City Council approves FY25 budget, sets 2.5-cent tax increase

City Council approves FY25 budget, sets 2.5-cent tax increase
City Council approved the fiscal year 2025 budget on May 1. (Photo/Jordan Tovin)

By Caitlyn Meisner |

On May 1, City Council unanimously approved a revised fiscal year 2025 operating budget, including a 2.5-cent increase in the real estate tax rate to $1.135 and additional funding toward Alexandria City Public Schools.

The $926.4 million operating budget is a nearly 5% increase from the fiscal year 2024 approved operating budget of $884.3 million. This is also an increase from City Manager Jim Parajon’s proposed operating budget of $911.3 million. 

Parajon did not propose an increase in the real estate tax rate, but shortly after his February proposal, Council proposed a maximum 4-cent increase. They’ve now found a middle ground with the 2.5-cent increase, which alone will raise the average homeowner’s bill by $483, according to Mayor Justin Wilson’s monthly newsletter, Council Connection.

“[Council] really focused pretty high attention in providing additional teacher compensation for recruitment and retention and additional funding for affordable housing,” Parajon said. “Once the Council heard the requests from our community at that kind of a level, including the School Board, the Council decided that to meet those needs, it did require a tax rate increase.”

Also in his monthly newsletter, Wilson urged residents to view the current tax increase in context of the city’s recent tax history, which he posited was one of restraint.

“Three years ago, the City Council was able to adopt the first reduction in the real estate tax rate in 15 years,” Wilson wrote. “This year, the City Council will be including the first real estate rate increase in seven years.”

This increase over the FY2024 rate of $1.11 per $100 of assessed value, combined with rising assessed home values and fee increases that were part of Parajon’s initial budget, will cause Alexandria households to pay roughly 6.5% more in local taxes and fees during the next fiscal year. The average homeowner will pay more than $800 in additional taxes and fees in FY25 above this year’s bill.

Parajon said the increase is in response to the needs that came forward, both from the School Board and the community. In his process, Parajon looks at what’s most pressing operations-wise and goes from there. 

The stormwater utility fee was also increased to $324.10 annually for single-family households, which is in line with Parajon’s budget proposal. This increase is consistent with previous plans for 5% growth each fiscal year.

Parajon emphasized that the budget process is not done in a vacuum and is influenced by the public’s concerns and comments.

“Community feedback, that really helps educate and helps inform the Council about the most pressing needs,” he said. “And I think Council responded to those and took action to add a series of additions to the budget that I proposed with the appropriate tax rate increase to cover the cost of those.”

Councilor Sarah Bagley, in the May 1 meeting, said this is the most engaged she has seen the community in a budget process in her 2 ½ years on Council.

“I’m proud of the fact that this budget reflects both what we heard from the community and also this Council’s larger obligation to understand the needs of the city,” Bagley said. “We also tried to address those items that don’t always have a voice in the room all the time.”

Councilors also suggested additions and deletions to be considered by the entire Council. In total, 22 additions were considered for the operating budget and two for the capital improvement program.

Major increases were granted to ACPS, including a $4.7 million increase in capital funding for the George Mason and Cora Kelly projects and a $4 million increase to the ACPS operating budget.

Several things were also approved to be placed in the contingency reserve. Most notably, $550,000 was granted for staff to “bridge the completion” of the Alexandria Recurring Income for Success and Equity, or ARISE, program in fiscal year 2026, the budget summary released ahead of Council’s decision reads.

$900,000 was also granted to mental health staffing stabilization, $1.75 million to one-time targeted retention bonuses and $1 million for cyclical employee pay adjustments. According to the budget summary, Parajon is now tasked with developing recommendations to present to Council before its recess in July.

The recommended additions that went unfunded were contingency funds for an e-bike pilot program – which was withdrawn following Gov. Glenn Youngkin’s veto of such legislation – and $250,000 to support the MetroStage capital campaign project.

“This [budget] was a challenging one given the state of the regional economy, which is still strong but [has showed] a little bit of signs of slowing down,” Parajon said. “[$926 million] covers a variety of everything, from state agencies to the school system to all of our city agency functions and partner agencies. It’s a big number, but it covers a lot.” 

At the end of the May 1 meeting, Wilson spoke to the challenging nature of the budget adoption process as this is his 14th and last, but joked with his colleagues about the particular challenge doing so during election season.

“I highly recommend when you’re not running, [budget season] is a lot of fun,” Wilson said with a laugh. “Kudos to my colleagues for putting all that aside and adopting a budget that we know is in the best interest of our residents; not just this year, but in the future.”

He also recognized that the city cannot be “all things to all people.”

“We can’t be a small town and have low taxes and have gold-plated city services,” Wilson said. “We can’t have police that are paid more than everyone and have one of the largest police departments in the region with small class sizes and higher paid teachers. You can’t do all of it; the tradeoffs that are going to be required over the next several years are going to have to all be prepared by the community to roll up our sleeves.”