Plan calls for 18% cut in property tax rate…But it won’t be a windfall for homeowners: Since values soared, change will keep most tax bills the same or only slightly higher
Rappahannock County’s $32.9 million budget for the fiscal year beginning July contains a critical piece of taxpayer relief: an 18% drop in the tax rate for property taxes, easing the pain that otherwise would have resulted from last year’s significant jump in assessed real estate values.
(Graphic/Laura Stanton)
Under the new rate, unveiled in the county’s fiscal year 2023 budget plan, land-holding residents will pay 55 cents for every $100 of real estate value – down from the current 67 cents.
Though significant, the change is less a windfall than a sigh of relief: most land-owners’ tax bills will be the same or slightly higher than they have been because of the surge in property valuations that came with last year’s general reassessment. The new valuations were the first since 2016, and according to Zillow, the national real estate data firm, median home values in Rappahannock rose 23% between 2016 and 2021. As a result, the property taxes for virtually all residents will be calculated on significantly higher real estate values.
(Graphic/Laura Stanton)
The budget plan notes that if the county’s Board of Supervisors chooses to drop the property tax rate to 56 cents per $100 of value, rather than the proposed 55 cents, taxes would be “equalized,” or essentially held steady with tax bills before last year’s general assessment. By adding a penny to the tax rate, the county would bring in an additional $193,000 in revenue. However, the county is currently in strong financial condition, and voters have historically favored lower taxes. Another change in the 2023 fiscal year budget proposal is a plan to chop the personal property tax rate to offset the effect of surging prices for used cars.
After County Administrator Garrey Curry’s Wednesday evening (March 9) presentation of the proposed budget to the Board of Supervisors, Keir Whitson, Hampton District, said the Board should consider cutting the rate of property taxes further than the proposed reduction to 55 cents per $100 of real estate value, from the current 67 cents. Noting the county’s currently strong financial position, he said, “I wonder if we could do better than 55 cents.”
The Board of Supervisors now embarks on a process of budget scrutiny, settling on a final budget plan in early May. The sole requirement is that the budget balances— with expenditures equalling revenues. A significant element in the rate cuts is the surge in sales taxes and meals and lodging taxes.
Taxing land to educate children
(Graphic/Laura Stanton)
As in the past, Rappahannock essentially taxes land to educate children. In the next fiscal year, the county’s take from property taxes is set at $13.66 million, up slightly from $13.45 million in the current fiscal year, despite the rate cut. The funds are spread across the full range of county programs but are particularly crucial to the largest single county expenditure, the schools, whose budget will rise to $15.5 million in the new fiscal year, with the county contributing $8.9 million, and state, federal and foundation funds providing $6.5 million.
An evaluation of last year’s taxes showed the median property tax in Rappahannock was $2,287, well above the statewide median of $1,862. That’s largely because Rapphannock’s real estate is more costly than that of surrounding counties. But many landowners’ property taxes are lowered through land-use tax deferrals, which effectively cut the taxes for land that is in agriculture, forestry, or horticulture. The system is critical to preserving Rappahannock’s exceptional landscape, and without it many farmers say they would be forced to sell their acreage and relocate. However, the land-use tax breaks lowered the county’s fiscal year 2021 property tax revenue by $4.2 million, and generally favor larger landowners who reap most of the tax benefits.
Strong cash balances
The budget, outlined in a presentation prepared by County Administrator Garrey Curry for a Board of Supervisors session Wednesday night, shows the county to be in the strongest financial position in years. February’s cash balance of $12.8 million is comfortably higher than the $11.3 million a year earlier, and markedly stronger than the balance of $8.5 million posted in February 2016.
Rappahannock County Treasurer Debra Knick (Photo/Luke Christopher)
In an email exchange discussing county finances, Treasurer Debra Knick notes that despite worries that pandemic pressures would result in tax payer delinquencies, tax receipts have generally been strong, with “sales tax, meals and lodging tax and other local revenue exceeding our budget projections.” To some extent the county planned for the worst during the pandemic, and is benefitting from the fact that the fallout from that feared scenario never materialized. Curry says the approach was consistent with maintaining a disciplined budgeting process even in good times. “We are usually conservative and do not forecast aggressively,” he explains.
The county is projecting $2.2 million for the next fiscal year from sales taxes and meals and lodging taxes – $443,000 more than in the current fiscal year. Curry doesn’t consider the figure overly optimistic because these two sources of tax revenue have been rising sharply.
Tourism, online sales benefit county revenues
(Graphic/Laura Stanton)
Several factors explain the surge, beginning with tourism becoming a more important source of revenue for the county. Last year, the tax on lodging jumped to 4% from 2%, which brought in added tax revenue of about $61,000, earmarked for spending to boost the tourism sector further. (The Inn at Little Washington, the county’s largest private business, sends huge amounts of meals and lodging taxes to the Town of Washington, not the county, though its sales taxes strengthen the county’s finances.)
