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County Board: No Property Tax Rate Hike Next Year

(Updated at 12:05 p.m.) The Arlington County Board is asking the County Manager for a budget that contains no property tax rate hike and maybe even a rate cut.

Members gave their Fiscal Year 2021 guidance to County Manager Mark Schwartz at last night’s recessed Board meeting.

The guidance for reducing the tax rate or keeping it steady will likely not, however, result in lower tax bills, as property assessments are expected to continue to rise in the wake of Amazon’s arrival. The average real estate assessment is expected to jump 4-6 percent next year.

A budget forecast paints a rosy picture of Arlington’s post-HQ2 economy, with business tax revenue expected to grow as well, though budget pressures of Metro, county employee compensation, needed stormwater improvements and flood mitigation, and a growing school population remain.

The Board also took action last night on the affordable housing front, asking the manager for options that could hike the county’s annual Affordable Housing Investment Fund contribution to as high as $25 million from the current $16 million. Additionally, the Board largely accepted Schwartz’s recommendation to carryover unspent funds from the last budget to the new budget and to reserve funds, but set aside $500,000 for emergency housing assistance.

“The Board understands that anticipated increases in property assessments could have a real impact on residents,” Arlington County Board Chair Christian Dorsey said in a statement. “We want the Manager to come back to us with a proposed budget with no increase in property tax rates and to consider a reduction in the tax rate if possible. Our guidance to the Manager also emphasizes the need to invest more in preserving and creating affordable housing in Arlington, including housing affordable to extremely low-income families.”

The manager will present his proposed FY 2021 budget in February, after a months-long public budget process, which will then continue through the Board’s budget adoption in April.

More from an Arlington County press release, after the jump.

The Arlington County Board today instructed the County Manager to include no real estate tax rate increase in his Proposed Fiscal Year 2021 Budget, and to provide more money for affordable housing.

“The Board understands that anticipated increases in property assessments could have a real impact on residents,” Arlington County Board Chair Christian Dorsey said. “We want the Manager to come back to us with a proposed budget with no increase in property tax rates and to consider a reduction in the tax rate if possible. Our guidance to the Manager also emphasizes the need to invest more in preserving and creating affordable housing in Arlington, including housing affordable to extremely low-income families.”

The Board also directed the Manager to propose “long-term efficiencies and improvements in service delivery that will continue beyond FY 2021,” and said that any new programs, or expansion of existing services, should be funded by increased revenue, including fees or re-allocations.”

The Board’s guidance followed a more upbeat financial forecast for FY 2021 compared to recent years from County Manager Mark Schwartz at the Board’s Tuesday, Nov. 19, 2019 Recessed Meeting.

“Our focus on economic development is starting to pay off,” Schwartz said. With County revenues expected to grow by three to four percent in FY 2021, “I’m confident that a stable budget year is ahead, which will allow us to continue investing in affordable housing, Metro, schools and other community priorities,” he said.  Real estate assessments are expected to grow between four percent and six percent. For every one percent change in assessments, the average residential real estate tax bill increases $68.

Emphasizing funding affordable housing, preventing displacement

The Board directed the Manager to include options for increasing funding for the County’s Affordable Housing Investment Fund (AHIF) by at least $3 million, $5 million, and $9 million above the FY 2020 level of $16 million by using both ongoing and one-time funds. AHIF, a revolving loan fund, is the County’s primary vehicle for funding affordable housing.

The Board asked the Manager for recommendations for how an increment of new AHIF funds or other housing funds could be used to support the housing needs of residents making less than 30 percent of the Area Median Income (AMI). Recommendations, the Board said, could include a set-aside for achieving deeper affordability in new committed affordable housing projects in FY 2021; loans to refinance existing committed affordable housing projects and changes to Housing Grants formulas or eligibility to serve more residents making less than 30 percent of the AMI.

