come up with more information by Thursday.
Councilor Michael Payne said he would like to see scenarios but was concerned that the personal property tax is more regressive than the real estate tax.
“I’m a little skeptical just because poor people and working people still drive cars and we don’t have the bus system that we want,” Payne said.
No Councilors identified spending that could be reduced. Council’s budget supports higher pay and benefits due to collective bargaining, a reclassification of the city’s pay structure, and a need to make up funding lost by the school system due to a recalculation of a state funding formula.
During the discussion, consensus grew that any increase in the personal property tax rate would go to reduce the meals tax by half a percent and that four of the city’s tax rates could increase.
Pinkston asked Oschrin if she could wait on an increase in the personal property tax rate until the budget cycle.
“Well, next year we’re going to have an even higher budget,” Oschrin said.
Pinkston said he was concerned about the confusion this would bring to staff. Oschrin said she just wanted to see the information. Sanders said he hoped to get the information to Council as soon as possible or at least by their meeting at 6 p.m. on Thursday.
Payne and Snook said they would entertain the idea. Mayor Wade was the lone vote in opposition.
“Four taxes is worse than three taxes,” Wade said. “I’m outvoted but it sounds like we have enough support to pursue it.”
Oschrin said taxes are part of the social contract and they are how governments fund what voters want.
“If you’re going to get taxed out of something, I’d rather someone get taxed out of their car then their house,” Oschrin said. “Not that I want either of those things to happen.”
Council’s discussion took place before the public hearing on the three tax rates. One of the speakers was Don Gathers, a one-time Council candidate and frequent speaker in Chambers. He said his household’s personal property tax bills have sky-rocketed in recent years and that low-income residents are going to continue to have a tough time.
“I don’t understand the mindset or the necessity to feel like we have to tax anyone out of anything,” Gathers said. “Eventually essentially what’s going to happen is that you’re going to tax your residents right out of the city.”
At least two other speakers called for tax increases to support more spending. Philip Hamilton, who twice ran for the General Assembly as a Republican, called for reductions.
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Oschrin took office in January and didn’t put fourth a tax increase proposal until late March. What took so long?