The Alexandria government may raise taxes on residential and commercial property again. While tax increases are generally met with a chorus of boos from those who must pay them, this proposed increase, when coupled with a proposed new commercial real estate add-on tax, seems particularly inopportune.
The timing is curious, considering that Alexandria is projected to finish fiscal year 2011 (ending June 30) with a surplus of $12.4 million on the $531.6 million budget a 2.3 percent overrun. Rather than spend the projected surplus on capital improvement projects, as is now being proposed, why not apply it toward the fiscal year 2012 general fund? Or better yet, why not return it to taxpayers? That would be a welcome change and a wonderful good-faith gesture.
The city manager has proposed a $553.4 million budget for FY12, a 4.1 percent increase over this year, despite inflation in 2010 resting at a mere 1.6 percent. If the FY12 budget merely kept pace with the rate of inflation, rather than increased spending in real terms, the budget increase would be $8.5 million. This could be covered out of the surplus and still leave almost $4 million to return to taxpayers pockets.
The city managers office has advertised a maximum increase in the real estate tax rate of 2.2 cents per $100 of assessed value. This increase would be on top of additional revenues generated because assessments are up and thus the tax base has grown. According to the citys website, the overall value of residential property in Alexandria rose by 1.25%, or $226.8 million in the past year. Most residents will pay more because their property is more valuable, so why also increase taxes?
Raising the tax rate to $1 per $100 of assessed value, particularly when its clearly not needed, also crosses a line that is psychologically significant. It takes property taxes to 1 percent of assessed value, which by itself doesnt sound like much, but when coupled with the layers of taxes we all pay (sales, property, real estate, income, fees, etc.) is quite a burden.
Homeowners are not the only ones being hit by this possible increase, as business taxes will also rise. The city is already going to receive significantly more money from commercial real estate taxes because their property values rose this year by almost 5 percent, increasing the commercial real estate tax base by $624.5 million.
Two things seem clear from crunching the numbers. The first is that Alexandria doesnt need a 4.1 percent spending increase when inflation is just 1.6 percent. The second is that we have enough money from last years surplus and additional revenues from higher assessments to cover any modest spending increase needed beyond inflation we dont need a property tax rate hike.
The math behind a possible tax hike just doesnt add up.