A pair of commercial property tax hikes in D.C. may drive additional economic activity in Arlington, according to a new report.
Commercial real estate services firm JLL says higher commercial property taxes in the District — a 2.2% hike from $1.85 to $1.89 per $100 of assessed value — “will cause rent paid by office tenants to jump further, at a time when the market’s supply-demand paradigm strongly favors tenants.”
The report also says an approved 72% increase in the District’s deed transfer and recordation tax will cause commercial property sales activity to “grind to a halt in the mid- to long-term.”
The new taxes will take effect Oct. 1, at the beginning of D.C.’s new fiscal year, as part of a $15.5 billion budget that includes new investments in affordable housing.
Between D.C. making itself more expensive for commercial property owners and lessees, and the arrival of Amazon’s HQ2, JLL says conditions are ripe for increased economic activity in Northern Virginia and Arlington, in particular.
DC’s losses will be Northern Virginia’s gains. These tax hikes come at a time when Northern Virginia is heating up as an investment alternative to DC. Transaction costs were already substantially lower in Arlington County than in Washington, and now will be even more so. It is no stretch to say that this will attract capital away from DC and toward Arlington’s top-tier offerings, of which there will be many when HQ2-related demand spurs the development of new buildings and the lease-up of old ones.
Bisnow, which first reported on the study, quoted JLL Managing Director of Research John Sikaitis as saying the new dynamic could drive increased investment interest and office leasing in Arlington.
With the increased taxes on commercial property sales making deals harder to pencil in D.C., the JLL researchers expect investors will begin to look across the river. Northern Virginia has traditionally not been viewed as the same type of core market as D.C. in the eyes of outside investors, but an improving office market and expected growth from Amazon HQ2 has them taking a closer look.
“No one denies now that Arlington is a core market with a significant amount of future urban demand,” Sikaitis said. “You’re now seeing institutional investors start to look at Arlington from an investment perspective, which didn’t happen 12 or 24 months ago. Their allocation to D.C. could be allocated to Arlington.”
Another Water Main Break in Courthouse — “Emergency Water Main Repairs: Crews working on a 6-inch valve leak at 1315 N Barton St. Traffic is detoured around the work site. At least one high-rise building is affected.” [Twitter]
Business Owners Planning for HQ2 — “Dawson and Bayne said Highline is ‘a happy-hour machine’ during the week, thanks to the office buildings that surround it. But business late at night and on weekends isn’t as steady. The impending arrival of Amazon, however, is causing the business partners to rethink Highline’s concept.” [WTOP]
Break-in at Overlee Pool — “At least seven community pools were the targets of theft or vandalism late Sunday into Monday, according to police and pool managers. The crime spree spanned Fairfax and Arlington counties, yet police have not been able to connect all seven cases to the same set of suspects.” [Fox 5]
Workers Striking at DCA — Updated at 9:25 a.m. — “Several union workers for two major airlines are on strike outside of Reagan National Airport on Thursday. The workers are employed by the Delta contractor Eulen Airport. Roughly six employees protesting tell ABC7 they are not being treated fairly by their contractors and are calling for better working conditions with some claiming they don’t receive lunch breaks.” [WJLA]
Levine Challenger Fails to Qualify for Ballot — “He had an opponent, then he didn’t. And as a result, Del. Mark Levine (D-45th) is home free in the Nov. 5 general election.” [InsideNova]
Nearby: Falls Church Mayor on Tax Deduction Changes — “Mayor P. David Tarter testified yesterday before the House Ways and Means Subcommittee on Select Revenue Measures about the impact of the cap on the deductibility of state and local tax (SALT) on federal returns… ‘[The SALT deduction cap] means that tax dollars that could have gone to the city are now going to the federal government, and there is less money available for essential local services like schools, police, and fire protection.'” [City of Falls Church]
Dense Fog Advisory This Morning — “A Dense Fog Advisory has been issued for the DC/Baltimore metro areas, including portions of western MD & eastern WV. Use caution driving early this morning, and allow extra time to reach your destination. The fog should dissipate by around 9am.” [Twitter]
HQ2 May Look Like HQ1 — “Amazon.com Inc. has enlisted a trio of firms deeply involved with the development of its Seattle campus to help shape the plans for its second headquarters, an early indication the two campuses could share some common design elements.” [Washington Business Journal]
