Arlington homeowners may find themselves facing a double-whammy at tax time again in 2025.
County officials say they are anticipating year-over-year tax-revenue growth of 1.7% to 2.5% for the fiscal year that begins next July, but growth in government expenses would be in the 3%-to-4% range.
Since by law the county’s annual operating budget, currently $1.65 billion, must be balanced, one way to make up the gap could be to increase tax rates on residential and commercial properties.
“It’s going to be some difficult times,” Arlington County Board Chair Libby Garvey predicted at a Nov. 19 staff presentation on the county government’s fiscal condition.
“You’re going to cheer us all up today,” she somewhat tongue-in-cheek said to County Manager Mark Schwartz before he began his presentation.
He did not.
Financial challenges “will be with us for the next several years — at least,” Schwartz said before turning the meeting over to county budget director Richard Stephenson to dig into the details.
Under current financial estimates, the county government will start the budget-planning process with a projected gap of $30 million to $40 million to plug in the budget.
Personnel costs, the local government’s share of Metro funding and the cost of servicing increasing debt levels will be key drivers of the ramp-up in expenses. Among other factors impacting costs: human-services funding, climate action, schools, new union contracts with police and fire personnel, and general inflationary pressures.
“This isn’t the first time the county has experienced fiscal challenges,” Stephenson said. “Through all these, the county has been resilient, but not without having to make hard choices.”
“We have a variety of budget levers we talk about every year,” he said, including potential cuts to programs and staffing and increases in taxes and fees.
For property owners, 2025 could mark a second consecutive year of having an increased tax rate on top of higher assessments.
Last spring, Board members increased the tax rate to $1.033 per $100 assessed valuation. That was up from $1.03 per $100 in 2023, but because county officials in 2024 went to a different way of charging for stormwater fees, the actual impact on homeowners was more significant.
Factoring in increased assessments, the net impact on a typical Arlington homeowner was a tax-bill increase of about 5.3%.
A property owner’s tax bill is based on both the assessed valuation of the property and the tax rate imposed by the local government. And many to most homeowners are likely to again see higher assessments when they arrive in the mail in late January.
The average sales price of residential property in Arlington is up 6.4% for the first 10 months of the year compared to the same period in 2023, according to recent data from Bright MLS, based on data from MarketStats by ShowingTime. County assessors estimate the market value of properties at the start of each calendar year to determine assessments.
County officials are expecting another year of lower commercial-office valuations, continuing a trend that started with increasing vacancy rates and was exacerbated by Covid.
Higher financing costs have slowed the development of new buildings, another factor pushing more of the overall tax burden to homeowners.
Schwartz will unveil his proposed fiscal 2026 budget in February. That will kick off a multi-month process culminating in Board members adopting a final budget and setting the tax rate in the spring.
While the county’s fiscal year runs on a July-to-June calendar, the real-estate tax rate adopted in the spring is retroactive to the start of each calendar year.
Arlington is hardly alone among Northern Virginia jurisdictions in bracing for challenges. Fairfax County officials are projecting a scant 1.8% increase in General Fund revenues for the coming fiscal year.
That would be the lowest growth rate in more than a decade with the exception of 2021, when the full force of Covid hit, and almost assuredly would not be enough to cover additional government spending in the coming fiscal year.
Like Arlington, Fairfax is projecting higher residential assessments, declining commercial valuations and a cooling of new construction coming online. Another tax-rate increase could be on the horizon for Fairfax residents, on top of the 3-cent rise (to $1.125 per $100) enacted this year.
One outlier in the tax-rate-increase trend has been the City of Falls Church, which owing to several major development projects has been able to reduce its tax rate in successive years. While not eliminating the impact of rising home-value assessments, those cuts have eased the sting a bit.
Localities may get some budget assistance from Richmond, as the General Assembly has a healthy budget surplus to divide up once it goes into session in January.
Photo via Pepi Stojanovski/Unsplash
