Projected Loudoun Real Estate Tax Rate Increase Dropped | News

Loudouners may be spared an all-but-certain real estate tax rate increase next year, but tax bills will likely still go up as the county faces its most constrained annual budget in a decade.

Facing uncertainty around tax revenues from the county’s data center market earlier this year, county staff members projected no growth in that tax base in earlier forecasts, trimming a major source of local tax funding. Last year, data centers generated enough local tax revenue to cover the entire county administration operating budget. The General Assembly this year passed a bill controlling how localities assess data center property for taxation, and Dominion Energy issued a surprise letter that it may not be able to provide electricity to new data centers for years. County budget officers projected just covering annual budget growth because of factors like inflation, employee raises and staffing new facilities would require a tax increase.

Now, Commissioner of the Revenue Bob Wertz’s office is forecasting Loudoun’s commercial property will appreciate by almost 20%, along with an estimated $3.1 billion in new development where before he predicted only $1.8 billion, both driven by data centers. With that growth feeding into the tax base, county staff members now expect at the current tax rate will be able to cover that annual base budget growth with a one-cent cut to the real estate tax rate, to $0.88 per $100 of assessed value.

Revenues are also limited by a five-cent reduction in the personal property tax rate beginning in 2023, to $4.15 per $100 of assessed value, and by a plan to dedicate a half-penny of the real estate tax rate to affordable housing projects.

And even with a slight tax rate cut homeowners may see higher tax bills. County staff members estimate the average homeowner will see annual real estate tax bill climb by $361.

It will also be the first year of the new 60/40 split of new revenues with Loudoun County Public Schools. The Board of Supervisors decides how much money to send to the school district, and the School Board decides how to use it. Seeking to avoid the often acrimonious debates over how much money to send to the schools, supervisors may try something common in other jurisdictions this year: the school district would get a set portion of the growth in local tax revenues, whatever that ends up being. Loudoun supervisors propose sending the schools 60%.

But despite the slightly improved picture for county revenues, that tax rate still leaves little for other Board of Supervisors priorities or requests for new funding from county department heads. That means projects proposed by the board over the course of the year could be stalled without funding. So far that list includes collective bargaining, continued work on the Unmet Housing Needs Strategic Plan, a county composting program, and a new energy plan. Meanwhile, some county departments and agencies have highlighted critical needs including for more field deputies in the Sheriff’s Office and crisis intervention staff in the Department of Mental Health, Substance Abuse and Developmental Services.

The Board of Supervisors’ finance committee on Dec. 13 recommended County Administrator Tim Hemstreet presented them a draft budget prepared with the one-cent cut to the tax rate, with options if they were to increase the tax rate by up to 1.5 cents. That reflects a common practice in the county’s budget process—supervisors sometimes take the options Hemstreet puts forth for that additional funding, and swap those with options already in his proposed budget.

“I think at least this way we’ll see some options and some top priorities, and we can decide how to work all that through,” Supervisor Matthew F. Letourneau (R-Dulles) said. “I will say that a lot of this discussion is based on the guidance we’ve gotten from the schools so far, which has some high-level numbers, but not specific numbers and frankly is pretty hard to evaluate.”

County Chair Phyllis J. Randall (D-At Large) also pointed out the school budget forecasts came from a superintendent who no longer works for Loudoun schools—former superintendent Scott Ziegler, who was fired after the release of a special grand jury’s report on his handling of a student sexual assault scandal. And she said the schools may not know how much money to expect from the state for some time. The General Assembly has not passed a budget by the end of its normal session since before the COVID-19 pandemic began.

“There may be some adjustments to that budget,” she said.

Another budget option would take supervisors away from their proposed 60/40 split before it began—the committee also recommended Hemstreet bring back options for that tax increase but with all of it going to the county government and none to the schools.

Supervisors on the finance committee approved the recommendations with a 5-0 vote. The Board of Supervisors will vote on those instructions in January. Hemstreet will propose a first draft of the budget based on those instructions as a starting point for supervisors’ annual budget deliberations.