Arlington Marks Older Americans Month — “As we enter the month of May, Arlington is joining the nationwide observance of Older Americans Month. We’ll be recognizing the positive impact older adults have in and around our community and highlighting the many programs and services we offer them.” [Arlington County]
Write-Up for Hot Lolas in Ballston Quarter — “Two new shops experiment with heat levels and global inspiration for new wave fried chicken sandwiches.” [Northern Virginia Magazine]
Beyer in the News — “Rep. Don Beyer was South Bend Mayor Pete Buttigieg’s first Congressional endorsement, and he said Wednesday that he ‘deeply’ believes there needs to be a woman on the Democratic ticket ‘either as president or vice president.'” Also, Beyer is calling for the resignation of Attorney General William Barr. [CBS News, Twitter]
Nearby: No Tax Rate Hike for Alexandria — “The Alexandria City Council unanimously adopted a $761.5 million budget Wednesday without raising taxes or cutting services, adding more money for schools, early childhood education, additional firefighters and a new $100,000 fund to provide lawyers for residents facing deportation. The property tax rate, for the second year in a row, will stay at $1.13 per $100 of assessed value.” [Washington Post]
Flickr pool photo by Eric
County Board Planning Tax Rate Hike — “Owners of a typical Arlington single-family home will see this year’s real-estate tax bill rise 4.95 percent to more than $8,400 under the county government’s fiscal 2020 budget slated for approval this week. County Board members on April 18 tentatively opted for a 2-cent increase in the real estate tax rate, bringing it to $1.026 per $100 assessed value and making Arlington the only jurisdiction in Northern Virginia’s inner suburbs to impose a tax-rate increase on homeowners this year.” [InsideNova]
UNTUCKit Coming to Pentagon City Mall — Internet-born clothing brand UNTUCKit, which specializes in button-down shirts intended to be worn untucked, is planning to open on the second level of the Fashion Centre at Pentagon City mall, next to Nordstrom. [Twitter]
(Updated at 10:45 p.m.) About a year ago at this time, Arlington looked to be in serious trouble down in Richmond.
In mid-March 2018, county officials faced the decidedly unpleasant prospect that they’d come out on the losing end of a bruising legislative battle with two local golf and country clubs.
One of the county’s foremost foes in the General Assembly had engineered the passage of legislation to slash the clubs’ tax bills, potentially pulling more than a million dollars in annual tax revenue out of the county’s coffers.
Arlington had spent years tangling with the clubs, which count among their members local luminaries ranging from retired generals to former presidents, arguing over how to tax those properties. Yet the legislation from Del. Tim Hugo (R-40th District) would’ve bypassed the local dispute entirely, and it was headed to Gov. Ralph Northam’s desk.
That meant that Arlington’s only hope of stopping the bill was convincing the governor to strike it down with his veto pen.
In those days, long before evidence of Northam’s racist medical school yearbook photos had surfaced, the Democrat was well-liked in the county. He’d raised plenty of cash from Arlingtonians in his successful campaign just a year before, and had won endorsements in his primary contest from many of the county’s elected officials.
Yet the situation still looked dire enough that the County Board felt compelled to take more drastic steps to win Northam to their side. The county shelled out $22,500 to hire a well-connected lobbying firm for just a few weeks, embarking on a frenetic campaign to pressure the governor and state lawmakers and launch a media blitz to broadcast the county’s position in both local and national outlets.
“It became apparent to all of us that every Arlingtonian had something at stake here,” then-County Board Chair Katie Cristol told ARLnow. “At a time when we were making excruciating decisions about our own budget, the idea that you would take more than million dollars and put it toward something that wasn’t a priority for anyone here was so frustrating.”
An ARLnow investigation of the events of those crucial weeks in spring 2018 sheds a bit more light on how the county won that veto, and how business is conducted down in the state capitol. This account is based both on interviews with many people close to the debate and a trove of emails and documents released via a public records request (and published now in the spirit of “National Sunshine Week,” a nationwide initiative designed to highlight the value of freedom of information laws).
Crucially, ARLnow’s research shows that the process was anything but smooth sailing for the county, as it pit Arlington directly against the club’s members. Many of them exercise plenty of political influence across the region and the state, and documents show they were able to lean heavily on Northam himself.
