A new report called Spending Growth and Real Estate Taxes by Dr. John Huntley of Arlington Analytics explains why Arlington real estate taxpayers will be hit by sharply rising tax bills over the next ten years. Such increases will disproportionately drive out of Arlington the most vulnerable, diverse residents the County claims to value.
Arlington’s long-term structural operating budget deficit
These tax bills will be rising sharply because the costs of many different County operating expenses are increasing at faster rates than County revenues. There is a long-term structural deficit built into Arlington County government’s operating budget. APS enrollment growth is a major driver of Arlington’s structural operating budget deficit.
The new report’s analysis of the County’s operating budget is based on Arlington’s own 2019 Multi-Year Financial Forecast, development projections that include anticipated revenues from Amazon-related growth, APS’s 2022 proposed operating budget, APS’s enrollment projections, and historical real estate assessment growth rates across different categories of properties.
The report documents the results of simulations in which real estate assessments are projected to increase at their historical rates to determine how the additional real estate tax burden will be distributed among Arlington homeowners. The report concludes that expensive detached single-family homes will see the greatest dollar increases in taxes. Duplexes and side-by-sides, with rapidly growing assessed values, also are likely to pay far higher taxes (both in percentage and dollar terms).
By 2031, real estate revenues (adjusted for inflation) must increase by $255 million compared to 2022 to meet County and APS spending needs. $100 million will come from residential property owners of townhomes, duplexes, condos, and detached single-family homes. $155 million will come from taxes on business real estate, which includes commercial properties, apartment buildings, hotels, and office buildings.
The report explains how these higher real estate tax revenues affect the individual tax liabilities of 10 illustrative homeowners of a variety of residence types, prices, and locations in the County (Report pp. 7-8). The largest tax increases, from several hundred to more than $2,000, will be paid by owners of detached single-family homes, duplexes, and side-by-sides.
Such real estate tax increases could imperil Arlington’s much prized 50-50 split between business and residential tax burdens by shifting greater burdens to residential homes. A permanent teleworking increase could reduce office space demand and also increase this shift.
APS enrollment growth is a major county budget driver
APS’s enrollment growth, reflecting County population growth, was a major driver of Arlington’s structural operating budget deficit pre-COVID, and will lead to even more significant increases in real estate taxes in a post-vaccination environment. As previously explained, APS’s current 47% share of locally generated tax revenues continues to be increasingly inadequate to support APS’s operations.
As a result, over each of the last 7-8 years, County government and APS have tried to mask their long-term structural operating budget deficit by pointing to one or another “special circumstance” allegedly responsible for that year’s deficit to justify shifting additional revenues to APS. This can only be sustained by reducing the share of revenue available for important County services and/or further accelerating real estate tax increases.
Additionally, because the County is years too late in developing a master plan for all public facilities (including schools) needed for the additional 63,000 residents which it forecasts will come here under existing zoning, there is no plan for how Arlington will finance the public infrastructure (including schools) these new residents will need.
Arlington real estate taxpayers will be hit by sharply rising tax bills over the next ten years to balance the long-term structural deficit built into Arlington County government’s operating budget.
APS enrollment growth is a very significant factor in Arlington’s operating budget deficit. Each 1,000-student enrollment increment increases homeowner’s tax liability on average several hundred dollars or more. Financing the new infrastructure needed for enrollment growth will only increase that deficit.
If our real estate tax bills rise too rapidly in an effort to try to keep pace with the infrastructure costs of APS enrollment and Arlington population growth, it will disproportionately continue to drive out of Arlington the most vulnerable, relatively lower fixed-income categories of people, including many of those over 65, African Americans, and Latinos.
Peter Rousselot previously served as Chair of the Fiscal Affairs Advisory Commission (FAAC) to the Arlington County Board and as Co-Chair of the Advisory Council on Instruction (ACI) to the Arlington School Board. He is also a former Chair of the Arlington County Democratic Committee (ACDC) and a former member of the Central Committee of the Democratic Party of Virginia (DPVA). He currently serves as a board member of the Together Virginia PAC, a political action committee dedicated to identifying, helping and advising Democratic candidates in rural Virginia.