County supervisors will start their annual budget deliberations with an 8.5-cent cut to the local real estate tax rate—one of the county’s biggest-ever rate cuts, and yet one that would still see the average real estate owner paying more in taxes amid record property value growth.
County Administrator Tim Hemstreet gave supervisors the starting point for their annual budget deliberations with his $3.5 billion budget proposal Wednesday evening, based on their direction and the county’s fiscal picture. This year, stagnating new construction and skyrocketing property values will put more of the burden of funding the government on existing landowners and homeowners. Although the proposed real estate tax rate of $0.895 per $100 of assessed value is a significant rate cut from the current $0.98 rate, Hemstreet noted, it was still five cents above the equalized tax rate, the rate at which the average real estate owner would pay the same amount in taxes despite changing assessments. For a homeowner paying the tax on the average residential property, this year valued at $636,200, that will amount to a $257 increase to $5,694.
But the budget proposal also comes with a cut to a tax rate that hasn’t moved since 1987: the personal property tax rate. Hemstreet has proposed cutting that rate by five cents beginning in 2023, to $4.15 per $100 of assessed value. The proposed real estate tax rate would cover 2022.
That discussion has been driven over concerns that Loudoun County is becoming too dependent on data centers for tax revenues. Although the largest real estate taxpayers in Loudoun are almost all data center companies, and data centers account for almost half of the value of all commercial property in Loudoun, the largest source of county tax revenue from data centers is in fact the tax on the computer equipment inside.
County budget officers have warned that real estate taxes are a more stable source of revenue for the county budget—a warning illustrated last year when, amid pandemic supply chain issues, data center property tax revenues missed projections by about $60 million. County staff members have recommended supervisors work toward rebalancing their income stream to lean more heavily on real estate taxes.
Hemstreet’s budget does not meet the full request from the Loudoun County School Board, and comes with no recommendation to do so. Hemstreet’s proposal would send $53.7 million more to the school system than last year, but is still $21.5 million short of the School Board request. If supervisors decide not to cut the personal property tax rate in 2023, Hemstreet recommended they could send the $5.5 million they would otherwise forego to the school system, still leaving a $16 million gap in the request.
The county’s legal notice advertises a $0.915 tax rate, which sets the highest tax supervisors can levy without issuing new public notices, and which Hemstreet said would be the tax rate necessary to fund the school system’s full request.
The county’s guidance to the school system had been for an increase of only $49.9 million.
“During budget development discussions with the schools, this transfer was regularly discussed as being sufficient to support the school division’s Fiscal Year 2023. However, changes occurred with the superintendent’s budget proposal notably due to impacts to state funding estimated within the governor’s proposed budget,” Hemstreet said.
This year’s budget will also have a number of new expenses beyond staffing up new facilities and keeping up with the growing population. Among other county board priorities those include dedicating the revenue generated by a half-penny of the tax rate to the Housing Trust Fund, an estimated $5.9 million, along with $1.9 million to administer the county health department locally as opposed to as a state agency, $1.3 million to continue expanding body-worn camera usage in the Loudoun County Sheriff’s Office, and a half-million dollars to administer collective bargaining with county employees.
The Board of Supervisors will hold three public input session on the budget. Those will be Thursday, Feb. 24 at 3 p.m. and 6 p.m. in the county government center in Leesburg, and Saturday, Feb. 26 at 9 a.m. in the school administration building in Broadlands. To sign up in advance for a speaking slot, call 703-777-0204.
Comment may also be emailed to [email protected], left as a voicemail on the Board of Supervisors’ Comment Line at 703-777-0115, or left on the county government’s official Facebook and Twitter accounts.
Tonight, supervisors will hear from the School Board about their budget request. The presentation will include a breakdown of the School Board’s $1.6 billion proposed budget for fiscal year 2023. The ask represents a 5.9% increase in funding, despite this year’s enrollment dropping 7% from projections. The proposed budget includes the addition of an International Baccalaureate program, a tripling of the existing funding for theater and performing arts programs, and an average 5% raise in teacher pay.
Supervisors will hold their first work session on the Fiscal Year 2023 budget Feb. 28 at 6 p.m., with plans to pass a budget April 5, 2022. More information is also online at loudoun.gov/budget.
Hayley Milon Bour contributed to this report.