“One would expect a Democratic governor to be highly responsive to one of most Democratic jurisdictions in the state,” said Stephen Farnsworth, a professor of political science at the University of Mary Washington in Fredericksburg. “But this was a matter of great concern to a bunch of very important people in Virginia, and that may well be the reason why additional efforts were necessary.”
And, looking forward, the bitter fight over the issue could well have big implications should similar legislation ever resurface in Richmond.
“Structurally, this bill could absolutely come back someday,” Cristol said. “And the idea that a bill that has such deleterious consequences for land use and taxation in jurisdictions across Virginia could come back and garner support because of an effective lobbying interest is very much a real threat.”
Arlington officials have pitched Amazon on a program to help the company slash its business license tax burden when it sets up shop in Pentagon City and Crystal City — but the county is also admitting that Amazon could avoid that particular tax altogether.
Should an incentive package designed to bring the tech giant’s new headquarters to Arlington win county approval this weekend, Amazon will still be subject to all manner of local levies. In particular, officials are counting on real estate tax revenues from the company to generate an extra $342 million for county coffers over the next 16 years.
But it’s an open question how much in business license taxes — a levy known as the “Business, Professional and Occupational License” tax or “BPOL” — Amazon will actually need to pay. It’s an issue that’s fueled outrage from local Amazon critics, who argue that the county shouldn’t be offering tax breaks to an extremely valuable company owned by the world’s richest man, which has already successfully avoided paying federal taxes for the last few years.
Documents show that county officials have already marketed Arlington’s “Technology Zone” program to the company, an incentive program that could help Amazon slash its BPOL burden by as much as 72 percent for the next 10 years. It’s unclear whether Amazon might qualify for the tax break, but county staff say it’s also a possibility that the BPOL tax might not apply to the company at all.
In a report prepared for the County Board ahead of this weekend’s vote, staff wrote that Amazon “may be classified as a type of company that is not subject to BPOL at all, such as a retailer or wholesaler.” State law does indeed allow for a variety of exemptions to the tax, with organizations from banks to newspapers eligible to avoid the BPOL levy.
Or perhaps Amazon could avoid the BPOL tax because it’s levied on each company’s “gross receipts.” Staff write that “as a corporate headquarters and global company, Amazon may not have gross receipts attributable to the Arlington location,” largely due to where the sales in question might originate.
Christina Winn, director of business investment for Arlington Economic Development, says the county will examine “the point of sale” in making that determination. If the sales happen somewhere other than Arlington, the BPOL tax may not apply to Amazon.
“Taxes are very complicated, especially with these large companies where all their consultants are based in other places,” Winn said. “They’re based here, but they may be on site in some other state.”
Victor Hoskins, the head of Arlington Economic Development, previously told the Washington Post that other companies with large corporate headquarters in the county (like Nestle and Lidl) have avoided the tax for just that sort of reason. He said it “just hasn’t been the case for large global companies” that they’ve been subject to the BPOL rate.
Staff stressed in the report that they haven’t included any BPOL revenues in their projections of the company’s fiscal impact on Arlington, given the uncertainty over Amazon’s eligibility for the tax. Instead, the county has based its revenue assumptions on real and personal property taxes, hotel stay and meals taxes and sales taxes — Arlington is also counting on BPOL taxes from the company’s landlord in Crystal City, developer JBG Smith.
“Because it’s such a big company with many different lines of business, and they don’t know what businesses are coming into the Arlington facility, we just assumed zero for gross receipts,” Winn said. “We just felt like that was the most conservative and responsible way to model this project.”
Amazon will need to sort out these tax questions with county staff, likely involving the commissioner of revenue’s office.
If the company does qualify for the BPOL tax after all, it could still apply for the “Technology Zone” incentive, though that only applies for 10 years, and would slash (but not eliminate) Amazon’s BPOL tax payments.
If the county judges that the business units located at Amazon’s Arlington headquarters have “a primary function in the creation, design and/or research and development of technology hardware or software,” the company would qualify for the tax break. The program has gone relatively unused since it was last updated in 2014 — for full disclosure, ARLnow’s parent company applied for the tax break in 2015, but was rejected, despite approximately 20 percent of the company’s budget being devoted to web design, development and hosting.
“That incentive zone is there for any business, and Amazon can take advantage of it, if they want to,” County Board Vice Chair Libby Garvey said during an interview on WAMU 88.5’s Kojo Nnamdi Show Friday. “So, we’re really treating Amazon — as hard as it is to believe — basically, like any other business. So, we’re not telling them that every other business can make use of this tech zone incentive that we have and you can’t.”
