Council directs staff to advertise a ten-cent increase on the Charlottesville property tax rate

So far this year, Council has had two discussions of the budget for the next fiscal year but they gave their first significant direction Monday night. At their work session last Thursday, Council were told they needed to decide whether they wanted to advertise an increase in the tax rate above 95 cents per $100 of assessed value. For all of that discussion, go back to the February 6 installment of Charlottesville Community Engagement.

Senior Budget Analyst Krisy Hammill said that a five-cent increase in the tax rate would not be enough to cover the additional debt service for a capital improvement plan that includes $75 million for renovations to Buford Middle School. Council also wants to honor the goal of putting $10 million toward affordable housing initiative for at least ten years. 

“In actuality, the five-cent tax increase does not afford the $75 million addition,” Hammill said.

Hammill showed a variety of different scenarios, but said five-cents are all that is needed to be dedicated to capital. 

“Ten cents we don’t need,” Hammill said. “Seven isn’t quite there but seven and a half is a little more than we need so I think we’re somewhere seven and eight cents to comfortably cover $75 million.” 

The update to Council was not on the agenda for the meeting but was delivered during the report from the Interim City Manager. (February 7 presentation)

Deputy City Manager Ashley Marshall said comparing tax rates doesn’t tell the whole picture. For instance, Roanoke has a tax rate of $1.22 per assessed value, but there’s a reason. 

“The average median house cost is $225,000 so when you think of that and a $1.22 tax rate, it’s going to hit a little different than in Loudoun County, where the average median home value is $625,000,” Marshall said. 

This year, residential assessments went up 11.7 percent and 67 households lost the ability to apply for tax relief because they now exceed the $375,000 cap. The city would have to ask the General Assembly for a charter amendment to increase that amount. 

Hammill showed a slide that depicted how much of a tax increase would occur. For instance, a hypothetical property assessed at $300,000 paid $3,487 in 2021. That would increase to $3,895 in 2022 without a tax increase. That would increase to $4,305 in 2022 with a ten cent tax increase. 

Deputy City Manager Sam Sanders said a ten cent tax increase would also allow more funding for the Charlottesville Affordable Housing Fund to meet the affordable housing fund, a local match to extend a federal grant for firefighters (see below) and more. 

That had the support of Vice Mayor Juandiego Wade.

“I think that at least even though we may not do the whole ten cents to give the staff direction tonight at least to go with that so we know we can’t go higher but we can certainly go lower,” Wade said. 

Councilor Michael Payne said he would support that rate. 

“We’re not even having a serious conversation until you begin with a ten cent real estate tax increase because otherwise it is not affordable,” Payne said. “I’m comfortable with advertising that at the rate to start out conversation but I still don’t think that gets us to a point where we are having a realistic conversation about the state of our budget.”

Mayor Lloyd Snook said he was concerned about raising the property tax rate this year because of the assessment increase, but called Charlottesville undertaxed. He said he wanted to increase a half-percent raise in the meals tax. That would yield just over $1.25 million according to staff projections. 

“At meals tax, we are at the moment I believe just a little on the low side and that may give us a little more than a million plus a year,” Snook said. 

Councilor Brian Pinkston said he supported the advertisement of ten cents.

“I’m not personally convinced yet that we need to raise it by a dime,” Pinkston said. “Maybe we do. Maybe it’s seven and a half cents. I’m not sure. Maybe it’s just a nickel but for me it is just for the purposes of this conversation tonight is the advertisement piece.” 

Councilor Sena Magill took ownership.

“I support advertising it,” Magill said. “It was my idea.” 

With that, the recommendation was officially made and check the classified section of the Daily Progress this weekend. The unscheduled conversation took an hour. 

At this point in mind, do remember that advertising a tax rate is not the same as adopting one. There are a lot more variables that may come into play between now and April. 

Some other budget items that were brought up include the potential of using $3 million in American Rescue Plan Act (ARPA) funding to pay back the general fund for the use of FY21 surplus money to pay COVID-related bonuses to employees. The school system is also hoping to use up to $8 million in ARPA funding toward school infrastructure above and beyond school reconfiguration.

“That’s still a number which is not in any of the scenarios that I presented to you,” Hammill said. 

Hammill said the budget staff is anticipating a surplus in FY22 as well as in previous years. 

“A lot of our big revenues, they are performing better than we had originally projected as we continue to recover from COVID,” Hammill said. 

Before you go: The time to write and research of this article is covered by paid subscribers to Charlottesville Community Engagement. In fact, this particular installment comes from the February 8, 2022 edition of the program. To ensure this research can be sustained, please consider becoming a paid subscriber or contributing monthly through Patreon.

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