Budget Guidance: Residential Assessments Expected to Rise

The preliminary outlook for next year’s Arlington County budget could be described as partly cloudy.

Officials expect the local housing market to remain resilient, with 1-3 percent rises in residential property assessments. High office vacancy rates, however, are expected to result in flat to slightly lower commercial property assessments.

Commercial property taxes are half of Arlington County’s tax base. While the office vacancy rate is dropping — it’s down to 20.8 percent from 23.6 percent near the end of 2014 — it’s “expected to remain high” during fiscal year 2017, which begins July 2016.

The county’s population, meanwhile, continues to rise. County projections call for the population to rise by 66,300 residents through 2040, a 31 percent increase from the current population of around 220,000.

School enrollment is also expected to continue its upward trajectory, with annual growth rates between 2.7 and 3.5 percent over then next five years. While still rising, that’s down from 2.8-5.2 percent growth over the past five years.

An excerpt from a county press release on the budget projection and the county-school revenue sharing agreement, after the jump.

The County faces a mixed economic picture as it begins the months-long process of crafting a budget for FY 2017, which begins in July 2016.

Acting County Manager Mark Schwartz pointed out that the County’s office vacancy rate, which began to rise in 2011, and climbed to a historic high of 23.6% in the fourth quarter of 2014, has begun to drop and is currently at 20.8%. Much work remains to be done, to bring the vacancy rate back to single digits, Schwartz said, but the current trend is encouraging and reflects both the improving economy and new efforts by the County to attract businesses.

County staff reported that residential real estate assessments are expected to rise slightly — between 1% and 3%. Residential real estate sales and prices are up slightly in 2015 over 2014. Commercial assessments, however, are expected to stay flat or fall slightly and the County’s office vacancy rate is expected to remain high. In Arlington, commercial property represents half the property tax base.

Other taxes — including sales, meals and Transient Occupancy Tax are all increasing, while Personal Property Tax and BPOL are expected to remain flat.

Arlington’s population, school enrollment and service demands are expected to continue to grow in FY 2017. The County’s population grew 4.4% between 2010 and 2015 and is projected to grow by 66,300 or 31%, through 2040. Student enrollment has grown 2.8% to 5.2% per year for the past five years and is projected to grow by 2.7% to 3.5% per year over the next five years.

The County’s growing population means increasing demands on public safety and County services.