Real estate taxes, both residential and commercial, account for over half of the citys revenue base.
The market corrections underway in both sectors are likely to challenge the citys ability to fund the services it needs going forward, said City Manager Jim Hartmann in an interview with the Times last week.
Real property taxes accounted for $278 million to the citys financial coffers out of a total revenue source of $519 million for 2008. The proposed city budget being considered for approval by City Council, as proposed by Hartmann for 2009, will increase by 3 percent to $535 million an increase at a time when city residential tax revenues are projected to decrease an average of 1.7% overall.
City Council will vote on one of two budget proposals recommended by Hartmann on May 12 for fiscal year 2009.
The citys Real Estate Assessments Director, Cynthia Smith-Page, said residential tax assessments for 2008 will be based on the most recent comparative sales data for market activity, and will vary throughout the city. While some neighborhoods will see little decrease in taxes, others with a better sales appreciation rate in 2007 will have their residential taxes increase.
In the citys Historic District (area code 22314), single family homes will diminish in assessed value by as much as 3 percent and condos will take the biggest hit, with the highest decreased value of almost 9 percent. The average values are represented by Zone 8, with single family homes down by 1.7 percent in value compared to 2007, and residential condominiums down by 4.1 percent. The condominium market shows the greatest decline in values overall, with valuations driven by location and neighborhood amenities, said Smith-Page.
The citys Zone 9 (Old Town) home valuations will be reduced by 3 percent for single-family homes and by 5 percent in residential condos, according to a tax assessment map provided to The Times by the city. Other highlights of the map show Old Towns Zone 6 (also Old Town) will have a reduction of half a percent in single-family homes and a 3% reduction in condos. The biggest reduction in city tax assessments will be in Zone 11, (North Old Town, mostly Potomac Greens) with condos dropping 9 percent in value, but single-family residences by only 1.4 percent.
The next largest decrease in assessments will be in Zone 15 (off Route 1 by I-495), with condos down in valuation by 7.8 percent and single- family dwellings decreasing by 1.5 percent.. Zone 10 (Del Ray) will see assessments reduced by 7.5 percent for condos, with single- family homes down by 1%. Zone 14 (Rosemont/ Beverly Hills) will see reductions of 0.3 percent for single-family homes, and 6% for condos. Zone 2, or Parker Gray, assessments will be down 5.9 percent for condos, and less than 1% for single-family homes.
These assessments will provide a stable platform for future appreciations, likely to be within the traditional 2-5 percent range, according to data collected by the National Association of Realtors covering the past 28 years.
Hartmann has presented two budgets to City Council, and has issued a one-time increase in commercial valuations of 12 percent over last year, which will help offset the reduction in residential tax revenues, while growing the overall budget by almost 3 percent for 2009.
While there is sufficient capital to run the city through 2009, according to Hartmann, the city may be challenged to provide enhanced services, if revenues do not pick up. Sales taxes are also down, as consumers are spending less money in Alexandria, the budget data shows.
The city can adjust spending on capital improvement projects to jiggle numbers to meet the reduced budget flow, but over time, there may be a need to adjust our expectations.
In the meantime, the city is about to hand real estate shoppers a powerful reason to look closely at the For Sale ads.
As property values take a reduction, market prices usually follow.