The Board is set to vote on the incentive package at its meeting Saturday (March 16), including the heart of the proposed offer to Amazon: an estimated $23 million over the next 15 years, drawn from a projected increase in hotel tax revenues driven by the company’s arrival.
However, the county has recently conceded that number could go higher (or lower) depending on what sort of impact local hotels actually see in the coming years. Amazon will only be permitted to use that cash on building and furnishing its new headquarters.
(Updated at 4:45 p.m.) Once Amazon starts to move into Arlington, the company could take advantage of a little-used county incentive program for tech firms to substantially slash its local tax burden.
Documents released in late January show that Arlington officials explicitly pitched the tech giant on the prospect of scoring major tax savings through the county’s “Technology Zone” program, back when they were still wooing Amazon last year. Created in 2001 and last updated in 2014, the program was designed to provide incentives for high-tech businesses to move to Arlington by offering significantly reduced rates for the county’s “Business, Professional and Occupational License” tax in certain neighborhoods.
Amazon wouldn’t be eligible to apply for the tax break until it actually sets up shop at its planned destinations in Crystal City and Pentagon City. One of the county’s “Technology Zones” runs along the “Jefferson Davis Corridor,” including the neighborhoods near Route 1 that the tech firm hopes to someday call home.
Once it arrives, however, the company could use the program to shrink its BPOL rate by as much as 72 percent for the next decade.
The potential tax break was not described in the memorandum of understanding laying out the county’s promised incentives to the company signed by both parties on Nov. 9, 2018, nor was it mentioned in any subsequent announcement of Arlington’s plans for Amazon.
Yet the county did advertise the program in documents dated Oct. 11, 2018, recently posted on the county’s website, outlining Arlington’s pitch to Amazon.
“Based on the jobs Amazon creates, if the company is eligible for tech zone benefits, it would apply each year for that BPOL credit,” said Cara O’Donnell, a spokeswoman for Arlington Economic Development, which helped broker the Amazon deal. “It’s a standard part of our proposals to technology-related companies and each one is handled individually.”
Critics of the deal see this potential tax saving as part of a pattern for Amazon, however.
Amazon is already set to receive $750 million in state incentives designed to defray its state tax burden, and Arlington officials have insisted that the company’s massive expansion plans could have a transformative impact on the county’s flagging tax revenues. Yet this BPOL tax break could result in Arlington losing out on a hefty chunk of cash from Amazon — the county collected $65.6 million in BPOL revenue in the last fiscal year, its third largest source of tax dollars behind the real estate and personal property levies.
“Their track record is clear — they try to do everything they can not to pay taxes,” said Danny Cendejas, an organizer with the “For Us, Not Amazon” coalition opposing the company’s Arlington plans. “I wouldn’t be surprised if they were looking for every possible loophole.”
The company has drawn criticism before for successfully avoiding paying any federal taxes for the last two years, largely by leveraging a mix of tax breaks and credits.
But O’Donnell stressed that county officials “have not factored BPOL into any of our revenue projections” associated with the company’s arrival. The county has long expected to see about $342 million in tax revenues from Amazon as it develops the new headquarters over the next 16 years.
O’Donnell added that the company would have to apply for the program like any other business.
Without the “Technology Zone” tax break, Amazon would also be responsible for paying $0.36 for every $100 of its gross receipts as part of the BPOL tax. Should it earn eligibility for that program, the company could see the rate cut in half if it can prove it employs up to 499 people in “business units with a primary function in the creation, design and/or research and development of technology hardware or software,” according to county documents.
If Amazon can show it employs up to 999 people for those purposes, it could pay a rate of $0.14 per $100 of receipts. If the company exceeds 1,000 employees, it would pay $0.10 for every $100.
The company hasn’t settled on the exact mix of job functions for the 25,000 to 38,000 employees who could someday call the Arlington headquarters home — Holly Sullivan, the company’s worldwide head of economic development, said at an event in Arlington last week that she anticipates a “50-50” split between tech workers and other staff on the campus, making it a pretty safe bet that Amazon could meet the program’s standards.
The potential size of the company’s tax savings also remains a bit murky. County documents estimated that the “Technology Zone” savings “are equivalent to approximately $2 to $3 per square foot in building occupancy costs annually.”