The county’s sales tax receipts began growing rapidly two years ago, after a Virginia law approved taxing online purchases within the state. As digital commerce expanded with pandemic-era shop-from-home patterns, sales taxes to Rappahannock soared, reaching $976,408 so far in the current fiscal year. Supervisor Keir Whitson, who represents the Hampton District, said that while property taxes remain the county’s financial lifeline, “looking forward to a sales tax contribution hitting about $1 million is significant,” relieving pressures on taxing land.
Inflation – generally understood as an economic scourge that saps citizens’ purchasing power – actually increases tax revenues for public authorities such as Rappahannock County. As prices rise, so do taxes on sales and hospitality. However, any benefits would likely be short-lived since an inflationary economy translates to upward cost pressure across the board – including fuel for the emergency vehicles and school buses, materials used in building maintenance and salaries.
One other factor explaining the county’s comparatively flush cash balance is the flow of pandemic-related funds from the federal government. The Coronavirus Aid Relief and Economic Security Act provided federal dollars for some functions that would normally have been covered by county funds. These include public safety payroll costs and certain school expenditures. Then the later American Rescue Plan Act brought in additional funds, $715,000 of which are in county accounts and can be spent with minimal restrictions.
The overall budget of $32.9 million is nearly 10% higher than the adjusted fiscal 2022 budget of $30 million, but it’s $72,000 less than the various departments across the county requested as the County Administrator managed an extended process of vetting and balancing the wish lists. The budget proposal will be subject to another round of scrutiny by the Supervisors, with public discussion, leading to a final budget May 11.
Other critical items in the FY2023 budget:
Fire & Rescue
The Chester Gap Volunteer Fire Department has a cost sharing agreement with neighboring Warren County. (Photo/Rachel Needham)
Rappahannock’s seven fire & rescue companies are supported by a separate fire levy, which is also tied to real estate valuations and private property valuations. Although the real estate and property tax rates are lowered under the proposal, the fire levy would be unchanged at current levels: 6 cents per $100 of real estate value, and 20 cents per $100 of private property value. These fire and rescue taxes are projected to bring in revenue of $1.3 million, needed to cover operational expenses of the county’s seven fire and rescue companies, along with their insurance costs. The fire and rescue operations, like many others in the U.S., are under financial pressure as they shift from an all-volunteer force to a blend of volunteers and paid staff. The budget plan also allocated $60,000 for replacing equipment.
One of the seven fire companies – the Chester Gap firehouse – has entered a cost sharing arrangement with nearby Warren County, which relies on the Rapphannock firehouse to respond to emergencies. Based on an analysis of emergency calls, Warren will cover 60% of the fire company’s operational costs, with Rappahannock picking up the remaining 40%.
Pricey used cars
To make up for soaring values, the proposed budget reduces the tax rate for used cars. (Photo/Luke Christopher)
The County taxes vehicles under its personal property tax. But used car prices have soared, and as a result the total personal property value in the county surged to $101 million from $76 million last year. To protect residents from a shock in the tax bill, the county proposed to cut the personal property tax rate to $3.25 per $100 of value from the current $4.25.
County employees
The fiscal year 2023 budget will fund a state mandate for cost-of-living increases for public employees, but the level is uncertain, with a House of Delegate increase of 4% and a Senate jump of 5%. The 5% pay increase will require $275,000, but less than half of the funds are provided by the state. An 8.5% increase in health insurance rates will be shared by the county and the employees.
Administration
County Administrator Garrey Curry is seeking an assistant. (Photo/Luke Christopher)
The budget proposes recruitment of a new assistant county administrator. County officials and business leaders have recently voiced support for this idea, particularly if the employee had or could develop expertise in planning and zoning matters.
Library
The library’s separate fund would provide $100,000 for services involving a future expansion and renovation project, while the county would transfer $277,696 to the library, up $35,535 from the current year.
Budget meeting schedule
The public may attend a series of budget-related meetings:
March 14 – BOS Budget Work Session, 1 p.m. – Library
March 21 – BOS Budget Work Session, 1 p.m. – Library
March 23 – BOS Budget Work Session, 1 p.m. – Courthouse
March 31 – BOS Budget Work Session, 1 p.m. – Library
April 1 – BOS Budget Work Session, 1 p.m. – Library
April 18 – Budget and Tax Rate Public Hearing, 7 p.m. – Rappahannock County Elementary School
April 25 – Consideration of Budget Adoption, 7 p.m. – Courthouse
May 2 – Regular Board of Supervisors Meeting, Budget Adoption/Discussion, 2 p.m. and 7 p.m. – Courthouse
May 9 – Consideration of Budget Adoption, 7 p.m. – Courthouse
May 11 – Budget Adoption (School Deadline), 7 p.m. – Courthouse
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