Chesapeake homeowners likely to pay more in taxes
Officials weigh rate cut to ease burden
CHESAPEAKE — Fifteen years ago, residents poured into Chesapeake City Hall demanding council members cut the real estate tax rate. Home assessments were spiking, up by an average of 28%, meaning their tax bills were going up.
In the end, they got what they wanted. The 2006 tax rate of $1.23 per $100 of assessed value was slashed to $1.11. The next year, the rate was cut again to $1.06 and eventually brought down to $1.05 by 2009.
Since then, the city tax rate has remained the same. Today, Chesapeake has the second-lowest real estate tax rate in Hampton Roads behind Virginia Beach’s $1.0175. And in their proposed budget for fiscal 2021-22, city officials suggest keeping the rate the same.
That comes as the average assessment on existing buildings is expected to go up 2.5%, continuing a trend that over the past few years has led to more revenue for the city. That means that while there is no rate increase, there is an effective tax hike for most homeowners.
Other Hampton Roads cities are experiencing similar increases in home values, including Virginia Beach, Norfolk and Hampton. Virginia Beach has seen eight consecutive years of real estate assessment growth, according to budget documents. The city manager has proposed cutting the real estate tax rate by 1 cent. In Norfolk, the proposed budget includes no change to the tax rate while property values are expected to rise. Tax revenue has similarly been increasing in Newport News for the past several years. In Chesapeake, at least one council member, Debbie Ritter, said she asked city staff to look at the tax rate given increasing home assessments and revenue in the commonwealth’s second largest city.
“My goal is that we can responsibly look at a reduction both this year and next,” Ritter said.
She emphasized the need to balance providing services — such as funding public education and picking up trash — and considering impacts to homeowners’ checkbooks.
Ritter wondered whether we’re experiencing a repeat of the housing bubble that led home values to skyrocket around 2008, just before the Great Recession.
“We don’t know that,” Ritter said, “which is why I want to look at this over at least a two-year term so that next year we aren’t faced with people getting hit with huge increases and have to compensate even more.”
Councilman Don Carey said he wanted to speak with the real estate assessor before commenting on what should happen to the tax rate. Like Ritter, Councilman Matt Hamel said the city needs to balance the impact of rising assessments on residents with the need to maintain services. He said the city had to slash its budget over the past five quarters due to the pandemic, but did so without adding any fees.
Mayor Rick West said he wants citizen input before weighing in on the tax rate.
He said the city has unfunded infrastructure needs that include some capital projects for schools, roads and parks. Other members of the council couldn’t be reached for this article. Over the next month, the council will hold public hearings on the proposed budget. The public will have a chance to comment April 27 and May 11 during the regular council meetings, which start at 6:30 p.m.
The real estate tax is a major driver of city revenue, accounting for roughly a quarter of the city’s $1.26 billion proposed budget.
City officials expect revenue from the real estate tax to be around $315.3 million in the upcoming fiscal year, most of which goes to the general fund used to cover salary, benefits, school funding and other costs. That’s a 6% increase compared to the fiscal 2020-21 budget.
Assuming the rate doesn’t change, real estate tax revenue is expected to go up 4% in the upcoming fiscal year. About 2.5% of that is due to reassessments of buildings around the city, said Greg Daniels, the city assessor. The rest is from new houses and development. Daniels’ office is responsible for yearly assessments, while the City Council sets the tax rate each year.
At the current rate, a home valued at $400,000 would pay $4,200 in annual real estate tax. Daniels said that while assessments are projected to go up overall, not every homeowner will see an increase.
In fiscal 2018, the city collected just over $264 million from the real estate tax, according to the treasurer’s office. That number grew by nearly 6%, to roughly $280 million, the next fiscal year. By 2020, it was about $293.5 million.