Kasia Tarczynska, a research analyst with Good Jobs First, an advocacy group studying the Amazon deal, says that the savings are difficult to estimate, but she suspects it would work out to “a lot of money because of the size of the project.”
And Tarczynska adds that this is the first she’s heard of Amazon being eligible for the tax break. The head of Good Jobs First, vocal Amazon critic Greg LeRoy, agreed with her assessment.
Many of Amazon’s local opponents were similarly surprised to hear the news that the company could reap the tax savings, particularly given the frequent assurances from county leaders that Amazon would help relieve the recent strain on Arlington’s finances.
“In all of the numerous meetings I’ve been to with the [County Board], they have never once mentioned the tech zone incentive,” said Roshan Abraham, an anti-Amazon organizer with Our Revolution Arlington.
Tarczynska says that such a tax break “is a common subsidy in the region” — neighboring Fairfax County has a similar program — yet Arlington has regularly seen anemic participation in the program.
When ARLnow last investigated the program in 2015, just eight businesses were currently taking advantage of it. These days, O’Donnell says the county has recorded approximately 70 businesses participating in the program since it began.
The County Board is moving closer to approving the first increase in the Arlington Public Library’s (APL) collections budget since 2014.
The proposal is part of the FY2020 budget sketched out by County Manager Mark Schwartz, which allocates $300,000 to APL’s budget for books and other materials for rent. The Board expressed broad support for beefing up the library’s budget during a work session Tuesday.
APL’s chief materials manager Peter Petruski presented that increasing the budget would help reduce the e-book hold times which have been “climbing precipitously.”
Together with APL Director Diane Kesh, Petruski told the Board that currently average hold times for an e-book are 38 weeks, but they are confident they can knock that down to 28 weeks.
“That’s a significant jump,” noted Board member Matt de Ferranti. “Is there any particular reason that we’re able to make that transition to pull that all the way down?”
“If we directly go towards the most in-demand titles, more copies of them, into people’s hands… that’s how we getting that 10-week that drop,” replied Petruski.
Director Kesh shared that the hold times for print books hover between 18 and 19 weeks, and that APL is “very hopeful” that the six-figure budget increase will help reduce that as well. Kesh also said the library would like to use the funding to buy extra copies of hot items, like Michelle Obama’s biography, which still has 300 holds.
APL also wants to use the funds to roll out a new movie and documentary streaming service called “Kanopy” currently used in Alexandria and D.C. public libraries. The last fiscal year budget cut 17 percent from the collections budget — leading the library to remove free digital services like its audiobook streaming service and investment research tool in July.
Schwartz previously forecasted up to $30 million more in county budget cuts this year, but proposed only $5.2 million due to some unexpected growth in real estate revenues and lower-than-expected employee healthcare costs. In a February letter about the proposed FY2020 budget Schwartz recommended using the county’s fortuitous finances to increase APL’s collection budget.
“This really goes a long way towards addressing where we’ve been in the past and we’re very, very grateful for the support,” Kresh said to the Board Tuesday afternoon.
“Since 2014, not only has the collection budget not increased as costs have escalated but the use of e-books and other digital platforms have become increasingly popular,” wrote Schwartz in February. “The library’s ability to provide popular materials to patrons in a timely manner, in either digital or print format, has eroded significantly.”
On Tuesday afternoon, Board members Katie Cristol and Eric Gutshall seemed to signal support for the budget increase by commending the library for its goals to reduce hold times and increase collections.
Board Chair Christian Dorsey said, “It’s remarkable when you think about it even though we’re having a budget discussion, libraries serve as any and everything for people in our community. Safe spaces for kids, productive spaces for teens, ways to combat social isolation for seniors and everything in between.”
The County Board will have until late April to amend the proposed county budget for the next fiscal year and is scheduled to vote on the final version on April 23.
Arlington officials have, at last, unveiled a detailed version of the county’s proposed incentive package designed to bring Amazon to the county.
A draft copy of the county’s “Economic Development Incentive Grant Agreement” posted online for the first time today (Tuesday) sketches out the exact amount of office space Amazon will need to occupy in Arlington in order to win $23 million in incentive cash over the next 15 years.
The agreement also reveals additional details about how the county plans to work with the company to add infrastructure improvements in the Crystal City and Pentagon City neighborhoods, which Amazon hopes to soon call home, and lays out the procedure for either side canceling the incentive arrangement.