The Manager also will develop proposals for funding, staffing and policy approaches to better monitor trends in rents in Market Rate and Committed Affordable apartments and to support low-income residents facing housing instability as a result of significant increases in rents and/or utilities. Proposals the Board said it wants to see include counseling and tenant services; increased emergency assistance through the County’s eviction prevention fund; legal services; outreach specialists embedded within County agencies, on site and in partnership with Arlington Public Schools or within another community partner.

Any increase in AHIF funding proposed for FY 2021 should target meeting the needs of households in Arlington earning no more than 30 percent of the Area Median Income, the Board said. The federal government considers households earning less than 30 percent of the AMI to be extremely low-income. A four-person household in the Washington Metropolitan Area earning 30 percent of the AMI earns about $32,760 a year.

The Board also directed the Manager to develop a strategy for the County to fund or facilitate the purchase of property for affordable housing and community facilities.

Stormwater review

The Board asked the Manager to submit a review of the County’s StormwaterWise Landscape Program, and any recommended changes, with his proposed budget. The County program funds voluntary projects to reduce stormwater runoff from private properties.

The Manager also will provide an update on potential alternative funding approaches for Arlington’s stormwater programs, specifically an analysis of the pros and cons of continuing the stormwater tax or an alternative approach of a fee based on impervious surfaces. The Board asked that the Manager explore opportunities to deploy flood sensors and report to the Board on best practices for flood warning systems and identify potential locations in the County as part of the County’s emergency response.

Funding schools

The Manager’s proposed funding for Arlington Public Schools in FY 2021 should be consistent with the Revenue Sharing Principles, which in FY 2020 allocated 53 percent of tax revenues to the County and 47 percent to Schools, the Board said.

The Board adopted the FY 2020 Budget in April 2019, and the fiscal year began on July 1, 2019. The Board adopted an increase of two cents per $100 of assessed valuation in the property tax rate at that time, with 1.5 cents devoted to Arlington Public Schools. The increase raised the Calendar Year 2019 tax rate to $1.026, including the sanitary district tax, per $100 of assessed value.

Fiscal Year 2019 Budget Close out

The Board also voted unanimously to close out Fiscal Year 2019’s budget and allocate $23.2 million that is not needed for reserves, restricted funding, allocations already approved by the Board, or needed for projects that straddle multiple fiscal years. More than half the carry-over funds were set aside for FY 2021 budget deliberations.

The $23.2 million of discretionary funds is 2.7 percent of the revised FY 2019 County General Fund budget, excluding schools. By adopting the recommendations of the County Manager, the Board allocated the funds to three areas:

  • $13.9 million was set aside for FY 2021 budget deliberations.
  • $6.8 million was allocated to increase the Budget, Revenue and Economic Stabilization Reserve, which increased County reserves from 6.0 percent to 6.5 percent, a critical step in ensuring the County’s triple-AAA rating.
  • $2.0 million to an operating contingency so the County can respond to needs not budgeted during the current fiscal year.
  • $500,000 was set aside for emergency housing assistance […]

Next Steps

The Board’s guidance to the Manager is the beginning of a months-long public budget process. The Manager will build his proposed budget by gathering input from his leadership team, County employees, and the Arlington community before presenting his Proposed FY 2021 Budget to the County Board in February.

The Board then will conduct an exhaustive review of all aspects of the budget, through work sessions with Arlington Public Schools, the Manager and County Departments, and through public input on the Manager’s recommendations.

The Board will hold public hearings on the proposed Calendar Year 2020 real estate tax rate and on the Budget before adopting the FY 2021 Budget in April 2020. The FY 2021 fiscal year will begin on July 1, 2020.

With the FY 2021 budget season underway, the County Manager is seeking public input as he develops his proposed budget to present to the County Board in February. There will be opportunities to provide input throughout the budget process.

The County’s new engagement tool makes it easy to get involved. It encourages Arlingtonians to share what they think about Arlington, give ideas for promoting diversity and inclusion, and even play budget director–all in less than one minute.

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