Our View: A tale of two tax bases

Our View: A tale of two tax bases
The divide between what the city collects in residential and commercial taxes continues to widen.

Gaps in the political realm are generally not good. A gender gap that’s too wide can spell doom for a political career. An education gap that’s too big means minority students are not being well educated.

What, then, to make of the huge and growing gap in Alexandria between our residential and commercial tax bases?

In general terms, cities aim for as close to a 50-50 split as they can get between property tax revenue gained from residential and commercial real estate. In recent years, Alexandria’s leaders have bemoaned the 70-30 split in our city, because that means the tax burden on residential property owners is too high.

The tax assessments announced this week are cause for alarm, as according to the CY 2018 Real Property Assessment Summary released by the city, that split is now closer to 80-20 than it is to 70-30.

To be exact, residential property in Alexandria, when multi-family rentals are included, account for $30,307,450,795 of the city’s total assessed taxable property value of $39,897,986,964. That’s 76 percent and it’s a exceedingly high total.

We have three main takeaways from this new data: one good, one bad and the last skewing toward ugly. The positive angle is that residential value in Alexandria is high and continuing to grow. That’s good news for people who own homes, condos or apartment buildings in the city – though not so good for lower income people who want to live here. It’s no wonder that solutions to the affordable housing dilemma remain so elusive.

But if you take out commercial multi-family apartment buildings, commercial property in Alexandria fell in value by 3.74 percent in 2018 assessments relative to those assessments in 2017. A shrinking commercial tax base, which without multi-family apartment buildings is about $9.5 billion out of a total property value of almost $40 billion, means that the property tax burden on Alexandria residents is bad and heading toward intolerable.

The ugly part is related to the city’s ever growing reliance on new residential development to fund an also ever-growing city budget.

The jump in residential property assessment value is based on both the value of properties already in the city and also on new developments.

Because non-residential commercial properties are declining in value, city council and staff have resorted to cramming residential development projects on every parcel of available land. Can anyone remember the last time a residential development plan was rejected by council?

Unfortunately, these decisions are being made by people with their eyes solely focused on the tax dollars projects will generate. There is limited and dwindling concern for the impact all of this residential development has on the quality of life of those already living in Alexandria.

The cost shows up in too much traffic, not enough parking, overcrowding in our schools, the need for more police and EMTs, etc. The solution being pursued is then ever-more residential development.

It’s a no-win circle with no end point and no clear way out.
Obviously, if Amazon were to choose Alexandria for its second headquarters, that could conceivably go far toward correcting this skewed tax base – though only if city hall doesn’t make Amazon’s property tax exempt in an effort to reel them in. Development around the new Potomac Yard Metro station would also help – if said development is more commercial than residential.

Otherwise, we need to work to make our city’s environment for commercial development as appealing as possible. We just need to make sure that we don’t give away the store in the process.