County staff are unveiling the incentives agreement 11 days before the County Board is set to vote on the deal, the last hurdle for the company to clear before it can start to officially set up shop in Arlington. Gov. Ralph Northam signed off on $750 million in state incentives for the company last month, amid persistent complaints from critics on both sides of the political aisle that government officials shouldn’t dole out grants to a company run by the world’s richest man — proponents of the deal argue that the incentives are well worth it, given Amazon’s potential to send hundreds of millions to county coffers in tax revenues.
Notably, Amazon has agreed to only use the incentive money to build its new Arlington facilities, including any expenses associated with “construction,” and “furniture, fixtures and equipment.”
Under the terms of the proposed deal, Amazon will need to lease 60,000 square feet of space in the county by June 30, 2020 to start qualifying for the cash. Arlington plans to draw the money from an expected increase in revenue from a tax on hotel stays, with Amazon’s arrival projected to juice hotel tax revenues in the area.
That office space occupancy target jumps to more than 567,000 square feet by 2021, and regularly creeps upward from there. By 2026, when the company expects to have new buildings built near Metropolitan Park in Pentagon City, Amazon will need to occupy about 1.8 million square feet of space. By 2028, when its new buildings at the former “PenPlace” site are set to be ready, it will need to hit a 2.69 million-square-foot target.
The timeline included in the incentive agreement tops out with a 6 million-square-foot target in 2035. The company has said it intends to build and lease a minimum of 4 million square feet in the county, and could reach 8 million square feet by the time it reaches its peak of roughly 38,000 employees stationed at the new headquarters.
Though the opening of the ever-controversial Long Bridge Park aquatics and fitness center is still a ways off, county officials are gearing up to hire two new staffers set to work at the facility.
County Manager Mark Schwartz set aside $110,000 for the newly created positions as part of his proposed budget for fiscal year 2020. He forwarded along his first draft of the new spending plan to the County Board late last week.
Schwartz is recommending that the Board act now to start the recruitment and hiring process for a general manager and a maintenance technician for the facility, currently expected to open sometime in “early 2021.”
“Hiring these two positions prior to the facility opening will allow the Department of Parks and Recreation to develop standard operating procedures; ensure mastery of all building systems, including specialized aquatics equipment; procure inventory; and develop staff training plans,” Schwartz wrote in a message attached to the budget proposal.
The manager expects that the county will be able to afford the new hires largely through some staff reductions elsewhere across the department. In all, Schwartz is recommending $5.2 million in cuts in his budget, affecting 29 full-time positions and one-part time position across the county government. He’s also proposing a tax hike to meet some of the county’s growing expenses, though the Board opted to explore an even larger tax increase than he originally recommended.
Construction has continued apace on the $60 million Long Bridge project ever since it finally broke ground last summer, following years of debate over its scope and cost. Schwartz added in his budget proposal that he “remains committed” to somehow striking a naming rights deal for the facility to defray some of its costs — the Board decided last year to hire a marketing firm to help the county search for potential sponsors.
“As the project moves closer to completion, we remain optimistic that our efforts will be successful,” Schwartz wrote.
County officials also expect to finalize a fee structure for anyone hoping to use the facility’s pools and gym as part of the upcoming budget process. A working group on the subject recently wrapped up its deliberations and will deliver a proposal with potential fees to the Board in the coming weeks.
According to a Jan. 31 presentation from the group, daily passes for county residents would range from $9 for adults to $5 for children. An annual pass for adults would cost $630 and $350 for kids.
Non-residents would pay a 25 percent premium on daily passes and a 30 percent premium on all other passes, under the working group’s proposal.
Growing expenses from the county school system and Metro have convinced Arlington officials to propose a substantial tax increase for the new year’s budget, with leaders advancing a tax hike that’s even larger than the one initially proposed by County Manager Mark Schwartz.
The County Board voted 4-1 to advertise a 2.75-cent bump to the county’s real estate tax rate at its meeting Saturday, nearly double the 1.5-cent increase included in Schwartz’s proposed budget for fiscal year 2020. Board member Katie Cristol cast the lone dissenting vote.
That change would raise the real estate rate to $1.0205 per $100 of assessed value, generating about $21.4 million for the county in all. The average homeowner would pay an extra $360 or so if the rate goes into effect, though most other county tax rates will remain unchanged.
Of course, there’s no guarantee that the Board will end up approving that exact tax bump — the advertised rate merely represents the upper limit of the rate officials can ultimately approve by the time the budget process ends in April, and they can always bring the rate back down if they so choose.
Most Board members said Saturday that they hope to eventually to do just that, but with the exact size of the budget challenges that the county will face still uncertain, leaders opted to post the higher rate to afford themselves some extra flexibility this spring.
“I don’t want to be in the position of erring because of a box we set ourselves in early,” said County Board Chair Christian Dorsey. “I’m comfortable having that [higher rate] to allow us the proper flexibility to make sure that, at the end of this budget season, we don’t end up with regrets.”
The Board was bracing for Schwartz himself to propose a similarly sizable tax hike in his first draft of the budget, given his warnings this fall that the county would need to close a budget gap of anywhere between $20 million to $35 million, without taking the schools’ needs into account.
But a larger-than-expected rise in property values filled up county coffers a bit, prompting Schwartz to propose the 1.5 cent tax increase and $5.2 million in cuts to balance the budget. Yet Schwartz also cautioned that he had no way of knowing quite yet just how much money the school system or Metro will ultimately need, convincing officials of the need for some extra wiggle room.
The extra quarter of a cent on the tax rate above Schwartz’s proposal would be set aside for Metro’s needs, a move championed by Dorsey, who also serves on WMATA’s Board of Directors. The transit system will set its new budget next month, and there’s no telling just how much cash that could demand from localities like Arlington — General Manager Paul Wiedefeld is proposing major service increases designed to increase ridership, but county officials have thrown cold water on some of those proposals.
As for the school system, Superintendent Pat Murphy will present his opening budget proposal to the School Board later this week, but he’s previously estimated that a flood of new students (and the opening of new schools to accommodate them) could put Arlington Public Schools in a budget hole of as much as $43 million.
Accordingly, Board members hoped to add an extra penny to the tax rate beyond Schwartz’s proposal, generating an extra $7.8 million to dedicate specifically to schools.
Board member Erik Gutshall says school leaders have been especially keen on a larger tax increase recently, particularly after the Board decided to hold the tax rate flat last year. Many around the school system felt that the Board promised them that they’d work to address school needs this year instead, and they’re looking to see officials deliver on that pledge.
Josh Folb, a leader of the Arlington Education Association, even argued that a 3-cent tax increase would be the most appropriate step for the Board to take.
“Without that flexibility, the Board will not be able to negotiate in good faith with the schools when they present their budget of needs in the coming days,” Folb said.
Board Vice Chair Libby Garvey, a former School Board member herself, said she’d have favored advertising the full 3-cent increase, but acknowledged she wouldn’t have the votes with her to make that happen.
Indeed, Cristol argued instead for the Board to advertise a 2-cent tax hike. She pointed out that the Board managed to find some extra money for both schools and Metro without raising taxes in last year’s budget, and worried that even advertising the 2.75-cent tax hike would send a poor message to local homeowners.
“Raising it any further undermines our commitment, or way of framing, we have taken to this community, this idea we’ve had softness in the office market and we were committed to doing everything we needed to do to raise that, rather than just balance the cost of our increasing needs on the backs of our residential taxpayers,” said Cristol, who’s up for re-election this fall. “I think that’s really penetrated and allowed us to have much a healthier conversation with most quarters of our community about Amazon’s arrival and why it’s necessary.”
But Cristol was the only Board member to support that proposal, with others arguing that last year’s budget cuts were painful enough that leaders aren’t eager to repeat that process this time around.
“If there’s fat to be found [in the budget], we’ve crossed that bridge already,” Gutshall said. “Last year, we hopefully didn’t cut to bone, but we came very, very close in some particular areas.”
As part of his proposal, Schwartz included an extra $3.4 million in potential cuts that the Board could consider if it doesn’t want to raise taxes at all. Those changes would affect another 19 county staffers, and involve changes like the elimination of library services at the Crystal City Connection and Glencarlyn Library, reductions in county transportation and human services staffing and cuts to some police department programs.
But Schwartz pointedly did not endorse those changes, urging the Board to opt for the tax hikes instead.
The Board will now hold a series of work sessions and public hearings on the budget and tax rates, with a final vote on the new spending plan set for April 23.